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Prepaid expenses and other current assets

112,430

14,889

^[1]

13,099

Total current assets

1,331,254

1,057,039

Restricted cash

34,090

Property and equipment, net

133,176

^[1]

72,333

663,500

^[1]

518,700

30,992

^[1]

26,102

Other assets

11,268

^[1]

17,182

Total assets

2,204,280

1,725,446

Current liabilities:

Accounts payable

74,642

^[1]

35,851

Deferred revenues, current portion

252,299

^[1]

134,414

Accrued interest

^[1]

3,363

3,462

45,037

74,619

Accrued restructuring expense, current portion

4,932

5,497

Secured notes (due 2012)

136,991

77,799

Income taxes payable (Alios)

^[1]

12,075

Other obligations

6,150

Total current liabilities

392,348

474,783

Deferred revenues, excluding current portion

118,095

160,049

Accrued restructuring expense, excluding current portion

21,381

24,098

Convertible senior subordinated notes (due 2015)

400,000

Construction financing obligation

243,707

^[1]

160,278

55,950

Other liabilities

7,287

^[1]

2,265

Total liabilities

1,238,768

1,221,473

Commitments and contingencies (Note T and Note U)

Redeemable noncontrolling interest (Alios)

^[1]

37,036

Shareholders' equity:

Preferred stock, $0.01 par value; 1,000,000 shares authorized; none issued and outstanding at December 31, 2011 and 2010

Common stock, $0.01 par value; 300,000,000 shares authorized at December 31, 2011 and 2010; 209,303,995 and 203,522,976 shares issued and outstanding at December 31, 2011 and 2010, respectively

2,072

2,016

Additional paid-in capital

4,200,659

3,947,433

Accumulated other comprehensive loss

(1,053)

(1,067)

Accumulated deficit

(3,414,835)

(3,444,409)

Total Vertex shareholders' equity

786,843

503,973

Noncontrolling interest (Alios)

^[1]

141,633

Total shareholders' equity

928,476

503,973

Total liabilities and shareholders' equity

$ 2,204,280

$ 1,725,446

[1]

Amounts include the assets and liabilities of Vertex's variable interest entity ("VIE"), Alios BioPharma, Inc. ("Alios"). Vertex's interests and obligations with respect to the VIE's assets and liabilities are limited to those accorded to Vertex in its agreement with Alios. See Note B , "Collaborative Arrangements," to these consolidated financial statements for amounts.

Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2011	Dec. 31, 2010
Consolidated Balance Sheets
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	300,000,000	300,000,000
Common stock, shares issued	209,303,995	203,522,976
Common stock, shares outstanding	209,303,995	203,522,976

Consolidated Statements of Shareholders' Equity, Comprehensive Income (Loss) and Noncontrolling Interest - USD ($) shares in Thousands, $ in Thousands	Total	Total Vertex Shareholders' Equity	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit	Noncontrolling Interest (Alios)	Redeemable Noncontrolling Interest (Alios)	Comprehensive Income (Loss)
Balance at Dec. 31, 2008	$ 238,874	$ 238,874	$ 1,494	$ 2,281,817	$ 3,168	$ (2,047,605)
Balance (in shares) at Dec. 31, 2008			151,245
Increase (Decrease) in Stockholders' Equity
Unrealized holding gains (losses) on marketable securities	(3,178)	(3,178)			(3,178)				$ (3,178)
Foreign currency translation adjustment	(630)	(630)			(630)				(630)
Net income (loss)	(642,178)	(642,178)				(642,178)			(642,178)
Comprehensive income (loss)	(645,986)	(645,986)							(645,986)
Issuances of common stock:
Convertible senior subordinated notes (due 2013) exchanges	270,892	270,892	$ 116	270,776
Convertible senior subordinated notes (due 2013) exchanges (in shares)			11,582
Acquisition of ViroChem	290,557	290,557	$ 107	290,450
Acquisition of ViroChem (in shares)			10,734
Equity offerings	801,385	801,385	$ 230	801,155
Equity offerings (in shares)			23,000
Benefit plans	$ 53,902	53,902	$ 35	53,867
Benefit plans (in shares)	198		3,394
Stock-based compensation expense	$ 86,722	86,722		86,722
Balance at Dec. 31, 2009	1,096,346	1,096,346	$ 1,982	3,784,787	(640)	(2,689,783)
Balance (in shares) at Dec. 31, 2009			199,955
Increase (Decrease) in Stockholders' Equity
Unrealized holding gains (losses) on marketable securities	46	46			46				46
Foreign currency translation adjustment	(473)	(473)			(473)				(473)
Net income (loss)	(754,626)	(754,626)				(754,626)			(754,626)
Comprehensive income (loss)	(755,053)	(755,053)							(755,053)
Issuances of common stock:
Convertible senior subordinated notes (due 2013) conversion	31,565	31,565	$ 14	31,551
Convertible senior subordinated notes (due 2013) conversion (in shares)			1,386
Benefit plans	$ 39,991	39,991	$ 20	39,971
Benefit plans (in shares)	174		2,182
Stock-based compensation expense	$ 91,124	91,124		91,124
Balance at Dec. 31, 2010	503,973	503,973	$ 2,016	3,947,433	(1,067)	(3,444,409)
Balance (in shares) at Dec. 31, 2010			203,523
Increase (Decrease) in Stockholders' Equity
Unrealized holding gains (losses) on marketable securities	(119)	(119)			(119)				(119)
Foreign currency translation adjustment	133	133			133				133
Net income (loss)	41,179	29,574				29,574	$ 11,605		41,179
Comprehensive income (loss)	41,193	29,588					11,605		$ 41,193
Issuances of common stock:
Benefit plans	$ 133,393	133,418	$ 56	133,362			(25)
Benefit plans (in shares)	183		5,781
Stock-based compensation expense	$ 119,268	118,964		118,964			304
Tax benefit from equity compensation	900	900		900
Alios noncontrolling interest upon consolidation	130,486						130,486	$ 36,299
Dividends on redeemable noncontrolling interest	(737)						(737)	737
Balance at Dec. 31, 2011	$ 928,476	$ 786,843	$ 2,072	$ 4,200,659	$ (1,053)	$ (3,414,835)	$ 141,633	$ 37,036
Balance (in shares) at Dec. 31, 2011			209,304

Consolidated Statements of Cash Flows $ in Thousands	12 Months Ended
Consolidated Statements of Cash Flows $ in Thousands	Dec. 31, 2011 USD ($)	Dec. 31, 2010 USD ($)	Dec. 31, 2009 USD ($)
Cash flows from operating activities:
Net income (loss)	$ 41,179	$ (754,626)	$ (642,178)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization expense	35,041	30,459	30,107
Stock-based compensation expense	118,226	91,124	86,722
Other non-cash based compensation expense	8,525	6,552	6,044
Intangible asset impairment charge	105,800		7,200
Secured notes (due 2012) discount amortization expense	18,409	13,589	3,125
Change in fair value of derivative instruments	16,801	41,229	1,847
Deferred income taxes	(7,501)		(2,225)
Loss on disposal of property and equipment	55	39	2,211
Loss on exchanges of convertible senior subordinated notes (due 2013)			18,137
Other non-cash items, net	264	(31)
Changes in operating assets and liabilities, excluding the effects of the acquisitions of a variable interest entity (Alios) and business (ViroChem):
Accounts receivable, net	(170,606)	(2,923)	13,900
Inventories	(111,388)
Prepaid expenses and other current assets	(1,717)	(600)	2,070
Accounts payable	37,468	(1,182)	(15,057)
Accrued expenses and other liabilities	116,921	8,182	8,924
Excess tax benefit from share-based payment arrangements	(900)
Accrued restructuring expense	(3,282)	(4,422)	(47)
Accrued interest	(99)	3,031	(1,423)
Income taxes payable (Alios)	12,075
Deferred revenues	(71,536)	(65,863)	53,057
Net cash provided by (used in) operating activities	143,735	(635,442)	(427,586)
Cash flows from investing activities:
Purchases of marketable securities	(721,545)	(1,234,719)	(1,186,701)
Sales and maturities of marketable securities	1,016,040	1,284,806	788,263
Payment for acquisition of ViroChem, net of cash acquired			(87,422)
Payment for acquisition of a variable interest entity (Alios)	(60,000)
Expenditures for property and equipment	(34,595)	(38,054)	(23,496)
Increase in restricted cash and cash equivalents		(3,777)	(55)
Decrease in restricted cash and cash equivalents (Alios)	12,695
Decrease (increase) in other assets	(183)	(955)	679
Net cash provided by (used in) investing activities	212,412	7,301	(508,732)
Cash flows from financing activities:
Excess tax benefit from share-based payment arrangements	900
Issuances of common stock from employee benefit plans, net	124,862	33,434	47,850
Issuances of common stock from stock offerings, net			801,385
Issuance of convertible senior subordinated notes (due 2015), net		391,645
Issuance of secured notes (due 2012) and sale of milestone payments, net			149,902
Payments to redeem secured notes (due 2012)	(155,000)
Settlement of milestone derivatives	(95,000)
Debt conversion/exchange costs		(22)	(131)
Net cash (used in) provided by financing activities	(124,238)	425,057	999,006
Effect of changes in exchange rates on cash	214	(377)	(5,145)
Net increase (decrease) in cash and cash equivalents	232,123	(203,461)	57,543
Cash and cash equivalents-beginning of period	243,197	446,658	389,115
Cash and cash equivalents-end of period	475,320	243,197	446,658
Supplemental disclosure of cash flow information:
Cash paid for interest	13,512	761	10,248
Cash paid for taxes	0
Conversion/exchange of convertible senior subordinated notes (due 2013) for common stock		32,071	255,429
Accrued interest offset to additional paid-in capital on conversion/exchange of convertible senior subordinated notes (due 2013)		140	3,355
Unamortized debt issuance costs of converted/exchanged convertible senior subordinated notes (due 2013) offset to additional paid-in capital		$ 624	5,899
Capitalization of construction in-process related to financing lease transactions	$ 54,655
Fair value of common stock issued to acquire ViroChem			$ 290,557

Nature of Business and Accounting Policies

12 Months Ended

Dec. 31, 2011

Nature of Business and Accounting Policies

Nature of Business and Accounting Policies

A. Nature of Business and Accounting Policies

Business

Vertex Pharmaceuticals Incorporated ("Vertex" or the "Company") is in the business of discovering, developing, manufacturing and commercializing small molecule drugs for the treatment of serious diseases. The Company's two products are INCIVEK^TM (telaprevir), which is approved in the United States and Canada for the treatment of adults with genotype 1 hepatitis C virus infection, and KALYDECO^TM (ivacaftor), which is approved in the United States for the treatment of patients six years of age or older with cystic fibrosis who have a specific genetic mutation that is referred to as the G551D mutation. The Company began recognizing net product revenues from sales of INCIVEK and related cost of product revenues in the second quarter of 2011. The Company's collaborator, Janssen Pharmaceutica, N.V. ("Janssen"), began marketing telaprevir in its territories under the brand name INCIVO™ in September 2011. The Company is seeking approval to market ivacaftor from the European Commission and plans to seek approval to market ivacaftor in a number of other countries, including Canada and Australia. The Company's net income attributable to Vertex for 2011 was $29.6 million, or $0.14 per diluted common share. As of December 31, 2011, the Company had cash, cash equivalents and marketable securities of $968.9 million. The Company expects that the cash flows it expects to generate from the sales of its products and the royalties it expects to receive from Janssen, together with the Company's cash, cash equivalents and marketable securities, will be sufficient to fund its operations for at least the next twelve months.

Vertex is subject to risks common to companies in its industry including, but not limited to, the dependence on revenues from INCIVEK, competition, uncertainty about clinical trial outcomes, uncertainties relating to pharmaceutical pricing and reimbursement, rapid technological change, uncertain protection of proprietary technology, the need to comply with government regulations, share price volatility, dependence on collaborative relationships and potential product liability.

Basis of Presentation

The consolidated financial statements reflect the operations of (i) the Company, (ii) its wholly-owned subsidiaries and (iii) Alios BioPharma, Inc. ("Alios"), a collaborator that is a variable interest entity (a "VIE") for which the Company is deemed under applicable accounting guidance to be the primary beneficiary. All material intercompany balances and transactions have been eliminated. The Company operates in one segment, pharmaceuticals. Please refer to Note W, "Geographic Information," for information regarding the geographic breakout of the Company's revenues.

Use of Estimates

The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the amounts of revenues and expenses during the reported periods. Significant estimates in these consolidated financial statements have been made in connection with the calculation of revenues, research and development expenses, stock-based compensation expense, restructuring expense, the fair value of intangible assets, noncontrolling interest (Alios), income tax provision, derivative instruments and debt securities. The Company bases its estimates on historical experience and various other assumptions, including in certain circumstances future projections, that management believes to be reasonable under the circumstances. Actual results could differ from those estimates. Changes in estimates are reflected in reported results in the period in which they become known.

Revenue Recognition

Product Revenues, Net

The Company sells INCIVEK principally to a limited number of major wholesalers, as well as selected regional wholesalers and specialty pharmacy providers (collectively, its "Distributors"), that subsequently resell INCIVEK to patients and health care providers. The Company recognizes net product revenues from sales of INCIVEK upon delivery to the Distributor as long as (i) there is persuasive evidence that an arrangement exists between the Company and the Distributor, (ii) collectibility is reasonably assured and (iii) the price is fixed or determinable.

The Company has written contracts with its Distributors and delivery occurs when a Distributor receives INCIVEK. The Company evaluates the creditworthiness of each of its Distributors to determine whether revenues can be recognized upon delivery, subject to satisfaction of the other requirements, or whether recognition is required to be delayed until receipt of payment. In order to conclude that the price is fixed or determinable, the Company must be able to (i) calculate its gross product revenues from the sales to Distributors and (ii) reasonably estimate its net product revenues. The Company calculates gross product revenues based on the wholesale acquisition cost that the Company charges its Distributors for INCIVEK. The Company estimates its net product revenues by deducting from its gross product revenues (a) trade allowances, such as invoice discounts for prompt payment and distributor fees, (b) estimated government and private payor rebates, chargebacks and discounts, such as Medicaid reimbursements, (c) reserves for expected product returns and (d) estimated costs of incentives offered to certain indirect customers, including patients.

        Trade Allowances:     The Company generally provides invoice discounts on INCIVEK sales to its Distributors for prompt payment and pays fees for distribution services, such as fees for certain data that Distributors provide to the Company. The payment terms for sales to Distributors generally include a 2% discount for payment within 30 days. The Company expects its Distributors to earn these discounts and fees, and deducts the full amount of these discounts and fees from its gross product revenues and accounts receivable at the time such revenues are recognized.

        Rebates, Chargebacks and Discounts:     The Company contracts with Medicaid, other government agencies and various private organizations (collectively, its "Third-party Payors") so that INCIVEK will be eligible for purchase by, or partial or full reimbursement from, such Third-party Payors. The Company estimates the rebates, chargebacks and discounts it will provide to Third-party Payors and deducts these estimated amounts from its gross product revenues at the time the revenues are recognized. The Company estimates the rebates, chargebacks and discounts that it will provide to Third-party Payors based upon (i) the Company's contracts with these Third-party Payors, (ii) the government-mandated discounts applicable to government-funded programs and (iii) information obtained from the Company's Distributors and other third parties regarding the payor mix for INCIVEK.

        Product Returns:     The Company estimates the amount of INCIVEK that will be returned and deducts these estimated amounts from its gross revenues at the time the revenues are recognized. The Company's Distributors have the right to return unopened unprescribed INCIVEK beginning six months prior to the labeled expiration date and ending twelve months after the labeled expiration date. The expiration date for INCIVEK is two years after it has been converted into tablet form, which is the last step in the manufacturing process for INCIVEK and generally occurs within a few months before INCIVEK is delivered to Distributors. As of December 31, 2011, the Company had not received any material product returns. From May 23, 2011 (the date the Company began selling INCIVEK) through December 31, 2011, the Company was able to reasonably estimate product returns based on its specialty distribution model with sales to a limited number of distributors, data provided to the Company by its Distributors (including weekly reporting of Distributors' sales and inventory held by Distributors that provided the Company with visibility into the distribution channel in order to determine what quantities, if any, were eligible to be returned), data provided to the Company by other third parties, historical industry information regarding return rates for similar specialty pharmaceutical products, the estimated remaining shelf life of INCIVEK previously shipped and currently being shipped to Distributors, and contractual agreements intended to limit the amount of inventory maintained by the Company's Distributors. Based on the Company's visibility into the distribution channel and available prescription data, the Company believes that most of the INCIVEK inventory held by its Distributors on December 31, 2011 has already been dispensed to patients in the first quarter of 2012.

        Other Incentives:     Other incentives that the Company offers to indirect customers include co-pay mitigation rebates provided by the Company to commercially insured patients who have coverage for INCIVEK and who reside in states that permit co-pay mitigation programs. The Company's co-pay mitigation program is intended to reduce each participating patient's portion of the financial responsibility for INCIVEK's purchase price to a specified dollar amount. Based upon the terms of the program and information regarding programs provided for similar specialty pharmaceutical products, the Company estimates the average co-pay mitigation amounts and the percentage of patients that it expects to participate in the program in order to establish its accruals for co-pay mitigation rebates and deducts these estimated amounts from its gross product revenues at the time the revenues are recognized. The Company's co-pay mitigation rebates offered to date expire six months from the date of issuance. A portion of the co-pay mitigation rebates the Company issued in the second quarter of 2011 expired in the fourth quarter of 2011. Based on this information, beginning in the fourth quarter, the Company began adjusting its accruals for co-pay mitigation rebates based on its estimates regarding the portion of issued rebates that it estimates will not be redeemed.

The following table summarizes activity in each of the product revenue allowance and reserve categories described above from May 23, 2011 through December 31, 2011:

	Trade Allowances			Rebates, Chargebacks and Discounts			Product Returns			Other Incentives			Total

	(in thousands)
Balance at May 23, 2011	$	—		$	—		$	—		$	—		$	—
Provision related to current period sales		38,228			75,145			553			9,692			123,618
Credits/payments made for current period sales		(27,066	)		(22,486	)		(213	)		(4,490	)		(54,255	)

Balance at December 31, 2011	$	11,162		$	52,659		$	340		$	5,202		$	69,363

Royalty Revenues

The Company's royalty revenues on commercial sales of INCIVO (telaprevir) by Janssen are based on net sales of licensed products in licensed territories as provided by Janssen. The Company recognizes royalty revenues in the period the sales occur.

The Company has sold its rights to receive certain royalties on sales of an HIV protease inhibitor (fosamprenavir) and recognizes the revenues related to this sale as royalty revenues. In the circumstance where the Company has sold its rights to future royalties under a license agreement and also maintains continuing involvement in the royalty arrangement (but not significant continuing involvement in the generation of the cash flows payable to the purchaser of the future royalty rights), the Company defers recognition of the proceeds it receives for the royalty stream and recognizes these deferred revenues over the life of the license agreement pursuant to the units-of-revenue method. The Company's estimates regarding the estimated remaining royalty payments due to the purchaser have changed in the past and may change in the future.

Collaborative Revenues

The Company also recognizes revenues generated through collaborative research, development and/or commercialization agreements. The terms of these agreements typically include payment to the Company of one or more of the following: nonrefundable, up-front license fees; development and commercial milestone payments; funding of research and/or development activities; payments for services the Company provides through its third-party manufacturing network; and royalties on net sales of licensed products. Each of these types of payments results in collaborative revenues, except for revenues from royalties on net sales of licensed products, which are classified as royalty revenues.

Agreements Entered into prior to January 1, 2011

Collaborative research, development and/or commercialization agreements entered into prior to January 1, 2011 that contain multiple elements of revenue are divided into separate units of accounting if certain criteria are met, including whether the delivered element has stand-alone value to the collaborator and whether there is objective and reliable evidence of the fair value of the undelivered obligation(s). The Company allocates consideration it receives among the separate units either on the basis of each unit's fair value or using the residual method, and applies the applicable revenue recognition criteria to each of the separate units.

Up-front License Fees

The Company recognizes revenues from nonrefundable, up-front license fees on a straight-line basis over the contracted or estimated period of performance, which is typically the period over which the research and development is expected to occur or manufacturing services are expected to be provided. In order to estimate the period of performance, the Company is required to make estimates regarding the drug development and commercialization timelines for drugs and drug candidates being developed pursuant to the applicable agreement. The Company's estimates regarding the period of performance under certain of its collaboration agreements did not change during 2011, but have changed in the past and may change in the future.

Milestone Payments

At the inception of each agreement that includes research and development milestone payments, the Company evaluates whether each milestone is substantive on the basis of the contingent nature of the milestone, specifically reviewing factors such as the scientific and other risks that must be overcome to achieve the milestone, as well as the level of effort and investment required. The Company recognizes revenues related to substantive milestones in full in the period in which the substantive milestone is achieved if payment is reasonably assured. If a milestone is not considered substantive, the Company recognizes the applicable milestone payment over the period of performance. Commercial milestone payments are recognized in full upon achievement, if payment is reasonably assured.

Research and Development Activities/Manufacturing Services

Under certain of its collaboration agreements, the Company is entitled to reimbursement from its collaborators for specified research and development expenses and/or payments for specified manufacturing services that the Company provides through its third-party manufacturing network. The Company considers the nature and contractual terms of the arrangement and the nature of the Company's business operations in order to determine whether research and development funding will result in collaborative revenues or an offset to research and development expenses. The Company typically recognizes the revenues related to these reimbursable expenses and manufacturing services in the period in which the reimbursable expenses are incurred or the manufacturing services are provided.

Agreements Entered into or Materially Modified on or after January 1, 2011

On January 1, 2011, updated guidance on the recognition of revenues for agreements with multiple deliverables became effective and applies to any agreements entered into or materially modified by the Company on or after January 1, 2011. This updated guidance (i) relates to whether multiple deliverables exist, how the deliverables in a revenue arrangement should be separated and how the consideration should be allocated; (ii) requires companies to allocate revenues in an arrangement using management's best estimate of selling prices of deliverables if a vendor does not have vendor-specific objective evidence or third-party evidence of selling price; and (iii) eliminates the use of the residual method and requires companies to allocate revenues using the relative selling price method. During 2011, the Company did not enter into any material agreements or material modifications to existing agreements that would be accounted for by the Company pursuant to this updated guidance. If the Company enters into or materially modifies an agreement with multiple deliverables, this updated guidance could have a material effect on the Company's consolidated financial statements in future periods.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of money market funds and marketable securities. The Company places these investments with highly rated financial institutions, and, by policy, limits the amounts of credit exposure to any one financial institution. These amounts at times may exceed federally insured limits. The Company has not experienced any credit losses in these accounts and does not believe it is exposed to any significant credit risk on these funds. The Company has no foreign exchange contracts, option contracts or other foreign exchange hedging arrangements.

In 2011, the Company's revenues were generated from net product sales to Distributors and a limited number of collaborators in the United States, Europe and Japan. Management believes the credit risks associated with these customers are not significant. The following table summarizes gross revenues and accounts receivable, net from each of the Company's customers who individually accounted for 10% or more of total gross revenues and/or 10% or more of total accounts receivable, net:

	Percent of Total Gross Revenues									Percent of Accounts Receivable, Net

	Year Ended December 31,									At December 31,
	2011			2010			2009			2011			2010
AmerisourceBergen Drug Corporation		25	%		—			—			35	%		—
McKesson Corporation		24	%		—			—			30	%		—
Cardinal Health Incorporated		15	%		—			—			20	%		—
Janssen		19	%		21	%		54	%		10	%		12	%
Mitsubishi Tanabe Pharma Corporation		<10	%		57	%		18	%		<10	%		55	%
GlaxoSmithKline plc		<10	%		<10	%		<10	%		<10	%		23	%

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. Cash equivalents consist principally of money market funds and debt securities. Changes in cash and cash equivalents may be affected by shifts in investment portfolio maturities as well as by actual cash receipts and disbursements.

Restricted Cash

Restricted cash consists of balances held in deposit with certain banks predominantly to collateralize conditional stand-by letters of credit in the names of the Company's landlords pursuant to certain operating lease agreements. The Company also separately discloses on its consolidated balance sheets restricted cash and cash equivalents (Alios). Please refer to Note B, "Collaborative Arrangements," for further information.

