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What changed in Vertex Pharmaceuticals's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Vertex Pharmaceuticals's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+719 added−652 removedSource: 10-K (2024-02-15) vs 10-K (2023-02-10)

Top changes in Vertex Pharmaceuticals's 2023 10-K

719 paragraphs added · 652 removed · 443 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

185 edited+98 added−53 removed172 unchanged
Biggest changeBasic Product Patent Expiration Year of European Basic Product Patent KALYDECO 2027 2025 1 ORKAMBI 2030 2026 2 SYMDEKO/SYMKEVI 2027 2028 3 TRIKAFTA/KAFTRIO 2037 2037 1 Certain European countries have granted supplementary protection certificates for KALYDECO, which expire in 2027. 2 Certain European countries have granted supplementary protection certificates for ORKAMBI, which expire in 2030. 3 Certain European countries have granted supplementary protection certificates for SYMKEVI, which expire in 2033.
Biggest changeBasic Product Patent Expiration Year of European Basic Product Patent KALYDECO 2027 2027 1 ORKAMBI 2030 2030 1 SYMDEKO/SYMKEVI 2027 2033 1 TRIKAFTA/KAFTRIO 2037 2037 CASGEVY 2035 2 2034 2, 3 1 Expiration date reflects SPCs granted in the five major European markets (France, Germany, Italy, Spain and the U.K.). 2 Expiration year reflects the expiration of regulatory exclusivity, which expires later than the basic product patent for this product in this market. 3 Product is approved in Great Britain with regulatory exclusivity until November 2033, which is later than the expiration of the basic product patent.
Additionally, private payors, including health maintenance organizations and pharmacy benefit managers in the U.S., are adopting more aggressive utilization management techniques and are increasingly applying restrictive plan designs that can impact patients and manufacturers. They continue to push for significant discounts and rebates from manufacturers.
Additionally, private payors, including health maintenance organizations and pharmacy benefit managers in the U.S., are adopting more aggressive utilization management techniques, and are increasingly applying restrictive plan designs that can impact patients and manufacturers and they continue to push for significant discounts and rebates from manufacturers.
INTELLECTUAL PROPERTY Patents and other proprietary rights such as trademarks, trade secrets, and copyrights are critical to our business. We actively seek protection for our products and proprietary information by means of U.S. and foreign patents, trademarks, and copyrights, as appropriate.
INTELLECTUAL PROPERTY Patents and other intellectual property rights such as trademarks, trade secrets, and copyrights are critical to our business. We actively seek protection for our products and proprietary information by means of U.S. and foreign patents, trademarks, and copyrights, as appropriate.
United States Government Regulation New Drug Application and Biologics License Application Approval Processes The process required by the FDA before a drug or biologic may be marketed in the U.S. generally involves the following: • completion of preclinical laboratory tests, animal studies and formulation studies conducted according to Good Laboratory Practices (“GLP”), and other applicable regulations; • submission to the FDA of an IND, which must become effective before clinical trials in the U.S. may begin; • performance of adequate and well-controlled clinical trials according to Good Clinical Practices (“GCP”), and other clinical trial-related regulations to establish the safety and efficacy of the proposed drug for its intended use; • submission to the FDA of an NDA or a BLA; • satisfactory completion of a pre-approval FDA inspection of the manufacturing facility or facilities at which the product will be produced to assess compliance with cGMP; and • FDA review and approval of the NDA or BLA.
United States Government Regulation New Drug Application and Biologics License Application Approval Processes The process required by the FDA before a drug or biologic may be marketed in the U.S. generally involves the following: • completion of preclinical laboratory tests, animal studies and formulation studies conducted according to Good Laboratory Practices (“GLP”), and other applicable regulations; • submission to the FDA of an IND, which must become effective before clinical trials in the U.S. may begin; • performance of adequate and well-controlled clinical trials according to Good Clinical Practices (“GCP”), and other clinical trial-related regulations to establish the safety and efficacy of the proposed drug for its intended use; 20 • submission to the FDA of an NDA or a BLA; • satisfactory completion of a pre-approval FDA inspection of the manufacturing facility or facilities at which the product will be produced to assess compliance with cGMP; and • FDA review and approval of the NDA or BLA.
We own and control patents and pending patent applications that relate to compounds, formulations, treatment of diseases, synthetic routes, intermediates, and other inventions. To protect our intellectual property, we typically apply for patents several years before a product receives marketing approval. Under current law, a patent expires 20 years from its first effective filing date.
We own and control patents and pending patent applications that relate to compounds, formulations, synthetic routes, intermediates, devices, treatment of diseases, and other inventions. To protect our intellectual property, we typically apply for patents several years before a product receives marketing approval. Under current law, a patent expires 20 years from its first effective filing date.
The 340B program, which is administered by the Health Resources and Services Administration, requires participating companies to agree to charge statutorily defined covered entities no more than the 340B “ceiling price” for our covered outpatient drugs. The 340B ceiling price is calculated using a statutory formula, which is based on pricing data calculated under the Medicaid Drug Rebate program.
The 340B program, which is administered by the Health Resources and Services Administration, requires participating companies to agree to charge statutorily defined covered entities no more than the 340B “ceiling price” for covered outpatient drugs. The 340B ceiling price is calculated using a statutory formula, which is based on pricing data calculated under the Medicaid Drug Rebate Program.
For example, the member states of the E.U. can restrict the range of drugs for which their national health insurance systems provide reimbursement and can control the prices of 10 prescription drugs. In addition, many ex-U.S. government payors require companies to provide health economic assessments of products, which are evaluated by government agencies set up for this purpose.
For example, the member states of the E.U. can restrict the range of drugs for which their national health insurance systems provide reimbursement and can control the prices of prescription drugs. In addition, many ex-U.S. government payors require companies to provide health economic assessments of products, which are evaluated by government agencies set up for this purpose.
If the FDA accepts the IND, the drug or biologic can then be studied in human clinical trials to determine if the product candidate is safe and effective. Clinical trials involve three separate phases that often overlap, can take many years and are 18 expensive. These three phases, which are subject to considerable regulation, are as follows: • Phase 1.
If the FDA accepts the IND, the drug or biologic can then be studied in human clinical trials to determine if the product candidate is safe and effective. Clinical trials involve three separate phases that often overlap, can take many years and are expensive. These three phases, which are subject to considerable regulation, are as follows: • Phase 1.
If a manufacturing facility is not in substantial compliance with the applicable regulations and requirements imposed when the product was approved, regulatory or judicial enforcement action may be initiated, which may include a warning letter, suspension of manufacturing, product seizure, or an injunction against shipment of products from the facility and/or recall of products previously shipped.
If a manufacturing facility is not in substantial compliance with the applicable regulations and requirements imposed when the product was approved, regulatory or judicial enforcement action may be initiated, which may include a warning 22 letter, suspension of manufacturing, product seizure, or an injunction against shipment of products from the facility and/or recall of products previously shipped.
As a result, our competitors may commercialize products more rapidly or effectively than we do, which would adversely affect our competitive position, the likelihood that our product candidates, if approved, would achieve and maintain market acceptance and our ability to generate meaningful revenues from our products. Future competitive products may render our products, or future products, obsolete or noncompetitive.
As a result, our competitors may commercialize products more rapidly or effectively than we do, which would adversely affect our 18 competitive position, the likelihood that our product candidates, if approved, would achieve and maintain market acceptance and our ability to generate meaningful revenues from our products. Future competitive products may render our products, or future products, obsolete or noncompetitive.
Other products may be entitled to three years of exclusivity if approval was based on the FDA’s reliance on new clinical studies essential to approval submitted by the NDA applicant. Biologics are also entitled to exclusivity under the Biologics Price Competition and Innovation Act (the “BPCIA”), 21 which was passed as Title VII to the ACA.
Other products may be entitled to three years of exclusivity if approval was based on the FDA’s reliance on new clinical studies essential to approval submitted by the NDA applicant. Biologics are also entitled to exclusivity under the Biologics Price Competition and Innovation Act (the “BPCIA”), which was passed as Title VII to the ACA.
State laws may also require disclosure of pharmaceutical pricing information and marketing expenditures. Many of these laws and regulations contain requirements that are subject to interpretation. Outside the U.S., other countries have implemented requirements for disclosure of financial interactions with healthcare providers and additional countries may consider or implement such laws.
State laws may also require disclosure of pharmaceutical pricing information and marketing expenditures. 25 Many of these laws and regulations contain requirements that are subject to interpretation. Outside the U.S., other countries have implemented requirements for disclosure of financial interactions with healthcare providers and additional countries may consider or implement such laws.
The manner and level at which reimbursement is provided for these services also are important. An inadequate reimbursement for such services may adversely affect physicians’ decisions to recommend any product for which we obtain approval in the future and our ability to market or sell the related cell or genetic therapy.
The manner and level at which reimbursement is provided for these services also are important. An inadequate reimbursement for such services may adversely affect ATCs and physicians’ decisions to recommend any product for which we obtain approval in the future and our ability to market or sell the related cell or genetic therapy.
In general, these raw materials and other necessary supplies are available from multiple sources. Third-party contract manufacturers, including some in China, perform different parts of our manufacturing process. Contract manufacturers may supply us with raw materials, convert these raw materials into drug substance and/or convert the drug substance or product into final dosage form.
In general, these raw materials and other necessary supplies are available from multiple sources. Third-party contract manufacturers, including some in China, perform different parts of our manufacturing process. Contract manufacturers supply us with raw materials, convert these raw materials into drug substance and/or convert the drug substance or product into final dosage form.
The centralized procedure, which is compulsory for orphan medicines, medicines produced by 22 biotechnology, and those medicines intended to treat AIDS, cancer, neurodegenerative disorders, or diabetes, and optional for those medicines that are highly innovative, provides for the grant of a single marketing authorization that is valid for all E.U. member states.
The centralized procedure, which is compulsory for orphan medicines, medicines produced by biotechnology, and those medicines intended to treat AIDS, cancer, neurodegenerative disorders, or diabetes, and optional for those medicines that are highly innovative, provides for the grant of a single marketing authorization that is valid for all E.U. member states.
Orphan drug exclusivity, however, also could block the approval of our products for seven years if a competitor first obtains approval of the same drug, as defined by the FDA, for the same disease or condition for which we were seeking approval. KALYDECO, ORKAMBI, SYMDEKO, and TRIKAFTA have been granted orphan drug exclusivity by the FDA.
Orphan drug exclusivity, however, also could block the approval of our products for seven years if a competitor first obtains approval of the same drug, as defined by the FDA, for the same disease or condition for which we were seeking approval. KALYDECO, ORKAMBI, SYMDEKO, TRIKAFTA, and CASGEVY have been granted orphan drug exclusivity by the FDA.
Bozic spent more than 20 26 years at Biogen Inc., a biotechnology company focused on neurological diseases, most recently as Senior Vice President of Global Development and Portfolio Transformation from 2015 to May 2019 and as Senior Vice President of Clinical and Safety Sciences from 2013 to 2015. Dr.
Bozic spent more than 20 years at Biogen Inc., a biotechnology company focused on neurological diseases, most recently as Senior Vice President of Global Development and Portfolio Transformation from 2015 to May 2019 and as Senior Vice President of Clinical and Safety Sciences from 2013 to 2015. Dr.
Some patients with AMKD have the histological finding of focal segmental glomerulosclerosis (“FSGS”) and co-morbidities such as hypertension. We are evaluating multiple novel small molecules that inhibit the function of APOL1 protein with the potential to treat APOL1-mediated kidney disease.
Some patients with AMKD have the histological finding of focal segmental glomerulosclerosis (“FSGS”) and co-morbidities such as hypertension. We are evaluating multiple novel small molecules that inhibit the function of the mutant APOL1 protein with the potential to treat APOL1-mediated kidney disease.
The T1D standard of care of exogenous insulin injections continues to progress toward an artificial pancreas as multiple companies are developing novel insulin formulations, advanced pumps and glucose sensors, and closed loop systems. 17 There are no approved therapies targeting AMKD.
The T1D standard of care of exogenous insulin injections continues to progress toward an artificial pancreas as multiple companies are developing novel insulin formulations, advanced pumps and glucose sensors, and closed loop systems. There are no approved therapies targeting AMKD.
He served as a member of the Board of Directors of Cerulean Pharma, Inc. from June 2015 through July 2017 and has served as a member of the Board of Directors of ImmunoGen, Inc. since January 2018 and of Rhythm Pharmaceuticals Inc. since July 2019. Mr. Arbuckle holds a BSc in Pharmacology and Physiology from the University of Leeds. Mr.
He served as a member of the Board of Directors of Cerulean Pharma, Inc. from June 2015 through July 2017 and has served as a member of the Board of Directors of ImmunoGen, Inc. since January 2018 and of Rhythm Pharmaceuticals Inc. since July 2019. Mr. Arbuckle holds a BSc in Pharmacology and Physiology from the University of Leeds. Dr.
Another key element of remaining competitive in our industry is recruiting and retaining leading scientific, technical and management personnel to conduct our research activities and advance our 16 development programs, including with the commercial expertise to effectively market our products.
Another key element of remaining competitive in our industry is recruiting and retaining leading scientific, technical and management personnel to conduct our research activities and advance our development programs, including with the commercial expertise to effectively market our products.
She completed her internship and residency in Internal Medicine at the Massachusetts General Hospital and her fellowship in Nephrology at the Massachusetts General Hospital and Brigham and Women’s 25 Hospital combined program. Dr. Kewalramani holds a B.A. from Boston University and an M.D. from Boston University School of Medicine. Dr.
She completed her internship and residency in Internal Medicine at the Massachusetts General Hospital and her fellowship in Nephrology at the Massachusetts General Hospital and Brigham and Women’s Hospital combined program. Dr. Kewalramani holds a B.A. from Boston University and an M.D. from Boston University School of Medicine. Dr.
Before approving an NDA or BLA, the FDA will inspect the facility or facilities where the drug or biologic is manufactured and tested. Additionally, before approving an NDA or BLA, the FDA may inspect one or more clinical trial sites to assure compliance with GCP requirements.
Before approving an NDA or BLA, the FDA will inspect the facility or facilities 21 where the drug or biologic is manufactured and tested. Additionally, before approving an NDA or BLA, the FDA may inspect one or more clinical trial sites to assure compliance with GCP requirements.
For accelerated 19 approval, the product must have an effect on a surrogate endpoint or an intermediate clinical endpoint that is considered reasonably likely to predict the clinical benefit of a drug, such as an effect on irreversible morbidity and mortality.
For accelerated approval, the product must have an effect on a surrogate endpoint or an intermediate clinical endpoint that is considered reasonably likely to predict the clinical benefit of a drug, such as an effect on irreversible morbidity and mortality.
To compensate for patent term lost while a product is in clinical trials and undergoing review for marketing approval, we may be able to apply for patent term extensions or supplementary protection certificates in some countries.
To compensate for patent term lost while a product is in clinical trials and undergoing review for marketing approval, we may be able to apply for patent term extensions or supplementary protection certificates (“SPCs”) in some countries.
Wagner served as a director and chairman of the Audit Committee of Good Start Genetics, Inc., a molecular diagnostics company, from April 2014 to August 2017 and served as a director and member of the Audit Committee of Bruker Corporation from August 2010 to June 2012. Mr.
Wagner served as a director and chairman of the Audit Committee of Good Start Genetics, Inc., a molecular diagnostics company, from April 2014 to August 2017 and served as a director and member of the Audit Committee of Bruker Corporation from August 2010 to June 2012.
These sanctions could include: • restrictions on marketing or manufacturing of the product; • safety alerts, Dear Healthcare Provider letters, press releases, or other communications containing warnings or other safety information about the product; • refusal to approve or delay in review of pending applications; • withdrawal of an approval or the implementation of limitations on a previously approved indication for use; • imposition of a clinical hold, a risk evaluation and mitigation strategy (“REMS”) or other safety-related limitations; • warning letters or “untitled letters”; • product seizures, recalls, or detentions, or refusal to permit the import or export of products; • total or partial suspension of production or distribution; • consent decrees, corporate integrity agreements, debarment or exclusion from federal healthcare programs; or • injunctions, fines, disgorgement, refusals of government contracts, or civil or criminal penalties.
These sanctions could include: • restrictions on marketing or manufacturing of the product; • safety alerts, Dear Healthcare Provider letters, press releases, or other communications containing warnings or other safety information about the product; • refusal to approve or delay in review of pending applications; • withdrawal of an approval or the implementation of limitations on a previously approved indication for use; • imposition of a clinical hold, a risk evaluation and mitigation strategy (“REMS”) or other safety-related limitations; • warning letters or “untitled letters;” • product seizures, recalls, or detentions, or refusal to permit the import or export of products; 23 • total or partial suspension of production or distribution; • consent decrees, corporate integrity agreements, debarment or exclusion from federal healthcare programs; or • injunctions, fines, disgorgement, refusals of government contracts, or civil or criminal penalties.
We plan to continue investing to advance our strategy, fostering scientific innovation by identifying additional product candidates through internal research efforts, and investing in business development transactions to access emerging technologies, products and product candidates.
We plan to continue investing to advance our strategy, fostering scientific innovation by identifying additional product candidates through internal research efforts, and investing in business development transactions to access 2 emerging technologies, products and product candidates.
Further, even if we obtain orphan drug exclusivity for a product candidate, that exclusivity may not effectively protect the product from competition because orphan drug exclusivity does not prevent different drugs from being approved for the same condition.
Further, even if we obtain orphan drug exclusivity for a product candidate, that exclusivity may not effectively protect the product from competition 24 because orphan drug exclusivity does not prevent different drugs from being approved for the same condition.
Our initiatives include learning, resources, and forums that promote inclusion, diversity, and equity in our workplaces; efforts to develop a diverse pipeline of talent from early career through leadership; four global employee resource networks that promote connectivity and collaboration across levels and functions, and engage colleagues in personal and professional development opportunities, including mentoring, community outreach, and cultural awareness activities; and investments to support efforts to address racism and social injustice.
Our initiatives include learning, resources, and forums that promote inclusion, diversity, and equity in our workplaces; efforts to develop a diverse pipeline of talent from early career through leadership; four global employee resource networks that promote connectivity and collaboration across levels and functions, and engage colleagues in personal and professional development opportunities, including mentoring, community outreach, and cultural awareness activities; and investments to support efforts to address racism and social injustice in our surrounding communities.
COMMERCIALIZATION OF OUR MEDICINES Commercial Organization Our commercial organization focuses on supporting the appropriate use of TRIKAFTA/KAFTRIO, SYMDEKO/SYMKEVI, ORKAMBI and KALYDECO in the markets where these products have been approved.
COMMERCIALIZATION OF OUR MEDICINES Commercial Organization Our commercial organization focuses on supporting the appropriate use of TRIKAFTA/KAFTRIO, SYMDEKO/SYMKEVI, ORKAMBI, KALYDECO and CASGEVY in the markets where these products have been approved.
Medicaid rebates are based on pricing data reported by us on a monthly and quarterly basis to the Centers for Medicare 9 & Medicaid Services (“CMS”), the federal agency that administers the Medicaid and Medicare programs.
Medicaid rebates are based on pricing data reported by us on a monthly and quarterly basis to the Centers for Medicare & Medicaid Services (“CMS”), the federal agency that administers the Medicaid and Medicare programs.
Further, after approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to 20 further FDA review and approval.
Further, after approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further FDA review and approval.
He served as the Director of the Institute’s Program in Medical and Population Genetics from 2003 through December 2014 and as the Institute’s Deputy Director and Chief Academic Officer from 2009 through December 2014. Dr.
He served as the Director of the Institute’s Program in 28 Medical and Population Genetics from 2003 through December 2014 and as the Institute’s Deputy Director and Chief Academic Officer from 2009 through December 2014. Dr.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and all amendments to those reports, are available to you free of charge through the “Investors-SEC Filings” section of our website as soon as reasonably practicable after those materials have been electronically filed with, or furnished to, the Securities and Exchange Commission.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and all amendments to those reports, are available to you free of charge through the “Investors/Financial Information/SEC Filings” section of our website as soon as reasonably practicable after those materials have been electronically filed with, or furnished to, the Securities and Exchange Commission.
In the future, it is possible that comparative effectiveness research demonstrating benefits of a competitor’s product could adversely affect the sales of our products.
In the future, it is possible that comparative effectiveness research demonstrating benefits of a competitor’s product could adversely affect the 11 sales of our products.
