To Our Shareholders,

Entering 2011, we stand poised to take an enormous step forward on our journey to establish Vertex as a company capable of discovering, developing and launching transformative medicines to treat serious diseases. Your support has been invaluable in bringing us to this point, and we are glad to be taking this step with you.

We expect this to be a year of exciting commercial and scientific achievements as well as continued financial strength. We have the ability, unprecedented in the industry, to launch breakthrough medicines in the next 12 months for two serious diseases - hepatitis C and cystic fibrosis. The U.S. Food & Drug Administration (FDA) is reviewing the registration package for our lead medicine in development for hepatitis C, telaprevir, and we expect approval and launch by mid-year. Following closely is our medicine in development for the treatment of cystic fibrosis (CF), VX-770, which recently showed profound results in its first Phase 3 trial. We expect to submit a New Drug Application (NDA) for VX-770 to the FDA in the second half of this year. We expect both telaprevir and VX-770 will change the lives of people living with a serious disease.

If telaprevir and VX-770 are as successful as we anticipate, these products will generate significant revenues. We believe these revenues will enable us to begin generating earnings as a cash-flow positive company during 2012 and, importantly, will also support the continued investment in the discovery and development of additional innovative medicines.

Beyond our lead medicines for hepatitis C and CF, we are investigating several other medicines in clinical trials at earlier stages of development. 2011 has already yielded data supporting the advancement of VX-765, a mid-stage medicine in development for the treatment of patients with epilepsy, and will yield additional data from a clinical trial of a medicine in development for rheumatoid arthritis as well as from trials evaluating combinations of medicines that we have in development for the treatment of hepatitis C and CF. We remain deeply committed to our preclinical research and have more than a dozen programs for diseases from pandemic influenza to multiple sclerosis.

Telaprevir:
Preparing to Launch

Our lead medicine in development is telaprevir for hepatitis C, and we are preparing for launch in 2011. The FDA granted the NDA Priority Review, as telaprevir may offer a major clinical improvement to currently available treatments.

Hepatitis C is a major health epidemic in the United States. The disease is caused by infection with the hepatitis C virus (HCV) and is the leading cause of liver transplant. The number of people who could benefit from new hepatitis C treatments is vast: almost 4 million Americans suffer from hepatitis C and 75 percent of them are unaware they are infected. If untreated, these patients face potentially serious consequences.

Telaprevir, an HCV protease inhibitor, offers a novel approach to hepatitis C treatment. Currently available medicines for hepatitis C – a combination of pegylated-interferon (PEG) and ribavirin (RBV) – boost the immune system's response to hepatitis C but do not attack the virus directly. Telaprevir is designed to thwart the virus by blocking HCV protease, an enzyme that helps the virus replicate, and is dosed in combination with PEG and RBV. In a Phase 3 trial in people with hepatitis C who were new to treatment, up to 75% achieved a viral cure with telaprevir-based combination therapy, com-pared to 44% of people who received pegylated-interferon and ribavirin alone.

We are on the forefront of exploring novel combinations that may have the potential to further improve treatment by shortening duration to 12 weeks for some people. As an example, we have undertaken a first clinical study testing telaprevir in combination with VX-222, a novel HCV polymerase inhibitor that targets a different enzyme involved in hepatitis C viral replication.

VX-770: Next in Line. NDA Submission On Track for 2011

We are blazing new trails in the fight against CF, a devastating genetic disease. While treatment has improved tremendously over the past two decades, the median predicted life expectancy of patients born today with CF is 37 years old. About 30,000 Americans live with CF.

Cystic fibrosis is caused by a genetic defect that leads to the accumulation of thick, sticky mucus in the body that damages the lungs and other organs. Currently available medicines treat the complications arising from CF, such as lung infections. Our medicines are different. We are developing two medicines that target the underlying cause: defective or missing CFTR proteins.

In early 2011, we received encouraging new data from two Phase 3 studies. Over 48 weeks, VX-770, our lead medicine for cystic fibrosis, dramatically improved lung function (FEV₁) among patients with the G551D mutation, a mutation that affects about 4 percent of patients with CF. We saw clinical benefits in children as young as six years old. In the Phase 3 trials, patients receiving VX-770 had a more than 10% absolute increase in FEV1 compared to placebo. VX-770 is a new type of medicine designed to increase the function of defective CFTR proteins.

We are completing a second Phase 3 study with VX-770 and we expect that we will submit an NDA in the second half of 2011.

Our next most advanced CF medicine in development is VX-809, which is designed to increase the concentration of CFTR proteins at the cell’s surface. We are now testing the first clinical combination of VX-770 and VX-809, with the goal of potentially addressing a broader group of CF patients with the most common mutation, known as F508del.

VX-509 and VX-765: Phase 2 Data in 2011

At Vertex, we are deeply committed to finding new medicines for serious diseases. Later this year, we plan to report data from a Phase 2 study of VX-509, an oral medicine in development for inflammatory disease currently being tested in people with rheumatoid arthritis. The medicine is designed to block Janus kinase 3 (JAK3), an enzyme that plays a role in the signaling pathways that control the survival of certain white blood cells.

In March of this year, we reported Phase 2 data for VX-765 in patients with treatment-resistant epilepsy. VX-765 is a Caspase-1 inhibitor that blocks a key inflammatory process that may play a role in the onset of epileptic seizures. This investigational medicine provides a new approach to epilepsy, a condition that affects about 2 million Americans and is characterized by recurrent seizures. Safety and efficacy results from this trial support the initiation of a larger and longer-duration Phase 2b study in people with treatment-resistant epilepsy. We expect to begin this trial as early as the fourth quarter of 2011.

Our Financial Position is Strong: Earnings and Cash-Flow Positive During 2012

We began 2011 with a cash position of more than $1 billion, which enables us to continue to invest in research and development while we prepare to launch telaprevir and seek approval of VX-770.

We are taking this balanced approach to ensure the sustainable growth of our business. We believe money we spend today on cutting-edge science will lead to our next generation of breakthrough medicines as we continue to establish Vertex as a company capable of discovering, developing and launching transformative medicines to treat serious diseases.

This is a truly exciting time for Vertex, and I look forward to updating you on our progress throughout 2011. Thank you for your continued support.

Sincerely,
Matthew Emmens
Chairman, President and CEO Vertex Pharmaceuticals

Please visit investors.vrtx.com for additional clinical data on Vertex's Phase 3 trials with telaprevir and VX-770, and Phase 2 trials with VX-222, VX-509, VX-765 and VX-809 including safety information.

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