Marketable Securities

Marketable securities consist of investments in U.S. Treasuries, government-sponsored enterprise securities and high-grade corporate bonds and commercial paper that are classified as available-for-sale. The Company classifies marketable securities available to fund current operations as current assets on its consolidated balance sheets. Marketable securities are classified as long-term assets on the consolidated balance sheets if (i) they have been in an unrealized loss position for longer than one year and (ii) the Company has the ability and intent to hold them (a) until the carrying value is recovered and (b) such holding period may be longer than one year. Marketable securities are stated at fair value with their unrealized gains and losses included as a component of accumulated other comprehensive income (loss), which is a separate component of shareholders' equity, until such gains and losses are realized. The fair value of these securities is based on quoted prices for identical or similar assets. If a decline in the fair value is considered other-than-temporary, based on available evidence, the unrealized loss is transferred from other comprehensive income (loss) to the consolidated statements of operations. There were no charges taken for other-than-temporary declines in fair value of marketable securities in 2011, 2010 or 2009. Realized gains and losses are determined using the specific identification method and are included in interest income in the consolidated statements of operations. There were no gross realized gains and losses recognized in 2011, 2010 or 2009.

The Company reviews investments in marketable securities for other-than-temporary impairment whenever the fair value of an investment is less than amortized cost and evidence indicates that an investment's carrying amount is not recoverable within a reasonable period of time. To determine whether an impairment is other-than-temporary, the Company considers the intent to sell, or whether it is more likely than not that the Company will be required to sell, the investment before recovery of the investment's amortized cost basis. Evidence considered in this assessment includes reasons for the impairment, compliance with the Company's investment policy, the severity and the duration of the impairment and changes in value subsequent to year end. Please refer to Note F, "Marketable Securities," for further information.

Stock-based Compensation Expense

The Company expenses the fair value of employee stock options and other forms of stock-based employee compensation over the associated employee service period or for awards with market conditions, the derived service period. For awards with performance conditions, the Company estimates the likelihood of satisfaction of the performance conditions, which affects the period over which the expense is recognized. Compensation expense is determined based on the fair value of the award at the grant date, including estimated forfeitures, and is adjusted each period to reflect actual forfeitures and the outcomes of certain market and performance conditions. Please refer to Note M, "Stock-based Compensation Expense," for further information.

Research and Development Expenses

The Company expenses as incurred all research and development expenses, including amounts funded by research and development collaborations. The Company defers and capitalizes nonrefundable advance payments made by the Company for research and development activities until the related goods are delivered or the related services are performed.

Research and development expenses are comprised of costs incurred by the Company in performing research and development activities, including salary and benefits; stock-based compensation expense; laboratory supplies and other direct expenses; contractual services costs, including clinical trial and pharmaceutical development costs; expenses associated with drug supplies that are not being capitalized; and infrastructure costs, including facilities costs and depreciation expense.

The Company's collaborators funded portions of the Company's research and development programs related to specific drugs, drug candidates and research targets, including, in 2011 telaprevir, VX-661 and research directed toward identifying additional corrector compounds for the treatment of cystic fibrosis, and in 2010 and 2009 telaprevir. The Company's collaborative revenues, including amortization of up-front license fees and milestone revenues, were $409.7 million $113.1 million and $73.6 million, respectively, in 2011, 2010 and 2009. The Company's research and development expenses allocated to programs in which a collaborator funded at least a portion of the research and development expenses were approximately $146 million, $156 million and $149 million, respectively, in 2011, 2010 and 2009.

Sales, General and Administrative Expenses

Sales, general and administrative expenses consist primarily of personnel costs, related benefits and stock-based compensation expense for the Company's sales, marketing, and managed markets personnel and personnel serving executive, finance, medical affairs, business development, legal, quality assurance, information technology and human resource functions. Other costs include facility costs not otherwise included in research and development expenses as well as professional fees for legal and accounting services. Advertising costs, which were $30.8 million in 2011, also are included in sales, general and administrative expenses and are expensed as incurred.

Inventories

The Company values its inventories at the lower of cost or market. The Company determines the cost of its inventories, which includes amounts related to materials and manufacturing overhead, on a first-in, first-out basis. If the Company identifies excess, obsolete or unsalable items, its inventories are written down to their realizable value in the period in which the impairment is first identified. Shipping and handling costs incurred for inventory purchases and product shipments are recorded in cost of product revenues in the Company's consolidated statements of operations.

The Company capitalizes inventories produced in preparation for initiating sales of a drug candidate when the related drug candidate is considered to have a high likelihood of regulatory approval and the related costs are expected to be recoverable through sales of the inventories. In determining whether or not to capitalize such inventories, the Company evaluates, among other factors, information regarding the drug candidate's safety and efficacy, the status of regulatory submissions and communications with regulatory authorities and the outlook for commercial sales, including the existence of current or anticipated competitive drugs and the availability of reimbursement. In addition, the Company evaluates risks associated with manufacturing the drug candidate and the remaining shelf life of the inventories. Please refer to Note G, "Inventories," for further information.

Property and Equipment

Property and equipment are recorded at cost. Depreciation and amortization is provided using the straight-line method over the estimated useful life of the related asset, generally four to seven years for furniture and equipment and three to five years for computers and software. Leasehold improvements are amortized using the straight-line method over the lesser of the useful life of the improvements or the estimated remaining life of the associated lease. Major additions and betterments are capitalized. Maintenance and repairs to an asset that do not improve or extend its life are charged to operations. When assets are retired or otherwise disposed of, the assets and related allowances for depreciation and amortization are eliminated from the accounts and any resulting gain or loss is reflected in the Company's consolidated statements of operations.

The Company records certain construction costs incurred by a landlord as an asset and corresponding financing obligation on the Company's consolidated balance sheets. Please refer to Note I, "Fan Pier Leases" for further information.

Income Taxes

Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the income tax bases of assets and liabilities. A valuation allowance is applied against any net deferred tax asset if, based on the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

Financial Transaction Expenses

Issuance costs incurred to complete the Company's convertible senior subordinated note offerings and the financial transactions that the Company entered into in September 2009 were deferred and included in other assets on the Company's consolidated balance sheets. The issuance costs are amortized using the effective interest rate method over the term of the related debt or financial instrument. The amortization expense related to the issuance costs is included in interest expense on the consolidated statements of operations.

The Company defers direct and incremental costs associated with the sale of its rights to future royalties. These costs are included in other assets on the Company's consolidated balance sheets and are amortized in the same manner and over the same period during which the related deferred revenues are recognized as royalty revenues. The amortization expense related to these transaction expenses is included in royalty expenses on the consolidated statements of operations. Expenses incurred in connection with common stock issuances are recorded as an offset to additional paid-in capital on the consolidated balance sheets.

Variable Interest Entities

The Company reviews each collaboration agreement pursuant to which the Company licenses assets owned by a collaborator in order to determine whether or not the collaborator is a VIE. If the collaborator is a VIE, the Company assesses whether or not the Company is the primary beneficiary of that VIE based on a number of factors, including (i) which party has the power to direct the activities that most significantly affect the VIE's economic performance, (ii) the parties' contractual rights and responsibilities pursuant to the collaboration and (iii) which party has the obligation to absorb losses or the right to receive benefits from the VIE. If the Company determines it is the primary beneficiary of a VIE, the Company consolidates the statements of operations and financial condition of the VIE into the Company's consolidated financial statements. As of June 13, 2011 (the effective date of the Company's collaboration agreement with Alios) and December 31, 2011, the Company evaluated its collaboration with Alios (the "Alios Collaboration") and determined that Alios is a VIE and that the Company is Alios' primary beneficiary. The Company will re-evaluate the Alios Collaboration each reporting period in order to determine if there are changes in circumstances that would result in the Company ceasing to consolidate the statements of operations and financial condition of Alios into the Company's consolidated financial statements. The Company would deconsolidate Alios if Alios ceased to be a VIE or if the Company was no longer Alios' primary beneficiary. Please refer to Note B, "Collaborative Arrangements," for further information.

Business Combinations

The Company assigns the value of consideration, including contingent consideration, transferred in business combinations based on its fair value as of the effective date of the transaction. The Company accounts for the Alios Collaboration as a business combination due to its determination that (i) Alios is a VIE, (ii) Alios is a business and (iii) the Company is Alios' primary beneficiary. Transaction costs and any restructuring costs associated with these transactions are expensed as incurred.

Fair Value of In-process Research and Development Assets and Contingent Payments in Business Combinations

The Company assesses the fair value of assets, including the fair value of in-process research and development assets and contingent payments pursuant to collaborations accounted for as business combinations, from the perspective of a market participant, using a variety of methods. The present-value models used to estimate the fair values of research and development assets and contingent payments pursuant to collaborations incorporate significant assumptions, including: assumptions regarding the probability of obtaining marketing approval and/or achieving relevant development milestones for a drug candidate; estimates regarding the timing of and the expected costs to develop a drug candidate; estimates of future cash flows from potential product sales and/or the potential to achieve certain commercial milestones with respect to a drug candidate; and the appropriate discount rates.

In-process Research and Development Assets

In-process research and development assets relate to (i) the Company's acquisition of ViroChem Pharma Inc. ("ViroChem") in March 2009 and (ii) the Alios Collaboration. The Company records the value of in-process research and development assets at their fair value as of the transaction date. Each of these assets is accounted for as an indefinite-lived intangible asset and maintained on the Company's consolidated balance sheet until either the project underlying it is completed or the asset becomes impaired. If a project is completed, the carrying value of the related intangible asset is amortized as a part of cost of product revenues over the remaining estimated life of the asset beginning in the period in which the project is completed. If the asset becomes impaired or is abandoned, the carrying value of the related intangible asset is written down to its fair value and an impairment charge is taken in the period in which the impairment occurs. In-process research and development assets are tested for impairment on an annual basis as of October 1, and more frequently if indicators are present or changes in circumstances suggest that impairment may exist. Please refer to Note B, "Collaborative Arrangements," and Note C, "Acquisition of ViroChem Pharma Inc.," for further information.

Goodwill

The difference between the purchase price and the fair value of assets acquired and liabilities assumed in a business combination, or deemed to be acquired or assumed in other transactions treated as business combinations for accounting purposes, is allocated to goodwill. As of December 31, 2010, goodwill consisted of goodwill related to the Company's acquisition of ViroChem. As of December 31, 2011, goodwill consisted of goodwill related to the Company's acquisition of ViroChem and the Alios Collaboration. Goodwill is evaluated for impairment on an annual basis as of October 1, and more frequently if indicators are present or changes in circumstances suggest that impairment may exist.

Derivative Instruments and Embedded Derivatives

The Company has entered into financial transactions involving free-standing derivative instruments and embedded derivatives. These financial transactions include arrangements involving secured notes, the sale of contingent milestone payments and senior subordinated convertible notes. The embedded derivatives are required to be bifurcated from the host instruments because the derivatives are not clearly and closely related to the host instruments. The Company determines the fair value of each derivative instrument or embedded derivative on the date of issuance and at the end of each quarterly period. The estimates of the fair value of these derivatives, particularly with respect to derivatives related to the achievement of milestones in the development of telaprevir, included significant assumptions regarding the estimates market participants would make in order to evaluate these derivatives. Please refer to Note K, "Common Stock Offerings and Convertible Senior Subordinated Notes," and Note N, "September 2009 Financial Transactions," for further information.

Restructuring Expense

The Company records costs and liabilities associated with exit and disposal activities based on estimates of fair value in the period the liabilities are incurred. In periods subsequent to the initial measurement, the Company measures changes to the liability using the credit-adjusted risk-free discount rate applied in the initial period. The Company evaluates and adjusts these liabilities as appropriate for changes in circumstances at least on a quarterly basis. Please refer to Note R, "Restructuring Expense," for further information.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss), which includes foreign currency translation adjustments and unrealized gains and losses on certain marketable securities. For purposes of comprehensive income (loss) disclosures, the Company does not record tax provisions or benefits for the net changes in foreign currency translation adjustment, as the Company intends to permanently reinvest undistributed earnings in its foreign subsidiaries.

Foreign Currency Translation

All material consolidated entities have the U.S. dollar as their functional currency except the functional currency of the Company's United Kingdom subsidiaries is the local currency. Non-U.S. dollar functional currency subsidiaries have assets and liabilities translated into U.S. dollars at rates of exchange in effect at the end of the year. Revenue and expense amounts are translated using the average exchange rates for the period. Net unrealized gains and losses resulting from foreign currency translation are included in accumulated other comprehensive income (loss), which is a separate component of shareholders' equity. Included in accumulated other comprehensive income (loss) is a net unrealized loss related to foreign currency translation of $0.9 million, $1.1 million and $0.6 million at December 31, 2011, 2010, and 2009, respectively.

Recent Accounting Pronouncements

In September 2011, the Financial Accounting Standards Board ("FASB") amended guidance regarding testing goodwill for impairment. This amended guidance allows an entity the option to first assess qualitative factors to determine whether it is necessary to perform a two-step impairment test. If an entity believes, as a result of its qualitative assessment, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the quantitative two-step impairment test is required; otherwise, no further testing is required. These amendments do not change the current guidance for testing other indefinite-lived intangible assets for impairment. This amended guidance became effective for annual and interim goodwill impairment tests performed by the Company for fiscal years beginning on January 1, 2012. The Company adopted this amended guidance early in connection with its October 1, 2011 goodwill assessment. The adoption of this guidance did not have a material effect on the Company's consolidated financial statements.

In June 2011, the FASB issued amended guidance intended to increase the prominence of items reported in other comprehensive income (loss). This amended guidance requires that all non-owner changes in shareholders' equity be presented either in a single continuous statement of comprehensive income (loss) or in two separate but consecutive statements. The amended guidance became effective on January 1, 2012. The Company will apply this guidance retrospectively beginning with its quarterly report for the three months ending March 31, 2012. This amended guidance will affect presentation, but will not have a material effect on the Company's consolidated financial statements.

In May 2011, the FASB amended guidance regarding the measurement of the fair value of assets and liabilities to harmonize the fair value measurement guidance under GAAP and under the International Financial Reporting Standards. This amended guidance clarifies the FASB's intent regarding the application of existing fair value measurement requirements and changes a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The amended guidance became effective on January 1, 2012. The Company will adopt this guidance on a prospective basis. The adoption of this amended guidance will not have a material effect on the Company's consolidated financial statements.

The Company did not adopt any new accounting pronouncements during 2011 that had a material effect on the Company's consolidated financial statements.

Collaborative Arrangements

12 Months Ended

Dec. 31, 2011

Collaborative Arrangements

Collaborative Arrangements

B. Collaborative Arrangements

Janssen Pharmaceutica, N.V.

In June 2006, the Company entered into a collaboration agreement with Janssen for the development, manufacture and commercialization of telaprevir, which Janssen began marketing under the brand name INCIVO™ in certain of its territories in September 2011. Under the agreement, Janssen agreed to be responsible for 50% of the drug development costs incurred under the development program for the parties' territories (North America for the Company, and the rest of the world, other than the Far East, for Janssen) and has exclusive rights to commercialize telaprevir in its territories including Europe, South America, the Middle East, Africa and Australia.

Janssen pays the Company a tiered royalty averaging in the mid-20% range, subject to adjustment for generic competition, as a percentage of net sales of INCIVO in Janssen's territories. Janssen is required pursuant to the agreement to use diligent efforts to maximize net sales of INCIVO in its territories through its commercial marketing, pricing and contracting strategies. In addition, Janssen is responsible for certain third-party royalties on net sales of INCIVO in its territories.

Janssen made a $165.0 million up-front license payment to the Company in July 2006. The up-front license payment is being amortized over the Company's estimated period of performance under the collaboration agreement. The Company's estimates regarding the period of performance under the Janssen collaboration agreement were adjusted in 2007, 2009 and 2010, as a result of changes in the global development plan for telaprevir, which includes the conduct of certain development activities in the post-approval period. These adjustments were made on a prospective basis beginning in the periods in which the changes were identified and resulted in a decrease in the amount of revenues the Company recognized from the Janssen agreement by $2.6 million per quarter for the first adjustment, by $1.1 million per quarter for the second adjustment and by $1.4 million per quarter for the third adjustment. As of December 31, 2011, there were $55.9 million in deferred revenues related to this up-front license payment that the Company expects to recognize over the remaining estimated period of performance.

Under the agreement, Janssen agreed to make contingent milestone payments for successful development, approval and launch of telaprevir as a product in its territories. At the inception of the agreement, the Company determined that all of these contingent milestones were substantive and would result in revenues in the period in which the milestone was achieved. As of December 31, 2011, the Company had earned $350.0 million of these contingent milestone payments, including a $50.0 million milestone payment in the first quarter of 2011 in connection with the European Medicines Agency's ("EMA") acceptance of the marketing authorization application ("MAA") for INCIVO and an aggregate of $200.0 million in milestone payments in the third quarter of 2011 related to the approval of INCIVO by the European Commission and launch of INCIVO in the European Union. The Company does not expect to receive any further milestone payments pursuant to this agreement. On September 30, 2009, the Company entered into two financial transactions related to the $50.0 million milestone payment that was earned in the first quarter of 2011 and the $200.0 million in milestone payments that were earned in the third quarter of 2011. Please refer to Note N, "September 2009 Financial Transactions," for further information.

Under the collaboration agreement for telaprevir, each party incurs internal and external reimbursable expenses related to the telaprevir development program and is reimbursed for 50% of these expenses. The Company recognizes the full amount of the reimbursable costs it incurs as research and development expenses on its consolidated statements of operations. The Company recognizes the amounts that Janssen is obligated to pay the Company with respect to reimbursable expenses net of reimbursable expenses incurred by Janssen as collaborative revenues. During 2011, Janssen incurred more reimbursable costs than the Company, and the net amounts payable by the Company to reimburse Janssen for expenses for 2011 were recorded as a reduction of collaborative revenues.

Each of the parties is responsible for drug supply in their respective territories. The Company provides Janssen certain services through the Company's third-party manufacturing network for telaprevir. Reimbursements from Janssen for manufacturing services are recorded as collaborative revenues.

Janssen may terminate the agreement upon the later of (i) one year's advance notice and (ii) such period as may be required to assign and transfer to the Company specified filings and approvals. The agreement also may be terminated by either party for a material breach by the other, subject to notice and cure provisions. Unless earlier terminated, the agreement will continue in effect until the expiration of Janssen's royalty obligations, which expire on a country-by-country basis with the last-to-expire patent covering telaprevir. In the European Union, the Company has a patent covering the composition-of-matter of telaprevir that expires in 2021 and expects to obtain extensions to the term of this patent through 2026.

During the three years ended December 31, 2011, the Company recognized the following collaborative revenues attributable to the Janssen collaboration:

	2011			2010		2009

	(in thousands)
Amortized portion of up-front payment	$	12,428		$	12,428	$	20,196
Milestone revenues		250,000			—		—
Net reimbursement (payment) for telaprevir development costs		(8,418	)		9,245		27,711
Reimbursement for manufacturing services		20,383			9,077		6,733

Total collaborative revenues attributable to the Janssen collaboration	$	274,393		$	30,750	$	54,640

In 2011, the Company also recognized $20.3 million in royalty revenues from net sales of INCIVO by Janssen.

Mitsubishi Tanabe Pharma Corporation

The Company has a collaboration agreement with Mitsubishi Tanabe (the "MTPC Agreement") pursuant to which Mitsubishi Tanabe has a fully-paid license to manufacture and commercialize TELAVIC (telaprevir) to treat HCV infection in Japan and specified other countries in the Far East. In September 2011, Mitsubishi Tanabe obtained approval to market TELAVIC in Japan.

The MTPC Agreement was entered into in 2004 and amended in 2009. Pursuant to the MTPC Agreement, Mitsubishi Tanabe provided financial and other support for the development and commercialization of telaprevir, made a $105.0 million payment in connection with the 2009 amendment of the collaboration agreement and made a $65.0 million commercial milestone payment in the fourth quarter of 2011 related to the commercialization of TELAVIC in Japan. There are no further milestone payments under this collaboration agreement. Mitsubishi Tanabe is responsible for its own development and manufacturing costs in its territory.

Mitsubishi Tanabe may terminate the MTPC Agreement at any time without cause upon 60 days' prior written notice to the Company. The agreement also may be terminated by either party for a material breach by the other, subject to notice and cure provisions. Unless earlier terminated, the agreement will continue in effect until the expiration of the last-to-expire patent covering TELAVIC. In Japan, the Company has a patent covering the composition-of-matter of TELAVIC that expires in 2021.

Prior to the 2009 amendment to the MTPC Agreement, the Company recognized revenues based on an amortized portion of the 2004 up-front payment, milestones, if any, and reimbursement of certain of the Company's expenses incurred in telaprevir development. The $105.0 million payment that the Company received in the third quarter of 2009 in connection with the amendment is a nonrefundable, up-front license fee and revenues related to this payment are being recognized on a straight-line basis over the expected period of performance of the Company's obligations under the amended agreement. As of December 31, 2011, there were $12.7 million in deferred revenues related to this up-front license payment that will be recognized over the remaining period of performance of the Company's obligations under the MTPC Agreement. In connection with the amendment to the MTPC Agreement, the Company agreed to supply manufacturing services to Mitsubishi Tanabe, until April 2012, through the Company's third-party manufacturing network for telaprevir.

During the three years ended December 31, 2011, the Company recognized the following collaborative revenues attributable to the Mitsubishi Tanabe collaboration:

	2011		2010		2009

	(in thousands)
Amortized portion of up-front payments	$	38,232	$	38,232	$	16,027
Milestone revenues		68,515		—		—
Reimbursement for telaprevir development costs		—		—		1,265
Payments for manufacturing services		14,928		43,636		1,419

Total collaborative revenues attributable to the Mitsubishi Tanabe collaboration	$	121,675	$	81,868	$	18,711

Cystic Fibrosis Foundation Therapeutics Incorporated

In April 2011, the Company entered into an amendment (the "April 2011 Amendment") to its existing collaboration agreement with Cystic Fibrosis Foundation Therapeutics Incorporated ("CFFT") pursuant to which CFFT agreed to provide financial support for (i) development activities for VX-661, a corrector compound discovered under the collaboration, and (ii) additional research and development activities directed at discovering new corrector compounds.

The Company entered into the original collaboration agreement with CFFT in 2004 and amended it several times prior to 2011 to provide partial funding for its cystic fibrosis drug discovery and development efforts. In 2006, the Company received a $1.5 million milestone payment from CFFT. There are no additional milestones payable by CFFT to the Company pursuant to the collaboration agreement, as amended. Under the April 2011 Amendment, CFFT agreed to provide the Company with up to $75.0 million in funding over approximately five years for corrector-compound research and development activities. The Company retains the right to develop and commercialize KALYDECO™ (ivacaftor), VX-809, VX-661 and any other compounds discovered during the course of the research collaboration with CFFT. During the year ended December 31, 2011, the Company recognized $13.7 million in collaborative revenues pursuant to this collaboration.

In the original agreement, as amended prior to the April 2011 Amendment, the Company agreed to pay CFFT tiered royalties calculated as a percentage, ranging from single digits to sub-teens, of annual net sales of any approved drugs discovered during the research term that ended in 2008, including KALYDECO, VX-809 and VX-661. The April 2011 Amendment provides for a tiered royalty in the same range on net sales of corrector compounds discovered during the research term that began in 2011. The Company also is obligated to make two one-time commercial milestone payments upon achievement of certain sales levels for a potentiator compound such as KALYDECO and two one-time commercial milestone payments upon achievement of certain sales levels for a corrector compound such as VX-809 or VX-661. KALYDECO was approved by the FDA on January 31, 2012, and the Company filed its MAA with the EMA for ivacaftor in October 2011.

The Company has royalty obligations to CFFT for each compound commercialized pursuant to this collaboration until the expiration of patents covering that compound. The Company has patents in the United States and European Union covering the composition-of-matter of ivacaftor that expire in 2027 and 2025, respectively, subject to potential patent life extensions. CFFT may terminate its funding obligations under the collaboration, as amended, in certain circumstances, in which case there will be a proportional adjustment to the royalty rates and commercial milestone payments for certain corrector compounds. The collaboration also may be terminated by either party for a material breach by the other, subject to notice and cure provisions.

Alios BioPharma, Inc.