Corporate Information Vertex was incorporated in Massachusetts in 1989, and our principal executive offices are located at 50 Northern Avenue Boston, Massachusetts 02210. INFORMATION ABOUT OUR EXECUTIVE OFFICERS The names, ages and positions held by our executive officers are as follows: Name Age Position Reshma Kewalramani, M.D. 50 Chief Executive Officer and President Jeffrey M.
Corporate Information Vertex was incorporated in Massachusetts in 1989, and our principal executive offices are located at 50 Northern Avenue Boston, Massachusetts 02210. 27 INFORMATION ABOUT OUR EXECUTIVE OFFICERS The names, ages and positions held by our executive officers are as follows: Name Age Position Reshma Kewalramani, M.D. 51 Chief Executive Officer and President Jeffrey M.
Kewalramani also completed the General Management Program at Harvard Business School and is an alumnus of the school. Dr. Leiden is our Executive Chairman, a position he has held since in April 2020. He was our Chief Executive Officer and President from 2012 through March 2020.
Kewalramani also completed the General Management Program at Harvard Business School and is an alumna of the school. Dr. Leiden is our Executive Chairman, a position he has held since in April 2020. He was our Chief Executive Officer and President from 2012 through March 2020.
Bozic is our Executive Vice President, Global Medicines Development and Medical Affairs, a position she has held since October 2019, and she has been our Chief Medical Officer since April 2020. She was our Senior Vice President and Head of Global Clinical Development from May 2019 to October 2019. Prior to joining Vertex, Dr.
Bozic is our Executive Vice President, Global Medicines Development and Medical Affairs, a position she has held since October 2019, and she has been our Chief Medical Officer since April 2020. She was our Senior Vice President and Head of Global Clinical Development from May 2019 to October 2019. Prior to joining us, Dr.
Wagner is our Executive Vice President and Chief Financial Officer, a position he has held since April 2019. Prior to joining Vertex, Mr. Wagner was Chief Financial Officer and Executive Vice President, Finance, of Ortho Clinical Diagnostics, a Carlyle Group portfolio company, from June 2015 to March 2019.
Wagner is our Executive Vice President and Chief Financial Officer, a position he has held since April 2019. Prior to joining us, Mr. Wagner was Chief Financial Officer and Executive Vice President, Finance, of Ortho Clinical Diagnostics, a Carlyle Group portfolio company, from June 2015 to March 2019.
We are pursuing three programs for the transplant of functional islets into patients: transplantation of islet cells alone following immunosuppression to protect the implanted cells, implantation of the islet cells inside a novel immunoprotective device, and development of hypoimmune cells to optimize how we protect the implanted islet cells from the immune system.
We are pursuing three programs for the transplant of functional islets into patients: transplantation of islet cells alone following immunosuppression to protect the implanted cells, implantation of the islet cells inside a novel immunoprotective device, and development of hypoimmune islet cells to optimize protection of the implanted islet cells from the immune system.
Financial information about our revenue by product and significant customers is set forth in Note R, “Segment Information,” to our consolidated financial statements included in this Annual Report on Form 10-K. Information Available on the Internet Our internet address is www.vrtx.com.
Financial information about our revenue by product and significant customers is set forth in Note Q, “Segment Information,” to our consolidated financial statements included in this Annual Report on Form 10-K. Information Available on the Internet Our internet address is www.vrtx.com.
The absence of working CFTR proteins results in poor flow of salt and water into and out of cells in a number of organs, including the lungs. As a result, thick, sticky mucus builds up and blocks the passages in many organs, leading to a variety of symptoms.
The absence of working CFTR protein results in poor flow of salt and water into and out of cells in a number of organs, including the lungs. As a result, thick, sticky mucus builds up and blocks the passages in many organs, leading to a variety of symptoms.
We are committed to identifying and developing our next generation of leaders and have developed programs focused on talent and succession for critical roles in our organization. OTHER MATTERS Financial Information and Significant Customers We operate in one segment, pharmaceuticals.
We are committed to identifying and developing our next generation of leaders and have developed programs focused on manager excellence, talent and succession for critical roles in our organization. OTHER MATTERS Financial Information and Significant Customers We operate in one segment, pharmaceuticals.
For example, certain third parties, including competitors, have reported obtaining a license to rights in this patent portfolio in certain fields. In addition, patents and patent applications in this patent portfolio are the subject of proceedings in the U.S., Europe, and other jurisdictions, including proceedings in the U.S.
For example, certain third parties, including competitors, have reported obtaining a license to rights in this patent portfolio in certain fields. In addition, patents and patent applications in this patent portfolio are the subject of adversarial proceedings in the U.S., Europe, and other 16 jurisdictions, including proceedings in the U.S.
Pipeline In recent years, we have committed significant research resources to, and made significant investments in, our pipeline of potential new therapies for SCD, TDT, pain, AMKD, T1D, AATD, muscular dystrophies, and other diseases.
Pipeline In recent years, we have committed significant research resources to, and made significant investments in, our pipeline of potential new therapies for pain, AMKD, T1D, muscular dystrophies, AATD and other diseases.
On July 1, 2021, with respect to exa-cel, the net profits and net losses incurred pursuant to the A&R JDCA began to be allocated 60% to us and 40% to CRISPR, subject to certain adjustments, while all other product candidates and products continue to have net profits and net losses shared equally between the parties.
On July 1, 2021, with respect to CASGEVY, the net profits and net losses incurred pursuant to the A&R JDCA began to be allocated 60% to us and 40% to CRISPR, subject to certain adjustments, while all other product candidates and products continue to have net profits and net losses shared equally between the parties.
Manufacturing facilities, both foreign and domestic, are subject to inspections by or under the authority of the FDA and other U.S. and foreign government authorities. Although we actively engage with regulatory authorities, the timing of inspections and regulatory approvals for each of these facilities may be delayed for a number of reasons, including the COVID-19 pandemic.
Manufacturing facilities, both foreign and domestic, are subject to inspections by or under the authority of the FDA and other U.S. and foreign government authorities. Although we actively engage with regulatory authorities, the timing of inspections and regulatory approvals for each of these facilities may be delayed for a number of reasons.
In particular, mucus builds up and clogs the airways in the lungs, causing chronic lung infections and progressive lung damage. CFTR potentiators such as ivacaftor and deutivacaftor, formerly VX-561, increase the probability that the CFTR protein channels open on the cell surface, increasing the flow of salt and water into and out of the cell.
In particular, mucus builds up and clogs the airways in the lungs, causing chronic lung infections and progressive lung damage. CFTR potentiators, such as ivacaftor, increase the probability that the CFTR protein channels open on the cell surface, increasing the flow of salt and water into and out of the cell.
To manufacture 15 our commercial products, we utilize both continuous manufacturing technology as well as batch manufacturing processes. We have developed systems and processes to track, monitor, and oversee our and our third-party manufacturers’ activities, including a quality assurance program intended to ensure that our third-party manufacturers comply with cGMP.
To manufacture our commercial CF products, we utilize continuous manufacturing technology as well as batch manufacturing processes. We have developed systems and processes to track, monitor, and oversee our and our third-party manufacturers’ 17 activities, including a quality assurance program intended to ensure that our third-party manufacturers comply with cGMP.
We are committed to building an outstanding, committed, and passionate team at Vertex, and we focus on a culture that values inclusion, diversity, and equity. We believe that each employee brings unique perspectives and strengths, and by embracing these strengths, we can do our best work for patients.
We are committed to building an outstanding, committed, and passionate team, and we focus on a culture that values inclusion, diversity, and equity for all employees. We believe that each employee brings unique perspectives and strengths, and by embracing these strengths, we can do our best work for patients.
For example, we also own and/or control U.S. and foreign patents and/or patent applications relating to the following: • Vanzacaftor, deutivacaftor, and other CF potentiators and correctors and many other related compounds, and the use of those compounds for the treatment CF. • VX-522 and other mRNA-based approaches for treating CF. • Exa-cel and other potential gene-editing approaches for treating hemoglobinopathies. • VX-548 and other compounds being studied for the potential treatment of pain. • Inaxaplin and other compounds being studied for the potential treatment of AMKD. • VX-880, VX-264, and other cell-based approaches for treating T1D. • VX-634 and other compounds being studied for the potential treatment of AATD. • Other pre-clinical and clinical candidates and the use of such candidates to treat specified diseases. • The manufacture, pharmaceutical compositions, related solid forms, formulations, dosing regimens, and methods of use of many of the above compounds.
For example, we also own and/or control U.S. and foreign patents and/or patent applications relating to the following: • Vanzacaftor, deutivacaftor, and other CF potentiators and correctors and many other related compounds, and the use of those compounds for the treatment CF. • VX-522 and other mRNA-based approaches for treating CF. • VX-548 and other compounds being studied for the potential treatment of pain. • Inaxaplin and other compounds being studied for the potential treatment of AMKD. • VX-880, VX-264, and other cell-based approaches for treating T1D. • VX-634, VX-668, and other compounds being studied for the potential treatment of AATD. • VX-670 for the treatment of DM1. • Other pre-clinical and clinical candidates and the use of such candidates to treat specified diseases. • The manufacture, pharmaceutical compositions, related solid forms, formulations, dosing regimens, and methods of use of many of the above compounds.
Subject to the terms and conditions of the A&R JDCA, we have the right to conduct all research, development, manufacturing and commercialization activities relating to the product candidates and products under the A&R JDCA (including exa-cel) throughout the world, subject to CRISPR’s reserved right to conduct certain activities.
Subject to the terms and conditions of the A&R JDCA, we have the right to conduct all research, 13 development, manufacturing, and commercialization activities relating to the product candidates and products under the A&R JDCA (including CASGEVY) throughout the world, subject to CRISPR’s reserved right to conduct certain activities.
Patent and Trademark Office (the “USPTO”), between the CVC Group and, separately, the Broad Institute, Sigma-Aldrich, Co. LLC (“Sigma-Aldrich”), and ToolGen, Inc. (“ToolGen”). To date, both the CVC Group and the Broad Institute have obtained granted patents that purport to cover aspects of CRISPR/Cas9 editing platform technology.
Patent and Trademark Office (the “USPTO”), between the CVC Group and, separately, Sigma-Aldrich, Co. LLC (“Sigma-Aldrich”), ToolGen, Inc. (“ToolGen”), and the Broad Institute, Harvard University, and Massachusetts Institute of Technology (collectively, “Broad”). To date, both the CVC Group and Broad have obtained granted patents that purport to cover aspects of CRISPR/Cas9 editing platform technology.
The manufacturing process for exa-cel involves a number of steps prior to the final infusion of drug product into patients. Following mobilization and collection of blood cells from the patient at the clinical site, cells are transferred to a manufacturing site where HSPCs are purified and CRISPR/Cas9 gene-editing is performed.
The manufacturing process for CASGEVY involves a number of steps prior to the final infusion of drug product into patients. Following mobilization and collection of blood cells from the patient, cells are transferred to a manufacturing site where HSPCs are purified and CRISPR/Cas9 gene-editing is performed.
We are developing fully differentiated stem-cell derived islet cell therapies designed to replace insulin-producing islet 7 cells that are destroyed in people with T1D, with the goal of delivering a functional cure.
We are developing non-autologous (allogeneic) fully differentiated, stem-cell derived islet cell therapies designed to replace insulin-producing islet cells that are destroyed in people with T1D, with the goal of delivering a functional cure.
From February 2003 until she joined Vertex, Ms. Ambrose held roles of increasing responsibility at Boston Scientific Corporation, a medical device company, most recently as Vice President of Finance and Controller of the Global Endoscopy Division from July 2019 to March 2021 and as Vice President of Global Internal Audit from February 2017 to June 2019.
Ambrose held roles of increasing responsibility at Boston Scientific Corporation, a medical device company, most recently as Vice President of Finance and Controller of the Global Endoscopy Division from July 2019 to March 2021 and as Vice President of Global Internal Audit from February 2017 to June 2019. Prior to Boston Scientific Corporation, Ms.
Pursuant to the A&R JDCA, we lead global development, manufacturing and commercialization of exa-cel, with support from CRISPR.
Pursuant to the A&R JDCA, we lead global development, manufacturing and commercialization of CASGEVY, with support from CRISPR.
To promote our employees’ continued well-being and development, we offer a variety of inclusive benefits and opportunities. We offer comprehensive work-life benefits, including health, dental, and income protection, such as life insurance and retirement savings programs and we enhanced and expanded those employee benefits in response to the COVID-19 pandemic.
To promote our employees’ continued well-being and development, we offer a variety of inclusive benefits and opportunities. We offer comprehensive work-life benefits, including health, dental, and income protection, such as life insurance and retirement savings programs and we enhanced and expanded those employee benefits.
We rely on third-party manufacturers to produce or process cell culture reagents, gene-editing components, such as Cas9 protein and guide RNA molecules, and to generate gene-edited cells to supply exa-cel for clinical trials. If approved, we expect to continue to rely on third-party manufacturers for commercial supply of exa-cel.
We rely on third-party manufacturers to produce or process cell culture reagents, gene-editing components, such as Cas9 protein and guide RNA molecules for clinical trials and commercial supply of CASGEVY, and to generate gene-edited cells to supply CASGEVY. We continue to rely on third-party manufacturers for commercial supply of CASGEVY.
The Medicare Part D program provides a voluntary prescription drug benefit to Medicare beneficiaries. Under Part D, Medicare beneficiaries may enroll in prescription drug plans offered by private entities, which provide coverage of outpatient prescription drugs such as our CF medicines. Unlike Medicare Part A and B, Part D coverage is not standardized.
Under Part D, Medicare beneficiaries may enroll in prescription drug plans offered by private entities, which provide coverage of outpatient prescription drugs such as our CF medicines. Unlike Medicare Part A and B, Part D coverage is not standardized.
Our approach to drug discovery has been further validated by our successful demonstration of clinical proof-of-concept in six additional disease areas: in SCD and beta thalassemia with exa-cel, in acute and neuropathic pain with our NaV1.8 inhibitors, in AMKD with inaxaplin, and in T1D with a stem cell-derived islet cell therapy.
Our approach to drug discovery has been further validated by our successful demonstration of clinical proof-of-concept in four additional disease areas: in acute and neuropathic pain with our NaV1.8 inhibitors, in AMKD with inaxaplin, and in T1D with a stem cell-derived islet cell therapy.
In collaboration with Moderna, we are developing VX-522, a CF mRNA therapeutic designed to treat the underlying cause of CF for these people by enabling cells in the lungs to produce functional CFTR protein. In December 2022, the FDA cleared our IND for VX-522.
In collaboration with Moderna, we are developing VX-522, a CF mRNA therapeutic designed to treat the underlying cause of CF for these people by enabling cells in the lungs to produce functional CFTR protein.
We have eleven issued U.S. patents listed in the Orange Book that cover the active pharmaceutical ingredients in KALYDECO, its marketed formulations, and/or its approved indication. We have 20 issued U.S. patents listed in the Orange Book that cover the active pharmaceutical ingredients in ORKAMBI, its marketed formulations, and/or its approved indication.
We have 20 issued U.S. patents listed in the Orange Book that cover the active pharmaceutical ingredients in ORKAMBI, its marketed formulations, and/or its approved indication. We have 24 issued U.S. patents listed in the Orange Book that cover the active pharmaceutical ingredients in SYMDEKO, its marketed formulation, and/or its approved indication.
We are evaluating VX-880, an investigational stem-cell derived fully-differentiated islet cell therapy, for the treatment of type 1 diabetes (“T1D”) in a Phase 1/2 clinical trial in which patients receive immunosuppressive therapy to protect the islet cells from immune rejection.
We are evaluating VX-880, an investigational allogeneic stem-cell derived, fully differentiated islet cell therapy, for the treatment of type 1 diabetes (“T1D”) in a Phase 1/2 clinical trial in which patients also receive immunosuppressive therapy to protect the islet cells from immune rejection. We have completed enrollment in Part C of this clinical trial.
We and CRISPR intend to rely upon a combination of rights, including patent rights, trade secret protection, and 14 regulatory exclusivities to protect exa-cel.
We and CRISPR intend to rely upon a combination of rights, including patent rights, trade secret protection, and regulatory exclusivities to protect CASGEVY.
The edited cellular product, called exa-cel, is frozen and transported back to the clinical site where it is stored prior to infusion into the patient. Each step must be completed successfully, and in a timely manner, requiring coordination between us, clinical sites, third-party manufacturers and shipping vendors.
The edited cellular product, called CASGEVY, is frozen and transported back to the ATC where it is stored prior to infusion into the patient. Each step must be completed successfully, and in a timely manner, requiring coordination between us, ATCs, third-party manufacturers and shipping vendors.
Over the last several years, we have expanded our capabilities to include additional innovative therapeutic modalities with a focus on cell and genetic therapies, which have the potential to treat, and in some cases, cure diseases by addressing the underlying cause of the disease.
Over the last several years, this strategy has led us to expand our capabilities to include additional innovative therapeutic modalities with a focus on cell and genetic therapies, which have the potential to treat, and in some cases, cure diseases by addressing the underlying cause of the disease.
Even with these measures, however, we cannot guarantee compliance with the various complex laws and regulations to which we are subject now or in the future. EMPLOYEES AND HUMAN CAPITAL MANAGEMENT As of December 31, 2022, we had approximately 4,800 employees. Of these employees, approximately 3,900 were based in the U.S. and approximately 900 were based outside the U.S.
Even with these measures, however, we cannot guarantee compliance with the various complex laws and regulations to which we are subject now or in the future. EMPLOYEES AND HUMAN CAPITAL MANAGEMENT As of December 31, 2023, we had approximately 5,400 employees. Of these employees, approximately 4,400 were based in the U.S. and approximately 1,000 were based outside the U.S.
To augment our internal programs, we plan to continue acquiring businesses and technologies and collaborating with biopharmaceutical and technology companies, leading academic research institutions, government laboratories, foundations and other organizations to advance research in our disease areas interest, as well as to access technologies needed to execute 4 on our strategy.
To augment our internal programs, we acquire businesses and technologies and collaborate with biopharmaceutical and technology companies, leading academic research institutions, government laboratories, foundations and other organizations to advance research in our disease areas of interest, as well as to access technologies needed to execute on our strategy.
For example, we increased company-wide personal time off, provided resources to enable employees to work from home, continued to promote and expand mental wellness tools, and enhanced child/elder care benefits for all 24 employees. We continually review and augment our programs to include benefits such as expanded parental bonding and increased support for family planning.
For example, we increased company-wide personal time off, continued to promote and expand mental wellness tools, and enhanced child/elder care benefits for all employees. We continually review and augment our programs to include benefits such as expanded parental bonding, increased support for family planning, and gender affirming benefits.
We are in Phase 3 clinical trials evaluating our new, once-daily investigational triple combination therapy, which includes deutivacaftor, for people with CF 12 years of age and older. • In 2019, we established our T1D program through our acquisition of Semma, a privately held company focused on the use of stem cell-derived human islets as a potentially curative treatment for T1D.
We recently announced positive results from our Phase 3 clinical trials evaluating our new, once-daily investigational triple combination therapy, vanzacaftor/tezacaftor/deutivacaftor , for people with CF 6 years of age and older. • In 2019, we established our T1D program through our acquisition of Semma, a privately held company focused on the use of stem cell-derived human islets as a potentially curative treatment for T1D.
He is an elected member of both the American Academy of Arts and Sciences and the Institute of Medicine of the National Academy of Sciences. Dr. Leiden is a director of the Massachusetts Mutual Life Insurance Company, an insurance company. Dr.
He is an elected member of both the American Academy of Arts and Sciences and the Institute of Medicine of the National Academy of Sciences. Dr. Leiden is a member of the Board of Directors of the Massachusetts Mutual Life Insurance Company, a private insurance company, since 2015. Dr.
Sickle Cell and Beta Thalassemia There are multiple approved small molecule and biologic treatments for SCD and beta thalassemia, including products from Novartis International AG (“Novartis”), Global Blood Therapeutics, Inc., which was recently acquired by Pfizer, and Bristol Myers Squibb together with Merck & Co. In addition, bluebird bio, Inc.
Sickle Cell and Beta Thalassemia There are multiple approved small molecule and biologic treatments for SCD and beta thalassemia, including products from Novartis International AG (“Novartis”), Pfizer Inc. (“Pfizer”), and Bristol Myers Squibb together with Merck & Co. In addition, bluebird bio, Inc.
We focus on recruiting, retaining, and developing employees from a diverse range of backgrounds to conduct our research, development, commercial, and other business activities. Our commitment to inclusion, diversity, and equity begins with our executive management team: four of the ten members are women and/or from underrepresented ethnic and racial groups.
We focus on recruiting, retaining, and 26 developing employees from a diverse range of backgrounds to conduct our research, development, commercial, and other business activities. Our executive management team reflects our commitment to inclusion, diversity, and equity: five of the ten members are women and/or from underrepresented communities.
Sachdev is our Executive Vice President, Chief Patient Officer, a role he has held since October 2019. In addition, Mr. Sachdev has served in the role of Chief of Staff to the CEO since April 2020.
From October 2019 to July 2023, he was our Executive Vice President, Chief Patient Officer. In addition, Mr. Sachdev has served in the role of Chief of Staff to the CEO since April 2020.
Treatment for beta thalassemia varies depending on the disease severity for each patient. Patients with TDT, the most severe form of the disease, require regular blood transfusions, as frequently as every two to four weeks. Repeated blood transfusions eventually cause an unhealthy buildup of iron in the patient, leading to organ damage.
Patients with TDT, the most severe form of the disease, require regular blood transfusions, as frequently as every two to four weeks. Repeated blood transfusions eventually cause an unhealthy buildup of iron in the patient, leading to organ damage.
We have also expanded our gender affirming benefits. Our management continues to assess and respond to the evolving needs of our workforce throughout the pandemic. In addition, we provide our employees with career development and advancement opportunities, including job rotations, mentoring, and managerial training.
Our management continues to assess and respond to the evolving needs of our workforce. In addition, we provide our employees with career development and advancement opportunities, including job rotations, mentoring, and managerial training.
We are focused on ensuring the stability of the supply chains for our current products, including TRIKAFTA/KAFTRIO, and for our pipeline programs. In addition, we are focused on identifying and ensuring efficient manufacturing and delivery processes for the cell and genetic therapies we are developing.
We are focused on ensuring the stability of the supply chains for our current products, including KALYDECO, ORKAMBI, SYMDECO/SYMKEVI, TRIKAFTA/KAFTRIO, CASGEVY, and for our pipeline programs. In addition, we are focused on identifying and ensuring efficient manufacturing and delivery processes for the cell and genetic therapies we are developing, including our stem cell therapy program for T1D.
TRIKAFTA/KAFTRIO is reimbursed or accessible in more than 30 countries outside the U.S. We expect to continue to focus significant resources to obtain expanded reimbursement for our CF medicines and pipeline therapies in ex-U.S. markets.
Our CF medicines are used by patients in more than 60 countries, and TRIKAFTA/KAFTRIO is reimbursed or accessible in more than 40 of these countries outside the U.S. We expect to continue to focus significant resources to maintain reimbursement and obtain expanded reimbursement for our CF medicines and pipeline therapies in ex-U.S. markets.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSuch statements may relate to: • our expectations regarding the amount of, timing of, and trends with respect to our financial performance, including revenues, costs and expenses, and other gains and losses; • our expectations regarding clinical trials, including expectations for patient enrollment, development timelines, the expected timing of data from our ongoing and planned clinical trials, and regulatory authority filings and other submissions for our therapies; • our ability to maintain and obtain adequate reimbursement for our products, our ability to launch, commercialize and market our products or any of our other therapies for which we obtain regulatory approval and our ability to obtain label expansions for existing therapies; • our expectations regarding our ability to continue to grow our CF business by increasing the number of people with CF eligible and able to receive our medicines and providing improved treatment options for people who are already eligible for one of our medicines; 59 • the data that will be generated by ongoing and planned clinical trials and the ability to use that data to advance compounds, continue development or support regulatory filings; • our beliefs regarding the support provided by clinical trials and preclinical and nonclinical studies of our therapies for further investigation, clinical trials or potential use as a treatment; • our plans to continue investing in our research and development programs, including anticipated timelines for our programs, and our strategy to develop our pipeline programs, alone or with third party-collaborators; • our beliefs regarding the approximate patient populations for the disease areas on which we focus; • the potential benefits and therapeutic scope of our acquisitions and collaborations, including our acquisition of ViaCyte and its potential to accelerate development of our stem-cell based T1D programs; • the establishment, development and maintenance of collaborative relationships, including potential milestone payments or other obligations; • potential business development activities, including the identification of potential collaborative partners or acquisition targets; • our ability to expand and protect our intellectual property portfolio and otherwise maintain exclusive rights to products; • potential fluctuations in foreign currency exchange rates and the effectiveness of our foreign currency management program; • our expectations regarding the amount of cash to generated by operations, our cash balance and expected generation and interest income; • our expectations regarding our provision for or benefit from income taxes and the utilization of our deferred tax assets; • our ability to use our research programs to identify and develop new product candidates to address serious diseases and significant unmet medical needs; • our plans to expand, strengthen, and invest in our global supply chains and manufacturing infrastructure and capabilities, including for cell and gene therapies; • our ability to attract and retain skilled personnel; • our expectations involving governmental cost containment and other regulatory efforts; • our expectations surrounding the competitive landscape facing our products and product candidates; • our expectations regarding the effect of COVID-19 on, among other things, our financial performance, liquidity, business and operations, including manufacturing, supply chain, research and development activities and pipeline programs; and • our liquidity and our expectations regarding the possibility of raising additional capital.
Biggest changeSuch statements may relate to: • our expectations regarding the amount of, timing of, and trends with respect to our financial performance, including revenues, costs and expenses, and other gains and losses; • our expectations regarding clinical trials, including expectations for patient enrollment, development timelines, the expected timing of data from our ongoing and planned clinical trials, and regulatory authority filings and other submissions for our therapies; • our ability to maintain and obtain adequate reimbursement for our products and product candidates, our ability to launch, commercialize and market our products or any of our other therapies for which we obtain regulatory approval, including CASGEVY, and our ability to obtain label expansions for existing therapies; • our expectations regarding our ability to continue to grow our CF business by increasing the number of people with CF eligible and able to receive our medicines and providing improved treatment options for people who are already eligible for one of our medicines; 60 • the data that will be generated by ongoing and planned clinical trials and the ability to use that data to advance compounds, continue development or support regulatory filings, including from the multiple ascending dose portion of the Phase 1/2 clinical trial of VX-522, the durable efficacy and effectiveness of CASGEVY as one-time functional cure for people with SCD and TDT, and the benefit risk profile supporting VX-548 as a transformative option for acute pain as compared to existing agents, and that our triple combinations of vanzacaftor/tezacaftor/deutivacaftor will provide additional clinical benefits to people with CF who have at least one mutation in their CFTR ; • our beliefs and plans with respect to the potential near-term launch of our triple combinations of vanzacaftor/tezacaftor/deutivacaftor for treatment of CF and for VX-548 for the treatment of acute pain; • our beliefs regarding the support provided by clinical trials and preclinical and nonclinical studies of our therapies for further investigation, clinical trials or potential use as a treatment; • our plans to continue investing in our research and development programs, including anticipated timelines for our programs, and our strategy to develop our pipeline programs, alone or with third party-collaborators; • our beliefs regarding the approximate patient populations for the disease areas on which we focus; • the potential benefits and therapeutic scope of our acquisitions and collaborations, including our acquisition of ViaCyte and its potential to accelerate development of our stem-cell based T1D programs, and our collaboration with CRISPR for their gene-editing technology to accelerate the development of our hypoimmune cell therapies for T1D; • potential business development activities, including the identification of potential collaborative partners or acquisition targets; • the establishment, development and maintenance of collaborative relationships, including potential milestone payments or other obligations; • our ability to expand and protect our intellectual property portfolio and otherwise maintain exclusive rights to products; • potential fluctuations in foreign currency exchange rates and the effectiveness of our foreign currency management program; • our expectations regarding the amount of cash to generated by operations, our cash balance and expected generation and interest income; • our expectations regarding our provision for or benefit from income taxes and the utilization of our deferred tax assets; • our ability to use our research programs to identify and develop new product candidates to address serious diseases and significant unmet medical needs; • the effectiveness of our governance, plans and strategy with respect to managing cybersecurity risks and other threats to our information technology systems; • our plans to expand, strengthen, and invest in our global supply chains and manufacturing infrastructure and capabilities, including for cell and gene therapies; • our ability to attract and retain skilled personnel; • our expectations involving governmental cost containment and other regulatory efforts; • our expectations surrounding the competitive landscape facing our products and product candidates; and • our liquidity and our expectations regarding the possibility of raising additional capital.
While we have developed internal capabilities to supply product candidates for use in our clinical trials as well as our medicines for commercial sale, a majority of the manufacturing steps needed to produce our medicines, product candidates, and drug products are performed through a third-party manufacturing network.
While we have developed internal capabilities to supply product candidates for use in our clinical trials as well as our products for commercial sale, a majority of the manufacturing steps needed to produce our medicines, product candidates, and drug products are performed through a third-party manufacturing network.
In addition, we need to attract and retain employees with experience in development, marketing and commercialization of medicines and therapies, including cell and genetic therapies. We have entered into employment agreements with some executives and provide stock-related compensation benefits to all of our key employees that vest over time and therefore induce them to remain with us.
In addition, we need to attract and retain employees with experience in development, marketing and commercialization of medicines and therapies, including cell and genetic therapies. We provide stock-related compensation benefits to all of our key employees that vest over time and therefore induce them to remain with us and have entered into employment agreements with some executives.
Risks associated with operating a global biotechnology company include: • differing regulatory requirements for drug approvals and regulation of approved drugs in foreign countries; • varying reimbursement regimes and difficulties or the inability to obtain reimbursement for our products in foreign countries in a timely manner; • differing patient treatment infrastructures, particularly since our business is focused on the treatment of serious diseases that affect relatively smaller numbers of patients and are typically prescribed by specialist physicians; • collectability of accounts receivable; • changes in tariffs, trade barriers, and regulatory requirements, the risks of which appear to have increased in the current political environment; 52 • economic weakness, including recession and inflation, or political instability in particular foreign economies and markets; • differing levels of enforcement and/or recognition of contractual and intellectual property rights; • complying with local laws and regulations, which can change significantly over time; • foreign taxes, including withholding of payroll taxes; • foreign currency fluctuations, which could result in reduced revenues or increased operating expenses, and other obligations incident to doing business or operating in another country; • workforce uncertainty in countries where labor unrest is more common than in the U.S.; • reliance on third-party vendors, distributors and suppliers; • import and export licensing requirements, tariffs, and other trade and travel restrictions; • global or regional public health emergencies that could affect our operations or business; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and • business interruptions resulting from geo-political actions, including war and terrorism.
Risks associated with operating a global biotechnology company include: • differing regulatory requirements for drug approvals and regulation of approved drugs in foreign countries; • varying reimbursement regimes and difficulties or the inability to obtain reimbursement for our products in foreign countries in a timely manner; • differing patient treatment infrastructures, particularly since our business is focused on the treatment of serious diseases that affect relatively smaller numbers of patients and are typically prescribed by specialist physicians; • collectability of accounts receivable; • changes in tariffs, trade barriers, and regulatory requirements, the risks of which appear to have increased in the current political environment; 54 • economic weakness, including recession and inflation, or political instability in particular foreign economies and markets; • differing levels of enforcement and/or recognition of contractual and intellectual property rights; • complying with local laws and regulations, which can change significantly over time; • foreign taxes, including withholding of payroll taxes; • foreign currency fluctuations, which could result in reduced revenues or increased operating expenses, and other obligations incident to doing business or operating in another country; • workforce uncertainty in countries where labor unrest is more common than in the U.S.; • reliance on third-party vendors, distributors and suppliers; • import and export licensing requirements, tariffs, and other trade and travel restrictions; • global or regional public health emergencies that could affect our operations or business; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and • business interruptions resulting from geo-political actions, including war and terrorism.
Among the factors that could delay our development programs are: • ongoing discussions with the FDA or comparable foreign authorities regarding the scope or design of our clinical trials and the number of clinical trials we must conduct; • failure or delay in reaching agreement on acceptable terms with prospective contract research organizations (“CROs”) and clinical trial sites; • failure to add or delay in adding a sufficient number of clinical trial sites and obtaining institutional review board or independent ethics committee approval at each clinical trial site; • suspension or termination of clinical trials of product candidates for various reasons, including non-compliance with regulatory requirements; • clinical trial sites deviating from clinical trial protocol or dropping out of a clinical trial; • delays in enrolling volunteers or patients into clinical trials, including as a result of low numbers of patients that meet the eligibility criteria for the trial; • a lower than anticipated retention rate of volunteers or patients in clinical trials; 40 • the need to repeat clinical trials as a result of unfavorable or inconclusive results, unforeseen complications in testing or clinical investigator error; • inadequate supply or deficient quality of product candidate materials or other materials necessary for the conduct of our clinical trials; • unfavorable FDA or foreign regulatory authority inspection and review of a manufacturing facility that supplied clinical trial materials or its relevant manufacturing records or a clinical trial site or records of any clinical or preclinical investigation; • unfavorable or inconclusive scientific results from clinical trials; • serious and unexpected treatment-related side-effects experienced by participants in our clinical trials or by participants in clinical trials being conducted by our competitors to evaluate product candidates with similar mechanisms of action or structures to therapies that we are developing; • favorable results in testing of our competitors’ product candidates, or FDA or foreign regulatory authority approval of our competitors’ product candidates; or • action by the FDA or a foreign regulatory authority to place a clinical hold or partial clinical hold on a trial or compound or deeming the clinical trial conduct as problematic.
Among the factors that could delay our development programs are: 41 • ongoing discussions with the FDA or comparable foreign authorities regarding the scope or design of our clinical trials and the number of clinical trials we must conduct; • failure or delay in reaching agreement on acceptable terms with prospective contract research organizations (“CROs”) and clinical trial sites; • failure to add or delay in adding a sufficient number of clinical trial sites and obtaining institutional review board or independent ethics committee approval at each clinical trial site; • suspension or termination of clinical trials of product candidates for various reasons, including non-compliance with regulatory requirements; • clinical trial sites deviating from clinical trial protocol or dropping out of a clinical trial; • delays in enrolling volunteers or patients into clinical trials, including as a result of low numbers of patients that meet the eligibility criteria for the trial; • a lower than anticipated retention rate of volunteers or patients in clinical trials; • the need to repeat clinical trials as a result of unfavorable or inconclusive results, unforeseen complications in testing or clinical investigator error; • inadequate supply or deficient quality of product candidate materials or other materials necessary for the conduct of our clinical trials; • unfavorable FDA or foreign regulatory authority inspection and review of a manufacturing facility that supplied clinical trial materials or its relevant manufacturing records or a clinical trial site or records of any clinical or preclinical investigation; • unfavorable or inconclusive scientific results from clinical trials; • serious and unexpected treatment-related side-effects experienced by participants in our clinical trials or by participants in clinical trials being conducted by our competitors to evaluate product candidates with similar mechanisms of action or structures to therapies that we are developing; • favorable results in testing of our competitors’ product candidates, or FDA or foreign regulatory authority approval of our competitors’ product candidates; or • action by the FDA or a foreign regulatory authority to place a clinical hold or partial clinical hold on a trial or compound or deeming the clinical trial conduct as problematic.
Pharmaceutical companies have been prosecuted under these laws for a variety of alleged promotional and marketing activities, such as providing free product to customers with the expectation that the customers would bill federal programs for the product; reporting to pricing services inflated average wholesale prices that were then used by federal programs to set reimbursement rates; engaging in promotion for uses that the FDA has not approved, known as “off-label” uses, that caused claims to be submitted to Medicaid for those off-label uses; submitting inflated “best price” information to the Medicaid Rebate Program; and certain manufacturing-related violations.
Pharmaceutical companies have been prosecuted under these laws for a variety of alleged promotional and marketing activities, such as providing free product to customers with the expectation that the customers would bill federal programs for the product; reporting to pricing services inflated average wholesale prices that were then used by federal programs to set reimbursement rates; engaging in promotion for uses that the FDA has not approved, known as “off-label” uses, that caused claims to be submitted to Medicaid for those off-label uses; submitting inflated “best price” information to 43 the Medicaid Rebate Program; and certain manufacturing-related violations.
Any later discovery of previously unknown problems or safety issues with approved drugs or manufacturing processes, or failure to comply with regulatory requirements, may result in restrictions on such drugs 43 or manufacturing processes, withdrawal of drugs from the market, the imposition of civil or criminal penalties or a refusal by the FDA and/or other regulatory bodies to approve pending applications for marketing approval of new drugs or supplements to approved applications, any of which could have a material adverse effect on our business.
Any later discovery of previously unknown problems or safety issues with approved drugs or manufacturing processes, or failure to comply with regulatory requirements, may result in restrictions on such drugs or manufacturing processes, withdrawal of drugs from the market, the imposition of civil or criminal penalties or a refusal by the FDA and/or other regulatory bodies to approve pending applications for marketing approval of new drugs or supplements to approved applications, any of which could have a material adverse effect on our business.
For example, while we are not directly subject to the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act (“HIPAA”), we could be subject to penalties, including criminal penalties if we knowingly obtain or disclose individually identifiable health information from a HIPAA-covered health care provider or research institution that has not complied with HIPAA’s requirements for disclosing such information.
For example, while we are not directly subject to the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act (“HIPAA”), we could be subject to penalties, including criminal penalties if we knowingly obtain or disclose individually identifiable health information from a HIPAA-covered health care provider or 46 research institution that has not complied with HIPAA’s requirements for disclosing such information.
Achieving the anticipated benefits of any transaction and successfully integrating acquired businesses or technologies involves a number of risks, including: • failure to successfully develop and commercialize the acquired products, product candidates or technologies or to achieve other strategic objectives; 45 • delays or inability to progress preclinical programs into clinical development or unfavorable data from clinical trials evaluating the acquired or licensed product or product candidates; • difficulty in integrating the products, product candidates, technologies, business operations and personnel of an acquired asset or company; • disruption of our ongoing business and distraction of our management and employees from daily operations or other opportunities and challenges; • the potential loss of key employees of an acquired company; • entry into markets in which we have no or limited direct prior experience or where competitors in such markets have stronger market positions; • potential failure of the due diligence processes to identify significant problems, liabilities or challenges of an acquired company, or acquired or licensed products, product candidate or technology, including but not limited to, problems, liabilities or challenges with respect to intellectual property, clinical or non-clinical data, safety, accounting practices, employee, or third-party relations and other known and unknown liabilities; • liability for activities of the acquired company or licensor before the acquisition or license, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities, and other known and unknown liabilities; • exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of an acquisition or license, including but not limited to, claims from terminated employees, customers, former equity holders or other third parties; and • difficulties in the integration of the acquired company’s departments, systems, including accounting, human resource and other administrative systems, technologies, books and records, and procedures, as well as in maintaining uniform standards, controls, including internal control over financial reporting required by the Sarbanes-Oxley Act of 2002 and related procedures and policies.
Achieving the anticipated benefits of any transaction and successfully integrating acquired businesses or technologies involves a number of risks, including: • failure to successfully develop and commercialize the acquired products, product candidates or technologies or to achieve other strategic objectives; • delays or inability to progress preclinical programs into clinical development or unfavorable data from clinical trials evaluating the acquired or licensed product or product candidates; • difficulty in integrating the products, product candidates, technologies, business operations and personnel of an acquired asset or company; • disruption of our ongoing business and distraction of our management and employees from daily operations or other opportunities and challenges; • the potential loss of key employees of an acquired company; • entry into markets in which we have no or limited direct prior experience or where competitors in such markets have stronger market positions; • potential failure of the due diligence processes to identify significant problems, liabilities or challenges of an acquired company, or acquired or licensed products, product candidate or technology, including problems, liabilities or challenges with respect to intellectual property, clinical or non-clinical data, safety, accounting practices, employee, or third-party relations and other known and unknown liabilities; • liability for activities of the acquired company or licensor before the acquisition or license, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities, and other known and unknown liabilities; • exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of an acquisition or license, including claims from terminated employees, customers, former equity holders or other third parties; and • difficulties in the integration of the acquired company’s departments, systems, including accounting, human resource and other administrative systems, technologies, books and records, and procedures, as well as in maintaining uniform standards, controls, including internal control over financial reporting required by the Sarbanes-Oxley Act of 2002 and related procedures and policies.
For example, Clinical Trial Regulation (EU) No. 536/2014, and the EMA policy on publication of clinical data for medicinal products for human use, both permit the EMA to publish clinical information submitted in marketing authorization applications. Third party review and scrutiny could result in public misconceptions regarding our drugs and product candidates.
For example, Clinical Trial Regulation (EU) No. 536/2014, and the EMA policy on publication of clinical data 40 for medicinal products for human use, both permit the EMA to publish clinical information submitted in marketing authorization applications. Third party review and scrutiny could result in public misconceptions regarding our drugs and product candidates.