License and Collaboration Agreement

On June 13, 2011, the Company entered into a license and collaboration agreement (the "Alios Agreement") with Alios, a privately-held biotechnology company. The Company and Alios are collaborating on the research, development and commercialization of two hepatitis C virus ("HCV") nucleotide analogues discovered by Alios, ALS-2200 and ALS-2158, which are designed to act on the HCV polymerase. As of June 13, 2011, these two HCV nucleotide analogues were being evaluated in nonclinical studies and had not begun Phase 1 clinical development. Alios and the Company began clinical development of these two HCV nucleotide analogues in December 2011. The Company is responsible for all costs related to development and commercialization of the compounds incurred after the effective date of the Alios Agreement, and manufacturing costs for the supply of ALS-2200 and ALS-2158 used after the effective date, and is providing funding to Alios to conduct the Phase 1 clinical trials for ALS-2200 and ALS-2158 and a research program directed to the discovery of additional HCV nucleotide analogues that act on the HCV polymerase.

Under the terms of the Alios Agreement, the Company received exclusive worldwide rights to ALS-2200 and ALS-2158, and has the option to select additional compounds discovered in the research program. The Company paid Alios a $60.0 million up-front payment, and Alios is eligible to receive research and development milestone payments of up to $715.0 million if two compounds are approved and commercialized. As of December 31, 2011, Alios had earned $35.0 million of these research and development milestones. Alios also is eligible to receive commercial milestone payments of up to $750.0 million, as well as tiered royalties on net sales of approved drugs.

The Company may terminate the Alios Agreement (a) upon 30 days' notice to Alios if the Company ceases development after both ALS-2200 and ALS-2158 have experienced a technical failure and/or (b) upon 60 days' notice to Alios at any time after the Company completes specified Phase 2a clinical trials. The Alios Agreement also may be terminated by either party for a material breach by the other, and by Alios for the Company's inactivity or if the Company challenges certain Alios patents, in each case subject to notice and cure provisions. Unless earlier terminated, the Alios Agreement will continue in effect until the expiration of the Company's royalty obligations, which expire on a country-by-country basis on the later of (i) the date the last-to-expire patent covering a licensed product expires or (ii) ten years after the first commercial sale in the country.

Alios is continuing to operate as a separate entity, is engaged in other programs directed at developing novel drugs that are not covered by the Alios Agreement, and maintains ownership of the underlying patent rights that are licensed to the Company pursuant to the Alios Agreement. Under applicable accounting guidance, the Company has determined that Alios is a VIE, that Alios is a business and that the Company is Alios' primary beneficiary. The Company based these determinations on, among other factors, the significance to Alios of the two licensed compounds and on the Company's power, through the joint steering committee for the licensed compounds established under the Alios Agreement, to direct the activities that most significantly affect the economic performance of Alios.

Accordingly, the Company consolidated Alios' statements of operations and financial condition with the Company's consolidated financial statements beginning on June 13, 2011. However, the Company's interests in Alios are limited to those accorded to the Company in the Alios Agreement. In particular, the Company did not acquire any equity interest in Alios, any interest in Alios' cash and cash equivalents or any control over Alios' activities that do not relate to the Alios Agreement. Alios does not have any right to the Company's assets except as provided in the Alios Agreement.

The initial consolidation of a VIE that is determined to be a business is accounted for as a business combination. As a result, as of June 13, 2011 the Company recorded all of Alios' assets and liabilities at fair value on the Company's consolidated balance sheet. The Company continues to consolidate Alios' financial statements, (A) eliminating all intercompany balances and transactions and (B) allocating loss (gain) attributable to the noncontrolling interest in Alios to net loss (gain) attributable to noncontrolling interest (Alios) in the Company's consolidated statement of operations and reflecting noncontrolling interest (Alios) on the Company's consolidated balance sheet.

Consideration for the Alios Collaboration

The consideration from the Company to Alios pursuant to the Alios Agreement consisted of (i) a $60.0 million up-front payment paid by the Company to Alios, (ii) the estimated fair value on the effective date of the Alios Agreement of the contingent research, development and commercialization milestones potentially payable by the Company to Alios and (iii) the estimated fair value on the effective date of the Alios Agreement of potential royalty payments payable by the Company to Alios. The Company used present-value models to determine the estimated fair value of the potential contingent milestone and royalty payments, based on assumptions regarding the probability of achieving the relevant milestones, estimates regarding the time to develop the drug candidate(s), estimates of future cash flows from potential product sales and assumptions regarding the appropriate discount rates. The Company valued the contingent milestone and royalty payments using (a) discount rates ranging from 3.6% to 6.5% for the research and development milestones and (b) a discount rate of 9.4% for commercial milestones and royalties. The consideration paid and the fair value of the contingent milestone and royalty payments payable by the Company pursuant to the Alios Agreement are set forth in the table below:

	As of June 13, 2011

	(in thousands)
Up-front payment	$	60,000
Fair value of contingent milestone and royalty payments		197,720

Total	$	257,720

Allocation of Assets and Liabilities

On June 13, 2011, the Company recorded $250.6 million of intangible assets on the Company's consolidated balance sheet for Alios' in-process research and development assets. These in-process research and development assets relate to Alios' HCV nucleotide analogue program, including the intellectual property related to ALS-2200 and ALS-2158. The Company used a 9.5% discount rate in the present-value models used to estimate the fair value of the in-process research and development assets. The Company also conducted an evaluation of Alios' other programs and determined that market participants would not have ascribed value to those assets because Alios had not yet identified drug candidates for clinical development, and because of the uncertainties related to (i) identifying compounds suitable for clinical development and (ii) the potential clinical development of these compounds. The difference between the fair value of the consideration and the fair value of Alios' assets, including the fair value of intangible assets and liabilities was allocated to goodwill. This goodwill related to the potential synergies from the possible development of combination therapies involving the acquired drug candidates and telaprevir and/or VX-222. None of the goodwill is expected to be deductible for income tax purposes. The Company completed its valuations of in-process research and development assets and the contingent milestone and royalty payments as of September 30, 2011 and completed its valuation of the deferred tax liability, Alios' net other assets (liabilities) and goodwill in the fourth quarter of 2011. There were no material changes to the preliminary amounts the Company recorded. The following table summarizes the fair values of the assets and liabilities recorded on the effective date of the Alios Collaboration:

	Fair Values as of June 13, 2011

	(in thousands)
Intangible assets	$	250,600
Goodwill		4,890
Deferred tax liability		(90,935	)
Net other assets		2,230

Net assets attributable to noncontrolling interest (Alios)	$	166,785

If the Company is successful in developing an Alios HCV nucleotide analogue, it will amortize as part of cost of product revenues the carrying value of the related in-process research and development asset over the remaining estimated life of the asset, beginning in the period in which the project is completed. If the Company determines that an in-process research and development asset has become impaired or abandons development of the Alios HCV nucleotide analogues, it will write down the carrying value of the related intangible asset to its fair value and will take an impairment charge in the period in which the impairment occurs.

The Company tests Alios' intangible assets and goodwill for impairment on an annual basis as of October 1, and more frequently if indicators are present or changes in circumstance suggest that impairment may exist. In connection with each annual impairment assessment and any interim impairment assessment, the Company will compare the fair value of the asset as of the date of the assessment with the carrying value of the asset on the Company's consolidated balance sheet.

Noncontrolling Interest (Alios)

The Company recorded noncontrolling interest (Alios) on two lines on its consolidated balance sheet beginning as of the effective date of the Alios Agreement. The noncontrolling interest (Alios) is reflected on two separate lines because Alios has both common shareholders and preferred shareholders that are entitled to redemption rights in certain circumstances. The aggregate fair value of the noncontrolling interest on June 13, 2011 was equal to the up-front payment and the fair value of the contingent payments under the Alios Collaboration less the deferred tax liability.

The Company records net income (loss) attributable to noncontrolling interest (Alios) on its consolidated statements of operations, reflecting Alios' net income (loss) for the reporting period, adjusted for changes in fair value of contingent milestone and royalty payments, which are evaluated each reporting period. During 2011, the fair value of contingent milestone and royalties increased by $70.0 million based on the advancement of ALS-2200 and ALS-2158 into Phase 1 clinical trials, which reduced net income attributable to Vertex. If the Alios HCV nucleotide analogues continue to advance in clinical development, the Company expects it will record increases in the fair value of the contingent milestone and royalty payments.

Activity Related to the Alios Collaboration

A summary of net income attributable to noncontrolling interest (Alios) from June 13, 2011 to December 31, 2011 was as follows:

	June 13, 2011 to December 31, 2011

	(in thousands)
Loss before provision for income taxes	$	(9,536	)
Provision for income taxes		(48,809	)
Change in fair value of contingent milestone and royalty payments		69,950

Net income attributable to noncontrolling interest (Alios)	$	11,605

Since the effective date of the collaboration, the Company has consolidated all of Alios' expenses and revenues into its consolidated statement of operations, eliminating all intercompany balances and transactions. Pro forma results of operations for 2011, 2010 and 2009, assuming the transaction had taken place at the beginning of each period, would not differ significantly from Vertex's actual reported results.

Alios Balance Sheet Information

The following summarizes items related to Alios included in the Company's consolidated balance sheets as of June 13, 2011 and December 31, 2011:

	As of June 13, 2011		As of December 31, 2011

	(in thousands)
Restricted cash and cash equivalents (Alios)	$	4,575	$	51,878
Accounts receivable, net		—		—
Prepaid expenses and other current assets		69		2,299
Property and equipment, net		885		1,925
Intangible assets		250,600		250,600
Goodwill		4,890		4,890
Other assets		76		133
Accounts payable		1,189		4,132
Accrued expenses and other current liabilities		1,504		4,291
Accrued interest		—		13
Income taxes payable (Alios)		—		12,075
Deferred tax liability		90,935		116,121
Other liabilities		682		1,030
Redeemable noncontrolling interest (Alios)		36,299		37,036
Noncontrolling interest (Alios)		130,486		141,633

The Company has recorded Alios' cash and cash equivalents as restricted cash and cash equivalents (Alios) because (i) the Company does not have any interest in or control over Alios' cash and cash equivalents and (ii) the Alios Agreement does not provide for these assets to be used for the development of the assets that the Company licensed from Alios pursuant to the collaboration. Assets recorded as a result of consolidating Alios' financial condition into the Company's consolidated balance sheets do not represent additional assets that could be used to satisfy claims against the Company's general assets.

Acquisition of ViroChem Pharma Inc.

12 Months Ended

Dec. 31, 2011

Acquisition of ViroChem Pharma Inc.

Acquisition of ViroChem Pharma Inc.

C. Acquisition of ViroChem Pharma Inc.

On March 12, 2009, the Company acquired 100% of the outstanding equity of ViroChem, a privately-held biotechnology company based in Canada, for $100.0 million in cash and 10,733,527 shares of the Company's common stock. Vertex acquired ViroChem in order to add two clinical-development stage non-nucleoside HCV polymerase inhibitors to Vertex's HCV drug development portfolio. As of December 31, 2011, the Company is continuing development of one of these two non-nucleoside HCV polymerase inhibitors, VX-222. At the time of the acquisition, ViroChem also was engaged in research-stage activities related to viral diseases and was developing an early-stage drug candidate for the treatment of patients with HIV infection.

The Company accounted for the transaction under the acquisition method of accounting. The Company recognized all of the assets acquired and liabilities assumed in the transaction at their acquisition-date fair values and expensed as incurred all transaction costs and restructuring costs associated with the transaction. The intangible assets and goodwill related to the ViroChem acquisition are tested for impairment on an annual basis as of October 1, and more frequently if indicators are present or changes in circumstance suggest that impairment may exist.

The Company consolidated ViroChem's operating results with those of Vertex beginning on the date of the acquisition. ViroChem had no revenues in the period from the acquisition date through December 31, 2009. Pro forma results of operations for the year ended December 31, 2009, assuming the acquisition of ViroChem had taken place at the beginning of 2009, would not differ significantly from Vertex's actual reported results.

The Company allocated the purchase price of $390.6 million for the acquisition of ViroChem to net tangible assets and intangible assets, goodwill and a deferred tax liability. The difference between the aggregate purchase price and the fair value of assets acquired and liabilities assumed was allocated to goodwill. All of the intangible assets acquired in the ViroChem acquisition related to in-process research and development assets. The in-process research and development assets primarily related to ViroChem's two clinical development-stage non-nucleoside HCV polymerase inhibitors, VX-222 and VX-759. As of December 31, 2011 and 2010, VX-222 accounted for $412.9 million of the intangible assets reflected on the Company's consolidated balance sheets. No impairment has been found for VX-222 since the acquisition date.

As of December 31, 2010, VX-759 accounted for $105.8 million of the intangible assets reflected on the Company's consolidated balance sheet. In connection with its preparation of its financial statements for the third quarter of 2011, the Company identified certain factors that were considered impairment indicators related to VX-759. As a result, the Company determined that the value of VX-759, the back-up to VX-222, had become impaired. The Company evaluated VX-759 for impairment in the third quarter of 2011 after receiving (A) information from its ongoing Phase 2a clinical trials of VX-222 including (i) interim data from treatment arms involving the administration of telaprevir, VX-222, pegylated-interferon and ribavirin that suggested the potential to treat patients with genotype 1 HCV infection in as few as 12 weeks and no more than 24 weeks, (ii) in September 2011, final sustained viral response data from these treatment arms and (iii) in the third quarter of 2011, completion of enrollment in the two all-oral treatment arms of this clinical trial, and (B) information regarding potentially competitive drug candidates. Based on the review and consideration of the information regarding the Phase 2a clinical trial, the Company decided to continue developing VX-222, and determined that based on the advancement of VX-222 it was not likely to pursue further development of VX-759. In connection with its impairment evaluation, the Company considered the fair value that would be attributed to VX-759 by a market participant, based on present-value models that were based upon multiple scenarios involving the development and potential commercialization of VX-759, and determined that a market participant would assign a negative fair value to the potential development of VX-759. The Company based this determination on the following: (i) VX-759 was not being evaluated in clinical trials and had only been evaluated in Phase 1 clinical trials in a small number of patients and (ii) drug candidates that would potentially be competitive to VX-759, including VX-222 and drug candidates being developed by the Company's competitors, had been evaluated in Phase 2 clinical trials and therefore, if successful, these drug candidates would reach the market in advance of VX-759. In addition, other drug candidates, including VX-222, continued to have more promising clinical and nonclinical data to support their continued development and commercial potential than the clinical and nonclinical data available for VX-759. Based on this evaluation, the Company determined that the probability of VX-759 reaching the market had decreased significantly and the resulting revenues and market share assumptions included in the Company's present value models also had decreased significantly. Accordingly, the Company determined that the fair value of VX-759 was zero dollars as of September 30, 2011, resulting in a $105.8 million impairment charge, which was recorded as an operating expense during the three months ended September 30, 2011. In connection with this impairment charge, the Company recorded an adjustment of $32.7 million to its deferred tax liability.

In addition to the two non-nucleoside HCV polymerase inhibitors, at the time of the acquisition the Company considered ViroChem's other clinical drug candidates and determined that VCH-286, ViroChem's lead HIV drug candidate, had an estimated fair value of $7.2 million at the acquisition date, based on development costs through the acquisition date. In 2009, the Company determined that the fair value of VCH-286 was zero dollars, resulting in a $7.2 million impairment charge. In connection with this impairment charge, the Company also recorded an adjustment of $2.2 million to the deferred tax liability.

The Company's consolidated balance sheets also reflect goodwill that relates to the potential synergies from the possible development of combination therapies involving telaprevir and the acquired drug candidates. No impairment has been found for goodwill since the acquisition date. None of the goodwill is expected to be deductible for income tax purposes.

The deferred tax liability related to ViroChem of $127.6 million and $160.3 million, respectively, recorded as of December 31, 2011 and 2010 primarily relates to the tax impact of future amortization or impairments associated with the identified intangible assets acquired from ViroChem, which are not deductible for tax purposes.

Acquisition-related Expenses, Including Restructuring

In connection with the acquisition of ViroChem, the Company incurred $7.8 million in expenses, which are reflected as acquisition-related expenses on the consolidated statement of operations for 2009. These costs include transaction expenses as well as a restructuring charge the Company incurred in March 2009 when it determined it would restructure ViroChem's operations in order to focus on ViroChem's HCV programs. As a result of this restructuring plan, which was completed in the second quarter of 2009, Vertex recorded a $2.1 million expense due to employee severance, benefits and related costs in 2009.

Earnings Per Share

12 Months Ended

Dec. 31, 2011

Earnings Per Share

Earnings Per Share

D. Earnings Per Share

Basic net loss attributable to Vertex per common share is based upon the weighted-average number of common shares outstanding during the period, excluding restricted stock that has been issued but is not yet vested. Diluted net loss attributable to Vertex per common share is based upon the weighted-average number of common shares outstanding during the period plus additional weighted-average common equivalent shares outstanding during the period when the effect is dilutive.

Basic and diluted net income attributable to Vertex per common share are presented in conformity with the two-class method required for participating securities. Under the two-class method, earnings are allocated to (i) Vertex common shares, excluding shares of restricted stock that have been issued but have not yet vested, and (ii) participating securities, based on their respective weighted-average shares outstanding for the period. The shares of unvested restricted stock have the non-forfeitable right to receive dividends on an equal basis with other outstanding common stock. As a result, these unvested shares of restricted stock are considered participating securities that must be included in the calculation of basic and diluted net income attributable to Vertex per common share using the two-class method. Potentially dilutive shares result from the assumed exercise of outstanding stock options (the proceeds of which are then assumed to have been used to repurchase outstanding stock using the treasury stock method) and the assumed conversion of convertible notes.

	Year Ended December 31,

	2011			2010			2009
	(in thousands)
Basic net income (loss) attributable to Vertex per common share calculation:
Net income (loss) attributable to Vertex common shareholders	$	29,574		$	(754,626	)	$	(642,178	)
Less: Undistributed earnings allocated to participating securities		(291	)		—			—

Net income (loss) attributable to Vertex common shareholders—basic	$	29,283		$	(754,626	)	$	(642,178	)
Basic weighted-average common shares outstanding		204,891			200,402			173,259
Basic net income (loss) attributable to Vertex per common share	$	0.14		$	(3.77	)	$	(3.71	)
Diluted net income (loss) attributable to Vertex per common share calculation:
Net income (loss) attributable to Vertex common shareholders	$	29,574		$	(754,626	)	$	(642,178	)
Less: Undistributed earnings allocated to participating securities		(285	)		—			—

Net income (loss) attributable to Vertex common shareholders—diluted	$	29,289		$	(754,626	)	$	(642,178	)
Weighted-average shares used to compute basic net income (loss) per common share		204,891			200,402			173,259
Effect of potentially dilutive securities:
Stock options		3,863			—			—
Other		53			—			—

Weighted average shares used to compute diluted net income (loss) per common share		208,807			200,402			173,259
Diluted net income (loss) attributable to Vertex per common share	$	0.14		$	(3.77	)	$	(3.71	)

The Company did not include the securities described in the following table in the computation of the net income (loss) attributable to Vertex per common share calculations because the effect would have been anti-dilutive during each such period:

	Year Ended December 31,

	2011		2010		2009
	(in thousands)
Stock options		9,626		21,293		19,232
Convertible senior subordinated notes		8,192		8,192		1,386
Unvested restricted stock and restricted stock units		8		1,950		1,727

Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2011

Fair Value of Financial Instruments

Fair Value of Financial Instruments

E. Fair Value of Financial Instruments

The fair value of the Company's financial assets and liabilities reflects the Company's estimate of amounts that it would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from sources independent from the Company) and to minimize the use of unobservable inputs (the Company's assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:


Level 1:		Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2:		Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3:		Unobservable inputs based on the Company's assessment of the assumptions that market participants would use in pricing the asset or liability.

The Company's investment strategy is focused on capital preservation. The Company invests in instruments that meet the credit quality standards outlined in the Company's investment policy. This policy also limits the amount of credit exposure to any one issue or type of instrument. As of December 31, 2011, the Company's investments were in money market funds, short-term U.S. Treasury securities and short-term government-sponsored enterprise securities.

As of December 31, 2011, all of the Company's financial assets that were subject to fair value measurements were valued using observable inputs. The Company's financial assets that were valued based on Level 1 inputs consist of a money market fund, U.S. Treasury securities and government-sponsored enterprise securities. The Company's money market fund also invests in government-sponsored enterprise securities. During 2011, 2010 and 2009, the Company did not record an other-than-temporary impairment charge related to its financial assets. During the third quarter of 2011, the Company evaluated VX-759 for impairment using Level 3 inputs. Please refer to Note C, "Acquisition of ViroChem Pharma Inc." for further information. The Company's financial liabilities that were subject to fair value measurement related to the financial transactions that the Company entered into in September 2009 and were valued based on Level 3 inputs. Please refer to Note N, "September 2009 Financial Transactions," for further information. The Company's noncontrolling interest (Alios) includes the fair value of the contingent milestone and royalty payments, which is valued based on Level 3 inputs. Please refer to Note B, "Collaborative Arrangements," for further information.

The following table sets forth the Company's financial assets (excluding Alios' cash equivalents) subject to fair value measurements as of December 31, 2011:

	Fair Value Measurements as of December 31, 2011

			Fair Value Hierarchy
	Total		Level 1		Level 2		Level 3
	(in thousands)
Financial assets carried at fair value:
Cash equivalents:
Money market funds	$	222,225	$	222,225	$	—	$	—
Government-sponsored enterprise securities		113,285		113,285		—		—
Marketable securities:
U.S. Treasury securities		22,107		22,107		—		—
Government-sponsored enterprise securities		471,495		471,495		—		—
Restricted cash		34,090		34,090		—		—

Total	$	863,202	$	863,202	$	—	$	—

Alios' cash equivalents of $49.0 million as of December 31, 2011 consist of money market funds, which are valued based on Level 1 inputs.

The following table is a reconciliation of financial liabilities measured at fair value using significant unobservable inputs (Level 3):

	Year Ended December 31, 2011

	(in thousands)
Balance, December 31, 2010	$	89,888
Change in fair value of derivative instruments		16,801
Redemption of the 2012 Notes and settlement of the liability related to the sale of milestone rights		(106,689	)

Balance, December 31, 2011	$	—

As of December 31, 2011, the Company had $400.0 million in aggregate principal amount of 3.35% convertible senior subordinated notes due 2015 (the "2015 Notes") on its consolidated balance sheet. At December 31, 2011, these 2015 Notes had a fair value of approximately $414 million as obtained from a quoted market source.

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 133
-Paragraph 44A, 44B
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15C, 15D
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15A
-Subparagraph a-d
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 15B
-Subparagraph a, b
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 107
-Paragraph 3, 10, 14, 15
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 157
-Paragraph 32, 33, 34
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 159
-Paragraph 17-22, 27, 28
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 820
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19207-110258

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 21
-URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13537-108611

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 28
-URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13433-108611

Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 30
-URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612

Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 16
-URI http://asc.fasb.org/extlink&oid=6947722&loc=d3e13504-108611

Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 820
-SubTopic 10
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19296-110258

Marketable Securities

12 Months Ended

Dec. 31, 2011

Marketable Securities

Marketable Securities

F. Marketable Securities

A summary of the Company's cash, cash equivalents and marketable securities is shown below:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value

	(in thousands)
December 31, 2011
Cash and cash equivalents:
Cash and money market funds	$	362,035	$	—	$	—		$	362,035
Government-sponsored enterprise securities		113,302		—		(17	)		113,285

Total cash and cash equivalents	$	475,337	$	—	$	(17	)	$	475,320

Marketable securities:
U.S. Treasury securities (due within 1 year)	$	22,105	$	2	$	—		$	22,107
Government-sponsored enterprise securities (due within 1 year)		471,589		8		(102	)		471,495

Total marketable securities	$	493,694	$	10	$	(102	)	$	493,602

Total cash, cash equivalents and marketable securities	$	969,031	$	10	$	(119	)	$	968,922

December 31, 2010
Cash and cash equivalents:
Cash and money market funds	$	193,845	$	—	$	—		$	193,845
U.S. Treasury securities		4,770		—		—			4,770
Government-sponsored enterprise securities		44,587		1		(6	)		44,582

Total cash and cash equivalents	$	243,202	$	1	$	(6	)	$	243,197

Marketable securities:
U.S. Treasury securities (due within 1 year)	$	103,230	$	1	$	(11	)	$	103,220
Government-sponsored enterprise securities (due within 1 year)		684,969		87		(62	)		684,994

Total marketable securities	$	788,199	$	88	$	(73	)	$	788,214

Total cash, cash equivalents and marketable securities	$	1,031,401	$	89	$	(79	)	$	1,031,411

Alios' $51.9 million of cash and money market funds as of December 31, 2011, recorded on the Company's consolidated balance sheet in "Restricted cash and cash equivalents (Alios)," are not included in the above table.

Inventories

12 Months Ended

Dec. 31, 2011

Inventories

G. Inventories

As of December 31, 2011, all of the Company's inventories related to INCIVEK. The following table sets forth the Company's inventories:

	At December 31,

	2011		2010
	(in thousands)
Raw materials	$	32,213	$	—
Work in process		47,010		—
Finished goods		33,207		—

Total	$	112,430	$	—

On January 1, 2011, the Company began capitalizing inventory costs for INCIVEK manufactured in preparation for the product launch in the United States based on its evaluation of, among other factors, information regarding INCIVEK's safety and efficacy and the status of the INCIVEK new drug application. The FDA approved INCIVEK on May 23, 2011. In periods prior to January 1, 2011, the Company expensed costs associated with INCIVEK raw materials, work in process and finished goods as development expenses. As of December 31, 2011, the Company has not capitalized inventory costs related to its other drug development programs. The Company expects to begin capitalizing KALYDECO inventories as of January 1, 2012.

Property and Equipment

12 Months Ended

Dec. 31, 2011

Property and Equipment

H. Property and Equipment

Property and equipment, net consisted of the following:

	At December 31,

	2011		2010
	(in thousands)
Furniture and equipment	$	151,961	$	137,904
Leasehold improvements		107,169		102,720
Software		56,923		50,211
Computers		33,116		28,817
Construction-in-progress		55,070		—

Total property and equipment, gross		404,239		319,652
Less accumulated depreciation and amortization		271,063		247,319

Total property and equipment, net	$	133,176	$	72,333

Construction-in-progress as of December 31, 2011 included $54.7 million related to construction costs incurred by the landlord at Fan Pier in Boston, Massachusetts. Please refer to Note I, "Fan Pier Leases," for further information.

Depreciation and amortization expense for the years ended December 31, 2011, 2010 and 2009 was $28.9 million, $27.9 million and $28.3 million, respectively.

In 2011, 2010 and 2009, the Company wrote off certain assets that were fully depreciated and no longer utilized. There was no effect on the Company's net property and equipment. Additionally, the Company wrote off or sold certain assets that were not fully depreciated. The loss on disposal of those assets was $55,000 in 2011, $39,000 in 2010 and $2.2 million in 2009.

The entire disclosure for long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale. Examples include land, buildings, machinery and equipment, and other types of furniture and equipment including, but not limited to, office equipment, furniture and fixtures, and computer equipment and software. This disclosure may include property plant and equipment accounting policies and methodology, a schedule of property, plant and equipment gross, additions, deletions, transfers and other changes, depreciation, depletion and amortization expense, net, accumulated depreciation, depletion and amortization expense and useful lives, income statement disclosures, assets held for sale and public utility disclosures.

Accrued Expenses and Other Current Liabilities

Fan Pier Leases

12 Months Ended

Dec. 31, 2011

Fan Pier Leases

Fan Pier Leases

I. Fan Pier Leases

On May 5, 2011, the Company entered into two leases, pursuant to which the Company agreed to lease approximately 1.1 million square feet of office and laboratory space in two buildings to be built at Fan Pier in Boston, Massachusetts (the "Fan Pier Leases"). The Fan Pier Leases will commence upon completion of the buildings (the "Buildings"), scheduled for late 2013, and will extend for 15 years from the commencement date. The Company has an option to extend the term of the Fan Pier Leases for an additional ten years.

Because the Company is involved in the construction project, including having responsibility to pay for a portion of the costs of tenant improvements and structural elements of the Buildings, the Company is deemed for accounting purposes to be the owner of the Buildings during the construction period. Accordingly, the Company has recorded, as of December 31, 2011, $54.7 million of project construction costs incurred by the landlord as an asset and a corresponding financing obligation in "Property and equipment, net" and "Construction financing obligation," respectively, on the Company's consolidated balance sheet.

The Company bifurcates its future lease payments pursuant to the Fan Pier Leases into (i) a portion that is allocated to the Buildings and (ii) a portion that is allocated to the land on which the Buildings are being built. Although the Company will not begin making lease payments pursuant to the Fan Pier Leases until the Company occupies the Buildings, the portion of the lease obligations allocated to the land is treated for accounting purposes as an operating lease that commenced in the second quarter of 2011. The Company recorded $3.9 million in expense related to this operating lease during 2011.

Once the construction of the Buildings is completed, the Company will evaluate the Fan Pier Leases in order to determine whether or not the leases meet the criteria for "sale-leaseback" treatment. The Company expects that upon completion of construction of the Buildings the Fan Pier Leases will not meet the "sale-leaseback" criteria. If the Fan Pier Leases do not meet "sale-leaseback" criteria, the Company will treat the Buildings as a financing obligation and the asset will be depreciated over its estimated useful life. If the Fan Pier Leases meet the "sale-leaseback" criteria, the Company will remove the asset and the related liability from its consolidated balance sheet and treat the Fan Pier Leases as either operating or capital leases based on the Company's assessment of the accounting guidance.

Accrued Expenses and Other Current Liabilities

12 Months Ended

Dec. 31, 2011

Accrued Expenses and Other Current Liabilities

J. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

	At December 31,

	2011		2010
	(in thousands)
Research and development contract costs	$	66,426	$	55,506
Payroll and benefits		57,453		50,041
Product revenue allowances		58,201		—
Royalty payable		28,603		2,869
State income taxes		3,691		—
Unrecognized tax benefits		4,360		2,374
Professional fees		12,785		8,629
Other		20,780		14,995

Total	$	252,299	$	134,414

Common Stock Offerings and Convertible Senior Subordinated Notes

12 Months Ended

Dec. 31, 2011

Common Stock Offerings and Convertible Senior Subordinated Notes

Common Stock Offerings and Convertible Senior Subordinated Notes

K. Common Stock Offerings and Convertible Senior Subordinated Notes

Common Stock Offerings

In December 2009, the Company completed an offering of 13,000,000 shares of common stock, which were sold at a price of $38.50 per share. This offering resulted in $488.1 million of net proceeds to the Company. The underwriting discount of $12.1 million and other expenses of $0.3 million were recorded as an offset to additional paid-in capital.

In February 2009, the Company completed an offering of 10,000,000 shares of common stock, which were sold at a price of $32.00 per share. This offering resulted in $313.3 million of net proceeds to the Company. The underwriting discount of $6.4 million and other expenses of $0.3 million were recorded as an offset to additional paid-in capital.

Convertible Senior Subordinated Notes

Convertible Senior Subordinated Notes (due 2015)

In September 2010, the Company completed an offering of $400.0 million in aggregate principal amount of 2015 Notes. This offering resulted in $391.6 million of net proceeds to the Company. The underwriting discount of $8.0 million and other expenses of $0.4 million were recorded as debt issuance costs and are included in other assets on the Company's consolidated balance sheets. The 2015 Notes were issued pursuant to and are governed by the terms of an indenture (as supplemented, the "Indenture").

The 2015 Notes are convertible at any time, at the option of the holder, into common stock at a price equal to approximately $48.83 per share, or 20.4794 shares of common stock per $1,000 principal amount of the 2015 Notes, subject to adjustment. The 2015 Notes bear interest at the rate of 3.35% per annum, and the Company is required to make semi-annual interest payments on the outstanding principal balance of the 2015 Notes on April 1 and October 1 of each year. The 2015 Notes mature on October 1, 2015.

Prior to October 1, 2013, if the closing price of the Company's common stock has exceeded 130% of the then applicable conversion price for at least 20 trading days within a period of 30 consecutive trading days, the Company may redeem the 2015 Notes at its option, in whole or in part, at a redemption price equal to 100% of the principal amount of the 2015 Notes to be redeemed. If the Company elects to redeem the 2015 Notes prior to October 1, 2013, or the holder elects to convert the 2015 Notes after receiving notice of such redemption, the Company will be obligated to make an additional payment, payable in cash or, subject to certain conditions, shares of the Company's common stock, so that the Company's total interest payments on the 2015 Notes being redeemed and such additional payment shall equal three years of interest. On or after October 1, 2013, the Company may redeem the 2015 Notes at its option, in whole or in part, at the redemption prices stated in the Indenture plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

Holders may require the Company to repurchase some or all of their 2015 Notes upon the occurrence of certain fundamental changes of Vertex, as set forth in the Indenture, at 100% of the principal amount of the 2015 Notes to be repurchased, plus any accrued and unpaid interest, if any, to, but excluding, the repurchase date.

If a fundamental change occurs that is also a specific type of change of control under the Indenture, the Company will pay a make-whole premium upon the conversion of the 2015 Notes in connection with any such transaction by increasing the applicable conversion rate on such 2015 Notes. The make-whole premium will be in addition to, and not in substitution for, any cash, securities or other assets otherwise due to holders of the 2015 Notes upon conversion. The make-whole premium will be determined by reference to the Indenture and is based on the date on which the fundamental change becomes effective and the price paid, or deemed to be paid, per share of the Company's common stock in the transaction constituting the fundamental change, subject to adjustment.

Based on the Company's evaluation of the 2015 Notes, the Company determined that the 2015 Notes contain a single embedded derivative. This embedded derivative relates to potential penalty interest payments that could be imposed on the Company for a failure to comply with its securities reporting obligations pursuant to the 2015 Notes. This embedded derivative required bifurcation because it was not clearly and closely related to the host instrument. The Company has determined that the value of this embedded derivative was nominal as of September 28, 2010, the issue date of the 2015 Notes, December 31, 2010, and December 31, 2011.

Convertible Senior Subordinated Notes (due 2013)

On January 1, 2009, the Company had outstanding $287.5 million in aggregate principal amount of 4.75% convertible senior subordinated notes due 2013 (the "2013 Notes"). The 2013 Notes were convertible, at the option of the holder, into common stock at a price equal to $23.14 per share or 43.22 shares of common stock per $1,000 in principal amount of the 2013 Notes. The 2013 Notes bore interest at the rate of 4.75% per annum, and the Company was required to make semi-annual interest payments on the outstanding principal balance of the 2013 Notes on February 15 and August 15 of each year. The Company had the right to redeem the 2013 Notes, in whole or in part, on or after February 15, 2010, at the redemption prices stated in the indenture, plus accrued and unpaid interest to, but excluding, the redemption date. The 2013 Notes would have matured on February 15, 2013.

In 2009, the Company exchanged $255.4 million in aggregate principal amount of the 2013 Notes, plus accrued interest, for 11,581,838 shares of newly-issued common stock. As a result of these exchanges, the Company incurred non-cash charges of $18.1 million related to the incremental shares that were issued to induce the holders of the 2013 Notes to enter into these exchanges. In addition, accrued interest of $3.4 million and unamortized debt issuance costs of the 2013 Notes of $5.9 million were recorded as an offset to additional paid-in capital.

In the first quarter of 2010, the Company announced that it would redeem the remaining $32.1 million in aggregate principal amount of the 2013 Notes on March 19, 2010. Instead, the holders of the remaining 2013 Notes elected to convert their 2013 Notes, pursuant to the original terms of the 2013 Notes, into 1,386,006 shares of newly-issued common stock in full satisfaction of the 2013 Notes. Accrued interest of $0.1 million and unamortized debt issuance costs of the 2013 Notes of $0.6 million were recorded as an offset to additional paid-in capital.

Preferred Stock, Common Stock and Equity Plans

12 Months Ended

Dec. 31, 2011

Preferred Stock, Common Stock and Equity Plans

Preferred Stock, Common Stock and Equity Plans

L. Preferred Stock, Common Stock and Equity Plans

The Company is authorized to issue 1,000,000 shares of preferred stock in one or more series and to fix the powers, designations, preferences and relative participating, option or other rights thereof, including dividend rights, conversion rights, voting rights, redemption terms, liquidation preferences and the number of shares constituting any series, without any further vote or action by the Company's shareholders. As of December 31, 2011 and 2010, the Company had no shares of preferred stock issued or outstanding.

The Company is authorized to issue 300,000,000 shares of common stock. Holders of common stock are entitled to one vote per share. Holders of common stock are entitled to receive dividends, if and when declared by the Company's Board of Directors, and to share ratably in the Company's assets legally available for distribution to the Company's shareholders in the event of liquidation. Holders of common stock have no preemptive, subscription, redemption or conversion rights. The holders of common stock do not have cumulative voting rights.

Stock and Option Plans

The purpose of each of the Company's stock and option plans is to attract, retain and motivate its employees, consultants and directors. Awards granted under these plans can be incentive stock options ("ISOs"), nonstatutory stock options ("NSOs"), restricted stock ("RSs"), restricted stock units ("RSUs") or other equity-based awards, as specified in the individual plans.

Shares issued under all of the Company's plans are funded through the issuance of new shares. The following table contains information about the Company's equity plans:

			As of December 31, 2011

Title of Plan	Group Eligible	Type of Award Granted	Awards Outstanding		Additional Awards Authorized for Grant
2006 Stock and Option Plan	Employees, Non-employee Directors and Consultants	NSO, ISO, RS and RSU		19,889,776		8,631,417
1996 Stock and Option Plan	Employees, Non-employee Directors, Advisors and Consultants	NSO, ISO and RS		3,177,457		—

Total				23,067,233		8,631,417

All options granted under the Company's 2006 Stock and Option Plan ("2006 Plan") and 1996 Stock and Option Plan were granted with an exercise price equal to the fair value of the underlying common stock on the date of grant. As of December 31, 2011, the only stock and option plan under which the Company makes new equity awards is the Company's 2006 Plan. Under the 2006 Plan, no stock options can be awarded with an exercise price less than the fair market value on the date of grant. The Company's shareholders approved increases in the number of shares authorized for issuance pursuant to the 2006 Plan of 12,000,000 shares and 7,700,000 shares, respectively, in 2010 and 2009.

During the three years ended December 31, 2011, grants to current employees and directors had a grant date that was the same as the date the award was approved by the Company's Board of Directors. During the three years ended December 31, 2011, for grants to new employees and directors, the date of grant for awards was the employee's first day of employment or the date the director was elected to the Company's Board of Directors. All options awarded under the Company's stock and option plans expire not more than ten years from the grant date.

During the three years ended December 31, 2011, all shares of outstanding restricted stock and restricted stock units have been granted at price equal to $0.01, the par value of the Company's common stock. Vesting of options, restricted stock and restricted stock units generally is ratable over specified periods, usually four years, and is determined by the Company's Board of Directors.

The following table summarizes information related to the outstanding and vested options during the year ended December 31, 2011:

	Stock Options			Weighted-average Exercise Price		Weighted-average Remaining Contractual Life		Aggregate Intrinsic Value

	(in thousands)			(per share)		(in years)		(in thousands)
Outstanding at December 31, 2010		21,293		$	30.50
Granted		5,754			43.55
Exercised		(4,119	)		26.60
Forfeited		(1,554	)		36.78
Expired		(451	)		37.81

Outstanding at December 31, 2011		20,923		$	34.23		6.84	$	56,376

Exercisable at December 31, 2011		12,225		$	30.59		5.55	$	53,552

Total exercisable or expected to vest at December 31, 2011		19,922		$	33.94		6.74	$	56,108

The aggregate intrinsic value in the table above represents the total pre-tax amount, net of exercise price, which would have been received by option holders if all option holders had exercised all options with an exercise price lower than the market price on December 30, 2011 (the last trading day of 2011), which was $32.92 based on the average of the high and low price of the Company's common stock on that date.

The total intrinsic value (the amount by which the fair market value exceeded the exercise price) of stock options exercised during 2011, 2010 and 2009 was $90.5 million, $10.5 million and $36.4 million, respectively. The total cash received from employees as a result of employee stock option exercises during 2011, 2010 and 2009 was $109.6 million, $22.2 million and $38.2 million, respectively.

The following table summarizes information about stock options outstanding and exercisable at December 31, 2011:

	Options Outstanding						Options Exercisable

Range of Exercise Prices	Number Outstanding		Weighted-average Remaining Contractual Life		Weighted-average Exercise Price		Number Exercisable		Weighted-average Exercise Price
	(in thousands)		(in years)		(per share)		(in thousands)		(per share)
$ 9.07–$20.00		2,751		2.99	$	15.52		2,689	$	15.44
$20.01–$30.00		1,902		6.71	$	28.89		1,363	$	28.61
$30.01–$40.00		13,790		7.16	$	35.70		7,804	$	35.17
$40.01–$50.00		403		9.04	$	44.53		69	$	44.54
$50.01–$57.27		2,077		9.47	$	52.17		300	$	53.12

The following table summarizes the restricted stock activity of the Company during the year ended December 31, 2011:

	Restricted Stock			Weighted-average Grant-date Fair Value

	(in thousands)			(per share)
Unvested at December 31, 2010		1,931		$	33.35
Granted		1,185			41.04
Vested		(747	)		33.97
Cancelled		(269	)		36.01

Unvested at December 31, 2011		2,100		$	37.13

The total fair value of the restricted stock vesting during 2011, 2010 and 2009 (measured on the date of vesting) was $34.6 million, $20.1 million and $26.5 million, respectively.

Employee Stock Purchase Plan

The Company has an employee stock purchase plan (the "ESPP"). The ESPP permits eligible employees to enroll in a twelve-month offering period comprising two six-month purchase periods. Participants may purchase shares of the Company's common stock, through payroll deductions, at a price equal to 85% of the fair market value of the common stock on the first day of the applicable twelve-month offering period, or the last day of the applicable six-month purchase period, whichever is lower. Purchase dates under the ESPP occur on or about May 14 and November 14 of each year. As of December 31, 2011, there were 482,000 shares of common stock authorized for issuance pursuant to the ESPP.

During the year ended December 31, 2011, the following shares were issued to employees under the ESPP:

	Year Ended December 31, 2011

	(in thousands, except per share amount)
Number of shares		557
Average price paid per share	$	27.47

Stock-based Compensation Expense

12 Months Ended

Dec. 31, 2011

Stock-based Compensation Expense

Stock-based Compensation Expense

M. Stock-based Compensation Expense

The Company recognizes share-based payments to employees as compensation expense using the fair value method. The fair value of stock options and shares purchased pursuant to the ESPP is calculated using the Black-Scholes option pricing model. The fair value of restricted stock and restricted stock units typically is based on the intrinsic value on the date of grant. Stock-based compensation, measured at the grant date based on the fair value of the award, is typically recognized as expense ratably over the service period. The expense recognized over the service period includes an estimate of awards that will be forfeited.

The effect of stock-based compensation expense during the three years ended December 31, 2011 was as follows:

	2011		2010		2009

	(in thousands)
Stock-based compensation expense by line item:
Research and development expenses	$	75,574	$	65,198	$	64,128
Sales, general and administrative expenses		42,652		25,926		22,594

Total stock-based compensation expense included in costs and expenses	$	118,226	$	91,124	$	86,722

During 2011, the Company capitalized $1.0 million of stock-based compensation expense to inventories, all of which was attributable to employees who supported the Company's manufacturing operations related to INCIVEK.

The stock-based compensation expense by type of award during the three years ended December 31, 2011 was as follows:

	2011			2010		2009

	(in thousands)
Stock-based compensation expense by type of award:
Stock options	$	83,098		$	64,005	$	63,397
Restricted stock and restricted stock units		30,708			22,960		18,983
ESPP share issuances		5,462			4,159		4,342
Less stock-based compensation expense capitalized to inventories		(1,042	)		—		—

Total stock-based compensation expense included in costs and expenses	$	118,226		$	91,124	$	86,722

The stock-based compensation expense related to stock options for 2009 included $12.7 million related to stock options that were accelerated and modified in connection with transition and severance arrangements with certain of the Company's former executive officers. The stock-based compensation expense related to restricted stock for 2009 included $2.2 million related to accelerated vesting of restricted stock awards in connection with transition and severance arrangements with certain of the Company's former executive officers.

The following table sets forth the Company's unrecognized stock-based compensation expense, net of estimated forfeitures, as of December 31, 2011 by type of award and the weighted-average period over which that expense is expected to be recognized:

	As of December 31, 2011

	Unrecognized Expense Net of Estimated Forfeitures		Weighted-average Recognition Period
	(in thousands)		(in years)
Type of award:
Stock options	$	139,165		2.73
Restricted stock and restricted stock units		44,744		2.25
ESPP share issuances		5,128		0.65

Stock Options

The Company issues stock options with service conditions, which are generally the vesting periods of the awards. In 2009, the Company also issued, to certain members of senior management, stock options that vest upon the earlier of the satisfaction of (1) performance conditions or (2) a service condition. If the Company estimates that it is probable that a performance condition will be met over a period shorter than the vesting period, the Company recognizes stock-based compensation expense related to the shares that would vest upon the performance condition over an implicit service period equal to the period that the Company estimates will be required to meet the performance condition. The Company uses the Black-Scholes option pricing model to estimate the fair value of stock options at the grant date. The Black-Scholes option pricing model uses the option exercise price as well as estimates and assumptions related to the expected price volatility of the Company's stock, the rate of return on risk-free investments, the expected period during which the options will be outstanding, and the expected dividend yield for the Company's stock to estimate the fair value of a stock option on the grant date. The options granted during 2011, 2010 and 2009 had a weighted-average grant-date fair value per share of $20.88, $18.52 and $19.11, respectively.

The fair value of each option granted during 2011, 2010 and 2009 was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:



Expected stock price volatility	49.53	%	52.17	%	57.77	%
Risk-free interest rate	2.09	%	2.44	%	2.85	%
Expected term of options	5.74 years		5.71 years		6.31 years
Expected annual dividends	—		—		—

The weighted-average valuation assumptions were determined as follows:

•

Expected stock price volatility:  Options to purchase the Company's stock with remaining terms of greater than one year are regularly traded in the market. Expected stock price volatility is calculated using the trailing one month average of daily implied volatilities prior to grant date.

•

Risk-free interest rate:  The Company bases the risk-free interest rate on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected option term.

•

Expected term of options:  The expected term of options represents the period of time options are expected to be outstanding. The Company uses historical data to estimate employee exercise and post-vest termination behavior. The Company believes that all groups of employees exhibit similar exercise and post-vest termination behavior and therefore does not stratify employees into multiple groups in determining the expected term of options.

•

Expected annual dividends:  The estimate for annual dividends is $0.00 because the Company has not historically paid, and does not intend for the foreseeable future to pay, a dividend.

Restricted Stock and Restricted Stock Units

The Company issues restricted stock and restricted stock units with service conditions, which are generally the vesting periods of the awards. The Company also issues, to certain members of senior management, restricted stock and restricted stock units that vest upon the earlier of the satisfaction of (i) a market or performance condition or (ii) a service condition.

Employee Stock Purchase Plan

The weighted-average fair value of each purchase right granted during 2011, 2010 and 2009 was $9.80, $10.19 and $11.31, respectively. The following table reflects the weighted-average assumptions used in the Black-Scholes option pricing model for 2011, 2010 and 2009:



Expected stock price volatility	51.32	%	43.92	%	54.22	%
Risk-free interest rate	0.08	%	0.24	%	0.39	%
Expected term	0.72 years		0.71 years		0.76 years
Expected annual dividends	—		—		—

The expected stock price volatility for ESPP offerings is based on implied volatility. The Company bases the risk-free interest rate on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected term. The expected term represents purchases and purchase periods that take place within the offering period. The expected annual dividends estimate is $0.00 because the Company has not historically paid, and does not for the foreseeable future intend to pay, a dividend.

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 123R
-Paragraph 64, 65, A240
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Statement of Position (SOP)
-Number 93-6
-Paragraph 53
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Staff Accounting Bulletin (SAB)
-Number Topic 14

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 50
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 718
-SubTopic 10
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 718
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 718
-SubTopic 10
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 718
-SubTopic 40
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929

September 2009 Financial Transactions

September 2009 Financial Transactions

12 Months Ended

Dec. 31, 2011

September 2009 Financial Transactions

N. September 2009 Financial Transactions

2012 Notes

In September 2009, the Company sold $155.0 million in aggregate of secured notes due 2012 (the "2012 Notes") for an aggregate of $122.2 million pursuant to a note purchase agreement with Olmsted Park S.A. (the "Purchaser"). The 2012 Notes were issued pursuant to, and the 2012 Notes were governed by the terms of, an indenture entered into on September 30, 2009 between the Company and U.S. Bank National Association, as trustee and collateral agent. In connection with the issuance of the 2012 Notes, the Company granted a security interest to the Purchaser with respect to $155.0 million of telaprevir milestone payments that the Company was eligible to earn from Janssen for the filing, approval and launch of telaprevir in the European Union.