Failure to comply with the reporting requirements could result in significant civil monetary penalties. 42 The sales and marketing practices of our industry have been the subject of increased scrutiny from government authorities in the U.S. and other countries in which we market our products, and we believe that this trend will continue.
Failure to comply with the reporting requirements could result in significant civil monetary penalties. The sales and marketing practices of our industry have been the subject of increased scrutiny from government authorities in the U.S. and other countries in which we market our products, and we believe that this trend will continue.
Additionally, patients may be unwilling to participate in our clinical trials because of concerns that cell and genetic therapies are unsafe or unethical, negative publicity from adverse events in the biotechnology or gene therapy industries, or for other reasons, including competitive clinical studies for similar patient populations.
Additionally, patients may be unwilling to participate in our clinical trials because of concerns that cell and genetic therapies are unsafe or unethical, negative publicity from adverse safety events in the biotechnology or gene therapy industries, or for other reasons, including competitive clinical studies for similar patient populations.
For example, the ACA required 35 manufacturers of Medicare Part D brand name drugs to provide discounts on those drugs to Medicare Part D beneficiaries during the coverage gap; increased the rebates paid by pharmaceutical companies to state Medicaid programs on drugs covered by Medicaid; and imposed an annual fee, which increases annually, on sales by branded pharmaceutical manufacturers.
For example, the ACA required manufacturers of Medicare Part D brand name drugs to provide discounts on those drugs to Medicare Part D beneficiaries during the coverage gap; increased the rebates paid by pharmaceutical companies to state Medicaid programs on drugs covered by Medicaid; and imposed an annual fee, which increases annually, on sales by branded pharmaceutical manufacturers.
These product candidates are in various stages of development and must satisfy rigorous standards of safety and efficacy before they can be approved for sale by the FDA or comparable foreign regulatory authorities. To satisfy these standards, we must allocate resources among our various development programs and must engage in expensive and lengthy testing of our product candidates.
These product candidates are in various stages of development and must satisfy rigorous standards of safety and efficacy before they can be 39 approved for sale by the FDA or comparable foreign regulatory authorities. To satisfy these standards, we must allocate resources among our various development programs and must engage in expensive and lengthy testing of our product candidates.
U.S. and foreign patent applications typically are maintained in confidence for a period of time after they initially are filed with the applicable patent office. Consequently, we cannot be certain that we were the first to invent, or the first to file patent applications on, our products or product candidates or their use.
U.S. and foreign patent applications typically are maintained in confidence for a period of time after they initially are filed with the applicable patent office. Consequently, we cannot be certain that we were the first to file patent applications on our products or product candidates or their use.
As a result, currency fluctuations among our reporting currency, the U.S. dollar, and the currencies in which we do business may affect our operating results, often in unpredictable ways. Our quarterly results also could be materially affected by significant charges, which may or may not be similar to charges we have experienced in the past.
As a result, currency fluctuations among our reporting currency, the U.S. dollar, and the currencies in which we 58 do business may affect our operating results, often in unpredictable ways. Our quarterly results also could be materially affected by significant charges, which may or may not be similar to charges we have experienced in the past.
Such standards, particularly with respect to newer cell and genetic therapies, will continue to evolve and subject us and third parties to new or changing requirements. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be required to replace them.
Such standards, particularly with respect to newer cell and genetic therapies, will continue to evolve and subject us and third parties to new or changing requirements. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be 48 required to replace them.
If the decision is upheld on appeal (including a potential subsequent appeal to the Supreme Court), the Broad Institute would maintain its granted patents directed to those applications CRISPR/Cas9 technology in eukaryotic cells, and the CVC Group’s pending patent applications directed to that subject matter would not proceed to grant.
If the decision is upheld on appeal (including a potential subsequent appeal to the Supreme Court), Broad would maintain its granted patents directed to those applications CRISPR/Cas9 technology in eukaryotic cells, and the CVC Group’s pending patent applications directed to that subject matter would not proceed to grant.
The regulatory approval process and clinical trial requirements for cell and genetic therapies can be more expensive and take longer than for other, better known or more extensively studied product candidates, and regulatory requirements governing cell and genetic therapy products have changed frequently and may continue to change in the future.
The regulatory approval process and clinical trial requirements for cell and genetic therapies can be more expensive and take longer than for other, better known or more extensively studied product candidates, and regulatory requirements 45 governing cell and genetic therapy products have changed frequently and may continue to change in the future.
On February 28, 2021, the USPTO issued a decision in Interference No. 106, 115, concluding that the Broad Institute invented certain applications of CRISPR/Cas9 technology in eukaryotic cells before the CVC Group. The CVC Group has appealed the decision to the U.S. Court of Appeals for the Federal Circuit.
On February 28, 2021, the USPTO issued a decision in Interference No. 106, 115, concluding that Broad invented certain applications of CRISPR/Cas9 technology in eukaryotic cells before the CVC Group. The CVC Group has appealed the decision to the U.S. Court of Appeals for the Federal Circuit.
In the event of a successful claim of infringement against us, we may have to pay substantial damages, obtain 51 one or more licenses from third parties, pay royalties or redesign our infringing products, which may be impossible or require substantial time and monetary expenditure.
In the event of a successful claim of infringement against us, we may have to pay substantial damages, obtain one or more licenses from third parties, pay royalties or redesign our infringing products, which may be impossible or require substantial time and monetary expenditure.
Any new information regarding our products and product candidates or competitive products or potentially competitive product candidates can substantially affect investors’ perceptions regarding our future prospects. We, our collaborators, and our competitors periodically provide updates regarding drug development programs, typically through press releases, conference calls and presentations at medical conferences.
Any new information regarding our products and product candidates, or competitive products or potentially competitive product candidates, can substantially affect investors’ perceptions regarding our future prospects. We, our collaborators, and our competitors periodically provide updates regarding drug and therapy development programs, typically through press releases, conference calls and presentations at medical conferences.
We may later incur impairment charges related to assets acquired in any such transaction. Even if we achieve the long-term benefits associated with our strategic transactions, our expenses and short-term costs may increase materially and adversely affect our liquidity and short-term net income.
We may later incur impairment charges related to assets acquired in any such transaction. Even if we achieve the long- 50 term benefits associated with our strategic transactions, our expenses and short-term costs may increase materially and adversely affect our liquidity and short-term net income.
The lawsuit follows our receipt of a Notice Letter on June 9, 2022, advising that Lupin had submitted an ANDA to the FDA seeking approval to manufacture and market a generic version of KALYDECO ® granules in the U.S.
The lawsuit follows our receipt of a Notice Letter on June 9, 2022, advising that Lupin had submitted an ANDA to the FDA seeking approval to manufacture and market a generic version of KALYDECO granules in 52 the U.S.
Accordingly, even if we believe 39 one of our product candidates meets the criteria for Fast Track, Priority Review, Breakthrough Therapy and/or RMAT designation, the FDA may disagree and instead determine not to make such designation.
Accordingly, even if we believe one of our product candidates meets the criteria for Fast Track, Priority Review, Breakthrough Therapy and/or RMAT designation, the FDA may disagree and instead determine not to make such designation.
The timing of the release of information by us regarding our drug development programs is often beyond our control and is influenced by the timing of receipt of data from our clinical trials and by the general preference among pharmaceutical companies to disclose clinical data during medical conferences.
The timing of the release of information by us regarding our drug and therapy development programs is often beyond our control and is influenced by the timing of receipt of data from our clinical trials and by the general preference among pharmaceutical companies to disclose clinical data during medical conferences.
Patents and patent applications in this patent portfolio have been the subject of numerous contentious proceedings in the U.S., Europe, and other jurisdictions, including interference proceedings in the USPTO between the CVC Group and (separately) the Broad Institute, Sigma-Aldrich and ToolGen.
Patents and patent applications in this patent portfolio have been the subject of numerous contentious proceedings in the U.S., Europe, and other jurisdictions, including interference proceedings in the USPTO between the CVC Group and (separately) Broad, Sigma-Aldrich and ToolGen.
In the course of our business, we collect, store, and transmit confidential information (including personal information and intellectual property), and it is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information.
In the course of our business, we collect, store, and transmit confidential information (including personal information and intellectual property), and it is critical that we do so in a secure manner to maintain the confidentiality, integrity, and availability of such confidential information.
Additionally, if a collaborator were to be involved in a business combination with a third party, it might de-emphasize or terminate the development or commercialization of any product candidate licensed to it by us.
If a collaborator were to be involved in a business combination with a third party, it might de-emphasize or terminate the development or commercialization of any product candidate licensed to it by us.
In the course of providing its services, a contract manufacturer may develop process technology related to the 48 manufacture of our products or product candidates that the manufacturer owns, either independently or jointly with us.
In the course of providing its services, a contract manufacturer may develop process technology related to the manufacture of our products or product candidates that the manufacturer owns, either independently or jointly with us.
In the U.S., various states, including Nevada, Maryland, Louisiana, New York, California, Washington, Massachusetts, New Jersey, Connecticut, Vermont, New Hampshire, Utah, Minnesota, Oregon, Colorado, New Mexico, Virginia, Maine, Texas, North Dakota, and West Virginia, have passed legislation requiring companies to disclose extensive information relating to drug prices, drug price increases, and spending on research, development, and marketing, among other things.
In the U.S., various states, including Nevada, Maryland, Louisiana, New York, California, Washington, Massachusetts, New Jersey, Connecticut, Vermont, New Hampshire, Utah, Minnesota, Oregon, Colorado, New Mexico, Virginia, Maine, Texas, North Dakota, West Virginia, Florida, and New Jersey have passed legislation requiring companies to disclose extensive 37 information relating to drug prices, drug price increases, and spending on research, development, and marketing, among other things.
Additional factors that have caused quarterly fluctuations to our operating results in recent years include variable amounts of revenues, expenses resulting from our significant investments in research and development and commercialization activities, changes in the fair value of our strategic investments, derivative instruments and contingent consideration liabilities, charges for excess and obsolete inventories, interest income, interest expenses and our provision for income taxes.
Additional factors that have caused quarterly fluctuations to our operating results in recent years include variable amounts of revenues; expenses resulting from our significant investments in research and development, acquired in-process research and development, and commercialization activities; changes in the fair value of our strategic investments, derivative instruments and contingent consideration liabilities; charges for excess and obsolete inventories, interest income, interest expenses; and our provision for income taxes.
In addition, medical centers that administer procedures accompanying treatment could experience capacity constraints, and these centers are subject to competing priorities that could delay patient access to procedures associated with cell and gene therapy products. Negative public opinion or more restrictive government regulations may delay or impair the successful commercialization of, and demand for, cell and gene therapies.
In addition, medical centers, including ATCs, that administer procedures accompanying treatment could experience capacity constraints, and these centers are subject to competing priorities that could delay patient access to procedures associated with cell and gene therapy products. Negative public opinion or more restrictive government regulations may delay or impair the successful commercialization of, and demand for, cell and gene therapies.
In addition, the 44 commercialization of cell and gene therapies requires the collection and processing of a greater amount of personal data than traditional therapies, potentially increasing risk.
In addition, the commercialization of cell and gene therapies requires the collection and processing of a greater amount of personal data than traditional therapies, potentially increasing risk.
Challenges could adversely affect our operations and financial results if we do not have sufficient staff to perform necessary functions. In addition, the 53 available pool of skilled employees would be further reduced if immigration laws change in a manner that increases restrictions on immigration.
Challenges could adversely affect our operations and financial results if we do not have sufficient staff to perform necessary functions. In addition, the 55 available pool of skilled employees would be further reduced if immigration laws change in a manner that increases restrictions on immigration.
Furthermore, whether or not we are ultimately successful in defending any such claims, we might be required to direct significant financial and managerial resources to such defense and adverse publicity is likely to result. 55 If our facilities were to experience a catastrophic loss, our operations would be seriously harmed.
Furthermore, whether or not we are ultimately successful in defending any such claims, we might be required to direct significant financial and managerial resources to such defense and adverse publicity is likely to result. 56 If our facilities were to experience a catastrophic loss, our operations would be seriously harmed.
For programs addressing rare genetic diseases with small patient populations, we may not be able to identify, recruit and enroll a sufficient number of patients, or those with required or desired characteristics, to complete our clinical studies in an adequate and timely manner.
For cell and genetic therapy programs addressing rare genetic diseases with small patient populations, we may not be able to identify, recruit and enroll a sufficient number of patients, or those with required or desired characteristics, to complete our clinical studies in an adequate and timely manner.
Our concentrated source of revenues presents a number of risks to our business, including: • that one or more competing therapies may be developed successfully as a treatment for people with CF; • that reimbursement policies of payors and other third parties may make it difficult to obtain reimbursement or reduce the net price we receive for our products; • that we may experience manufacturing or supply disruptions for our CF medicines; and • that we may experience adverse developments with respect to development or commercialization of our CF medicines and/or pipeline product candidates.
Our concentrated source of revenues presents a number of risks to our business, including: • that one or more competing therapies may be developed successfully as a treatment for people with CF; • that reimbursement policies of payors and other third parties may make it difficult to obtain reimbursement or reduce the net price we receive for our products; • that we may experience manufacturing or supply disruptions for our CF medicines; and • that we may experience adverse developments with respect to development or commercialization of our CF medicines.
For example, our corporate headquarters, as well as additional leased space that we use for certain logistical and laboratory operations and manufacturing, are located in a flood zone along the Massachusetts coast. We have adopted a business continuity plan to address most crises.
For example, our corporate headquarters, as well as additional leased space that we use for certain logistical and laboratory operations and manufacturing, are located in a flood zone along the Massachusetts coast. We have adopted business continuity plans to address most crises.
Our stock repurchases will depend upon, among other factors, our cash balances and potential future capital requirements, results of operations, financial condition, and other factors that we may deem relevant. We can provide no assurance that we will repurchase stock at favorable prices, if at all.
Our stock repurchases will depend upon, among other factors, market conditions, our cash balances and potential future capital requirements, results of operations, financial condition, and other factors that we may deem relevant. We can provide no assurance that we will repurchase stock at favorable prices, if at all.
There is no assurance that coverage and reimbursement will be available outside of the U.S. for our four approved medicines or any future medicine, and, even if it is available, whether the timing or the level of reimbursement will be sufficient to allow us to market our medicines.
There is no assurance that coverage and reimbursement will be available outside of the U.S. for our five approved medicines or any future medicine, and, even if it is available, whether the timing or the level of reimbursement will be sufficient to allow us to market our medicines.
Risks Related To Our Operations A variety of risks associated with operating in foreign countries could materially adversely affect our business. We have expanded our international operations over the past several years to market our CF medicines and expand our research and development capabilities.
A variety of risks associated with operating in foreign countries could materially adversely affect our business. We have expanded our international operations over the past several years to market our medicines and expand our research and development capabilities.
There is considerable uncertainty within our industry about the validity, scope, and enforceability of many issued patents in the U.S. and elsewhere in the world, and, to date, the law and practice remains in substantial flux both in the agencies that grant patents and in the courts.
There is considerable uncertainty within our industry about the validity, scope, and enforceability of many issued patents in the U.S. and elsewhere in the world, and, to date, the law and practice remains in flux both in the agencies that grant 51 patents and in the courts.
Risks Related to Intellectual Property • If our patents do not protect our products or our products infringe third-party patents, we could be subject to litigation which could result in injunctions preventing us from selling our products or substantial liabilities. • Uncertainty over intellectual property in the pharmaceutical and biotechnology industry has been the source of litigation and other disputes, that are inherently costly and unpredictable. • We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.
Risks Related to Intellectual Property • If our patents do not protect our products and our products infringe third-party patents, we could be subject to litigation which could result in injunctions preventing us from selling out products, substantial damages, or circumvention of our patents by third parties. • Uncertainty over intellectual property in the pharmaceutical and biotechnology industry has been the source of litigation and other disputes that are inherently costly and unpredictable. • We may be subject to claims by third parties asserting that our employees or we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.
Physicians may elect not to prescribe our products or recommend our cell or genetic therapies, and patients may elect not to take them or receive them or they may discontinue use of our products after initiation of treatment, for a variety of reasons including: • prevalence and severity of adverse side effects; • lack of reimbursement availability from third-party payors, including governmental entities; • lower demonstrated efficacy, safety and/or tolerability compared to alternative treatment methods; • lack of cost-effectiveness; • a decision to wait for the approval of other therapies in development that have significant perceived advantages over our product; • convenience and ease of administration; • limitations or warnings contained in the labeling; • the timing of market introduction of our product as well as competitive products; • other potential advantages of alternative treatment methods; and • inadequate sales, marketing and/or distribution support, including as a result of limitations or restrictions resulting from COVID-19.
Physicians may elect not to prescribe our products or recommend our cell or genetic therapies, and patients may elect not to take them or receive them or they may discontinue use of our products after initiation of treatment, for a variety of reasons including: • prevalence and severity of adverse side effects; • lack of reimbursement availability from third-party payors, including governmental entities; • lower demonstrated efficacy, safety and/or tolerability compared to alternative treatment methods; • lack of cost-effectiveness; • a decision to wait for the approval of other therapies in development that have significant perceived advantages over our product; 35 • convenience and ease of administration; • limitations or warnings contained in the labeling; • the timing of market introduction of our product as well as competitive products; • other potential advantages of alternative treatment methods; and • inadequate sales, marketing and/or distribution support.
Such proceedings may involve claims for, or the possibility of, damages or fines and penalties involving substantial amounts of money or other relief, including but not limited to civil or criminal fines and penalties. If any of these legal proceedings were to result in an adverse outcome, it could have a material adverse effect on our business.
Such proceedings may involve claims for, or the possibility of, damages or fines and penalties involving substantial amounts of money or other relief, including civil or criminal fines and penalties. If any of these legal proceedings were to result in an adverse outcome, it could have a material adverse effect on our business.
Our products and any products that we develop in the future may not be able to compete effectively with marketed drugs or new drugs that may be developed by competitors. The risk of competition is particularly important to our company because substantially all of our revenues are related to the treatment of people with CF.
Our products and any products that we develop in the future may not be able to compete effectively with marketed 34 therapies or new therapies that may be developed by competitors. The risk of competition is particularly important to our company because substantially all of our revenues are related to the treatment of people with CF.
Any such forward-looking statements are made on the basis of our views and assumptions as of the date of the filing and are not estimates of future performance. Except as required by law, we undertake no obligation to publicly update any forward-looking statements. The reader is cautioned not to place undue reliance on any such statements.
Any such forward-looking statements are made on the basis of our views and assumptions as of the date of the filing and are not estimates of future performance. Except as required by law, we undertake no obligation to publicly update any forward-looking statements. The reader is cautioned not to place undue reliance on any such statements. 61 ITEM 1B.
The enrollment of patients further depends on many factors, including: • the proximity of patients to clinical trial sites; • the size of the patient population, the nature of the protocol, and the design of the clinical trial; • our ability to recruit clinical trial investigators with the appropriate competencies and experience; • the number of other clinical trials ongoing and competing for patients in the same indication; • our ability to obtain and maintain patient consents; • reporting of the preliminary results of any of our clinical trials; • the availability of effective treatments for the relevant disease and eligibility criteria for the clinical trial; • the risk that patients enrolled in clinical trials will drop out of the clinical trials before clinical trial completion; and • factors we may not be able to control, such as current or potential pandemics that may limit patients, principal investigators or staff or clinical site availability (e.g., the COVID-19 pandemic).
The enrollment of patients further depends on many factors, including: • the proximity of patients to clinical trial sites; • the size of the patient population, the nature of the protocol, and the design of the clinical trial; 42 • our ability to recruit clinical trial investigators with the appropriate competencies and experience; • the number of other clinical trials ongoing and competing for patients in the same indication; • our ability to obtain and maintain patient consents; • reporting of the preliminary results of any of our clinical trials; • the availability of effective treatments for the relevant disease and eligibility criteria for the clinical trial; • the risk that patients enrolled in clinical trials will drop out of the clinical trials before clinical trial completion; and • factors we may not be able to control, such as current or potential pandemics that may limit patients, principal investigators or staff or clinical site availability.
Additionally, private payors, including health maintenance organizations and pharmacy benefit managers in the U.S., are adopting more aggressive utilization management techniques and are increasingly applying restrictive plan designs that can impact patients and manufacturers, and they continue to push for significant discounts and rebates from manufacturers. Additionally, on August 16, 2022, the Inflation Reduction Act was enacted.