The 2012 Notes were issued at a discount and did not pay current interest prior to maturity. The 2012 Notes were scheduled to mature on October 31, 2012, subject to earlier mandatory redemption to the extent that specified milestone events set forth in the Company's collaboration with Janssen occurred prior to October 31, 2012. In February 2011, the Company received a milestone payment of $50.0 million and subsequently redeemed $50.0 million of 2012 Notes pursuant to their terms. The remaining $105.0 million of 2012 Notes were redeemed on October 31, 2011, with the proceeds of milestone payments received from Janssen in October 2011.

The 2012 Notes contained an embedded derivative related to the potential mandatory redemption or early repayment of the 2012 Notes at the face amount prior to their maturity date. The Company bifurcated the embedded derivative from the 2012 Notes because the features of the embedded derivative were not clearly and closely related to the 2012 Notes. The Company determined the fair value of the embedded derivative based on a probability-weighted model of the discounted value that market participants would ascribe to the potential mandatory redemption and early repayment features of the outstanding 2012 Notes. The fair value of this embedded derivative was evaluated quarterly, with any changes in the fair value of the embedded derivative resulting in a corresponding loss or gain. The Company recorded quarterly interest expense related to the 2012 Notes using the effective interest rate method. The liabilities related to the 2012 Notes, including the embedded derivative, were reflected together on the Company's consolidated balance sheet as of December 31, 2010.

Sale of Contingent Milestone Payments

On September 30, 2009, the Company entered into two purchase agreements with the Purchaser pursuant to which the Company sold its rights to an aggregate of $95.0 million in contingent milestone payments under the Janssen agreement related to the launch of telaprevir in the European Union, for nonrefundable payments totaling $32.8 million. The purchase agreements contained representations, warranties, covenants and indemnification obligations of each party. The Purchaser received the $95.0 million in milestone payments from Janssen in October 2011.

The Company determined that this sale of a future revenue stream should be accounted for as a liability because the Company had significant continuing involvement in the generation of the milestone payments pursuant to its collaboration agreement with Janssen. As a result, the Company recorded a liability on its consolidated balance sheet equal to the fair value of the purchase agreements. No revenues or deferred revenues were recorded on account of the amounts that the Company received from the Purchaser pursuant to these purchase agreements. In addition, the Company determined that the purchase agreements were free-standing derivative instruments. The aggregate fair value of the free-standing derivatives created by the sale of the rights to contingent milestone payments to the Purchaser pursuant to the purchase agreements was based on a probability-weighted model of the discounted value that market participants would ascribe to these rights. The models used to estimate the fair value of the rights sold to the Purchaser pursuant to the purchase agreements required the Company to make estimates regarding, among other things, the assumptions market participants would make regarding the timing and probability of achieving the milestones and the appropriate discount rates. The fair value of the rights sold to the Purchaser pursuant to the purchase agreements was evaluated each reporting period, with any changes in the fair value of the derivative instruments based on the probability of achieving the milestones, the timing of achieving the milestones or discount rates resulting in a corresponding gain or loss. Because the Company's estimates of the fair value of the rights to the contingent milestone payments included the application of a discount rate to reflect the time-value of money, the Company recorded costs related to this liability each quarter.

Expenses and Liabilities Related to September 2009 Financial Transactions

The tables below set forth the total expenses related to the September 2009 financial transactions for 2011, 2010 and 2009, and the liabilities reflected on the Company's consolidated balance sheets related to these transactions as of December 31, 2011 and 2010.

	Year Ended December 31,

	2011			2010		2009
	(in thousands)
Expenses and Losses (Gains):
Interest expense related to 2012 Notes	$	21,687		$	15,068	$	3,465
Change in fair value of embedded derivative related to 2012 Notes		(400	)		1,637		(200	)
Change in fair value of free-standing derivatives related to the sale of milestone payments		17,201			39,592		2,047

Total September 2009 financial transaction expenses	$	38,488		$	56,297	$	5,312

	At December 31,

	2011		2010
	(in thousands)
Liabilities:
2012 Notes, excluding fair value of embedded derivative	$	—	$	124,902
Embedded derivative related to 2012 Notes		—		12,089
Derivatives related to the sale of milestone payments		—		77,799

Total liabilities related to September 2009 financial transactions	$	—	$	214,790

Sale of HIV Protease Inhibitor Royalty Stream

12 Months Ended

Dec. 31, 2011

Sale of HIV Protease Inhibitor Royalty Stream

Sale of HIV Protease Inhibitor Royalty Stream

O. Sale of HIV Protease Inhibitor Royalty Stream

In 2008, the Company sold to a third party its rights to receive royalty payments from GlaxoSmithKline plc, net of royalty amounts to be earned by and due to a third party, for a one-time cash payment of $160.0 million. These royalty payments relate to net sales of HIV protease inhibitors, which had been developed pursuant to a collaboration agreement between the Company and GlaxoSmithKline plc. As of December 31, 2011, the Company had $94.0 million in deferred revenues related to the one-time cash payment, which it is recognizing over the life of the collaboration agreement with GlaxoSmithKline plc based on the units-of-revenue method. In addition, the Company continues to recognize royalty revenues equal to the amount of the third-party subroyalty and an offsetting royalty expense for the third-party subroyalty payment.

Credit Agreement

12 Months Ended

Dec. 31, 2011

Credit Agreement

Credit Agreement

P. Credit Agreement

On January 7, 2011, the Company entered into a credit agreement with Bank of America, N.A., as administrative agent and lender. The credit agreement provides for a $100.0 million revolving credit facility that is initially unsecured. As of December 31, 2011, the Company had not borrowed any amount under the credit agreement.

The Company may elect that the loans under the credit agreement bear interest at a rate per annum equal to (i) LIBOR plus 1.50%, or (ii) the rate of interest publicly announced from time to time by Bank of America as its prime rate. The Company may prepay the loans, in whole or in part, in minimum amounts without premium or penalty, other than customary breakage costs with respect to LIBOR borrowings. The Company may borrow, repay and reborrow under the facility until July 6, 2012, at which point the facility terminates.

The agreement contains customary representations and warranties, affirmative and negative covenants and events of default, including payment defaults, defaults for breaches of representations and warranties, covenant defaults and cross defaults. The credit agreement also requires that the Company comply with certain financial covenants, including a covenant that requires the Company to maintain at least $400.0 million in cash, cash equivalents and marketable securities in domestic deposit and securities accounts, and a covenant that limits the Company's quarterly net losses.

The obligation of the lender to make an initial advance under the credit agreement is subject to a number of conditions, including a satisfactory due diligence review of the Company's financial position and business. Also, if, prior to an initial borrowing under the credit agreement, the Company engages in certain investment, acquisition or disposition transactions or prepays indebtedness, such activities could restrict the Company's ability to borrow under the credit agreement.

If the Company borrows under the credit agreement, the Company will become subject to certain additional negative covenants, subject to exceptions, restricting or limiting the Company's ability and the ability of the Company's subsidiaries to, among other things, grant liens, make certain investments, incur indebtedness, make certain dispositions and prepay indebtedness.

If the Company defaults under certain provisions of the credit agreement, including any default of a financial covenant, the loans will become secured by the Company's cash, cash equivalents and marketable securities with a margined value of $100.0 million. In addition, if an event of default occurs, the interest rate would increase and the administrative agent would be entitled to take various actions, including the acceleration of payment of amounts due under the loan.

Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes

Income Taxes

Q. Income Taxes

The components of income (loss) before provision for (benefit from) income taxes during the three years ended December 31, 2011 consisted of the following:

	2011			2010			2009

	(in thousands)
United States	$	343,515		$	(719,859	)	$	(621,455	)
Foreign		(283,070	)		(34,767	)		(20,723	)

Income (loss) before provision for income taxes	$	60,445		$	(754,626	)	$	(642,178	)

The components of provision for income taxes during the three years ended December 31, 2011 consisted of the following:

	2011			2010		2009

	(in thousands)
Current taxes:
United States	$	22,275		$	—	$	—
Foreign		(561	)		—		—
State		8,655			—		—

	$	30,369		$	—	$	—

Deferred taxes:
United States	$	19,629		$	—	$	—
Foreign		(32,692	)		—		—
State		1,960			—		—

	$	(11,103	)	$	—	$	—
Provision for income taxes	$	19,266		$	—	$	—

The Company's federal statutory income tax rate for 2011 was 35% and for 2010 and 2009 was 34%. The Company had income from operations in 2011 and incurred losses from operations in 2010 and 2009. The Company recorded a valuation allowance against its net operating losses and other net deferred tax assets due to uncertainties related to the realizability of these tax assets.

The difference between the Company's "expected" tax provision (benefit), as computed by applying the U.S. federal corporate tax rate to income (loss) before provision for income taxes, and actual tax is reconciled as follows:

	2011			2010			2009

	(in thousands)
Income (loss) before provision for income taxes	$	60,445		$	(754,626	)	$	(642,178	)
Expected tax provision (benefit)		21,156			(256,574	)		(218,341	)
State taxes, net of federal benefit		10,624			(46,108	)		(38,965	)
Foreign rate differential		43,629			632			674
Tax credits		(51,086	)		(23,292	)		(13,027	)
Unbenefited operating losses		(6,286	)		322,551			260,741
Non-deductible expenses		1,953			2,158			8,244
Other		(724	)		633			674

Income tax provision	$	19,266		$	—		$	—

For federal income tax purposes, as of December 31, 2011, the Company has net operating loss carryforwards of approximately $2.7 billion, and tax credits of $121.9 million, which may be used to offset future federal income and tax liability, respectively. For state income tax purposes, the Company has net operating loss carryforwards of approximately $1.8 billion, and tax credits of approximately $56 million, which may be used to offset future state income and tax liability, respectively. These operating loss carryforwards began to expire in 2006, and the tax credit carryforwards began to expire in 2005. After consideration of all the evidence, both positive and negative, management has established a valuation allowance for the full amount of the 2011 deferred tax asset because it is more likely than not that the deferred tax asset will not be realized. In future periods, if management determines that it is more likely than not that the deferred tax asset will be realized, (i) the valuation allowance would be decreased, (ii) a portion or all of the deferred tax asset would be reflected on the Company's consolidated balance sheet and (iii) the Company would record non-cash benefits in its statements of operations related to the reflection of the deferred tax asset on the Company's consolidated balance sheet.

Unrecognized tax benefits during the two years ended December 31, 2011 consisted of the following:

	2011			2010

	(in thousands)
Unrecognized tax benefits beginning of year	$	2,374		$	1,858
Gross change for current year positions		2,564			516
Increase for prior period positions		—			—
Decrease for prior period positions		—			—
Decrease due to settlements and payments		(23	)		—
Decrease due to statute limitations		(560	)		—

Unrecognized tax benefits end of year	$	4,360		$	2,374

The Company had gross unrecognized tax benefits of $4.4 million as of December 31, 2011 and $2.4 million as of December 31, 2010. At December 31, 2011, $4.4 million represented the amount of unrecognized tax benefits that, if recognized, would result in a reduction of the Company's effective tax rate. In the next twelve months it is reasonably possible that the Company will reduce the balance of its unrecognized tax benefits by $0.5 million due to the application of statute of limitations and settlements with taxing authorities, all of which would reduce the Company's effective tax rate.

Deferred tax assets and liabilities are determined based on the difference between financial statement and tax bases using enacted tax rates in effect for the year in which the differences are expected to reverse. The components of the deferred taxes at December 31 were as follows:

	2011			2010

	(in thousands)
Deferred tax assets:
Net operating loss	$	870,367		$	944,275
Tax credit carryforwards		167,759			112,467
Property and equipment		15,537			22,483
Intangibles		71,076			—
Deferred revenues		59,939			138,809
Stock-based compensation		90,563			81,211
Inventory		23,883			38,810
Accrued expenses and other		30,636			30,078
Unrealized Loss		245			—

Gross deferred tax assets		1,330,005			1,368,133
Valuation allowance		(1,329,775	)		(1,368,133	)

Total deferred tax assets		230			—
Deferred tax liabilities:
Contingent consideration		(14,241	)		—
Acquired intangibles		(229,696	)		(160,278	)

Net deferred tax liabilities	$	(243,707	)	$	(160,278	)

Generally, tax return deductions are allowable on stock-based compensation plans, but, may arise in different amounts and periods from when stock-based compensation expense is recognized in the financial statements. If the tax return deduction for an award exceeds the cumulative stock-based compensation expense recognized in the financial statements, any excess tax benefit is recognized as additional paid-in capital when the deduction reduces income tax payable. The net tax amount of the unrealized excess tax benefits as of December 31, 2011 was approximately $114 million. As of December 31, 2011, the gross amount of this excess tax deduction in the net operating loss carryforward was approximately $525 million.

The valuation allowance decreased by $38.4 million from December 31, 2010 to December 31, 2011 because the Company had net income in 2011.

The Company files United States federal income tax returns and income tax returns in various state, local and foreign jurisdictions. The Company is no longer subject to any tax assessment from an income tax examination in the United States before 2007 and any other major taxing jurisdiction for years before 2005, except where the Company has net operating losses or tax credit carryforwards that originate before 2005. The Company completed an examination by the Internal Revenue Service with respect to 2006 in June 2009 with no material changes. The Company is currently under examination by Revenue Quebec for the year ended March 11, 2009 and the year ended December 31, 2007. No adjustments have been reported. The Company is not under examination by any other jurisdictions for any tax year.

The Company currently intends to reinvest the total amount of its unremitted earnings in the local international jurisdiction or to repatriate the earnings only when tax-effective. As such, the Company has not provided for U.S. federal income taxes on the unremitted earnings of its international subsidiaries. Upon repatriation of those earnings, in the form of dividends or otherwise, the Company would be subject to U.S. federal income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. Determination of the amount of the unrecognized deferred U.S. federal income tax liability is not practical due to the complexity associated with this hypothetical calculation; however, unrecognized foreign tax credits would be available to reduce some portion of the U.S. federal income tax liability.

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 08
-Paragraph h
-Article 4

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 109
-Paragraph 136, 172
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 109
-Paragraph 43, 44, 45, 46, 47, 48, 49
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 15
-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319

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-Name Accounting Standards Codification
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-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319

Reference 6: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
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-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08.(h))
-URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690

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-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319

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-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319

Restructuring Expense

12 Months Ended

Dec. 31, 2011

Restructuring Expense

Restructuring Expense

R. Restructuring Expense

In June 2003, Vertex adopted a plan to restructure its operations to coincide with its increasing internal emphasis on advancing drug candidates through clinical development to commercialization. The restructuring was designed to re-balance the Company's relative investments in research and development to better support the Company's long-term strategy. At that time, the restructuring plan included a workforce reduction, write-offs of certain assets and a decision not to occupy approximately 290,000 square feet of specialized laboratory and office space in Cambridge, Massachusetts under lease to Vertex (the "Kendall Square Lease"). The Kendall Square Lease commenced in January 2003 and has a 15-year term. In the second quarter of 2005, the Company revised its assessment of its real estate requirements and decided to use approximately 120,000 square feet of the facility subject to the Kendall Square Lease (the "Kendall Square Facility") for its operations, beginning in 2006. The remaining rentable square footage of the Kendall Square Facility currently is subleased to third parties.

The Company's initial estimate of its liability for net ongoing costs associated with the Kendall Square Lease obligation was recorded in the second quarter of 2003 at fair value. The restructuring expense incurred from the second quarter of 2003 through the end of the first quarter of 2005 (i.e., immediately prior to the Company's decision to use a portion of the Kendall Square Facility for its operations) relates to the estimated incremental net ongoing lease obligations associated with the entire Kendall Square Facility, together with imputed interest costs relating to the restructuring liability. The restructuring expense incurred in the period beginning in the second quarter of 2005 relates only to the portion of the building that the Company is not occupying and does not intend to occupy for its operations. The remaining lease obligations, which are associated with the portion of the Kendall Square Facility that the Company occupies and uses for its operations, are recorded as rental expense in the period incurred. The Company reviews its assumptions and estimates quarterly and updates its estimates of this liability as changes in circumstances require. The expense and liability recorded is calculated using probability-weighted discounted cash-flows of the Company's estimated ongoing lease obligations, including contractual rental and build-out commitments, net of estimated sublease rentals, offset by related sublease costs.

In estimating the expense and liability under its Kendall Square Lease obligation, the Company estimated (i) the costs to be incurred to satisfy rental and build-out commitments under the lease (including operating costs), (ii) the lead-time necessary to sublease the space, (iii) the projected sublease rental rates, and (iv) the anticipated durations of subleases. The Company uses a credit-adjusted risk-free rate of approximately 10% to discount the estimated cash flows. The Company reviews its estimates and assumptions on at least a quarterly basis, and intends to continue such reviews until the termination of the Kendall Square Lease, and will make whatever modifications the Company believes necessary, based on the Company's best judgment, to reflect any changed circumstances. The Company's estimates have changed in the past, and may change in the future, resulting in additional adjustments to the estimate of the liability. Changes to the Company's estimate of the liability are recorded as additional restructuring expense/(credit). In addition, because the Company's estimate of the liability includes the application of a discount rate to reflect the time-value of money, the Company records imputed interest costs related to the liability each quarter. These costs are included in restructuring expense on the Company's consolidated statements of operations.

The restructuring liability of $26.3 million at December 31, 2011 related solely to the portion of the Kendall Square Facility that the Company does not intend to use for its operations and included other related lease obligations, recorded at net present value. The Company classified $4.9 million of the total restructuring liability at December 31, 2011 as short-term, and $21.4 million as long-term. The short-term portion of the restructuring liability represented the net amount the Company expects to pay in 2012.

The activity related to restructuring and other liability for 2003 was as follows:

	Charge in 2003		Cash payments in 2003			Non-cash write-off in 2003			Liability as of December 31, 2003

	(in thousands)
Lease restructuring and other operating lease expense	$	84,726	$	(15,200	)	$	—		$	69,526
Employee severance, benefits and related costs		2,616		(2,616	)		—			—
Leasehold improvements and asset impairments		4,482		—			(4,482	)		—

Total	$	91,824	$	(17,816	)	$	(4,482	)	$	69,526

In 2003, the lease restructuring and other operating lease expense included $78.7 million of lease restructuring expense and $6.0 million of lease operating expense incurred prior to the decision not to occupy the Kendall Square Facility. The restructuring accrual as of December 31, 2003 related only to the lease restructuring expense.

The activity related to restructuring for 2004 through 2011 was as follows:

	Restructuring Liability

	2011			2010			2009			2004-2011
	(in thousands)
Liability, beginning of the period	$	29,595		$	34,017		$	34,064		$	69,526
Cash payments		(14,904	)		(14,759	)		(14,924	)		(148,844	)
Cash received from subleases		9,548			8,836			8,637			55,014
Credit for portion of facility Vertex decided to occupy in 2005		—			—			—			(10,018	)
Restructuring expense		2,074			1,501			6,240			60,635

Liability, end of the period	$	26,313		$	29,595		$	34,017		$	26,313

In each period, the Company recorded lease restructuring expense attributable to imputed interest related to the restructuring liability. In certain periods, the restructuring expense also reflected the revision of certain key estimates and assumptions about building operating expenses and sublease income.

The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled.

Employee Benefits

12 Months Ended

Dec. 31, 2011

Employee Benefits

Employee Benefits

S. Employee Benefits

The Company has a 401(k) retirement plan (the "Vertex 401(k) Plan") in which substantially all of its permanent United States employees are eligible to participate. Participants may contribute up to 60% of their annual compensation to the Vertex 401(k) Plan, subject to statutory limitations. The Company may declare discretionary matching contributions to the Vertex 401(k) Plan that are payable in Vertex common stock. The match is paid in the form of fully vested interests in a Vertex common stock fund. Employees have the ability to transfer funds from the Company common stock fund as they choose. As of December 31, 2011, 96,000 shares of common stock remained available for grant under the Vertex 401(k) Plan. The Company declared matching contributions to the Vertex 401(k) Plan as follows:

	2011		2010		2009

	(in thousands)
Discretionary matching contributions during the year ended December 31,	$	8,619	$	6,552	$	6,044
Shares issued during the year ended December 31,		183		174		198
Shares issuable as of the year ended December 31,		62		42		35

The entire disclosure for pension and other postretirement benefits.

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 132R
-Paragraph 5
-Subparagraph a
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 132R
-Paragraph 5
-Subparagraph b
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 132R
-Paragraph 5
-Subparagraph h
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 132R
-Paragraph 5
-Subparagraph q
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-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 132R
-Paragraph 8
-Subparagraph m
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-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 106
-Paragraph 518
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-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 87
-Paragraph 264
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-Publisher FASB
-Name Emerging Issues Task Force (EITF)
-Number 03-2
-Paragraph 8
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-Publisher AICPA
-Name Accounting Principles Board Opinion (APB)
-Number 30
-Paragraph 26
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-Name FASB Staff Position (FSP)
-Number FAS106-2
-Paragraph 20, 21, 22
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-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 158
-Paragraph 7, 21, 22
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Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 132R
-Paragraph 5, 6, 7, 8
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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-Publisher FASB
-Name Implementation Guide (Q and A)
-Number FAS88
-Paragraph 63
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 715
-URI http://asc.fasb.org/topic&trid=2235017

Commitments

12 Months Ended

Dec. 31, 2011

Commitments

Commitments

T. Commitments

The Company leases its facilities and certain equipment. The Company's leases have terms through 2028. The leases of the Company's current primary facilities in Cambridge were extended in 2009 through December 2015. The term of the Kendall Square Lease began on January 1, 2003. Rent payments pursuant to the Kendall Square Lease will be subject to increase in May 2013, based on changes in an inflation index. These increases will be treated as contingent rentals. The Kendall Square Lease will expire in 2018, and the Company has the option to extend the term for two consecutive terms of ten years each. The Company occupies and uses for its operations approximately 120,000 square feet of the Kendall Square Facility. The Company has sublease arrangements in place for the remaining rentable square footage of the Kendall Square Facility, with terms that expire in April 2015 and August 2015. See Note R, "Restructuring Expense," for further information. In 2011, the Company entered into two leases for approximately 1.1 million square feet of office and laboratory space in Boston, Massachusetts. The Company expects that it will begin occupying and making lease payments for this space in late 2013. Please see Note I, "Fan Pier Leases," for additional information regarding this commitment.

As of December 31, 2011, future minimum commitments under Fan Pier Leases, facility operating leases with terms of more than one year and expected sublease income under the Company's subleases for the Kendall Square Facility were as follows:

Year	Fan Pier Leases		Kendall Square Lease		Sublease Income			Other Operating Leases		Total Lease Commitments (Net of Sublease Income)

	(in thousands)
2012	$	—	$	18,260	$	(7,850	)	$	36,455	$	46,865
2013		—		18,260		(8,424	)		37,942		47,778
2014		67,206		18,260		(8,424	)		29,025		106,067
2015		67,206		18,260		(3,942	)		22,678		104,202
2016		67,206		18,260		—			4,611		90,077
Thereafter		887,211		24,346		—			10,018		921,575

Total minimum lease payments	$	1,088,829	$	115,646	$	(28,640	)	$	140,729	$	1,316,564

Rental expense for 2011 was $49.4 million, which included $11.2 million related to the Kendall Square Facility. Rental expense for 2010 was $46.6 million, which included $11.6 million related to the Kendall Square Facility. Rental expense for 2009 was $39.1 million, which included $11.5 million related to the Kendall Square Facility.

In addition, the Company has committed to make potential future milestone and royalty payments pursuant to the Alios Agreement. Payments generally become due and payable upon the achievement of certain developmental, regulatory and/or commercial milestones.

In September 2010, the Company issued $400.0 million in aggregate principal of 2015 Notes. See Note K, "Common Stock Offerings and Convertible Senior Subordinated Notes," for further information.

Contingencies

12 Months Ended

Dec. 31, 2011

Contingencies

Contingencies

U. Contingencies

The Company has certain contingent liabilities that arise in the ordinary course of its business activities. The Company accrues a reserve for contingent liabilities when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. There were no material contingent liabilities accrued as of December 31, 2011 or 2010.

Guarantees

12 Months Ended

Dec. 31, 2011

Guarantees

Guarantees

V. Guarantees

As permitted under Massachusetts law, the Company's Articles of Organization and Bylaws provide that the Company will indemnify certain of its officers and directors for certain claims asserted against them in connection with their service as an officer or director. The maximum potential amount of future payments that the Company could be required to make under these indemnification provisions is unlimited. However, the Company has purchased directors' and officers' liability insurance policies that could reduce its monetary exposure and enable it to recover a portion of any future amounts paid. No indemnification claims currently are outstanding, and the Company believes the estimated fair value of these indemnification arrangements is minimal.

The Company customarily agrees in the ordinary course of its business to indemnification provisions in agreements with clinical trial investigators and sites in its drug development programs, in sponsored research agreements with academic and not-for-profit institutions, in various comparable agreements involving parties performing services for the Company, and in its real estate leases. The Company also customarily agrees to certain indemnification provisions in its drug discovery, development and commercialization collaboration agreements. With respect to the Company's clinical trials and sponsored research agreements, these indemnification provisions typically apply to any claim asserted against the investigator or the investigator's institution relating to personal injury or property damage, violations of law or certain breaches of the Company's contractual obligations arising out of the research or clinical testing of the Company's compounds or drug candidates. With respect to lease agreements, the indemnification provisions typically apply to claims asserted against the landlord relating to personal injury or property damage caused by the Company, to violations of law by the Company or to certain breaches of the Company's contractual obligations. The indemnification provisions appearing in the Company's collaboration agreements are similar, but in addition provide some limited indemnification for its collaborator in the event of third-party claims alleging infringement of intellectual property rights. In each of the cases above, the indemnification obligation generally survives the termination of the agreement for some extended period, although the obligation typically has the most relevance during the contract term and for a short period of time thereafter. The maximum potential amount of future payments that the Company could be required to make under these provisions is generally unlimited. The Company has purchased insurance policies covering personal injury, property damage and general liability that reduce its exposure for indemnification and would enable it in many cases to recover a portion of any future amounts paid. The Company has never paid any material amounts to defend lawsuits or settle claims related to these indemnification provisions. Accordingly, the Company believes the estimated fair value of these indemnification arrangements is minimal.

The Company entered into underwriting agreements with Merrill Lynch, Pierce, Fenner & Smith Incorporated dated February 18, 2009 and September 23, 2010, and with Goldman, Sachs & Co. dated December 2, 2009 (collectively, the "Underwriting Agreements"), in each case as the representative of the several underwriters, if any, named in such agreements, relating to the public offering and sale of shares of the Company's common stock or convertible senior subordinated notes. The Underwriting Agreement relating to each offering requires the Company to indemnify the underwriters of that public offering against any loss they may suffer by reason of the Company's breach of any representation or warranty relating to that public offering, the Company's failure to perform certain covenants in those agreements, the inclusion of any untrue statement of material fact in the prospectus used in connection with that offering, the omission of any material fact needed to make those materials not misleading, and any actions taken by the Company or its representatives in connection with the offering. The representations, warranties, covenants and indemnification provisions in the Underwriting Agreements are of a type customary in agreements of this sort. The Company believes the estimated fair value of these indemnification arrangements is minimal.

Geographic Information

12 Months Ended

Dec. 31, 2011

Geographic Information

Geographic Information

W. Geographic Information

The following table summarizes total revenues from external customers and collaborators by geographic region. Product revenues are attributed to countries based on the location of the customer. Collaborative revenues are attributed to the operations of the Company in the United States. Royalty revenues are attributed to countries based on the location of the collaborator.

	Year Ended December 31,

	2011		2010		2009
	(in thousands)
United States	$	1,389,568	$	143,370	$	101,889
Outside of the United States
Belgium		20,289		—		—
Canada		769		—		—

Total revenues outside of the United States		21,058		—		—

Total revenues	$	1,410,626	$	143,370	$	101,889

At December 31, 2011, the net book value of the Company's property and equipment in the United States and United Kingdom was $109.5 million and $21.4 million, respectively, which comprised approximately 98% of the total net book value of the Company's property and equipment. At December 31, 2010, the net book value of the Company's property and equipment in the United States and United Kingdom was $55.6 million and $15.3 million, respectively, which comprised approximately 98% of the total net book value of the Company's property and equipment.

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

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Quarterly Financial Data (unaudited)

Quarterly Financial Data (unaudited)

12 Months Ended

Dec. 31, 2011

Quarterly Financial Data (unaudited)

X. Quarterly Financial Data (unaudited)

	Three Months Ended

	March 31, 2011			June 30, 2011			Sept. 30, 2011			Dec. 31, 2011
	(in thousands, except per share amounts)
Revenues:
Product revenues, net	$	—		$	74,535		$	419,595		$	456,759
Royalty revenues		6,061			10,010			8,539			25,405
Collaborative revenues		67,601			29,879			231,066			81,176

Total revenues		73,662			114,424			659,200			563,340
Costs and expenses:
Cost of product revenues		—			5,404			35,285			22,936
Royalty expenses		2,666			3,902			3,121			7,191
Research and development expenses		158,612			173,604			189,052			186,438
Sales, general and administrative expenses		71,523			96,663			110,654			121,881
Restructuring expense (credit)		760			741			(419	)		992
Intangible asset impairment charge		—			—			105,800			—

Total costs and expenses		233,561			280,314			443,493			339,438

Income (loss) from operations		(159,899	)		(165,890	)		215,707			223,902
Interest income		1,402			202			77			197
Interest expense		(12,001	)		(6,962	)		(7,059	)		(12,430	)
Change in fair value of derivative instruments		(5,598	)		(2,220	)		(8,115	)		(868	)

Income (loss) before provision for (benefit from) income taxes		(176,096	)		(174,870	)		200,610			210,801
Provision for (benefit from) income taxes		—			24,448			(27,842	)		22,660

Net income (loss)		(176,096	)		(199,318	)		228,452			188,141
Net income (loss) attributable to noncontrolling interest (Alios)		—			(25,249	)		7,342			29,512

Net income (loss) attributable to Vertex	$	(176,096	)	$	(174,069	)	$	221,110		$	158,629

Net income (loss) per share attributable to Vertex common shareholders:
Basic	$	(0.87	)	$	(0.85	)	$	1.06		$	0.76

Diluted	$	(0.87	)	$	(0.85	)	$	1.02		$	0.74

Shares used in per share calculations:
Basic		202,329			204,413			206,002			206,758
Diluted		202,329			204,413			219,349			217,602

	Three Months Ended

	March 31, 2010			June 30, 2010			Sept. 30, 2010			Dec. 31, 2010
	(in thousands, except per share amounts)
Revenues:
Royalty revenues	$	6,407		$	7,262		$	8,173		$	8,402
Collaborative revenues		16,022			24,360			15,622			57,122

Total revenues		22,429			31,622			23,795			65,524
Costs and expenses:
Royalty expenses		3,367			3,086			3,228			3,049
Research and development expenses		143,012			155,082			170,434			168,888
Sales, general and administrative expenses		35,552			40,915			48,855			62,478
Restructuring expense (credit)		780			2,112			866			(2,257	)

Total costs and expenses		182,711			201,195			223,383			232,158

Loss from operations		(160,282	)		(169,573	)		(199,588	)		(166,634	)
Interest income		455			484			493			523
Interest expense		(3,955	)		(3,683	)		(3,951	)		(7,686	)
Change in fair value of derivative instruments		(1,489	)		(27,234	)		(5,911	)		(6,595	)

Net loss attributable to Vertex	$	(165,271	)	$	(200,006	)	$	(208,957	)	$	(180,392	)

Basic and diluted net loss per share attributable to Vertex common shareholders	$	(0.83	)	$	(1.00	)	$	(1.04	)	$	(0.90	)

Basic and diluted weighted-average number of common shares outstanding		198,935			200,397			200,887			201,355

The entire disclosure for the quarterly financial data in the annual financial statements. The disclosure may include a tabular presentation of financial information for each fiscal quarter for the current and previous year, including revenues, gross profit, income or loss before extraordinary items and earnings per share data. It also includes an indication if the information in the note is unaudited, comments on the aggregate effect of year-end adjustments, and an explanation of matters or transactions that affect comparability or are pertinent to an understanding of the information furnished.

Nature of Business and Accounting Policies

Nature of Business and Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2011

Basis of Presentation

Basis of Presentation

Use of Estimates

Use of Estimates

Revenue Recognition

Revenue Recognition

Product Revenues, Net

        Trade Allowances:     The Company generally provides invoice discounts on INCIVEK sales to its Distributors for prompt payment and pays fees for distribution services, such as fees for certain data that Distributors provide to the Company. The payment terms for sales to Distributors generally include a 2% discount for payment within 30 days. The Company expects its Distributors to earn these discounts and fees, and deducts the full amount of these discounts and fees from its gross product revenues and accounts receivable at the time such revenues are recognized.

        Rebates, Chargebacks and Discounts:     The Company contracts with Medicaid, other government agencies and various private organizations (collectively, its "Third-party Payors") so that INCIVEK will be eligible for purchase by, or partial or full reimbursement from, such Third-party Payors. The Company estimates the rebates, chargebacks and discounts it will provide to Third-party Payors and deducts these estimated amounts from its gross product revenues at the time the revenues are recognized. The Company estimates the rebates, chargebacks and discounts that it will provide to Third-party Payors based upon (i) the Company's contracts with these Third-party Payors, (ii) the government-mandated discounts applicable to government-funded programs and (iii) information obtained from the Company's Distributors and other third parties regarding the payor mix for INCIVEK.

        Product Returns:     The Company estimates the amount of INCIVEK that will be returned and deducts these estimated amounts from its gross revenues at the time the revenues are recognized. The Company's Distributors have the right to return unopened unprescribed INCIVEK beginning six months prior to the labeled expiration date and ending twelve months after the labeled expiration date. The expiration date for INCIVEK is two years after it has been converted into tablet form, which is the last step in the manufacturing process for INCIVEK and generally occurs within a few months before INCIVEK is delivered to Distributors. As of December 31, 2011, the Company had not received any material product returns. From May 23, 2011 (the date the Company began selling INCIVEK) through December 31, 2011, the Company was able to reasonably estimate product returns based on its specialty distribution model with sales to a limited number of distributors, data provided to the Company by its Distributors (including weekly reporting of Distributors' sales and inventory held by Distributors that provided the Company with visibility into the distribution channel in order to determine what quantities, if any, were eligible to be returned), data provided to the Company by other third parties, historical industry information regarding return rates for similar specialty pharmaceutical products, the estimated remaining shelf life of INCIVEK previously shipped and currently being shipped to Distributors, and contractual agreements intended to limit the amount of inventory maintained by the Company's Distributors. Based on the Company's visibility into the distribution channel and available prescription data, the Company believes that most of the INCIVEK inventory held by its Distributors on December 31, 2011 has already been dispensed to patients in the first quarter of 2012.

        Other Incentives:     Other incentives that the Company offers to indirect customers include co-pay mitigation rebates provided by the Company to commercially insured patients who have coverage for INCIVEK and who reside in states that permit co-pay mitigation programs. The Company's co-pay mitigation program is intended to reduce each participating patient's portion of the financial responsibility for INCIVEK's purchase price to a specified dollar amount. Based upon the terms of the program and information regarding programs provided for similar specialty pharmaceutical products, the Company estimates the average co-pay mitigation amounts and the percentage of patients that it expects to participate in the program in order to establish its accruals for co-pay mitigation rebates and deducts these estimated amounts from its gross product revenues at the time the revenues are recognized. The Company's co-pay mitigation rebates offered to date expire six months from the date of issuance. A portion of the co-pay mitigation rebates the Company issued in the second quarter of 2011 expired in the fourth quarter of 2011. Based on this information, beginning in the fourth quarter, the Company began adjusting its accruals for co-pay mitigation rebates based on its estimates regarding the portion of issued rebates that it estimates will not be redeemed.

The following table summarizes activity in each of the product revenue allowance and reserve categories described above from May 23, 2011 through December 31, 2011:

	Trade Allowances			Rebates, Chargebacks and Discounts			Product Returns			Other Incentives			Total

	(in thousands)
Balance at May 23, 2011	$	—		$	—		$	—		$	—		$	—
Provision related to current period sales		38,228			75,145			553			9,692			123,618
Credits/payments made for current period sales		(27,066	)		(22,486	)		(213	)		(4,490	)		(54,255	)

Balance at December 31, 2011	$	11,162		$	52,659		$	340		$	5,202		$	69,363

Royalty Revenues

Collaborative Revenues

Agreements Entered into prior to January 1, 2011

Up-front License Fees

Milestone Payments

Research and Development Activities/Manufacturing Services

Agreements Entered into or Materially Modified on or after January 1, 2011

Concentration of Credit Risk

Concentration of Credit Risk

	Percent of Total Gross Revenues									Percent of Accounts Receivable, Net

	Year Ended December 31,									At December 31,
	2011			2010			2009			2011			2010
AmerisourceBergen Drug Corporation		25	%		—			—			35	%		—
McKesson Corporation		24	%		—			—			30	%		—
Cardinal Health Incorporated		15	%		—			—			20	%		—
Janssen		19	%		21	%		54	%		10	%		12	%
Mitsubishi Tanabe Pharma Corporation		<10	%		57	%		18	%		<10	%		55	%
GlaxoSmithKline plc		<10	%		<10	%		<10	%		<10	%		23	%

Cash and Cash Equivalents

Cash and Cash Equivalents

Restricted Cash

Restricted Cash

Marketable Securities

Marketable Securities

Stock-based Compensation Expense

Stock-based Compensation Expense

Research and Development Expenses

Research and Development Expenses

Sales, General and Administrative Expenses

Sales, General and Administrative Expenses

Financial Transaction Expenses

Inventories

Property and Equipment.

Property and Equipment

Income Taxes

Income Taxes

Financial Transaction Expenses

Variable Interest Entities

Variable Interest Entities

Business Combinations

Business Combinations

Fair Value of In-Process Research and Development Asset and Contingent payments in Business Combinations

Fair Value of In-process Research and Development Assets and Contingent Payments in Business Combinations

In-process Research and Development Assets

In-process Research and Development Assets

Derivative Instruments and Embedded Derivatives

Goodwill

Derivative Instruments and Embedded Derivatives

Restructuring Expense

Restructuring Expense

Comprehensive Income (Loss)

Comprehensive Income (Loss)

Foreign Currency Translation

Foreign Currency Translation

Recent Accounting Pronouncements

Recent Accounting Pronouncements

The Company did not adopt any new accounting pronouncements during 2011 that had a material effect on the Company's consolidated financial statements.

Nature of Business and Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2011

Nature of Business and Accounting Policies

Schedule of product revenues allowances and reserve categories

	Trade Allowances			Rebates, Chargebacks and Discounts			Product Returns			Other Incentives			Total

	(in thousands)
Balance at May 23, 2011	$	—		$	—		$	—		$	—		$	—
Provision related to current period sales		38,228			75,145			553			9,692			123,618
Credits/payments made for current period sales		(27,066	)		(22,486	)		(213	)		(4,490	)		(54,255	)

Balance at December 31, 2011	$	11,162		$	52,659		$	340		$	5,202		$	69,363

Summary of gross revenues and accounts receivable, net from customers representing 10% or more of total gross revenues and /or accounts receivable, net

	Percent of Total Gross Revenues									Percent of Accounts Receivable, Net

	Year Ended December 31,									At December 31,
	2011			2010			2009			2011			2010
AmerisourceBergen Drug Corporation		25	%		—			—			35	%		—
McKesson Corporation		24	%		—			—			30	%		—
Cardinal Health Incorporated		15	%		—			—			20	%		—
Janssen		19	%		21	%		54	%		10	%		12	%
Mitsubishi Tanabe Pharma Corporation		<10	%		57	%		18	%		<10	%		55	%
GlaxoSmithKline plc		<10	%		<10	%		<10	%		<10	%		23	%

Tabular disclosure of the nature of a concentration, a benchmark to which it is compared, and the percentage that the risk is to the benchmark.

Collaborative Arrangements

Collaborative Arrangements (Tables)

12 Months Ended

Dec. 31, 2011

Collaborative Arrangements

	2011			2010		2009

	(in thousands)
Amortized portion of up-front payment	$	12,428		$	12,428	$	20,196
Milestone revenues		250,000			—		—
Net reimbursement (payment) for telaprevir development costs		(8,418	)		9,245		27,711
Reimbursement for manufacturing services		20,383			9,077		6,733

Total collaborative revenues attributable to the Janssen collaboration	$	274,393		$	30,750	$	54,640

	2011		2010		2009

	(in thousands)
Amortized portion of up-front payments	$	38,232	$	38,232	$	16,027
Milestone revenues		68,515		—		—
Reimbursement for telaprevir development costs		—		—		1,265
Payments for manufacturing services		14,928		43,636		1,419

Total collaborative revenues attributable to the Mitsubishi Tanabe collaboration	$	121,675	$	81,868	$	18,711

Summary of fair values of consideration paid or payable by the Company pursuant to the Alios Agreement

	As of June 13, 2011

	(in thousands)
Up-front payment	$	60,000
Fair value of contingent milestone and royalty payments		197,720

Total	$	257,720

Summary of the fair values of the assets and liabilities recorded on the effective date of the Alios Collaboration

	Fair Values as of June 13, 2011

	(in thousands)
Intangible assets	$	250,600
Goodwill		4,890
Deferred tax liability		(90,935	)
Net other assets		2,230

Net assets attributable to noncontrolling interest (Alios)	$	166,785

Summary of activity related to net income (loss) attributable to noncontrolling interest (Alios)

	June 13, 2011 to December 31, 2011

	(in thousands)
Loss before provision for income taxes	$	(9,536	)
Provision for income taxes		(48,809	)
Change in fair value of contingent milestone and royalty payments		69,950

Net income attributable to noncontrolling interest (Alios)	$	11,605

Summary of Alios' items included in the Company's consolidated balance sheets

	As of June 13, 2011		As of December 31, 2011

	(in thousands)
Restricted cash and cash equivalents (Alios)	$	4,575	$	51,878
Accounts receivable, net		—		—
Prepaid expenses and other current assets		69		2,299
Property and equipment, net		885		1,925
Intangible assets		250,600		250,600
Goodwill		4,890		4,890
Other assets		76		133
Accounts payable		1,189		4,132
Accrued expenses and other current liabilities		1,504		4,291
Accrued interest		—		13
Income taxes payable (Alios)		—		12,075
Deferred tax liability		90,935		116,121
Other liabilities		682		1,030
Redeemable noncontrolling interest (Alios)		36,299		37,036
Noncontrolling interest (Alios)		130,486		141,633

Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2011

Earnings Per Share

Calculation of net income (loss) per basic and diluted share

	Year Ended December 31,

	2011			2010			2009
	(in thousands)
Basic net income (loss) attributable to Vertex per common share calculation:
Net income (loss) attributable to Vertex common shareholders	$	29,574		$	(754,626	)	$	(642,178	)
Less: Undistributed earnings allocated to participating securities		(291	)		—			—

Net income (loss) attributable to Vertex common shareholders—basic	$	29,283		$	(754,626	)	$	(642,178	)
Basic weighted-average common shares outstanding		204,891			200,402			173,259
Basic net income (loss) attributable to Vertex per common share	$	0.14		$	(3.77	)	$	(3.71	)
Diluted net income (loss) attributable to Vertex per common share calculation:
Net income (loss) attributable to Vertex common shareholders	$	29,574		$	(754,626	)	$	(642,178	)
Less: Undistributed earnings allocated to participating securities		(285	)		—			—

Net income (loss) attributable to Vertex common shareholders—diluted	$	29,289		$	(754,626	)	$	(642,178	)
Weighted-average shares used to compute basic net income (loss) per common share		204,891			200,402			173,259
Effect of potentially dilutive securities:
Stock options		3,863			—			—
Other		53			—			—

Weighted average shares used to compute diluted net income (loss) per common share		208,807			200,402			173,259
Diluted net income (loss) attributable to Vertex per common share	$	0.14		$	(3.77	)	$	(3.71	)

Potential gross common equivalent shares

	Year Ended December 31,

	2011		2010		2009
	(in thousands)
Stock options		9,626		21,293		19,232
Convertible senior subordinated notes		8,192		8,192		1,386
Unvested restricted stock and restricted stock units		8		1,950		1,727

Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2011

Fair Value of Financial Instruments

Financial assets subject to fair value measurements (excluding restricted cash and cash equivalents (Alios))

	Fair Value Measurements as of December 31, 2011

			Fair Value Hierarchy
	Total		Level 1		Level 2		Level 3
	(in thousands)
Financial assets carried at fair value:
Cash equivalents:
Money market funds	$	222,225	$	222,225	$	—	$	—
Government-sponsored enterprise securities		113,285		113,285		—		—
Marketable securities:
U.S. Treasury securities		22,107		22,107		—		—
Government-sponsored enterprise securities		471,495		471,495		—		—
Restricted cash		34,090		34,090		—		—

Total	$	863,202	$	863,202	$	—	$	—

Reconciliation of financial liabilities measured at fair value using significant unobservable inputs

	Year Ended December 31, 2011

	(in thousands)
Balance, December 31, 2010	$	89,888
Change in fair value of derivative instruments		16,801
Redemption of the 2012 Notes and settlement of the liability related to the sale of milestone rights		(106,689	)

Balance, December 31, 2011	$	—

Tabular disclosure of the fair value measurement of liabilities using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and gains or losses recognized in other comprehensive income and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issuances, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs) by class of liability.