Additionally, private payors, including health maintenance organizations and pharmacy benefit managers in the U.S., are adopting more aggressive utilization management techniques and are increasingly applying restrictive plan designs that can impact patients and manufacturers, and they continue to push for significant discounts and rebates from manufacturers. Additionally, on August 16, 2022, the IRA was enacted.
The Inflation Reduction Act also requires the Secretary of the Department of Health and Human Services to issue program guidance on numerous areas associated with implementation of the law’s requirements, including for drug price negotiation and inflation rebates. We cannot know what form this program guidance would take or how it would affect our business. It is possible the U.S.
The IRA also requires the Secretary of the Department of Health and Human Services (the “Secretary”) to issue program guidance on numerous areas associated with implementation of the law’s requirements, including for drug price negotiation and inflation rebates. We cannot know what form this program guidance would take or how it would affect our business. It is possible the U.S.
As a result, shareholders or other parties may find it difficult to remove or replace our directors or to effectuate certain types of business combinations involving Vertex.
As a result, shareholders or other parties may find it difficult to remove or replace our directors or to effectuate certain types of business combinations involving us.
In particular, our success will depend upon physicians prescribing our product candidates in lieu of existing treatments they are already familiar with and for which greater clinical data may be available. Moreover, physicians and patients may delay acceptance of cell and gene therapy product candidates until the product candidates have been on the market for a certain amount of time.
In particular, our success will depend upon physicians prescribing our therapies in lieu of existing treatments they are already familiar with and for which greater clinical data may be available. Moreover, physicians and patients may delay acceptance of cell and gene therapies until the therapies have been on the market for a certain amount of time.
Our business also may be materially harmed by impaired sales of our products, denial or withdrawal of regulatory approvals, required label changes or additional clinical trials, reputational harm, or government investigations or lawsuits brought against us.
Our business also may be materially harmed by impaired sales of our products, denial or withdrawal of regulatory approvals, non-renewal of conditional regulatory approvals, required label changes or additional clinical trials, reputational harm, or government investigations or lawsuits brought against us.
The future market price of our securities could be significantly and adversely affected by factors such as: • the information contained in our quarterly earnings releases, including updates regarding our commercialized products or our product candidates, our net product revenues and operating expenses for completed periods and financial guidance regarding future periods; • announcements of FDA actions with respect to our therapies or those of our competitors, or regulatory filings for our therapies or those of our competitors, or announcements of interim or final results of clinical trials or nonclinical studies relating to our therapies or those of our competitors; • developments in domestic and international governmental policy or regulation, for example, relating to drug pricing and tax reform; • technological innovations or the introduction of new drugs by our competitors; • government regulatory action; • public concern as to the safety of drugs developed by us or our competitors; • developments in patent or other intellectual property rights or announcements relating to these matters; • information disclosed by third parties regarding our business or products; 56 • developments relating specifically to other companies and market conditions for pharmaceutical and biotechnology stocks or stocks in general; • business development, capital structuring or financing activities; and • general worldwide or national economic, political and capital market conditions, including as a result of the COVID-19 pandemic, inflation and rapid fluctuations in interest rates.
The future market price of our securities could be significantly and adversely affected by factors such as: • the information contained in our quarterly earnings releases, including updates regarding our commercialized products or our product candidates, our net product revenues and operating expenses for completed periods and financial guidance regarding future periods; • announcements of FDA actions with respect to our therapies or those of our competitors, or regulatory filings for our therapies or those of our competitors, or announcements of interim or final results of clinical trials or nonclinical studies relating to our therapies or those of our competitors; • announcements we make or commentary by public equity analysts with respect to clinical development of the product candidates in our pain program; • developments in domestic and international governmental policy or regulation, for example, relating to drug pricing and tax reform; • technological innovations or the introduction of new drugs by our competitors; • government regulatory action; 57 • public concern as to the safety of drugs developed by us or our competitors; • developments in patent or other intellectual property rights or announcements relating to these matters; • information disclosed by third parties regarding our business or products; • developments relating specifically to other companies and market conditions for pharmaceutical and biotechnology stocks or stocks in general; • business development, capital structuring or financing activities; and • general worldwide or national economic, political and capital market conditions, including as a result of inflation and rapid fluctuations in interest rates.
The use of social media platforms presents risks and challenges. Social media is being used by third parties to communicate about our products and product candidates and the diseases our therapies are designed to treat.
The use of social media platforms and artificial intelligence tools presents risks and challenges. Social media is being used by third parties to communicate about our products and product candidates and the diseases our therapies are designed to treat.
We market our products to eligible people with CF for whom the applicable product has been approved and provide promotional materials and training programs to physicians regarding the use of each product in these patient populations. These eligible people do not represent all people with CF.
We market our products to eligible people with CF, SCD, and TDT for whom the applicable product has been approved and provide promotional materials and informational programs to physicians regarding the use of each product in these patient populations. These eligible people do not represent all people with CF, SCD, and TDT.
We cannot predict how CMS will interpret the Inflation Reduction Act or how the provisions of the law will affect our business once fully implemented, but it is possible that these changes or other legislative updates will have an adverse impact on our revenue.
We cannot predict how CMS will interpret the IRA or how the provisions of the law will affect our business once fully implemented, but it is possible that these changes or other legislative updates will have an adverse impact on our revenue.
We have experienced challenges commercializing products outside of the U.S., and our future revenues will be dependent on our ability to obtain adequate reimbursement for our products.
We have experienced challenges commercializing products outside of the U.S., and our future revenues will be dependent on our ability to obtain adequate reimbursement for our products in ex-U.S. markets.
Under the Inflation Reduction Act, the coverage gap phase and the associated coverage gap discount program will be eliminated after the 2024 plan year. Starting in 2025, there will be a new Part D manufacturer discount program, which requires a 10% discount in the initial phase and a 20% discount in the catastrophic phase of the benefit.
Under the IRA, the coverage gap phase and the associated coverage gap discount program will be eliminated after the 2024 plan year. Starting in 2025, there will be a new Part D manufacturer discount program, which requires a 10% discount in the initial phase and a 20% discount in the catastrophic phase of the benefit.
Risks Related to Our Operations • A variety of risks associated with operating in foreign countries could materially adversely affect our business. • If we fail to attract and retain skilled employees, our business could be materially harmed. • A breakdown or breach of our information technology systems could subject us to liability or interrupt the operation of our business.
Risks Related to Our Operations • If we fail to scale our operations to accommodate growth, our business may suffer. • A variety of risks associated with operating in foreign countries could materially adversely affect our business. • If we fail to attract and retain skilled employees, our business could be materially harmed. • A breakdown or breach of our information technology systems could subject us to liability or interrupt the operation of our business.
We have adopted provisions in our articles of incorporation and by-laws and are subject to Massachusetts corporate laws that may frustrate any attempt to remove or replace members of our board or to effectuate certain types of business combinations involving Vertex.
We have adopted provisions in our articles of organization and by-laws and are subject to Massachusetts corporate laws that may frustrate any attempt to remove or replace members of our board or to effectuate certain types of business combinations involving us.
On July 24, 2020, we filed a lawsuit against Sun Pharmaceutical Industries Limited (“Sun”) in the U.S. District Court for the District of Delaware alleging infringement of U.S. Patent No. 10,646,481 (the “’481 patent”).
On July 24, 2020, we filed a lawsuit against Sun Pharmaceutical Industries Limited (“Sun”) in the U.S. District Court for the District of Delaware alleging infringement of our U.S. Patent No. 10,646,481 (“the ’481 patent”).
Additionally, the Inflation Reduction Act requires manufacturers to pay rebates for Medicare Part B and Part D drugs with prices that increase faster than the rate of inflation.
Additionally, the IRA requires manufacturers to pay rebates for Medicare Part B and Part D drugs with prices that increase faster than the rate of inflation.
In that event, we could be unable to further develop and commercialize exa-cel or other products that we may develop using the CRISPR/Cas9 technology we license from CRISPR.
In that event, we could be unable to further develop and commercialize CASGEVY or other products that we may develop using the CRISPR/Cas9 technology we license from CRISPR.
Consequently, we are, and will continue to be, subject to risks related to operating in foreign countries, including risks relating to intellectual property protections and business interruptions, including as a result of COVID-19. These risks are increased with respect to countries such as China that have substantially different local laws and business practices and weaker protections for intellectual property.
Consequently, we are, and will continue to be, subject to risks related to operating in foreign countries, including risks relating to intellectual property protections and business interruptions. These risks are increased with respect to countries such as China that have substantially different local laws and business practices and weaker protections for intellectual property.
Risks Related to Business Development Activities • Our ability to execute on our long-term strategy depends in part on our ability to engage in transactions and collaborations with other entities that add to our pipeline or provide us with new commercial opportunities. • We may not realize the anticipated benefits of acquisitions of businesses or technologies, and the integration following any such acquisition may disrupt our business and management. • We face risks in connection with existing and future collaborations with respect to the development, manufacture and commercialization of our products and product candidates. • We may not be able to attract collaborators or external funding for the development and commercialization of certain of our product candidates.
Risks Related to Business Development Activities • Our ability to execute on our long-term strategy depends in part on our ability to engage in transactions and collaborations with other entities that add to our pipeline or provide us with new commercial opportunities. • We face risks in connection with existing and future collaborations with respect to the development, manufacture and commercialization of our products and product candidates. • We may not realize the anticipated benefits of existing or future acquisitions of businesses or technologies, and the integration following any such acquisition may disrupt our business and management.
The law establishes a Drug Price Negotiation Program, under which the government may negotiate maximum fair prices for certain drugs covered by Medicare that do not have generic or biosimilar competition. The first set of maximum fair prices will be effective in 2026.
Among other things, the IRA establishes a Drug Price Negotiation Program, under which the government may negotiate maximum fair prices for certain drugs covered by Medicare that do not have generic or biosimilar competition. The first set of maximum fair prices will be effective in 2026.
If the FDA determines that our promotional materials, training, or other activities constitute off-label promotion, it could request that we modify our training or promotional materials or other activities, conduct corrective advertising, or subject us to regulatory enforcement actions, including the issuance of a warning or untitled letter, injunction, seizure, civil fines and criminal penalties.
If a regulatory agency determines that our promotional materials, or other activities constitute off-label promotion, it could request that we modify our promotional materials or other activities, conduct corrective advertising, or subject us to regulatory enforcement actions, such as the issuance of a warning or untitled letter, injunction, seizure, civil fines and criminal penalties.
The Inflation Reduction Act also authorizes the government to negotiate maximum fair prices for certain Medicare drugs. It also establishes mandatory rebates for Part B and Part D drugs 37 with prices that increase faster than inflation.
The IRA also authorizes the government to negotiate maximum fair prices for certain Medicare drugs. It also establishes mandatory rebates for Part B and Part D drugs with prices that increase faster than inflation.
Accordingly, our efforts to obtain regulatory approvals for and commercialize our product candidates could be delayed. In addition, failure of any third-party contractor to conduct activities in accordance with our expectations, including as a result of COVID-19, could adversely affect the relevant research, development, commercial or administrative activity.
Accordingly, our efforts to obtain regulatory approvals for and commercialize our product candidates could be delayed. In addition, failure of any third-party contractor to conduct activities in accordance with our expectations, could adversely affect the relevant research, development, commercial or administrative activity.
If they fail to provide coverage and adequate reimbursement rates for our products, our revenues will be harmed. • We may experience incremental pricing pressure on our products, which could reduce our revenues and future profitability. • Current health care laws and regulations in the U.S. and future legislative or regulatory reforms to the U.S. health care system may affect our ability to commercialize our marketed products profitably. • We have experienced challenges commercializing products outside of the U.S., and our future revenues will be dependent on our ability to obtain adequate reimbursement for our products.
If they fail to provide coverage and adequate reimbursement rates for our products, our revenues will be harmed. • We may experience pricing pressure on our products, which could reduce our revenues and future profitability. • Current health care laws and regulations in the U.S. and future legislative or regulatory reforms to the U.S. health care system may affect our ability to commercialize our marketed products profitably. • We have experienced challenges commercializing products outside of the U.S., and our future revenues will be dependent on our ability to obtain adequate reimbursement for our products in ex-U.S. markets. • Insurance coverage and reimbursement of our cell or genetic therapies is uncertain.
If we encounter such difficulties in protecting or are otherwise precluded from effectively protecting our intellectual property rights in foreign jurisdictions, our business could be substantially harmed.
If we encounter such difficulties in protecting or are otherwise precluded from effectively protecting our intellectual property rights in foreign jurisdictions, including through compulsory licensing, our business could be substantially harmed.
Risks Related to Financial Results and Holding Our Common Stock • Our effective tax rate fluctuates, and changes in tax laws, regulations and treaties, unfavorable resolution to the tax positions we have taken or exposure to additional income tax liabilities could have a material impact on our future taxable income. 30 Risks Related to Our Business We invest significant resources in the research, development, manufacturing and supply of therapies for serious diseases other than CF, and if we are unable to successfully commercialize one or more of these therapies, our business could be materially harmed.
Risks Related to Financial Results and Holding Our Common Stock • Our effective tax rate fluctuates, and changes in tax laws, regulations and treaties, unfavorable resolution to the tax positions we have taken or exposure to additional income tax liabilities could have a material impact on our future taxable income. 32 Risks Related to Our Business We invest significant resources in the research, development, manufacturing and supply of therapies for serious diseases, and if we are unable to successfully develop and commercialize additional products, our business could be materially harmed.
In addition, our increased use of cloud technologies heightens these third party and other operational risks, and any failure by cloud or other technology service providers to adequately safeguard their systems and prevent cyber-attacks could disrupt our operations and result in misappropriation, corruption, or loss of confidential or propriety information. Risk of cyber-attack is increased with employees working remotely.
In addition, our increased use of cloud technologies heightens these third party and other operational risks, and any failure by cloud or other technology service providers to adequately safeguard their systems and prevent cyber-attacks could disrupt our operations and result in misappropriation, corruption, or loss of confidential or propriety information.
If one or more competing therapies are successfully developed as a treatment for people with CF or any of the other diseases we are currently targeting in our pipeline, our products and our net product revenues could face competitive pressures.
If one or more competing therapies are successfully developed as a treatment for people with CF, SCD, TDT, pain or any of the other disease areas we are currently targeting in our pipeline, our products and our net product revenues could face competitive pressures.
Despite our efforts, our product candidates may not: • offer therapeutic or other improvement over existing competitive therapies; • show the level of safety and efficacy, including the level of statistical significance, required by the FDA or other regulatory authorities for approval of a drug or biologic; • meet applicable regulatory standards; • be capable of being produced in commercial quantities at acceptable costs; or • if approved for commercial sale, be successfully marketed as pharmaceutical or biological products. 38 We have recently completed and/or have ongoing or planned clinical trials for several of our product candidates.
Despite our efforts, our product candidates may not: • offer therapeutic or other improvement over existing competitive therapies; • show the level of safety and efficacy, including the level of statistical significance, required by the FDA or other regulatory authorities for approval of a drug or biologic; • meet applicable regulatory standards; • be capable of being produced in commercial quantities at acceptable costs; or • if approved for commercial sale, be successfully marketed as pharmaceutical or biological products.
In addition, while it is our policy to require our employees and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own.
Litigation may be necessary to defend against these claims. 53 In addition, while it is our policy to require our employees and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own.
Although physicians are permitted, based on their medical judgment, to prescribe products for indications other than those approved by the FDA, manufacturers are prohibited from promoting their products for such off-label uses.
Although physicians are generally permitted, based on their medical judgment, to prescribe products for indications other than those approved by the applicable regulatory agency, manufacturers are prohibited from promoting their products for such off-label uses.
In the future, we expect to issue a limited number of additional options to our directors. In addition, we may issue additional common stock or restricted securities in the future as part of financing activities or business development activities and any such issuances may have a dilutive effect on our then-existing shareholders.
In addition, we may issue additional common stock or restricted securities in the future as part of financing activities or business development activities and any such issuances may have a dilutive effect on our then-existing shareholders.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe have an option to extend the term of the leases for an additional ten years. Additional United States and Worldwide Locations In addition to our corporate headquarters, we lease an aggregate of approximately 838,000 square feet of space globally.
Biggest changeWe have an option to extend the term of the leases for an additional ten years. Additional United States and Worldwide Locations In addition to our corporate headquarters, we lease an aggregate of approximately 840,000 square feet of space globally.
MINE SAFETY DISCLOSURES Not applicable. 61 PART II
MINE SAFETY DISCLOSURES Not applicable. 63 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePerformance Graph Our performance graph includes the NASDAQ Biotechnology Index, which we believe is a comparable index consisting of companies with similar industry classifications, and which we plan to use in our future performance graphs.
Biggest changePerformance Graph Our performance graph includes the NASDAQ Biotechnology Index, which we believe is a comparable index consisting of companies with similar industry classifications, and which we plan to use in our future performance graphs. 64 Dividends We have never paid any cash dividends on our common stock, and we do not anticipate paying any in the foreseeable future.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on The Nasdaq Global Select Market under the symbol “VRTX.” Shareholders As of January 31, 2023, there were 107 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on The Nasdaq Global Select Market under the symbol “VRTX.” Shareholders As of February 9, 2024, there were 106 holders of record of our common stock.
In February 2023, our Board of Directors approved a share repurchase program (the “2023 Share Repurchase Program”) pursuant to which we are authorized to repurchase up to $3.0 billion of our common stock. ITEM 6. [RESERVED] 63
Issuer Repurchases of Equity Securities In February 2023, our Board of Directors approved a share repurchase program (the “Share Repurchase Program”) pursuant to which we are authorized to repurchase up to $3.0 billion of our common stock. Our Share Repurchase Program does not have an expiration date and can be discontinued at any time.
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Dividends We have never paid any cash dividends on our common stock, and we do not anticipate paying any in the foreseeable future. 62 Issuer Repurchases of Equity Securities In June 2021, our Board of Directors approved a share repurchase program (the “2021 Share Repurchase Program”), pursuant to which we were authorized to repurchase up to $1.5 billion of our common stock by December 31, 2022.
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The table set forth below shows repurchases of securities by us during the three months ended December 31, 2023 under our Share Repurchase Program.
Removed
We did not repurchase any shares of our common stock under the 2021 Share Repurchase Program in the three months ended December 31, 2022. On December 31, 2022, the 2021 Share Repurchase Program expired with $499.7 million remaining authorization.
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Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs (1) Oct. 1, 2023 to Oct. 31, 2023 179,000 $ 360.95 179,000 $ 2,651,316,977 Nov. 1, 2023 to Nov. 30, 2023 172,552 $ 362.50 172,552 $ 2,588,767,489 Dec. 1, 2023 to Dec. 31, 2023 46,464 $ 352.39 46,464 $ 2,572,394,027 Total 398,016 $ 360.62 398,016 $ 2,572,394,027 (1) Under our Share Repurchase Program, we are authorized to purchase shares from time to time through open market or privately negotiated transactions.
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Such purchases may be made pursuant to Rule 10b5-1 plans or other means as determined by our management and in accordance with the requirements of the Securities and Exchange Commission. ITEM 6. [RESERVED] 65

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAs discussed below in “Other Income (Expense), Net” in our Results of Operations , any changes in the fair value of equity investments with readily determinable fair values (including publicly traded securities) are recorded to other income (expense), net in our consolidated statements of operations. 69 RESULTS OF OPERATIONS 2022 % Change 2021 % Change 2020 (in millions, except percentages and per share amounts) Revenues $ 8,930.7 18% $ 7,574.4 22% $ 6,205.7 Operating costs and expenses 4,623.3 (4)% 4,792.3 43% 3,349.4 Income from operations 4,307.4 55% 2,782.1 (3)% 2,856.3 Other non-operating (expense) income, net (75.0) 45% (51.7) ** 260.6 Provision for income taxes 910.4 134% 388.3 (4)% 405.2 Net income $ 3,322.0 42% $ 2,342.1 (14)% $ 2,711.7 Net income per diluted common share $ 12.82 $ 9.01 $ 10.29 Diluted shares used in per share calculations 259.1 259.9 263.4 ** Not meaningful Revenues 2022 % Change 2021 % Change 2020 (in millions, except percentages) TRIKAFTA/KAFTRIO $ 7,686.8 35% $ 5,697.2 47% $ 3,863.8 SYMDEKO/SYMKEVI 180.0 (57)% 420.4 (33)% 628.6 ORKAMBI 510.7 (34)% 771.6 (15)% 907.5 KALYDECO 553.2 (19)% 684.2 (15)% 802.9 Product revenues, net 8,930.7 18% 7,573.4 22% 6,202.8 Other revenues — ** 1.0 ** 2.9 Total revenues $ 8,930.7 18% $ 7,574.4 22% $ 6,205.7 ** Not meaningful Product Revenues, Net In 2022, our net product revenues increased by $1.4 billion, or 18%, as compared to 2021 primarily due to the launches of TRIKAFTA/ KAFTRIO in multiple countries internationally and the continued performance of TRIKAFTA in the U.S., following the June 2021 launch of TRIKAFTA for children with CF 6 through 11 years of age.