Summary of cash, cash equivalents and marketable securities

Marketable Securities (Tables)

12 Months Ended

Dec. 31, 2011

Marketable Securities

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value

	(in thousands)
December 31, 2011
Cash and cash equivalents:
Cash and money market funds	$	362,035	$	—	$	—		$	362,035
Government-sponsored enterprise securities		113,302		—		(17	)		113,285

Total cash and cash equivalents	$	475,337	$	—	$	(17	)	$	475,320

Marketable securities:
U.S. Treasury securities (due within 1 year)	$	22,105	$	2	$	—		$	22,107
Government-sponsored enterprise securities (due within 1 year)		471,589		8		(102	)		471,495

Total marketable securities	$	493,694	$	10	$	(102	)	$	493,602

Total cash, cash equivalents and marketable securities	$	969,031	$	10	$	(119	)	$	968,922

December 31, 2010
Cash and cash equivalents:
Cash and money market funds	$	193,845	$	—	$	—		$	193,845
U.S. Treasury securities		4,770		—		—			4,770
Government-sponsored enterprise securities		44,587		1		(6	)		44,582

Total cash and cash equivalents	$	243,202	$	1	$	(6	)	$	243,197

Marketable securities:
U.S. Treasury securities (due within 1 year)	$	103,230	$	1	$	(11	)	$	103,220
Government-sponsored enterprise securities (due within 1 year)		684,969		87		(62	)		684,994

Total marketable securities	$	788,199	$	88	$	(73	)	$	788,214

Total cash, cash equivalents and marketable securities	$	1,031,401	$	89	$	(79	)	$	1,031,411

Inventories (Tables)

12 Months Ended

Dec. 31, 2011

Inventories

	At December 31,

	2011		2010
	(in thousands)
Raw materials	$	32,213	$	—
Work in process		47,010		—
Finished goods		33,207		—

Total	$	112,430	$	—

Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2011

Schedule of Property and equipment

	At December 31,

	2011		2010
	(in thousands)
Furniture and equipment	$	151,961	$	137,904
Leasehold improvements		107,169		102,720
Software		56,923		50,211
Computers		33,116		28,817
Construction-in-progress		55,070		—

Total property and equipment, gross		404,239		319,652
Less accumulated depreciation and amortization		271,063		247,319

Total property and equipment, net	$	133,176	$	72,333

Accrued Expenses and Other Current Liabilities (Tables)

12 Months Ended

Dec. 31, 2011

Accrued Expenses and Other Current Liabilities

Preferred Stock, Common Stock and Equity Plans

	At December 31,

	2011		2010
	(in thousands)
Research and development contract costs	$	66,426	$	55,506
Payroll and benefits		57,453		50,041
Product revenue allowances		58,201		—
Royalty payable		28,603		2,869
State income taxes		3,691		—
Unrecognized tax benefits		4,360		2,374
Professional fees		12,785		8,629
Other		20,780		14,995

Total	$	252,299	$	134,414

Preferred Stock, Common Stock and Equity Plans (Tables)

12 Months Ended

Dec. 31, 2011

Stock and Stock Option Equity Plans

			As of December 31, 2011

Title of Plan	Group Eligible	Type of Award Granted	Awards Outstanding		Additional Awards Authorized for Grant
2006 Stock and Option Plan	Employees, Non-employee Directors and Consultants	NSO, ISO, RS and RSU		19,889,776		8,631,417
1996 Stock and Option Plan	Employees, Non-employee Directors, Advisors and Consultants	NSO, ISO and RS		3,177,457		—

Total				23,067,233		8,631,417

Outstanding and vested options

	Stock Options			Weighted-average Exercise Price		Weighted-average Remaining Contractual Life		Aggregate Intrinsic Value

	(in thousands)			(per share)		(in years)		(in thousands)
Outstanding at December 31, 2010		21,293		$	30.50
Granted		5,754			43.55
Exercised		(4,119	)		26.60
Forfeited		(1,554	)		36.78
Expired		(451	)		37.81

Outstanding at December 31, 2011		20,923		$	34.23		6.84	$	56,376

Exercisable at December 31, 2011		12,225		$	30.59		5.55	$	53,552

Total exercisable or expected to vest at December 31, 2011		19,922		$	33.94		6.74	$	56,108

Stock options outstanding and exercisable

	Options Outstanding						Options Exercisable

Range of Exercise Prices	Number Outstanding		Weighted-average Remaining Contractual Life		Weighted-average Exercise Price		Number Exercisable		Weighted-average Exercise Price
	(in thousands)		(in years)		(per share)		(in thousands)		(per share)
$ 9.07–$20.00		2,751		2.99	$	15.52		2,689	$	15.44
$20.01–$30.00		1,902		6.71	$	28.89		1,363	$	28.61
$30.01–$40.00		13,790		7.16	$	35.70		7,804	$	35.17
$40.01–$50.00		403		9.04	$	44.53		69	$	44.54
$50.01–$57.27		2,077		9.47	$	52.17		300	$	53.12

Restricted stock activity

	Restricted Stock			Weighted-average Grant-date Fair Value

	(in thousands)			(per share)
Unvested at December 31, 2010		1,931		$	33.35
Granted		1,185			41.04
Vested		(747	)		33.97
Cancelled		(269	)		36.01

Unvested at December 31, 2011		2,100		$	37.13

Shares issued under Employee Stock Purchase Plan

	Year Ended December 31, 2011

	(in thousands, except per share amount)
Number of shares		557
Average price paid per share	$	27.47

Stock-based Compensation Expense (Tables)

12 Months Ended

Dec. 31, 2011

Stock-based Compensation Expense

Stock-based compensation expense by line item

	2011		2010		2009

	(in thousands)
Stock-based compensation expense by line item:
Research and development expenses	$	75,574	$	65,198	$	64,128
Sales, general and administrative expenses		42,652		25,926		22,594

Total stock-based compensation expense included in costs and expenses	$	118,226	$	91,124	$	86,722

Stock-based compensation expense by type of award

	2011			2010		2009

	(in thousands)
Stock-based compensation expense by type of award:
Stock options	$	83,098		$	64,005	$	63,397
Restricted stock and restricted stock units		30,708			22,960		18,983
ESPP share issuances		5,462			4,159		4,342
Less stock-based compensation expense capitalized to inventories		(1,042	)		—		—

Total stock-based compensation expense included in costs and expenses	$	118,226		$	91,124	$	86,722

Unrecognized stock-based compensation expense, net of estimated forfeitures

	As of December 31, 2011

	Unrecognized Expense Net of Estimated Forfeitures		Weighted-average Recognition Period
	(in thousands)		(in years)
Type of award:
Stock options	$	139,165		2.73
Restricted stock and restricted stock units		44,744		2.25
ESPP share issuances		5,128		0.65

Schedule of assumptions used to estimate the grant date fair value of options



Expected stock price volatility	49.53	%	52.17	%	57.77	%
Risk-free interest rate	2.09	%	2.44	%	2.85	%
Expected term of options	5.74 years		5.71 years		6.31 years
Expected annual dividends	—		—		—

Schedule of assumptions used to estimate the grant date fair value employee stock purchase plan



Expected stock price volatility	51.32	%	43.92	%	54.22	%
Risk-free interest rate	0.08	%	0.24	%	0.39	%
Expected term	0.72 years		0.71 years		0.76 years
Expected annual dividends	—		—		—

Tabular disclosure of components of a stock option or other award plan under which equity-based compensation is awarded to employees, typically comprised of the amount of unearned compensation (deferred compensation cost), compensation expense, and changes in the quantity and fair value of the shares (or other type of equity) granted, exercised, forfeited, and issued and outstanding pertaining to that plan. Disclosure may also include nature and general terms of such arrangements that existed during the period and potential effects of those arrangements on shareholders, effect of compensation cost arising from equity-based payment arrangements on the income statement, method of estimating the fair value of the goods or services received, or the fair value of the equity instruments granted, during the period, cash flow effects resulting from equity-based payment arrangements and, for registrants that accelerate vesting of out of the money share options, reasons for the decision to accelerate.

Tabular disclosure of the allocation of equity-based compensation costs to a given line item on the balance sheet and income statement for the period. This may include the reporting line for the costs and the amount capitalized and expensed.

September 2009 Financial Transactions

September 2009 Financial Transactions (Tables)

12 Months Ended

Dec. 31, 2011

Expenses and Liabilities Related to September 2009 Financial Transactions

	Year Ended December 31,

	2011			2010		2009
	(in thousands)
Expenses and Losses (Gains):
Interest expense related to 2012 Notes	$	21,687		$	15,068	$	3,465
Change in fair value of embedded derivative related to 2012 Notes		(400	)		1,637		(200	)
Change in fair value of free-standing derivatives related to the sale of milestone payments		17,201			39,592		2,047

Total September 2009 financial transaction expenses	$	38,488		$	56,297	$	5,312

	At December 31,

	2011		2010
	(in thousands)
Liabilities:
2012 Notes, excluding fair value of embedded derivative	$	—	$	124,902
Embedded derivative related to 2012 Notes		—		12,089
Derivatives related to the sale of milestone payments		—		77,799

Total liabilities related to September 2009 financial transactions	$	—	$	214,790

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2011

Income Taxes

Schedule of components of income (loss) before provision for (benefit from) income taxes

	2011			2010			2009

	(in thousands)
United States	$	343,515		$	(719,859	)	$	(621,455	)
Foreign		(283,070	)		(34,767	)		(20,723	)

Income (loss) before provision for income taxes	$	60,445		$	(754,626	)	$	(642,178	)

Schedule of components of provision of income taxes

	2011			2010		2009

	(in thousands)
Current taxes:
United States	$	22,275		$	—	$	—
Foreign		(561	)		—		—
State		8,655			—		—

	$	30,369		$	—	$	—

Deferred taxes:
United States	$	19,629		$	—	$	—
Foreign		(32,692	)		—		—
State		1,960			—		—

	$	(11,103	)	$	—	$	—
Provision for income taxes	$	19,266		$	—	$	—

Reconciliation of the provision for income taxes

	2011			2010			2009

	(in thousands)
Income (loss) before provision for income taxes	$	60,445		$	(754,626	)	$	(642,178	)
Expected tax provision (benefit)		21,156			(256,574	)		(218,341	)
State taxes, net of federal benefit		10,624			(46,108	)		(38,965	)
Foreign rate differential		43,629			632			674
Tax credits		(51,086	)		(23,292	)		(13,027	)
Unbenefited operating losses		(6,286	)		322,551			260,741
Non-deductible expenses		1,953			2,158			8,244
Other		(724	)		633			674

Income tax provision	$	19,266		$	—		$	—

Schedule of unrecognized tax benefits

	2011			2010

	(in thousands)
Unrecognized tax benefits beginning of year	$	2,374		$	1,858
Gross change for current year positions		2,564			516
Increase for prior period positions		—			—
Decrease for prior period positions		—			—
Decrease due to settlements and payments		(23	)		—
Decrease due to statute limitations		(560	)		—

Unrecognized tax benefits end of year	$	4,360		$	2,374

Schedule of deferred tax assets and liabilities

	2011			2010

	(in thousands)
Deferred tax assets:
Net operating loss	$	870,367		$	944,275
Tax credit carryforwards		167,759			112,467
Property and equipment		15,537			22,483
Intangibles		71,076			—
Deferred revenues		59,939			138,809
Stock-based compensation		90,563			81,211
Inventory		23,883			38,810
Accrued expenses and other		30,636			30,078
Unrealized Loss		245			—

Gross deferred tax assets		1,330,005			1,368,133
Valuation allowance		(1,329,775	)		(1,368,133	)

Total deferred tax assets		230			—
Deferred tax liabilities:
Contingent consideration		(14,241	)		—
Acquired intangibles		(229,696	)		(160,278	)

Net deferred tax liabilities	$	(243,707	)	$	(160,278	)

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

Restructuring and other liabilities

Restructuring Expense (Tables)

12 Months Ended

Dec. 31, 2011

Restructuring Expense

	Charge in 2003		Cash payments in 2003			Non-cash write-off in 2003			Liability as of December 31, 2003

	(in thousands)
Lease restructuring and other operating lease expense	$	84,726	$	(15,200	)	$	—		$	69,526
Employee severance, benefits and related costs		2,616		(2,616	)		—			—
Leasehold improvements and asset impairments		4,482		—			(4,482	)		—

Total	$	91,824	$	(17,816	)	$	(4,482	)	$	69,526

	Restructuring Liability

	2011			2010			2009			2004-2011
	(in thousands)
Liability, beginning of the period	$	29,595		$	34,017		$	34,064		$	69,526
Cash payments		(14,904	)		(14,759	)		(14,924	)		(148,844	)
Cash received from subleases		9,548			8,836			8,637			55,014
Credit for portion of facility Vertex decided to occupy in 2005		—			—			—			(10,018	)
Restructuring expense		2,074			1,501			6,240			60,635

Liability, end of the period	$	26,313		$	29,595		$	34,017		$	26,313

Employee Benefits (Tables)

12 Months Ended

Dec. 31, 2011

Employee Benefits

Matching contributions to the Vertex 401(k) Plan

	2011		2010		2009

	(in thousands)
Discretionary matching contributions during the year ended December 31,	$	8,619	$	6,552	$	6,044
Shares issued during the year ended December 31,		183		174		198
Shares issuable as of the year ended December 31,		62		42		35

Commitments (Tables)

12 Months Ended

Dec. 31, 2011

Commitments

Future minimum commitments under Fan Pier Leases and facilitiy operating leases with terms of more than one year, net of estimated sublease income

Year	Fan Pier Leases		Kendall Square Lease		Sublease Income			Other Operating Leases		Total Lease Commitments (Net of Sublease Income)

	(in thousands)
2012	$	—	$	18,260	$	(7,850	)	$	36,455	$	46,865
2013		—		18,260		(8,424	)		37,942		47,778
2014		67,206		18,260		(8,424	)		29,025		106,067
2015		67,206		18,260		(3,942	)		22,678		104,202
2016		67,206		18,260		—			4,611		90,077
Thereafter		887,211		24,346		—			10,018		921,575

Total minimum lease payments	$	1,088,829	$	115,646	$	(28,640	)	$	140,729	$	1,316,564

Geographic Information (Tables)

12 Months Ended

Dec. 31, 2011

Geographic Information

Total revenues from external customers and collaboration partners by geographic region

	Year Ended December 31,

	2011		2010		2009
	(in thousands)
United States	$	1,389,568	$	143,370	$	101,889
Outside of the United States
Belgium		20,289		—		—
Canada		769		—		—

Total revenues outside of the United States		21,058		—		—

Total revenues	$	1,410,626	$	143,370	$	101,889

Quarterly Financial Data (unaudited) (Tables)

12 Months Ended

Dec. 31, 2011

Quarterly Financial Data (unaudited)

Schedule of Quarterly Financial Data

	Three Months Ended

	March 31, 2011			June 30, 2011			Sept. 30, 2011			Dec. 31, 2011
	(in thousands, except per share amounts)
Revenues:
Product revenues, net	$	—		$	74,535		$	419,595		$	456,759
Royalty revenues		6,061			10,010			8,539			25,405
Collaborative revenues		67,601			29,879			231,066			81,176

Total revenues		73,662			114,424			659,200			563,340
Costs and expenses:
Cost of product revenues		—			5,404			35,285			22,936
Royalty expenses		2,666			3,902			3,121			7,191
Research and development expenses		158,612			173,604			189,052			186,438
Sales, general and administrative expenses		71,523			96,663			110,654			121,881
Restructuring expense (credit)		760			741			(419	)		992
Intangible asset impairment charge		—			—			105,800			—

Total costs and expenses		233,561			280,314			443,493			339,438

Income (loss) from operations		(159,899	)		(165,890	)		215,707			223,902
Interest income		1,402			202			77			197
Interest expense		(12,001	)		(6,962	)		(7,059	)		(12,430	)
Change in fair value of derivative instruments		(5,598	)		(2,220	)		(8,115	)		(868	)

Income (loss) before provision for (benefit from) income taxes		(176,096	)		(174,870	)		200,610			210,801
Provision for (benefit from) income taxes		—			24,448			(27,842	)		22,660

Net income (loss)		(176,096	)		(199,318	)		228,452			188,141
Net income (loss) attributable to noncontrolling interest (Alios)		—			(25,249	)		7,342			29,512

Net income (loss) attributable to Vertex	$	(176,096	)	$	(174,069	)	$	221,110		$	158,629

Net income (loss) per share attributable to Vertex common shareholders:
Basic	$	(0.87	)	$	(0.85	)	$	1.06		$	0.76

Diluted	$	(0.87	)	$	(0.85	)	$	1.02		$	0.74

Shares used in per share calculations:
Basic		202,329			204,413			206,002			206,758
Diluted		202,329			204,413			219,349			217,602

	Three Months Ended

	March 31, 2010			June 30, 2010			Sept. 30, 2010			Dec. 31, 2010
	(in thousands, except per share amounts)
Revenues:
Royalty revenues	$	6,407		$	7,262		$	8,173		$	8,402
Collaborative revenues		16,022			24,360			15,622			57,122

Total revenues		22,429			31,622			23,795			65,524
Costs and expenses:
Royalty expenses		3,367			3,086			3,228			3,049
Research and development expenses		143,012			155,082			170,434			168,888
Sales, general and administrative expenses		35,552			40,915			48,855			62,478
Restructuring expense (credit)		780			2,112			866			(2,257	)

Total costs and expenses		182,711			201,195			223,383			232,158

Loss from operations		(160,282	)		(169,573	)		(199,588	)		(166,634	)
Interest income		455			484			493			523
Interest expense		(3,955	)		(3,683	)		(3,951	)		(7,686	)
Change in fair value of derivative instruments		(1,489	)		(27,234	)		(5,911	)		(6,595	)

Net loss attributable to Vertex	$	(165,271	)	$	(200,006	)	$	(208,957	)	$	(180,392	)

Basic and diluted net loss per share attributable to Vertex common shareholders	$	(0.83	)	$	(1.00	)	$	(1.04	)	$	(0.90	)

Basic and diluted weighted-average number of common shares outstanding		198,935			200,397			200,887			201,355

Nature of Business and Accounting Policies (Details) $ / shares in Units, $ in Thousands	3 Months Ended								7 Months Ended	12 Months Ended
	Dec. 31, 2011 USD ($) $ / shares	Sep. 30, 2011 USD ($) $ / shares	Jun. 30, 2011 USD ($) $ / shares	Mar. 31, 2011 USD ($) $ / shares	Dec. 31, 2010 USD ($) $ / shares	Sep. 30, 2010 USD ($) $ / shares	Jun. 30, 2010 USD ($) $ / shares	Mar. 31, 2010 USD ($) $ / shares	Dec. 31, 2011 USD ($)	Dec. 31, 2011 USD ($) Y M $ / shares	Dec. 31, 2010 USD ($) $ / shares	Dec. 31, 2009 USD ($) $ / shares
Nature of Business and Accounting Policies
Net income	$ 158,629	$ 221,110	$ (174,069)	$ (176,096)	$ (180,392)	$ (208,957)	$ (200,006)	$ (165,271)		$ 29,574	$ (754,626)	$ (642,178)
Diluted (in dollars per share) \| $ / shares	$ 0.74	$ 1.02	$ (0.85)	$ (0.87)	$ (0.90)	$ (1.04)	$ (1.00)	$ (0.83)		$ 0.14	$ (3.77)	$ (3.71)
Cash, cash equivalents and marketable securities	$ 968,900								$ 968,900	$ 968,900
Product revenues, net
Discount rate for payments made within 30 days (as a percent)										2.00%
Period prior to the labeled expiration date in which distributors have right to return unopened, unprescribed INCIVEK (teleprevir) (in months) \| M										6
Period after the labeled expiration date in which distributors have right to return unopened, unprescribed INCIVEK (teleprevir) (in months) \| M										12
Expiration period of INCIVEK (telaprevir) (in years) \| Y										2
Activity related to product revenues allowances and reserve categories
Provision related to current period sales									123,618
Credits/payments made for current period sales									(54,255)
Balance at the end of the period	69,363								69,363	$ 69,363
Trade Allowances
Activity related to product revenues allowances and reserve categories
Provision related to current period sales									38,228
Credits/payments made for current period sales									(27,066)
Balance at the end of the period	11,162								11,162	11,162
Rebates, Chargebacks and Discounts
Activity related to product revenues allowances and reserve categories
Provision related to current period sales									75,145
Credits/payments made for current period sales									(22,486)
Balance at the end of the period	52,659								52,659	52,659
Product Returns
Activity related to product revenues allowances and reserve categories
Provision related to current period sales									553
Credits/payments made for current period sales									(213)
Balance at the end of the period	340								340	$ 340
Other Incentives
Activity related to product revenues allowances and reserve categories
The expiration period from the date of issuance for the company's co-pay mitigation rebates offered \| M										6
Provision related to current period sales									9,692
Credits/payments made for current period sales									(4,490)
Balance at the end of the period	$ 5,202								$ 5,202	$ 5,202

Nature of Business and Accounting Policies (Details 2) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2011 USD ($)	Sep. 30, 2011 USD ($)	Jun. 30, 2011 USD ($)	Mar. 31, 2011 USD ($)	Dec. 31, 2010 USD ($)	Sep. 30, 2010 USD ($)	Jun. 30, 2010 USD ($)	Mar. 31, 2010 USD ($)	Dec. 31, 2011 USD ($) M	Dec. 31, 2010 USD ($)	Dec. 31, 2009 USD ($)
Cash and Cash Equivalents
Maximum maturity period at the date of purchase for cash equivalents (in months) \| M									3
Collaborative Arrangements
Collaborative revenues	$ 81,176	$ 231,066	$ 29,879	$ 67,601	$ 57,122	$ 15,622	$ 24,360	$ 16,022	$ 409,722	$ 113,126	$ 73,569
Research and Development Expenses
Research and development expense associated with collaborative programs									146,000	$ 156,000	$ 149,000
Sales, General and Administrative Expenses
Advertising Expenses									$ 30,800
Accounts Receivable \| Minimum
Customers representing greater than 10% of accounts receivable and revenues balances
Percentage required for qualification as major customer (as a percent)									10.00%
Accounts Receivable \| Gross revenues and accounts receivable balances \| AmerisourceBergen Drug Corporation
Customers representing greater than 10% of accounts receivable and revenues balances
Revenues and accounts receivable by major customer (as a percent)	35.00%								35.00%
Accounts Receivable \| Gross revenues and accounts receivable balances \| McKesson Corporation
Customers representing greater than 10% of accounts receivable and revenues balances
Revenues and accounts receivable by major customer (as a percent)	30.00%								30.00%
Accounts Receivable \| Gross revenues and accounts receivable balances \| Cardinal Health
Customers representing greater than 10% of accounts receivable and revenues balances
Revenues and accounts receivable by major customer (as a percent)	20.00%								20.00%
Accounts Receivable \| Gross revenues and accounts receivable balances \| Janssen
Customers representing greater than 10% of accounts receivable and revenues balances
Revenues and accounts receivable by major customer (as a percent)	10.00%				12.00%				10.00%	12.00%
Accounts Receivable \| Gross revenues and accounts receivable balances \| Mitsubishi Tanabe Pharma Corporation
Customers representing greater than 10% of accounts receivable and revenues balances
Revenues and accounts receivable by major customer (as a percent)					55.00%					55.00%
Accounts Receivable \| Gross revenues and accounts receivable balances \| GlaxoSmithKline plc
Customers representing greater than 10% of accounts receivable and revenues balances
Revenues and accounts receivable by major customer (as a percent)					23.00%					23.00%
Revenues \| Minimum
Customers representing greater than 10% of accounts receivable and revenues balances
Percentage required for qualification as major customer (as a percent)									10.00%
Revenues \| Gross revenues and accounts receivable balances \| AmerisourceBergen Drug Corporation
Customers representing greater than 10% of accounts receivable and revenues balances
Revenues and accounts receivable by major customer (as a percent)	25.00%								25.00%
Revenues \| Gross revenues and accounts receivable balances \| McKesson Corporation
Customers representing greater than 10% of accounts receivable and revenues balances
Revenues and accounts receivable by major customer (as a percent)	24.00%								24.00%
Revenues \| Gross revenues and accounts receivable balances \| Cardinal Health
Customers representing greater than 10% of accounts receivable and revenues balances
Revenues and accounts receivable by major customer (as a percent)	15.00%								15.00%
Revenues \| Gross revenues and accounts receivable balances \| Janssen
Customers representing greater than 10% of accounts receivable and revenues balances
Revenues and accounts receivable by major customer (as a percent)	19.00%				21.00%				19.00%	21.00%	54.00%
Revenues \| Gross revenues and accounts receivable balances \| Mitsubishi Tanabe Pharma Corporation
Customers representing greater than 10% of accounts receivable and revenues balances
Revenues and accounts receivable by major customer (as a percent)					57.00%					57.00%	18.00%

Nature of Business and Accounting Policies (Details 3) $ in Millions	12 Months Ended
	Dec. 31, 2011 USD ($) Y	Dec. 31, 2010 USD ($)	Dec. 31, 2009 USD ($)
Foreign Currency Translation
Net unrealized gain (loss) related to foreign currency translation included in accumulated other comprehensive income (loss) \| $	$ (0.9)	$ (1.1)	$ (0.6)
Furniture and equipment
Property and Equipment
Property and equipment useful life, minimum (in years)	4
Property and equipment useful life, maximum (in years)	7
Computers and software
Property and Equipment
Property and equipment useful life, minimum (in years)	3
Property and equipment useful life, maximum (in years)	5

Accumulated adjustment, net of tax, that results from the process of translating subsidiary financial statements and foreign equity investments into the reporting currency from the functional currency of the reporting entity, net of reclassification of realized foreign currency translation gains or losses.