Biggest changePlease refer to Note B, “Collaboration, License and Other Arrangements,” for further information regarding our collaboration, in-license agreements and asset acquisitions. 72 RESULTS OF OPERATIONS 2023 % Change 2022 % Change 2021 (in millions, except percentages and per share amounts) Revenues $ 9,869.2 11% $ 8,930.7 18% $ 7,574.4 Operating costs and expenses 6,037.2 31% 4,623.3 (4)% 4,792.3 Income from operations 3,832.0 (11)% 4,307.4 55% 2,782.1 Other non-operating income (expense), net 547.8 ** (75.0) 45% (51.7) Provision for income taxes 760.2 (16)% 910.4 134% 388.3 Net income $ 3,619.6 9% $ 3,322.0 42% $ 2,342.1 Net income per diluted common share $ 13.89 $ 12.82 $ 9.01 Diluted shares used in per share calculations 260.5 259.1 259.9 ** Not meaningful Revenues 2023 % Change 2022 % Change 2021 (in millions, except percentages) TRIKAFTA/KAFTRIO $ 8,944.7 16% $ 7,686.8 35% $ 5,697.2 KALYDECO 475.5 (14)% 553.2 (19)% 684.2 ORKAMBI 326.0 (36)% 510.7 (34)% 771.6 SYMDEKO/SYMKEVI 123.0 (32)% 180.0 (57)% 420.4 Product revenues, net 9,869.2 11% 8,930.7 18% 7,573.4 Other revenues — ** — ** 1.0 Total revenues $ 9,869.2 11% $ 8,930.7 18% $ 7,574.4 ** Not meaningful Product Revenues, Net In 2023, our net product revenues increased by $938.5 million, or 11%, as compared to 2022.
Pursuant to our agreement with the Cystic Fibrosis Foundation, our tiered third-party royalties on sales of TRIKAFTA/KAFTRIO, SYMDEKO/SYMKEVI, KALYDECO, and ORKAMBI, calculated as a percentage of net sales, range from the single digits to the sub-teens, with royalties on sales of TRIKAFTA/KAFTRIO lower than for our other products.
Pursuant to our agreement with the Cystic Fibrosis Foundation, our tiered third-party royalties on sales of TRIKAFTA/KAFTRIO, SYMDEKO/SYMKEVI, KALYDECO, and ORKAMBI, calculated as a percentage of net sales, range from the single digits to the sub-teens, with lower royalties on sales of TRIKAFTA/KAFTRIO than for our other products.
We plan to continue to engage in discussions with numerous commercial insurers and managed health care organizations, along with government health programs that are typically managed by authorities in the individual states, to ensure that payors recognize the significant benefits that our medicines provide and provide patients with appropriate levels of access to our medicines now and in the future.
We plan to continue to engage in discussions with numerous commercial insurers and managed health care organizations, along with government health programs that are typically managed by authorities in the individual states, to ensure that payors recognize the significant benefits that our therapies provide and provide patients with appropriate levels of access to our medicines and therapies now and in the future.
The duration and cost of discovery, nonclinical studies and clinical trials may vary significantly over the life of a project and are difficult to predict. Therefore, accurate and meaningful estimates of the ultimate costs to bring our product candidates to market are not available.
The duration and cost of 74 discovery, nonclinical studies and clinical trials may vary significantly over the life of a project and are difficult to predict. Therefore, accurate and meaningful estimates of the ultimate costs to bring our product candidates to market are not available.
We rely on a global network of third parties and our internal capabilities to manufacture and distribute our products for commercial sale and post-approval clinical trials and to manufacture and distribute our product candidates for clinical trials.
We rely on a global network of third parties and our internal capabilities to manufacture and distribute our products for commercial sale and post-approval clinical trials and to 70 manufacture and distribute our product candidates for clinical trials.
For a discussion of our financial condition and results of operations for 2021 as compared to 2020, please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2021 Annual Report on Form 10-K, except as set forth below.
For a discussion of our financial condition and results of operations for 2022 as compared to 2021, please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2022 Annual Report on Form 10-K, except as set forth below.
We are evaluating our medicines in additional patient populations, including younger children, with the goal of having small molecule treatments for all people who have at least one mutation in their cystic fibrosis transmembrane conductance regulator (“CFTR”) gene that is response to our CFTR modulators.
We are evaluating our CF medicines in additional patient populations, including younger children, with the goal of having small molecule treatments for all people who have at least one mutation in their cystic fibrosis transmembrane conductance regulator (“CFTR”) gene that is responsive to our CFTR modulators.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our discussion and analysis of our financial condition and results of operations for 2022 as compared to 2021 are discussed below.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our discussion and analysis of our financial condition and results of operations for 2023 as compared to 2022 are discussed below.
Contingent Consideration The fair value of our contingent consideration decreased by $57.5 million in 2022, primarily as a result of a revision to the scope of certain gene-editing programs in the second quarter of 2022. The fair value of contingent consideration decreased by $3.1 million in 2021.
In 2022, the fair value of our contingent consideration decreased by $57.5 million, primarily as a result of a revision to the scope of certain gene-editing programs in the second quarter of 2022.
Acquired In-Process Research and Development In 2022 and 2021, our AIPR&D included $115.5 million and $1.1 billion, respectively, related to upfront, contingent milestone, or other payments pursuant to our business development transactions, including the collaborations, licenses of third-party technologies, and asset acquisitions described above.
Acquired In-Process Research and Development Expenses In 2023 and 2022, our AIPR&D included $527.1 million and $115.5 million, respectively, related to upfront, contingent milestone, or other payments pursuant to our business development transactions, including the collaborations, licenses of third-party technologies, and asset acquisitions described above.
To conform prior periods to our current presentation, we have reclassified $1.1 billion and $184.6 million from “Research and development expenses” to AIPR&D for 2021 and 2020, respectively. Cost of Sales Our cost of sales primarily consists of third-party royalties payable on net sales of our products as well as the cost of producing inventories.
To conform prior periods to our current presentation, we have reclassified $1.1 billion from “Research and development expenses” to AIPR&D for 2021. Cost of Sales Our cost of sales primarily consists of third-party royalties payable on net sales of our products as well as the cost of producing inventories.
Under the terms of the A&R JDCA, we are leading worldwide development, manufacturing, and commercialization of exa-cel. As of July 1, 2021, 60% of the net profits and net losses for exa-cel are allocated to us and 40% of the net profits and net losses for exa-cel are allocated to CRISPR, subject to certain adjustments.
Under the terms of the A&R JDCA, we lead worldwide development, manufacturing, and commercialization of CASGEVY. As of July 1, 2021, 60% of the net profits and net losses for CASGEVY are allocated to us and 40% of the net profits and net losses for CASGEVY are allocated to CRISPR, subject to certain adjustments.
Most of these collaboration payments are expensed as AIPR&D; however, depending on many factors, including the structure of the collaboration, the stage of development of the acquired technology, the significance of the in-licensed product candidate to the collaborator’s operations and the other activities in which our collaborators are engaged, the accounting for these transactions can vary significantly.
However, depending on many factors, including the structure of the collaboration, the stage of development of the acquired technology, the significance of the in-licensed product candidate to the collaborator’s operations and the other activities in which our collaborators are engaged, the accounting for these transactions can vary significantly.
This approach includes advancing multiple compounds from each program, spanning multiple modalities, into early clinical trials to obtain patient data that can inform selection of the most promising compounds for later-stage development, and to inform discovery and development of additional compounds.
This approach includes advancing multiple compounds or therapies from each program, spanning multiple modalities, into early clinical trials to obtain patient data that can inform selection of the most promising therapies for later-stage development, as well as to inform discovery and development efforts.
Our future interest income is dependent on the amount of, and prevailing market interest rates on, our outstanding cash equivalents and available-for-sale debt securities. Interest Expense Interest expense was $54.8 million in 2022 as compared to $61.5 million in 2021.
Our future interest income is dependent on the amount of, and prevailing market interest rates on, our outstanding cash equivalents and available-for-sale debt securities. Interest Expense Interest expense was $44.1 million in 2023, as compared to $54.8 million in 2022.
Over the last several years, our cost of sales has been increasing due to increased net product revenues. Our cost of sales as a percentage of our net product revenues was 12% in each of 2022 and 2021.
Over the last several years, our cost of sales has been increasing due to increased net product revenues. Our cost of sales as a percentage of our net product revenues was 13% and 12% in 2023 and 2022, respectively.
Other Non-Operating Income (Expense), Net Interest Income Interest income increased to $144.6 million in 2022, as compared to $4.9 million in 2021, primarily due to increased market interest rates and increased cash equivalents and available-for-sale debt securities.
Other Non-Operating Income (Expense), Net Interest Income Interest income increased to $614.7 million in 2023, as compared to $144.6 million in 2022, primarily due to increased market interest rates and increased cash equivalents and available-for-sale debt securities.
We also are pursuing genetic therapies for people with CF who do not make CFTR protein and, as a result, cannot benefit from our current CF medicines.
We also are pursuing messenger ribonucleic acid (“mRNA”) and genetic therapies for people with CF who do not make full-length CFTR protein and, as a result, cannot benefit from our current CF medicines.
Research Expenses 2022 Change % 2021 Change % 2020 (in millions, except percentages) Research Expenses: Salary and benefits $ 159.5 17% $ 136.7 5% $ 129.8 Stock-based compensation expense 84.0 9% 77.3 (10)% 85.6 Outsourced services and other direct expenses 189.6 19% 160.0 38% 116.2 Intangible asset impairment charge 13.0 ** — ** — Infrastructure costs 180.6 31% 138.3 15% 120.5 Total research expenses $ 626.7 22% $ 512.3 13% $ 452.1 ** Not meaningful Our research expenses have been increasing over the last several years as we have invested in our pipeline and expanded our cell and genetic therapy capabilities, resulting in increased headcount and infrastructure costs associated with our research facilities.
Research Expenses 2023 Change % 2022 Change % 2021 (in millions, except percentages) Research Expenses: Salary and benefits $ 184.1 15% $ 159.5 17% $ 136.7 Stock-based compensation expense 92.4 10% 84.0 9% 77.3 Outsourced services and other direct expenses 237.0 25% 189.6 19% 160.0 Intangible asset impairment charge — ** 13.0 ** — Infrastructure costs 192.1 6% 180.6 31% 138.3 Total research expenses $ 705.6 13% $ 626.7 22% $ 512.3 ** Not meaningful Our research expenses have been increasing over the last several years as we have invested in our pipeline and expanded our cell and genetic therapy capabilities, resulting in increased headcount, outside services and other direct expenses, and infrastructure costs associated with our research facilities.
We 67 dedicate substantial management and other resources to obtain and maintain appropriate levels of reimbursement for our products from third-party payors, including governmental organizations in the U.S. and ex-U.S. markets. In the U.S., we have worked successfully with third-party payors to promptly obtain appropriate levels of reimbursement for our CF medicines.
We dedicate substantial management and other resources to obtain and maintain appropriate levels of reimbursement for our products from third-party payors, including governmental organizations in the U.S. and ex-U.S. markets.
Research and Development Expenses 2022 % Change 2021 % Change 2020 (in millions, except percentages) Research expenses $ 626.7 22% $ 512.3 13% $ 452.1 Development expenses 1,913.6 34% 1,425.5 20% 1,192.8 Total research and development expenses $ 2,540.3 31% $ 1,937.8 18% $ 1,644.9 Our research and development expenses include internal and external costs incurred for research and development of our products and product candidates.
Research and Development Expenses 2023 % Change 2022 % Change 2021 (in millions, except percentages) Research expenses $ 705.6 13% $ 626.7 22% $ 512.3 Development expenses 2,457.3 28% 1,913.6 34% 1,425.5 Total research and development expenses $ 3,162.9 25% $ 2,540.3 31% $ 1,937.8 Our research and development expenses include internal and external costs incurred for research and development of our products and product candidates.
The majority of our interest expense in these periods was related to imputed interest expense associated with our leased corporate headquarters in Boston. 73 Other Income (Expense), Net Other income (expense), net was expense of $164.8 million in 2022 and income of $4.9 million in 2021.
The majority of our interest expense in these periods was related to imputed interest expense associated with our leased corporate headquarters in Boston. Other Income (Expense), Net Other income (expense), net was expenses of $22.8 million and $164.8 million in 2023 and 2022, respectively.
Cost of sales was 12% of our net product revenues in 2022 and 2021.
Cost of sales was 13% and 12% of our net product revenues in 2023 and 2022, respectively.
All research and development costs for our products and product candidates are expensed as incurred. 71 Over the past three years, we have incurred $7.5 billion in total research and development and AIPR&D expenses associated with product discovery and development. The successful development of our product candidates is highly uncertain and subject to a number of risks.
Over the past three years, we have incurred $9.4 billion in total research and development and AIPR&D expenses associated with product discovery and development. The successful development of our product candidates is highly uncertain and subject to a number of risks.
We assign external costs of services provided to us by clinical research organizations and other outsourced research by individual program. Our internal costs are significantly greater than our external costs.
We assign external costs of services provided to us by clinical research organizations and other outsourced research by individual program. Our internal costs are greater than our external costs. All research and development costs for our products and product candidates are expensed as incurred.
Development Expenses 2022 Change % 2021 Change % 2020 (in millions, except percentages) Development Expenses: Salary and benefits $ 475.1 37% $ 347.6 18% $ 295.7 Stock-based compensation expense 213.9 12% 191.0 8% 177.1 Outsourced services and other direct expenses 912.9 45% 629.4 23% 512.2 Infrastructure costs 311.7 21% 257.5 24% 207.8 Total development expenses $ 1,913.6 34% $ 1,425.5 20% $ 1,192.8 Our development expenses increased by $488.1 million, or 34%, in 2022 as compared to 2021, primarily due to increased costs to support clinical trials associated with our advancing pipeline programs, including our CF triple combination of vanzacaftor/tezacaftor/deutivacaftor, pain and T1D.
Development Expenses 2023 Change % 2022 Change % 2021 (in millions, except percentages) Development Expenses: Salary and benefits $ 590.9 24% $ 475.1 37% $ 347.6 Stock-based compensation expense 262.5 23% 213.9 12% 191.0 Outsourced services and other direct expenses 1,238.7 36% 912.9 45% 629.4 Infrastructure costs 365.2 17% 311.7 21% 257.5 Total development expenses $ 2,457.3 28% $ 1,913.6 34% $ 1,425.5 Our development expenses increased by $543.7 million, or 28%, in 2023 as compared to 2022, primarily due to increased costs to support clinical trials and drug supply associated with our advancing pipeline programs, including pain and T1D, and our stock-based compensation expense.
Strategic Transactions Acquisitions As part of our business strategy, we seek to acquire products, product candidates and other technologies and businesses that are aligned with our corporate and research and development strategies and complement and advance our ongoing research and development efforts.
Strategic Transactions Acquisitions As part of our business strategy, we seek to acquire technologies, products, product candidates and other businesses that are aligned with our corporate and research and development strategies and complement and advance our ongoing research and development efforts. We have engaged in a number of acquisitions of privately held biotechnology companies over the last several years.
We expect our selling, general and administrative expenses to continue to increase in 2023 as we progress our efforts in preparation for the commercialization of exa-cel.
We expect our selling, general and administrative expenses to continue to increase in 2024 as we progress our efforts in preparation for the potential commercialization of VX-548 and launch CASGEVY.
Selling, General and Administrative Expenses 2022 % Change 2021 % Change 2020 (in millions, except percentages) Selling, general and administrative expenses $ 944.7 12% $ 840.1 9% $ 770.5 Selling, general and administrative expenses increased by 12% in 2022 as compared to 2021, primarily due to the continued investment to support the commercialization of our medicines and increased support for our pipeline product candidates.
Selling, General and Administrative Expenses 2023 % Change 2022 % Change 2021 (in millions, except percentages) Selling, general and administrative expenses $ 1,136.6 20% $ 944.7 12% $ 840.1 Selling, general and administrative expenses increased by 20% in 2023 as compared to 2022, primarily due to the continued investment to support the commercialization of our medicines, including increased commercial headcount, outsourced services to support our pipeline product candidates and stock-based compensation expense.
We expect that due to the volatility of the stock price of biotechnology companies, our other income (expense), net will fluctuate in future periods based on increases or decreases in the fair value of our strategic investments. Income Taxes Our effective tax rate fluctuates from year to year due to the global nature of our operations.
To the extent that we continue to hold strategic equity investments in publicly traded companies, we expect that due to the volatility of the stock price of biotechnology companies, our other income (expense), net will fluctuate in future periods based on increases or decreases in the fair value of our strategic equity investments.
We will account for the Entrada Agreement in the first quarter of 2023. Joint Development and Commercialization Agreement with CRISPR In 2017, we entered into a joint development and commercialization agreement (the “Original JDCA”) with CRISPR, pursuant to which we are developing and preparing to commercialize exa-cel for SCD and TDT.
Joint Development and Commercialization Agreement with CRISPR In 2017, we entered into a joint development and commercialization agreement (the “Original JDCA”) with CRISPR, pursuant to which we are developing and commercializing CASGEVY for SCD and TDT.
Generally, when we in-license a technology or product candidate, we make upfront payments to the collaborator, assume the costs of the program and/or agree to make contingent payments, which could consist of milestone, royalty and option payments.
Over the last several years, we entered into collaboration agreements with a number of companies, including CRISPR, Entrada, and Moderna, Inc. Generally, when we in-license a technology or product candidate, we make upfront payments to the collaborator, assume the costs of the program and/or agree to make contingent payments, which could consist of milestone, royalty and option payments.
We are advancing our pipeline of product candidates for the treatment of serious diseases outside of CF. Our strategy is to combine transformative advances in the understanding of causal human biology and the science of therapeutics to discover and develop innovative medicines.
Our strategy is to combine transformative advances in the understanding of causal human biology and the science of therapeutics to discover and develop innovative medicines.
In 2023, we expect our total cost of sales will increase due to expected increases in our net product revenues and our cost of sales as a percentage of our net product revenues will be similar to our cost of sales as a percentage of net product revenues in 2022 and 2021.
In 2024, we expect our total cost of sales, including as a percentage of our net product revenues, will increase due to expected increases in our CF net product revenues and costs associated with CASGEVY.
APOL1-Mediated Kidney Disease • Inaxaplin, formerly known as VX-147, is our small molecule for the treatment of APOL1-mediated kidney disease (“AMKD”), including APOL1-mediated focal segmental glomerulosclerosis (“FSGS”). Based on positive Phase 2 data in FSGS, we initiated pivotal development of inaxaplin in a single Phase 2/3 adaptive clinical trial in patients with AMKD.
APOL1-Mediated Kidney Disease • Inaxaplin is our small molecule for the treatment of APOL1-mediated kidney disease (“AMKD”), including APOL1-mediated focal segmental glomerulosclerosis (“FSGS”). We completed enrollment in the Phase 2B dose-ranging portion of the pivotal program for inaxaplin, a single Phase 2/3 clinical trial in patients with AMKD.
Type 1 Diabetes • VX-880 is a stem cell-derived, allogeneic, fully differentiated, insulin-producing islet cell replacement therapy, using standard immunosuppression to protect the implanted cells. A clinical trial is ongoing to evaluate VX-880 as a potential treatment for type 1 diabetes (“T1D”), and proof-of-concept has been achieved.
Type 1 Diabetes • VX-880 is an allogeneic stem cell-derived, fully differentiated, insulin-producing islet cell replacement therapy, using standard immunosuppression to protect the implanted cells. We are evaluating VX-880 as a potential treatment for type 1 diabetes (“T1D”) in a sequential, three-part Phase 1/2 clinical trial. We have completed enrollment in Part C of the clinical trial.
We continue to enroll patients in this Phase 2/3 clinical tria l and we expect to complete the Phase 2 dose-ranging portion of the trial in 2023. • The FDA granted inaxaplin Breakthrough Therapy designation for APOL1-mediated FSGS and the EMA granted inaxaplin Orphan Drug and PRIME designations for AMKD.
W e expect to select a dose and begin the Phase 3 portion of the clinical trial in the first quarter of 2024. • The FDA granted Breakthrough Therapy designation to inaxaplin for APOL1-mediated FSGS and the EMA granted Orphan Drug and PRIME designations to inaxaplin for AMKD.
This is necessary for each new medicine, as well as for label expansions for our current medicines. We expect to continue to focus significant resources to obtain expanded reimbursement for our CF medicines and, ultimately, pipeline therapies, in U.S. and ex-U.S. markets.
We expect to continue to focus significant resources to expand and maintain reimbursement for our CF medicines, CASGEVY and, ultimately, pipeline therapies, in U.S. and ex-U.S. markets.
OVERVIEW We are a global biotechnology company that invests in scientific innovation to create transformative medicines for people with serious diseases, with a focus on specialty markets. We have four approved medicines that treat the underlying cause of cystic fibrosis (“CF”), a life-threatening genetic disease, and we continue to focus on developing additional treatments for CF.
OVERVIEW We are a global biotechnology company that invests in scientific innovation to create transformative medicines for people with serious diseases, with a focus on specialty markets.
Our net product revenues from the U.S. and from ex-U.S. markets were as follows: 2022 % Change 2021 % Change 2020 (in millions, except percentages) United States $ 5,699.3 8% $ 5,287.3 10% $ 4,826.4 ex-U.S. 3,231.4 41% 2,286.1 66% 1,376.4 Product revenues, net $ 8,930.7 18% $ 7,573.4 22% $ 6,202.8 We expect that our net product revenues will increase in 2023 as a result of the continued performance of TRIKAFTA/KAFTRIO, label expansions into younger age groups for our previously approved products, and expanded access to our medicines. 70 Operating Costs and Expenses 2022 % Change 2021 % Change 2020 (in millions, except percentages) Cost of sales $ 1,080.3 19% $ 904.2 23% $ 736.3 Research and development expenses 2,540.3 31% 1,937.8 18% 1,644.9 Acquired in-process research and development expenses 115.5 (90)% 1,113.3 503% 184.6 Selling, general and administrative expenses 944.7 12% 840.1 9% 770.5 Change in fair value of contingent consideration (57.5) ** (3.1) ** 13.1 Total costs and expenses $ 4,623.3 (4)% $ 4,792.3 43% $ 3,349.4 ** Not meaningful Beginning in 2022, we separately classify upfront, contingent milestone, or other payments pursuant to our business development transactions, including collaborations, licenses of third-party technologies, and asset acquisitions as “Acquired in-process research and development expenses,” in our consolidated statements of operations in cases where such acquired assets do not have an alternative future use.
We expect 2024 to be a foundational year for CASGEVY, as we lay the groundwork for the first patients to initiate this multi-month treatment. 73 Operating Costs and Expenses 2023 % Change 2022 % Change 2021 (in millions, except percentages) Cost of sales $ 1,262.2 17% $ 1,080.3 19% $ 904.2 Research and development expenses 3,162.9 25% 2,540.3 31% 1,937.8 Acquired in-process research and development expenses 527.1 356% 115.5 (90)% 1,113.3 Selling, general and administrative expenses 1,136.6 20% 944.7 12% 840.1 Change in fair value of contingent consideration (51.6) ** (57.5) ** (3.1) Total costs and expenses $ 6,037.2 31% $ 4,623.3 (4)% $ 4,792.3 ** Not meaningful Beginning in 2022, we separately classify upfront, contingent milestone, or other payments pursuant to our business development transactions, including collaborations, licenses of third-party technologies, and asset acquisitions as “Acquired in-process research and development expenses,” in our consolidated statements of income in cases where such acquired assets do not have an alternative future use.
We expect to continue to identify and evaluate potential acquisitions and may include larger transactions or later-stage assets. Our acquisition of ViaCyte was accounted for as a business combination. As of the acquisition date, the cash payment was allocated primarily to goodwill and the fair value of an in-process research and development asset.
(“ViaCyte”), which had intellectual property, tools, technologies and assets with the potential to accelerate development of our T1D programs. Our acquisition of ViaCyte, for $315.0 million, was accounted for as a business combination. As of the acquisition date, the cash payment was allocated primarily to goodwill and the fair value of an in-process research and development asset.
We expect to continue to identify and evaluate collaboration and licensing opportunities that may be similar to or different from the collaborations and licenses that we have engaged in previously. 68 In addition, in the fourth quarter of 2022, we announced a strategic collaboration and licensing agreement (the “Entrada Agreement”) with Entrada focused on discovering and developing intracellular EEV therapeutics for DM1.
We expect to continue to identify and evaluate collaboration and licensing opportunities that may be similar to or different from the collaborations and licenses that we have engaged in previously.
Food and Drug Administration (the “FDA”) approved the use of ORKAMBI in children with CF 12 months to less than 24 months of age who are homozygous for the F508del mutation in the CFTR gene. • In the fourth quarter of 2022, we submitted global regulatory filings for TRIKAFTA/KAFTRIO in children with CF 2 to 5 years of age and for KALYDECO in children with CF from 1 month to less than 4 months of age. • TRIKAFTA/KAFTRIO is now approved and reimbursed or accessible in more than 30 countries outside the U.S.
TRIKAFTA label to the FDA. • The FDA and the European Commission approved the use of ORKAMBI for children with CF 12 to less than 24 months of age who are homozygous for the F508del mutation in the CFTR gene. • The FDA and MHRA approved KALYDECO in children with CF from 1 month to less than 4 months of age.
In 2022 and 2021, costs related to our CF programs represented the largest portion of our development costs. 72 Acquired In-process Research and Development Expenses 2022 % Change 2021 % Change 2020 (in millions, except percentages) Acquired in-process research and development expenses $ 115.5 (90)% $ 1,113.3 503% $ 184.6 AIPR&D in 2022 was primarily related to a $60.0 million payment to acquire the Catalyst complement portfolio, a $25.0 million upfront payment pursuant to our license agreement with Verve, and various other payments.
AIPR&D in 2022 was primarily related to the $60.0 million payment to acquire Catalyst’s complement portfolio, a $25.0 million upfront payment pursuant to our license agreement with Verve, and various other payments.
CRISPR may earn an additional one-time $200.0 million milestone payment upon regulatory approval of exa-cel. We concluded that the Original JDCA and the A&R JDCA are cost-sharing arrangements, which result in the net impact of the arrangements, excluding amounts recorded to AIPR&D, being recorded in “Research and development expenses” in our consolidated statements of operations.
We concluded that the Original JDCA and the A&R JDCA are cost-sharing arrangements, which result in the net impact of the arrangements, excluding amounts recorded to AIPR&D, being recorded in “Research and development expenses” or “Selling, general and administrative expenses.” in our consolidated statements of income. CASGEVY was approved by the FDA in December 2023 for the treatment of SCD.
Please refer to our critical accounting policies, “Acquisitions,” for further information regarding the significant judgments and estimates related to our acquisitions.
In 2023 and 2022, we also acquired programs that were accounted for as asset acquisitions resulting in $47.5 million and $60.0 million of AIPR&D, respectively. Please refer to our critical accounting policies, “Acquisitions,” for further information regarding the significant judgments and estimates related to our acquisitions.
The vast majority of these amounts relate to net unrealized gains or losses resulting from changes in the fair value and sales of certain of our strategic investments. As of December 31, 2022, the fair value of our investments in publicly traded companies was $116.8 million.
These amounts related primarily to net unrealized gains or losses resulting from changes in the fair value or sales of certain of our strategic equity investments, which consist of investments in our collaborators that may be public or private companies.
We cannot, however, predict how recent changes in the law, including through the Inflation Reduction Act of 2022, will affect our ability to negotiate successfully with third-party payors in the future. In ex-U.S. markets, we seek government reimbursement for our medicines on a country-by-country or region-by-region basis, as required.
We cannot, however, predict how recent changes in the law, including through the Inflation Reduction Act of 2022 and passage of state laws (e.g., transparency laws and prescription drug affordability boards), will affect our ability to negotiate successfully with third-party payors and distribute our products.
Expenses Our total research and development (“R&D”), acquired in-process research and development (“AIPR&D”), and selling, general and administrative (“SG&A”) expenses decreased to $3.6 billion as compared to $3.9 billion in 2021.
Expenses Our total research and development (“R&D”), acquired in-process research and development (“AIPR&D”), and selling, general and administrative (“SG&A”) expenses increased to $4.8 billion in 2023 as compared to $3.6 billion in 2022. The increase was primarily due to increased AIPR&D, the progression of several product candidates in mid- to late-stage clinical development and costs to support global launches.
The Phase 3 program for VX-548 also includes a single-arm study evaluating the safety and effectiveness of VX-548 in multiple other types of moderate to severe pain.
VX-548 in Acute Pain • We completed the pivotal program evaluating our lead compound, VX-548, for the treatment of moderate-to-severe acute pain, which included one randomized controlled Phase 3 pivotal trial in abdominoplasty, one randomized, controlled Phase 3 clinical trial in bunionectomy, and one single-arm safety and effectiveness clinical trial.
We expect to complete these Phase 3 trials in late 2023 or early 2024. • The FDA granted VX-548 Breakthrough Therapy and Fast Track designations for the treatment of moderate to severe acute pain. • At the end of 2022, we initiated a Phase 2 clinical trial evaluating VX-548 in diabetic peripheral neuropathy, a common form of peripheral neuropathic pain.
We plan to meet with regulators in the first quarter of 2024 and then we expect to advance VX-548 for the treatment of diabetic peripheral neuropathy into pivotal development. • We initiated a second Phase 2 clinical trial evaluating VX-548 in patients with peripheral neuropathic pain in December 2023.
We also have initiated a clinical trial of vanzacaftor/tezacaftor/deutivacaftor in children with CF 6 to 11 years of age, known as the RIDGELINE study. • In collaboration with Moderna, we are developing VX-522, an mRNA therapeutic for the treatment of people with CF who do not produce any CFTR protein.
Recent and anticipated progress in activities supporting these efforts is included below: Cystic Fibrosis • In collaboration with Moderna, we are developing VX-522, a CFTR mRNA therapeutic for the treatment of people with CF who do not produce full-length CFTR protein.
Our triple combination regimen, TRIKAFTA/KAFTRIO (elexacaftor/tezacaftor/ivacaftor and ivacaftor), was approved in 2019 in the United States (the “U.S.”) and in 2020 in the European Union (the “E.U.”). Collectively, our four medicines are being used by the majority of the approximately 88,000 people with CF in North America, Europe, and Australia.
Collectively, our four medicines are being used to treat nearly three quarters of the approximately 92,000 people with CF in North America, Europe, and Australia.
We are investing in both our internal headcount, leveraging outsourced services, and investing in infrastructure to support these programs. We expect our development expenses to continue to increase in 2023 as a result of our advancing pipeline programs, including our pain and T1D programs.
We expect our development expenses to continue to increase in 2024 due to our advancing pipeline programs, including our T1D program.
Beyond CF, we have a pipeline that includes mid- and late-stage clinical programs in sickle cell disease, beta thalassemia, acute and neuropathic pain, APOL1-mediated kidney disease, type 1 diabetes, and alpha-1 antitrypsin deficiency, and earlier-stage programs in diseases such as muscular dystrophies.
Our pipeline includes clinical-stage programs in CF, sickle cell disease, beta thalassemia, acute and neuropathic pain, APOL1-mediated kidney disease, type 1 diabetes, myotonic dystrophy type 1 and alpha-1 antitrypsin deficiency. Our triple combination regimen, TRIKAFTA/KAFTRIO (elexacaftor/tezacaftor/ivacaftor and ivacaftor), was approved in 2019 in the United States (“U.S.”) and in 2020 in the European Union (“E.U.”).
Recent and anticipated progress in activities supporting these efforts is included below: • The European Commission and the United Kingdom’s Medicines and Healthcare products Regulatory Agency (“MHRA”) granted marketing authorization for KAFTRIO for the treatment of children with CF 6 through 11 years of age who have at least one F508del mutation in the CFTR gene. • The U.S.
Food and Drug Administration (“FDA”), the European Commission, the Medicines and Healthcare Products Regulatory Agency (“MHRA”), and Health Canada approved TRIKAFTA/KAFTRIO for the treatment of children with CF 2 to 5 years of age who have at least one F508del mutation in the CFTR gene. • The European Medicines Agency (“EMA”) validated the Marketing Authorization Application (“MAA”) extension for KAFTRIO in combination with ivacaftor to include people with CF who have a rare mutation in the CFTR gene that is responsive based on clinical and/or in vitro data, including the N1303K mutation.
Financial Highlights Revenues In 2022, our net product revenues increased to $8.9 billion as compared to $7.6 billion in 2021, primarily due to the strong uptake of TRIKAFTA/KAFTRIO in multiple countries internationally and continued steady performance of TRIKAFTA in the U.S., following the June 2021 launch of TRIKAFTA for children with CF 6 through 11 years of age.
The increase was primarily due to the continued strong uptake of TRIKAFTA/KAFTRIO in ex-U.S. markets and label extensions in younger age groups, and the continued performance of TRIKAFTA in the U.S., following the launch of TRIKAFTA in children with CF 2 to 5 years of age.
We have initiated a Phase 1 clinical trial for VX-634, which is the first in a series of next-wave investigational molecules with significantly improved potency and drug-like properties as compared to our previous AAT correctors, allowing potential exploration of the full dose response. • We initiated a second Phase 2 clinical trial of VX-864, a first-generation AAT corrector, to assess the impact of longer-term treatment on the liver, as well as the levels of functional AAT in the plasma.
We continue to enroll and dose healthy volunteers in Phase 1 clinical trials evaluating VX-634 and VX-668, our next-wave investigational molecule AAT correctors with significantly improved potency and drug-like properties as compared to the first-generation AATD correctors. Our Business Environment In 2023, our net product revenues came from the sale of our medicines for the treatment of CF.
The decrease was primarily due to decreased AIPR&D following a $900.0 million upfront payment we made in 2021 to CRISPR in connection with an amendment to our exa-cel collaboration, partially offset by increased spend to advance the progression of several product candidates into mid- to late-stage clinical development.
AIPR&D in 2021 primarily related to the $900.0 million upfront payment we made to CRISPR in connection with the A&R JDCA.
Cystic Fibrosis • We are conducting two Phase 3 global, randomized, double-blind, active-controlled clinical trials, SKYLINE 102 and SKYLINE 103, evaluating our new once-daily investigational triple combination of vanzacaftor/tezacaftor/deutivacaftor, formerly known as VX-121/tezacaftor/VX-561, in people with CF 12 years of age and older, and have completed enrollment in these trials.
Potential Near-Term Launch Opportunities We are preparing for the following near-term launches of potential new products: Vanzacaftor/tezacaftor/deutivacaftor in CF • We completed the pivotal SKYLINE 102 and SKYLINE 103 clinical trials, which evaluate the efficacy and safety of our new once-daily investigational triple combination vanzacaftor/tezacaftor/deutivacaftor relative to TRIKAFTA in people with CF 12 years of age and older, and the RIDGELINE clinical trial of vanzacaftor/tezacaftor/deutivacaftor in children with CF 6 to 11 years of age, at the end of 2023. • In February 2024, we announced positive data from this Phase 3 program evaluating the new triple combination regimen.
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Cash Our cash, cash equivalents and marketable securities increased to $10.8 billion as of December 31, 2022 as compared to $7.5 billion as of December 31, 2021 primarily due to our net product revenues and operating cash flows, partially offset by income tax payments and our $315.0 million acquisition of ViaCyte. 64 Business Updates Marketed Products We expect to continue to grow our CF business by increasing the number of people with CF who are eligible and able to receive our medicines, including younger people, and providing improved treatment options for people who are already eligible for one of our medicines.
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We have four approved medicines that treat the underlying cause of cystic fibrosis (“CF”), a life-threatening genetic disease, and one approved therapy that treats severe sickle cell disease (“SCD”) and transfusion dependent beta thalassemia (“TDT”), life shortening inherited blood disorders.
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Pipeline We continue to advance a pipeline of potentially transformative small molecule and cell and genetic therapies aimed at treating serious diseases. Recent and anticipated progress in activities supporting these efforts is included below.
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CASGEVY (exagamglogene autotemcel or “exa-cel”), an ex-vivo, non-viral CRISPR/Cas9 gene-edited cell therapy, was recently approved in the U.S., the E.U., the United Kingdom (“U.K.”), the Kingdom of Saudi Arabia (“Saudi Arabia”), and the Kingdom of Bahrain (“Bahrain”) for the treatment of people 12 years of age and older with SCD and TDT.
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We expect to complete these clinical trials by the end of 2023.
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We estimate approximately 35,000 people with severe SCD or TDT could be eligible for CASGEVY in the U.S. and Europe, with additional people in Saudi Arabia and Bahrain. In addition, we are preparing for near-term launches of potential new products in CF and acute pain.
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In December 2022, the FDA cleared our Investigational New Drug Application (“IND”) for VX-522. We have initiated a single-ascending dose clinical trial for VX-522 in people with CF, which is active and enrolling patients. We expect to complete this single ascending dose clinical trial and initiate the multiple ascending dose clinical trial in 2023.
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Financial Highlights Revenues In 2023, our net product revenues increased to $9.9 billion as compared to $8.9 billion in 2022.
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The FDA has granted Fast Track designation for VX-522.
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Cash Our total cash, cash equivalents and marketable securities increased to $13.7 billion as of December 31, 2023 as compared to $10.9 billion as of December 31, 2022 primarily due to our income from operations driven by our net product revenues, and interest income, partially offset by our income tax payments and repurchases of our common stock. 66 Note: Charts above may not add due to rounding.
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Sickle Cell Disease and Beta Thalassemia • We are evaluating the use of a non-viral ex vivo CRISPR gene-editing therapy, exagamglogene autotemcel (“exa-cel”), formerly known as CTX001, for the treatment of sickle cell disease (“SCD”) and transfusion-dependent beta thalassemia (“TDT”). • In the fourth quarter of 2022, we completed regulatory submissions to the European Medicines Agency (“EMA”) and the MHRA for exa-cel for SCD and TDT, and both the EMA and the MHRA have validated the marketing authorization application.
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Business Updates Marketed Products Cystic Fibrosis We expect to grow our CF business with (i) continued uptake by patients in countries where we are early in our launch, such as those with recently achieved reimbursement agreements, (ii) label expansions, including into younger patient groups, and (iii) growth in the number of people living with CF.
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Exa-cel has been granted EMA Priority Medicines (“PRIME”) designation in the E.U. and Orphan Drug designation in the E.U. and the United Kingdom (the “U.K.”). • In November 2022, we initiated the submission of a biologics licensing application (“BLA”) for exa-cel for SCD and TDT for rolling review by the FDA, and expect to complete the submission by the end of the first quarter of 2023.
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Recent progress in activities supporting continued uptake and label expansions is included below: • The U.S.
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In the U.S., exa-cel has been granted Fast Track, Regenerative Medicine Advanced Therapy, Rare Pediatric Disease, and Orphan Drug designations. • Two additional Phase 3 clinical trials evaluating exa-cel in pediatric patients with SCD and TDT are ongoing. 65 Pain • We have discovered multiple selective small molecule inhibitors of NaV1.8, with the objective of creating a new class of pain medicines that provide effective non-opioid pain relief, without abuse potential.
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We plan to submit regulatory filings for these mutations in Australia, Brazil, Canada, New Zealand and Switzerland, and we plan to submit for regulatory approval of a subset of these mutations not currently included in the U.S.
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In March 2022, we announced positive Phase 2 data for VX-548, a NaV1.8 inhibitor, for treatment of acute pain. We have initiated two randomized, double-blind, placebo-controlled Phase 3 trials with a total of 2,000 patients with moderate to severe acute pain following bunionectomy or abdominoplasty surgery.
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Sickle Cell Disease and Beta Thalassemia • CASGEVY is now approved in the U.S., the E.U., the U.K., Saudi Arabia, and Bahrain for people 12 years of age and older with SCD or TDT. • The French National Authority for Health (“HAS”) approved our request for the implementation of an early access program (“EAP”) for the use of CASGEVY to treat eligible people with TDT from 12 to 35 years of age.
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We have completed enrollment in Part B of the Phase 1/2 clinical trial and, after completion of Part B, we expect to begin Part C of the trial, with concurrent dosing, in 2023. • We continue to advance additional programs in T1D, in which these same stem cell-derived, fully differentiated, insulin-producing islet cells are encapsulated and implanted in an immunoprotective device or are modified to produce hypoimmune cells with the goal of eliminating the need for immunosuppression.
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We are also pursuing an EAP submission for SCD in France and we expect to receive the outcome of this decision in the coming months. • Our regulatory submission for CASGEVY in both SCD and TDT is currently under review in Switzerland.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+86 added−1 removed11 unchanged
Biggest changeAs of December 31, 2022, we held foreign exchange forward contracts that were designated as cash flow hedges with notional amounts totaling $2.2 billion representing a net fair value of $33.1 million on our consolidated balance sheet. Although not predictive in nature, we believe a hypothetical 10% threshold reflects a reasonably possible near-term change in exchange rates.
Biggest changeAs of December 31, 2023, we held foreign exchange forward contracts that were designated as cash flow hedges with notional amounts totaling $2.4 billion representing a net liability of $31.9 million on our consolidated balance sheet. Although not predictive in nature, we believe a hypothetical 10% threshold reflects a reasonably possible near-term change in exchange rates.
We invest in instruments that meet the credit quality standards outlined in our investment policy, which also limits the amount of credit exposure to any one issue or type of instrument. These instruments principally include securities issued by the U.S. government and its agencies, investment-grade corporate bonds and commercial paper, and money market funds. These investments are denominated in U.S.
We invest in instruments that meet the credit quality standards outlined in our investment policy, which also limits the amount of credit exposure to any one issue or type of instrument. These instruments primarily include securities issued by the U.S. government and its agencies, investment-grade corporate bonds and commercial paper, and money market funds. These investments are denominated in U.S.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk Financial Instruments As part of our investment portfolio, we own financial instruments that are sensitive to market risks. The investment portfolio is used to preserve our capital, provide adequate liquidity and earn returns commensurate with our risk appetite.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk Financial Instruments As part of our investment portfolio, we own financial instruments that are sensitive to market risks. The investment portfolio is used to preserve our capital, provide adequate liquidity and earn returns commensurate with our risk appetite.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item 8 is contained on pages F-1 through F-45 of this Annual Report on Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item 8 is contained on pages F-1 through F-46 of this Annual Report on Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable.
As of December 31, 2022, we had no principal or interest outstanding under our credit facility. A portion of our “Interest expense” in 2023 will be dependent on whether, and to what extent, we borrow amounts under this facility.
As of December 31, 2023, we had no principal or interest outstanding under our credit facility. A portion of our “Interest expense” in 2024 will be dependent on whether, and to what extent, we borrow amounts under this facility.
However, since these contracts hedge a specific portion of our forecasted product revenues denominated in certain foreign currencies, any change in the fair value of these contracts is recorded in “Accumulated other comprehensive income” on our consolidated balance sheets and is 81 reclassified to earnings in the same periods during which the underlying product revenues affect earnings.
However, since these contracts hedge a specific portion of our forecasted product revenues denominated in certain foreign currencies, any change in the fair value of these contracts is recorded in “Accumulated other comprehensive (loss) income” on our consolidated balance sheets and is 84 reclassified to earnings in the same periods during which the underlying product revenues affect earnings.
If the December 31, 2022 exchange rates were to change by a hypothetical 10%, the fair value recorded on our consolidated balance sheet related to our foreign exchange forward contracts that were designated as cash flow hedges as of December 31, 2022 would change by approximately $220.2 million.
If the December 31, 2023 exchange rates were to change by a hypothetical 10%, the fair value recorded on our consolidated balance sheet related to our foreign exchange forward contracts that were designated as cash flow hedges as of December 31, 2023 would change by approximately $239.2 million.
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Equity Price Risk Information required by this section is incorporated by reference from the discussion in the “Strategic Investments” section of this Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” ITEM 8.
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Item 7a. Quantitative and Qualitative Disclosures About Market Risk. 76 Income Taxes Our effective tax rate fluctuates from year to year due to the global nature of our operations.
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The factors that most significantly impact our effective tax rate include changes in tax laws, variability in the allocation of our taxable earnings among multiple jurisdictions, the amount and characterization of our research and development expenses, the levels of certain deductions and credits, adjustments to the value of our uncertain tax positions, acquisitions and third-party collaboration and licensing transactions.
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Our provision for income taxes was $760.2 million for 2023 and $910.4 million for 2022.
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Our effective tax rate of 17.4% for 2023 was lower than the U.S. statutory rate primarily due to a benefit from a research and development tax credit study that was completed in 2023 and excess tax benefits related to stock-based compensation, partially offset by changes in uncertain tax positions.
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Our effective tax rate of 21.5% for 2022 was higher than the U.S. statutory rate primarily due to an increase in our uncertain tax positions associated with intercompany transfer pricing matters partially offset by excess tax benefits related to stock-based compensation, tax credits, and changes in our estimated prior-year tax liabilities.
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LIQUIDITY AND CAPITAL RESOURCES The following table summarizes the components of our financial condition as of December 31, 2023 and 2022: 2023 2022 % Change (in millions, except percentages) Cash, cash equivalents and marketable securities: Cash and cash equivalents $ 10,369.1 $ 10,504.0 Marketable securities 849.2 274.5 Long-term marketable securities 2,497.8 112.2 Total cash, cash equivalents and marketable securities $ 13,716.1 $ 10,890.7 26% Working Capital: Total current assets $ 14,144.2 $ 13,234.8 7% Total current liabilities (3,547.4) (2,742.1) 29% Total working capital $ 10,596.8 $ 10,492.7 1% Working Capital Our total working capital of $10.6 billion as of December 31, 2023 was similar to our total working capital of $10.5 billion as of December 31, 2022 primarily due to $3.8 billion of income from operations mostly offset by net purchases of long-term marketable securities of $2.4 billion, income tax payments and repurchases of our common stock of $427.6 million.
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Cash Flows 2023 2022 2021 (in millions) Net cash provided by (used in): Operating activities $ 3,537.3 $ 4,129.9 $ 2,643.5 Investing activities $ (3,141.7) $ (321.1) $ (340.9) Financing activities $ (562.2) $ (67.7) $ (1,478.0) Operating Activities Cash provided by operating activities was $3.5 billion in 2023 as compared to $4.1 billion in 2022.
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The largest driver of 77 the decrease in cash provided by operating activities in 2023 as compared to 2022 was an increase in cash paid for income taxes. Investing Activities Cash used in investing activities was $3.1 billion and $321.1 million in 2023 and 2022, respectively.
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In 2023, our investing activities primarily related to net purchases of available-for-sale debt securities of $2.9 billion. In 2022, our investing activities included a net payment of $295.9 million to acquire ViaCyte and $204.7 million in purchases of property and equipment, partially offset by net sales and maturities of available-for-sale debt securities of $227.3 million.
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Financing Activities Cash used in financing activities was $562.2 million and $67.7 million in 2023 and 2022, respectively. In 2023, our financing activities primarily related to repurchases of our common stock pursuant to our share repurchase program and payments related to our employee stock benefit plans.
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In 2022, the largest portions of our financing activities were payments related to our employee stock benefit plans and payments on finance leases. Sources and Uses of Liquidity As of December 31, 2023, we had current cash, cash equivalents, and marketable securities of $11.2 billion, which represented an increase of $439.8 million from $10.8 billion as of December 31, 2022.
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We intend to rely on our existing cash, cash equivalents and current marketable securities together with cash flows from product sales as our primary source of liquidity. We expect that cash flows from our product sales together with our cash, cash equivalents and current marketable securities will be sufficient to fund our operations for at least the next twelve months.
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The adequacy of our available funds to meet our future operating and capital requirements will depend on many factors, including our future product sales, and the potential introduction of one or more of our other product candidates to the market, our business development activities and the number, breadth, cost and prospects of our research and development programs.
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Credit Facilities & Financing Strategy We may borrow up to a total of $500.0 million pursuant to a revolving credit facility that we entered into in July 2022 and could repay and reborrow amounts under this revolving credit agreement without penalty.
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Subject to certain conditions, we could request that the borrowing capacity be increased by an additional $500.0 million, for a total of $1.0 billion. Negative covenants in our credit agreement could prohibit or limit our ability to access this source of liquidity. As of December 31, 2023, the facility was undrawn, and we were in compliance with these covenants.
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We may also raise additional capital by borrowing under credit agreements, through public offerings or private placements of our securities, or securing new collaborative agreements or other methods of financing. We will continue to manage our capital structure and will consider all financing opportunities, whenever they may occur, that could strengthen our long-term liquidity profile.
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There can be no assurance that any such financing opportunities will be available on acceptable terms, if at all.
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Future Capital Requirements We have significant future capital requirements, including: • Expected operating expenses to conduct research and development activities, manufacture and commercialize our existing and future products, and to operate our organization. • Cash that we pay for income taxes. • Royalties we pay related to sales of our CF products. • Facility, operating and finance lease obligations as described below. • Firm purchase obligations related to our supply and manufacturing processes.
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In addition, other potential significant future capital requirements may include: 78 • We have entered into certain business development-related and strategic agreements with third parties that include the funding of certain research, development, manufacturing and commercialization efforts.
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Certain of our transactions, including collaborations, licensing arrangements, and asset acquisitions, include the potential for future milestone and royalty payments by us upon the achievement of pre-established developmental and regulatory targets and/or commercial targets. Other transactions include the potential for future lease-related expenses and other costs.
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Our obligation to fund these research and development and commercialization efforts and to pay these potential milestones, expenses and royalties is contingent upon continued involvement in the programs and/or the lack of any adverse events that could cause their discontinuance.
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We may enter into additional business development transactions and strategic agreements, including acquisitions, collaborations, licensing arrangements and equity investments, which require additional capital. • To the extent we borrow amounts under our existing credit agreement, we would be required to repay any outstanding principal amounts in 2027. • As of December 31, 2023, we had $2.6 billion remaining authorization available under our $3.0 billion Share Repurchase Program that our Board of Directors approved in February 2023.
Added
We expect to fund repurchases of our common stock through a combination of cash on hand and cash generated by operations. This program does not have an expiration date and can be discontinued at any time. Additional information on several of our future capital requirements is provided below.
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Research and Development Costs At any point in time, we have several ongoing clinical trials at various stages of clinical development. Our clinical trial costs are dependent on, among other things, our research activities advancing to later-stage clinical development as well as the size, number, and length of our clinical trials.
Added
Leases Finance Leases Our corporate headquarters is in two buildings that we lease at Fan Pier in Boston, Massachusetts. We commenced lease payments on these buildings in 2013 and the initial lease periods end in December 2028. We also lease office and laboratory space in San Diego, California.
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We commenced lease payments for this building in 2019 pursuant to an initial 16-year lease term. We account for each of these buildings as finance leases. Operating Leases We account for our remaining real estate leases as operating leases, including office and laboratory space at the Jeffrey Leiden Center for Cell and Genetic Therapies near our corporate headquarters.
Added
Base rent payments commenced in 2021 pursuant to an initial 15-year lease term for this building.
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Our total future minimum lease payments for our finance and operating leases for each of the next five years and in total are included in Note L, “Leases.” The total future undiscounted minimum lease payments were $583.0 million and $436.1 million related to our finance and operating leases, respectively, as of December 31, 2023.
Added
CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements prepared in accordance with generally accepted accounting principles in the U.S.
Added
The preparation of these financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported periods.
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These items are monitored and analyzed by management for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are reflected in reported results for the period in which the change occurs.
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We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances.
Added
Actual results may differ from our estimates if past experience or other assumptions do not turn out to be substantially accurate. 79 We believe that our application of the following accounting policies, each of which requires significant judgments and estimates on the part of management, are the most critical to aid in fully understanding and evaluating our reported financial results: • revenue recognition; • acquisitions, including intangible assets, goodwill and contingent consideration; and • income taxes.
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Our accounting policies, including the ones discussed below, are more fully described in Note A, “Nature of Business and Accounting Policies.” Revenue Recognition CF Product Revenues, Net We generate CF product revenues from sales in the U.S. and in international markets.
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We sell our CF products principally to a limited number of specialty pharmacy and specialty distributors in the U.S., which account for the largest portion of our total revenues. Our customers in the U.S. subsequently resell our products to patients and health care providers.
Added
We contract with government agencies so that our products will be eligible for purchase by, or partial or full reimbursement from, such third-party payors. We make international sales primarily through distributor arrangements and to retail pharmacies, as well as to hospitals and clinics, many of which are government-owned or supported customers.
Added
We recognize net CF product revenues from sales of our products when our customers obtain control of our products, which typically occurs upon delivery to our customers. Revenues from our CF product sales are recorded at the net sales price, or transaction price, which requires us to make several significant estimates regarding the net sales price.
Added
The most significant estimate we are required to make for our CF product revenues is related to government and private payor rebates, chargebacks, discounts and fees, collectively rebates. The values of the rebates provided to third-party payors per course of treatment vary significantly and are based on government-mandated discounts and our arrangements with other third-party payors.
Added
To estimate our total rebates, we estimate the percentage of prescriptions that will be covered by each third-party payor, which is referred to as the payor mix.
Added
We track available information regarding changes, if any, to the payor mix for our products, to our contractual terms with third-party payors and to applicable governmental programs and regulations and levels of our products in the distribution channel. We adjust our estimated rebates based upon new information as it becomes available, including information regarding actual rebates for our products.
Added
Claims by third-party payors for rebates are submitted to us significantly after the related sales, potentially resulting in adjustments in the period in which the new information becomes known.
Added
The following table summarizes activity related to our CF product revenue accruals for rebates for 2023, 2022 and 2021: (in millions) Balance as of December 31, 2020 $ 775.6 Provision related to 2021 sales 2,126.1 Adjustments related to prior year(s) sales (27.6) Credits/payments made (2,035.5) Balance as of December 31, 2021 $ 838.6 Provision related to 2022 sales 2,977.2 Adjustments related to prior year(s) sales (10.4) Credits/payments made (2,514.0) Balance as of December 31, 2022 $ 1,291.4 Provision related to 2023 sales 3,481.4 Adjustments related to prior year(s) sales (6.5) Credits/payments made (3,064.7) Balance as of December 31, 2023 $ 1,701.6 80 We have also entered into annual contracts with government-owned and supported customers in international markets that limit the amount of annual reimbursement we can receive for our CF products.
Added
Upon exceeding the annual reimbursement amount provided by the customer’s contract with us, products are provided free of charge, which is a material right.
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If we estimate that the annual reimbursement amount under a contract will be exceeded for an annual period, we defer a portion of the consideration received, which includes upfront payments and fees, for shipments made up to the annual reimbursement limit as “Other current liabilities.” Once the annual reimbursement limit has been reached, we recognize the deferred amount as revenue when we ship the free products.
Added
To estimate the portion of the consideration received to be recognized as revenue and the portion of the amount to be deferred, we rely on our forecast of the number of units we will distribute during the applicable annual period in each international market in which our contracts with government-owned and supported customers limit the amount of annual reimbursement we can receive.
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Our forecasts are based on, among other things, our historical experience. The preceding estimates and judgments materially affect our recognition of net CF product revenues. Changes in our estimates of net CF product revenues could have a material effect on net CF product revenues recorded in the period in which we determine that change occurs.
Added
Acquisitions As part of our business strategy, we seek to acquire products, product candidates and other technologies and businesses that are aligned with our corporate and research and development strategies and complement and advance our ongoing research and development efforts.
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If we determine that substantially all the fair value associated with an acquisition is concentrated in a single asset, and the acquisition does not constitute a business, we account for it as an asset acquisition.
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For an asset acquisition involving rights to intellectual property related to in-process research and development that is not yet associated with a product that has achieved regulatory approval, we generally record our upfront payment to AIPR&D, because there is no alternative future use for the asset that was acquired.
Added
For example, we accounted for our A&R JDCA with CRISPR in 2021 as an asset acquisition of rights to in-process research and development for which we did not have any alternative future use and recorded the associated $900.0 million upfront payment to AIPR&D.
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If the fair value that we acquired in an acquisition is distributed among more than one asset, and the acquisition constitutes a business, we account for it as a business combination.
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We are required to make several significant judgments and estimates to calculate the purchase price for our business combinations and then allocate it to the assets that we have acquired and the liabilities that we have assumed on our consolidated balance sheet.
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The most significant judgments and estimates relate to the fair value of the in-process research and development assets and contingent consideration liabilities related to these business combinations. Based on these judgments and estimates, the fair value of the goodwill that we record as a result of these business combinations may be material.
Added
In-process Research and Development Intangible Assets As of each of December 31, 2023 and 2022, we had $603.6 million of in-process research and development assets on our consolidated balance sheet within “Other intangible assets, net.” Most recently, we recorded a $216.6 million in-process research and development intangible asset related to our acquisition of ViaCyte on our consolidated balance sheet in 2022.
Added
We characterize in-process research and development assets on our consolidated balance sheets as indefinite-lived intangible assets until either the project underlying it is completed or the asset becomes impaired and is subsequently written-off.
Added
We test our in-process research and development intangible assets for impairment on an annual basis, and more frequently if indicators are present or changes in circumstances suggest that impairment may exist.
Added
When we determine that an indefinite-lived intangible asset has become impaired or we abandon the associated research and development project, we write down the carrying value to its fair value and record an impairment charge in the period in which the impairment occurs.
Added
For example, we recorded a $13.0 million impairment of an in-process research and development intangible asset to “Research and development expenses” in 2022 due to a decision to revise the scope of certain acquired gene-editing programs.
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If one of our product candidates achieves regulatory approval, the in-process research and development intangible assets associated with the product candidate become finite-lived intangible assets as described below. To determine the fair value of our in-process research and development assets, we have utilized either the multi-period excess earnings or the relief from royalty methods of the income approach.
Added
Each method requires us to estimate the probability of technical and regulatory success, revenue projections and growth rates, and appropriate discount and tax rates. 81 The multi-period excess earnings method also requires us to estimate development and commercial costs.
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The relief from royalty method also requires us to estimate the after-tax royalty savings expected from ownership of the asset that we acquired.
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Contingent Consideration As of December 31, 2023 and 2022, we had $77.4 million and $129.0 million, respectively, of liabilities on our consolidated balance sheets attributable to the fair value of the contingent development and regulatory payments that we may owe to Exonics’ former equity holders upon the achievement of certain events associated with research programs focused on DMD and other severe neuromuscular diseases, including DM1.
Added
We record an increase or a decrease in the fair value of the contingent consideration liabilities on our consolidated balance sheet and in our consolidated statement of income on a quarterly basis.
Added
We determine the fair value of our contingent consideration liabilities using a probability weighted discounted cash flow method of the income approach, which requires us to make estimates of the timing of regulatory and commercial milestone achievement and the corresponding estimated probability of technical and regulatory success rates.
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We use significant judgment in determining the appropriateness of these assumptions during each reporting period. Reasonable changes in these assumptions can cause material changes to the fair value of our contingent consideration liabilities. Due to the early stage of Exonics’ programs, these significant assumptions could be affected by future economic and market conditions.
Added
In November 2023, we determined that additional pre-clinical studies of the delivery system for our gene-editing components for DMD will be required. As a result, we revised our estimates regarding the timing of the development and regulatory milestones and the probability of achieving those milestones, which reduced the estimated fair value of our contingent consideration as of December 31, 2023.
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Goodwill As of December 31, 2023 and 2022, we had goodwill of $1.1 billion on our consolidated balance sheets. During 2023, we did not have any business combinations. In 2022, we recorded $85.8 million of goodwill on our consolidated balance sheet related to our acquisition of ViaCyte.
Added
Goodwill reflects the difference between the fair value of the consideration transferred and the fair value of the net assets acquired. Thus, the goodwill that we record is dependent on the significant judgments and estimates inherent in these fair values. We have one reporting unit for goodwill reporting purposes.
Added
We evaluate our goodwill for impairment on an annual basis, and more frequently if indicators are present or changes in circumstances suggest that impairment may exist. We have not identified any goodwill impairment to date.
Added
Finite-lived Intangible Assets As of December 31, 2023, we had $236.3 million of finite-lived intangible assets on our consolidated balance sheet within “Other intangible assets, net.” These finite-lived intangible assets, which were recorded during 2023, relate to $208.0 million of CASGEVY regulatory approval milestones, including $200.0 million we paid to CRISPR pursuant to the A&R JDCA, and $30.0 million for a non-exclusive sublicense of developed technology related to CASGEVY.
Added
We amortize our finite-lived intangible assets using the straight-line method within “Cost of sales” over the remaining estimated life of the assets beginning in the period in which regulatory approval is achieved or the assets are acquired and continuing through the period that we no longer have either exclusive rights to market the products associated with the assets or in-license rights to the intellectual property underlying the assets.
Added
We test finite-lived intangible assets for impairment if indicators are present or changes in circumstances suggest that the carrying value of an asset may not be recoverable.

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