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Principles Board Opinion (APB)
-Number 12
-Paragraph 10
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 130
-Paragraph 17, 18, 19, 22, 23, 24, 25, 26
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 133
-Paragraph 45
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 52
-Paragraph 12, 13
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 52
-Paragraph 31
-Subparagraph a
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section 45
-Paragraph 11
-URI http://asc.fasb.org/extlink&oid=6920043&loc=d3e637-108580

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 830
-SubTopic 30
-Section 45
-Paragraph 12
-URI http://asc.fasb.org/extlink&oid=6915805&loc=d3e32022-110900

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 830
-SubTopic 30
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6450520&loc=d3e32583-110901

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section 45
-Paragraph 14
-URI http://asc.fasb.org/extlink&oid=6920043&loc=d3e681-108580

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section 45
-Paragraph 13
-URI http://asc.fasb.org/extlink&oid=6920043&loc=d3e653-108580

Collaborative Arrangements (Details)

1 Months Ended

3 Months Ended

7 Months Ended

12 Months Ended

Jun. 30, 2011

USD ($)

analogues

Apr. 30, 2011

USD ($)

Sep. 30, 2009

transactions

Jul. 31, 2006

USD ($)

Jun. 30, 2006

Dec. 31, 2011

USD ($)

Sep. 30, 2011

USD ($)

lines

Jun. 30, 2011

USD ($)

Mar. 31, 2011

USD ($)

Dec. 31, 2010

USD ($)

Sep. 30, 2010

USD ($)

Jun. 30, 2010

USD ($)

Mar. 31, 2010

USD ($)

Sep. 30, 2009

USD ($)

Dec. 31, 2011

USD ($)

Dec. 31, 2011

USD ($)

payments

Dec. 31, 2010

USD ($)

Dec. 31, 2009

USD ($)

Dec. 31, 2007

USD ($)

Dec. 31, 2006

USD ($)

Jun. 13, 2011

USD ($)

Total collaborative revenues attributable to the collaboration

$ 81,176,000

$ 231,066,000

$ 29,879,000

$ 67,601,000

$ 57,122,000

$ 15,622,000

$ 24,360,000

$ 16,022,000

$ 409,722,000

$ 113,126,000

$ 73,569,000

Royalty revenues from sale of INCIVO

25,405,000

8,539,000

10,010,000

6,061,000

8,402,000

8,173,000

7,262,000

6,407,000

50,015,000

30,244,000

28,320,000

Research and development milestone payments,earned

81,176,000

231,066,000

29,879,000

67,601,000

57,122,000

15,622,000

24,360,000

16,022,000

409,722,000

113,126,000

73,569,000

186,438,000

189,052,000

173,604,000

158,612,000

168,888,000

$ 170,434,000

$ 155,082,000

143,012,000

707,706,000

637,416,000

550,274,000

243,707,000

^[1]

160,278,000

$ 243,707,000

^[1]

243,707,000

^[1]

160,278,000

Provision for income taxes

22,660,000

(27,842,000)

24,448,000

19,266,000

Net income (loss) attributable to noncontrolling interest (Alios)

29,512,000

7,342,000

$ (25,249,000)

11,605,000

Restricted cash and cash equivalents (Alios)

51,878,000

^[1]

51,878,000

^[1]

51,878,000

^[1]

Accounts receivable, net

183,135,000

^[1]

12,529,000

183,135,000

^[1]

183,135,000

^[1]

12,529,000

Prepaid expenses and other current assets

14,889,000

^[1]

13,099,000

14,889,000

^[1]

14,889,000

^[1]

13,099,000

Property and equipment, net

133,176,000

^[1]

72,333,000

133,176,000

^[1]

133,176,000

^[1]

72,333,000

663,500,000

^[1]

518,700,000

663,500,000

^[1]

663,500,000

^[1]

518,700,000

30,992,000

^[1]

26,102,000

30,992,000

^[1]

30,992,000

^[1]

26,102,000

Other assets

11,268,000

^[1]

17,182,000

11,268,000

^[1]

11,268,000

^[1]

17,182,000

Accounts payable

74,642,000

^[1]

35,851,000

74,642,000

^[1]

74,642,000

^[1]

35,851,000

Income taxes payable (Alios)

252,299,000

^[1]

134,414,000

252,299,000

^[1]

252,299,000

^[1]

134,414,000

^[1]

12,075,000

Redeemable noncontrolling interest (Alios)

243,707,000

^[1]

160,278,000

243,707,000

^[1]

243,707,000

^[1]

160,278,000

Other liabilities

7,287,000

^[1]

$ 2,265,000

7,287,000

^[1]

7,287,000

^[1]

2,265,000

^[1]

37,036,000

Noncontrolling interest (Alios)

^[1]

141,633,000

$ 141,633,000

Janssen Pharmaceutica, N.V.

Schedule of Collaborative Arrangements

Drug development costs to be paid by collaborator (as a percent)

50.00%

Tiered royalty average range, as a percentage of net sales in the Janssen territories

mid-20% range

Up-front license payment

$ 165,000,000

Decrease in revenue recognition per quarter due to change in estimate regarding period of performance under Janssen collaboration agreement

$ 1,400,000

$ 1,100,000

$ 2,600,000

Deferred revenue related to up-front license payment

55,900,000

$ 55,900,000

Total contingent milestone payments earned

350,000,000

Milestone payment earned pursuant to the collaborative agreement

$ 200,000,000

$ 50,000,000

250,000,000

Number of financial transactions entered into related to milestones (in transactions) | transactions

Notice period required to terminate without cause after receipt of marketing approval (in years) | Y

Amortized portion of up-front payment

12,428,000

20,196,000

Net reimbursement (payment) for telaprevir development costs

250,000,000

(8,418,000)

9,245,000

27,711,000

Reimbursement for manufacturing services

20,383,000

9,077,000

6,733,000

Total collaborative revenues attributable to the collaboration

274,393,000

30,750,000

54,640,000

Royalty revenues from sale of INCIVO

20,300,000

274,393,000

30,750,000

54,640,000

Mitsubishi Tanabe Pharma Corporation

250,000,000

Schedule of Collaborative Arrangements

Deferred revenue related to up-front license payment

12,700,000

License fee paid upon amendment of agreement

$ 105,000,000

Notice period required to terminate without cause (in days) | D

Amortized portion of up-front payment

38,232,000

16,027,000

Net reimbursement (payment) for telaprevir development costs

68,515,000

1,265,000

Reimbursement for manufacturing services

14,928,000

43,636,000

1,419,000

Total collaborative revenues attributable to the collaboration

121,675,000

81,868,000

18,711,000

Milestone payment received

65,000,000

121,675,000

$ 81,868,000

$ 18,711,000

Cystic Fibrosis Foundation Therapeutics Incorporated

68,515,000

Total collaborative revenues attributable to the collaboration

13,700,000

Collaborative funding

$ 75,000,000

Number of years over which funding will be made (in years) | Y

Milestone payment received

$ 1,500,000

Number of commercial milestone payments for achievement of certain sales levels for potentiator compound such as VX-770 (in payments) | payments

$ 13,700,000

Number of commercial milestone payments for achievement of certain sales levels for corrector compound such as VX-809 or VX-661 (in payments) | payments

Alios BioPharma, Inc

Number of nucleotide analogues discovered by acquiree (in analogues) | analogues

$ 35,000,000

Research and development milestone payments, maximum

$ 715,000,000

Commercial milestone payments, maximum

$ 750,000,000

Notice period for termination of contract due to technical failure (in days) | D

Notice period for termination of contract after completion of clinical trials (in days) | D

Latest expiration period for royalty obligation after first commercial sale in country unless contract is terminated earlier (in years) | Y

Discount rate for contingent milestones and royalty payments for development milestones, low end of range (as a percent)

3.60%

Discount rate for contingent milestones and royalty payments for development milestones, high end of range (as a percent)

6.50%

Discount rate for contingent milestones and royalty payments for commercial milestones and royalties (as a percent)

9.40%

Up-front payment

60,000,000

$ 60,000,000

Fair value of contingent milestone and royalty payments

(70,000,000)

$ 197,720,000

Discount rate for intangible assets acquired (as a percent)

9.50%

$ 250,600,000

4,890,000

116,121,000

90,935,000

Net other assets

2,230,000

Net assets

166,785,000

Number of lines on balance sheet where noncontrolling interest is reported | lines

Income (loss) before provision for income taxes

35,000,000

(9,536,000)

Provision for income taxes

(48,809,000)

Change in fair value of contingent milestone and royalty payments

69,950,000

Net income (loss) attributable to noncontrolling interest (Alios)

11,605,000

Restricted cash and cash equivalents (Alios)

51,878,000

4,575,000

Accounts receivable, net

Prepaid expenses and other current assets

2,299,000

69,000

Property and equipment, net

1,925,000

885,000

250,600,000

4,890,000

Other assets

133,000

76,000

Accounts payable

4,132,000

1,189,000

Income taxes payable (Alios)

4,291,000

1,504,000

12,075,000

Redeemable noncontrolling interest (Alios)

116,121,000

90,935,000

Other liabilities

1,030,000

682,000

37,036,000

36,299,000

Noncontrolling interest (Alios)

$ 141,633,000

$ 130,486,000

[1]

Acquisition of ViroChem Pharma Inc. (Details)
$ in Thousands

1 Months Ended

3 Months Ended

9 Months Ended

12 Months Ended

Mar. 31, 2009

USD ($)

stages

Sep. 30, 2011

USD ($)

Dec. 31, 2009

USD ($)

Sep. 30, 2011

USD ($)

Dec. 31, 2011

USD ($)

Dec. 31, 2009

USD ($)

Dec. 31, 2010

USD ($)

Mar. 12, 2009

USD ($)

Intangible asset impairment charge

$ 663,500

^[1]

$ 518,700

$ 105,800

105,800

$ 7,200

Acquisition-related expenses

243,707

^[1]

160,278

7,793

ViroChem

Business Acquisition

Percent of voting interest acquired in ViroChem (as a percent)

100.00%

Number of clinical-development stage HCV drugs added to drug development portfolio (in stages) | stages

Portion of purchase price paid in common shares for the acquisition of ViroChem (in shares) | shares

10,733,527

Net assets

390,600

Deferred tax liability adjustment associated with impairment recognition

127,600

160,300

$ (32,700)

Acquisition-related expenses

$ 7,800

Employee severance, benefits and related costs to acquisition

$ 2,100

ViroChem | VX-222

$ 412,900

412,900

ViroChem | VX-759

Fair value at date of acquisition

$ 105,800

$ 0

Intangible asset impairment charge

$ 105,800

ViroChem | VCH-286

Fair value at date of acquisition

$ 0

Intangible asset impairment charge

7,200

Deferred tax liability adjustment associated with impairment recognition

$ 2,200

ViroChem | VX-286

Fair value at date of acquisition

$ 7,200

[1]

Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2010	Sep. 30, 2010	Jun. 30, 2010	Mar. 31, 2010	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Basic net income (loss) attributable to Vertex per common share calculation:
Net income (loss) attributable to Vertex common shareholders	$ 158,629	$ 221,110	$ (174,069)	$ (176,096)	$ (180,392)	$ (208,957)	$ (200,006)	$ (165,271)	$ 29,574	$ (754,626)	$ (642,178)
Less: Undistributed earnings allocated to participating securities									291
Net income (loss) attributable to Vertex common shareholders-basic									$ 29,283	$ (754,626)	$ (642,178)
Basic weighted-average common shares outstanding	206,758	206,002	204,413	202,329	201,355	200,887	200,397	198,935	204,891	200,402	173,259
Basic net income (loss) attributable to Vertex per common share (in dollars per share)	$ 0.76	$ 1.06	$ (0.85)	$ (0.87)	$ (0.90)	$ (1.04)	$ (1.00)	$ (0.83)	$ 0.14	$ (3.77)	$ (3.71)
Diluted net income (loss) attributable to Vertex per common share calculation:
Net income (loss) attributable to Vertex common shareholders	$ 158,629	$ 221,110	$ (174,069)	$ (176,096)	$ (180,392)	$ (208,957)	$ (200,006)	$ (165,271)	$ 29,574	$ (754,626)	$ (642,178)
Less: Undistributed earnings allocated to participating securities									(285)
Net income (loss) attributable to Vertex common shareholders-diluted									$ 29,289	$ (754,626)	$ (642,178)
Weighted-average shares used to compute basic net income (loss) per common share (in shares)	206,758	206,002	204,413	202,329	201,355	200,887	200,397	198,935	204,891	200,402	173,259
Effect of potentially dilutive securities:
Stock Options									3,863
Other									53
Weighted-average shares used to compute diluted net income (loss) per common share (in shares)	217,602	219,349	204,413	202,329	201,355	200,887	200,397	198,935	208,807	200,402	173,259
Diluted net income (loss) attributable to Vertex per common share (in dollars per share)	$ 0.74	$ 1.02	$ (0.85)	$ (0.87)	$ (0.90)	$ (1.04)	$ (1.00)	$ (0.83)	$ 0.14	$ (3.77)	$ (3.71)
Stock options.
Antidilutive Securities Excluded from Computation of Earnings Per Share
Antidilutive securities excluded from computation of earnings per share (in shares)									9,626	21,293	19,232
Convertible senior subordinated notes.
Antidilutive Securities Excluded from Computation of Earnings Per Share
Antidilutive securities excluded from computation of earnings per share (in shares)									8,192	8,192	1,386
Unvested restricted stock and restricted stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share
Antidilutive securities excluded from computation of earnings per share (in shares)									8	1,950	1,727

Fair Value of Financial Instruments (Details) $ in Thousands	Dec. 31, 2011 USD ($)
Financial assets carried at fair value:
Cash equivalents (Alios)	$ 49,000
Recurring basis \| Total
Financial assets carried at fair value:
Restricted cash	34,090
Total	863,202
Recurring basis \| Total \| Money market funds
Financial assets carried at fair value:
Cash equivalents:	222,225
Recurring basis \| Total \| U.S. Treasury securities (due within 1 year)
Financial assets carried at fair value:
Marketable securities:	22,107
Recurring basis \| Total \| Government-sponsored enterprise securities (due within 1 year)
Financial assets carried at fair value:
Cash equivalents:	113,285
Marketable securities:	471,495
Recurring basis \| Level 1
Financial assets carried at fair value:
Restricted cash	34,090
Total	863,202
Recurring basis \| Level 1 \| Money market funds
Financial assets carried at fair value:
Cash equivalents:	222,225
Recurring basis \| Level 1 \| U.S. Treasury securities (due within 1 year)
Financial assets carried at fair value:
Marketable securities:	22,107
Recurring basis \| Level 1 \| Government-sponsored enterprise securities (due within 1 year)
Financial assets carried at fair value:
Cash equivalents:	113,285
Marketable securities:	$ 471,495

Fair Value of Financial Instruments (Details 2) $ in Thousands	12 Months Ended
	Dec. 31, 2011 USD ($)
Reconciliation of financial liabilities measured at fair value using significant unobservable inputs (Level 3)
Balance, at beginning of period	$ 89,888
Change in fair value of derivative instruments	16,801
Redemption of the 2012 Notes and settlement of the liability related to the sale of milestone rights	$ (106,689)

Fair Value of Financial Instruments (Details 3) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Sep. 30, 2010	Sep. 29, 2010
Debt Offerings, Fair Value Disclosure
Convertible senior subordinated notes (due 2015)	$ 400,000	$ 400,000
Convertible Senior Subordinated Notes 3.35 Percent Due 2015
Debt Offerings, Fair Value Disclosure
Convertible senior subordinated notes (due 2015)	$ 400,000		$ 400,000	$ 400,000
Interest rate (as a percent)	3.35%
Fair value of convertible senior subordinated notes	$ 414,000

Marketable Securities (Details) - USD ($) $ in Thousands	Dec. 31, 2011	Dec. 31, 2010
Summary of cash, cash equivalents and marketable securities
Amortized Cost	$ 969,031	$ 1,031,401
Gross Unrealized Gains	10	89
Gross Unrealized Losses	(119)	(79)
Fair Value	968,922	1,031,411
Total cash and cash equivalents
Summary of cash, cash equivalents and marketable securities
Amortized Cost	475,337	243,202
Gross Unrealized Gains		1
Gross Unrealized Losses	(17)	(6)
Fair Value	475,320	243,197
Cash and money market funds
Summary of cash, cash equivalents and marketable securities
Amortized Cost	362,035	193,845
Fair Value	362,035	193,845
U.S. Treasury securities
Summary of cash, cash equivalents and marketable securities
Amortized Cost		4,770
Fair Value		4,770
Government-sponsored enterprise securities
Summary of cash, cash equivalents and marketable securities
Amortized Cost	113,302	44,587
Gross Unrealized Gains		1
Gross Unrealized Losses	(17)	(6)
Fair Value	113,285	44,582
Total marketable securities
Summary of cash, cash equivalents and marketable securities
Amortized Cost	493,694	788,199
Gross Unrealized Gains	10	88
Gross Unrealized Losses	(102)	(73)
Fair Value	493,602	788,214
U.S. Treasury securities (due within 1 year)
Summary of cash, cash equivalents and marketable securities
Amortized Cost	22,105	103,230
Gross Unrealized Gains	2	1
Gross Unrealized Losses		(11)
Fair Value	22,107	103,220
Government-sponsored enterprise securities (due within 1 year)
Summary of cash, cash equivalents and marketable securities
Amortized Cost	471,589	684,969
Gross Unrealized Gains	8	87
Gross Unrealized Losses	(102)	(62)
Fair Value	$ 471,495	$ 684,994

Marketable Securities (Details 2) - USD ($)
$ in Thousands

Dec. 31, 2011

Sep. 30, 2011

Marketable Securities

Cash equivalents (Alios)

$ 51,878

^[1]

$ 0

[1]

Inventories (Details) $ in Thousands	Dec. 31, 2011 USD ($)
Inventories
Raw materials	$ 32,213
Work in process	47,010
Finished goods	33,207
Total	$ 112,430

Property and Equipment (Details) - USD ($)
$ in Thousands

12 Months Ended

Dec. 31, 2011

Dec. 31, 2010

Dec. 31, 2009

Less accumulated depreciation and amortization

$ 404,239

$ 319,652

271,063

247,319

Total property and equipment, net

133,176

^[1]

72,333

Construction costs incurred by the landlord related to Fan Pier

54,700

Depreciation and amortization expense

28,900

27,900

$ 28,300

Loss on disposal of property and equipment

$ 2,211

Furniture and equipment

151,961

137,904

Leasehold improvements

107,169

102,720

Software

56,923

50,211

Computers

33,116

$ 28,817

Construction-in-progress

Accrued expenses and other current liabilities

$ 55,070

[1]

Fan Pier Leases (Details) squarefeet in Millions, $ in Millions	1 Months Ended	12 Months Ended
	May 31, 2011 squarefeet leases buildings	Dec. 31, 2011 USD ($) Y squarefeet leases
Fan Pier Leases
Number of leases \| leases	2	2
Area of leased property (in square feet) \| squarefeet	1.1	1.1
Number of buildings under lease agreement \| buildings	2
Initial term of lease agreement (in years) \| Y		15
Optional term of lease agreement (in years) \| Y		10
Project construction costs \| $		$ 54.7
Rent expense related to land operating lease \| $		$ 3.9

Accrued Expenses and Other Current Liabilities (Details) - USD ($)
$ in Thousands

Dec. 31, 2011

Dec. 31, 2010

Dec. 31, 2009

Research and development contract costs

$ 66,426

$ 55,506

Payroll and benefits

57,453

50,041

Product revenue allowances

58,201

State income taxes

3,691

Unrecognized tax benefits

4,360

2,374

$ 1,858

Royalty payable

28,603

2,869

Professional fees

12,785

8,629

Other

20,780

14,995

Total

$ 252,299

^[1]

$ 134,414

[1]

Common Stock and Convertible Senior Subordinated Notes (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	1 Months Ended		12 Months Ended
	Dec. 31, 2009	Feb. 28, 2009	Dec. 31, 2009
Convertible Senior Subordinated Notes due 2015
Shares issued (in shares)	13,000	10,000
Shares issued price (in dollars per share)	$ 38.50	$ 32.00
Net proceeds from issuance of common stock	$ 488,100	$ 313,300	$ 801,385
Underwriting discount	12,100	6,400
Other stock issuance expenses	$ 300	$ 300

Common Stock and Convertible Senior Subordinated Notes (Details 2)	1 Months Ended		3 Months Ended	12 Months Ended
	Sep. 30, 2010 USD ($) shares Y D	Jan. 31, 2009 shares	Mar. 31, 2010 USD ($) shares	Dec. 31, 2011 USD ($)	Dec. 31, 2010 USD ($)	Dec. 31, 2009 USD ($) shares	Dec. 31, 2008 USD ($)	Sep. 29, 2010 USD ($) $ / shares	Jan. 02, 2009 USD ($) $ / shares
Convertible Senior Subordinated Notes and Collaborator Loan
Convertible senior subordinated notes				$ 400,000,000	$ 400,000,000
Net proceeds from convertible debt offering					391,645,000		$ 278,607,000
Non-cash expense on exchange of convertible subordinated notes						$ (18,137,000)
Accrued interest offset to additional paid-in capital on conversion/exchange of convertible senior subordinated notes (due 2013)					140,000	3,355,000
Unamortized debt issuance costs of converted/exchanged convertible senior subordinated notes (due 2013) offset to additional paid-in capital					$ 624,000	5,899,000
Convertible Senior Subordinated Notes 3.35 Percent Due 2015
Convertible Senior Subordinated Notes and Collaborator Loan
Convertible senior subordinated notes	$ 400,000,000			$ 400,000,000				$ 400,000,000
Interest rate (as a percent)				3.35%
Net proceeds from convertible debt offering	391,600,000
Underwriting discount	8,000,000
Debt issuance costs	$ 400,000
Conversion price (in dollars per share) \| $ / shares								$ 48.83
Original conversion rate, number of shares to be issued per $1000 of principal (in shares) \| shares	20.4794
Convertible debt principal amount, basis for exchange	$ 1,000
Percent closing price needs to exceed the conversion price for at least 20 trading days within 30 consecutive trading days for provisional redemption (as a percent)	130.00%
Minimum number of days within 30 consecutive trading days the closing price needs to exceed the conversion price for provisional redemption (in days) \| D	20
Total consecutive trading days during which the closing price must exceed the conversion price for at least 20 trading days for provisional redemption (in days) \| D	30
Percentage of principal amount used in computation of provisional redemption price (as a percent)	100.00%
Total interest payments on notes being provisionally redeemed equal to interest for specified number of years (in years) \| Y	3
Convertible Senior Subordinated Notes (due 2013)
Convertible Senior Subordinated Notes and Collaborator Loan
Convertible senior subordinated notes									$ 287,500,000
Interest rate (as a percent)		4.75%
Conversion price (in dollars per share) \| $ / shares									$ 23.14
Original conversion rate, number of shares to be issued per $1000 of principal (in shares) \| shares		43.22
Convertible subordinated notes exchanged or converted						255,400,000
Non-cash expense on exchange of convertible subordinated notes						$ 18,100,000
Convertible subordinated notes exchanged or converted (in shares) \| shares						11,581,838
Accrued interest offset to additional paid-in capital on conversion/exchange of convertible senior subordinated notes (due 2013)						$ 3,400,000
Unamortized debt issuance costs of converted/exchanged convertible senior subordinated notes (due 2013) offset to additional paid-in capital						$ 5,900,000
Convertible Senior Subordinated Notes (due 2013) \| First quarter 2010 conversion
Convertible Senior Subordinated Notes and Collaborator Loan
Convertible senior subordinated notes			$ 32,100,000
Convertible subordinated notes exchanged or converted (in shares) \| shares			1,386,006
Accrued interest offset to additional paid-in capital on conversion/exchange of convertible senior subordinated notes (due 2013)			$ 100,000
Unamortized debt issuance costs of converted/exchanged convertible senior subordinated notes (due 2013) offset to additional paid-in capital			$ 600,000

Preferred Stock, Common Stock and Equity Plans (Details) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2011 USD ($) Y $ / shares shares	Dec. 31, 2010 USD ($) $ / shares shares	Dec. 31, 2009 USD ($) shares	Dec. 31, 2011 USD ($) Y $ / shares shares	Dec. 31, 2010 shares
Preferred Stock, Common Stock and Equity Plans
Preferred stock, shares authorized				1,000,000	1,000,000
Common stock, shares authorized				300,000,000	300,000,000
Number of votes per share holders of common stock are entitled to	one
Share-based Compensation Arrangement by Share-based Payment Award
Awards outstanding (in shares)	23,067,233	21,293,000		23,067,233	21,293,000
Additional awards authorized for grant (in shares)				8,631,417
Grant price of outstanding restricted stock and restricted stock units (in dollars per share) \| $ / shares				$ 0.01
Outstanding and vested options
Stock options outstanding at beginning of period (in shares)	21,293,000
Stock options outstanding at end of period (in shares)	23,067,233	21,293,000
Weighted average Exercise Price
Weighted-average Exercise Price outstanding at beginning of period (in dollars per share) \| $ / shares	$ 30.50
Weighted average exercise price, granted (in dollars per share) \| $ / shares				43.55
Weighted average exercise price, exercised (in dollars per share) \| $ / shares				26.60
Weighted average exercise price, forfeited (in dollars per share) \| $ / shares				36.78
Weighted average exercise price, expired (in dollars per share) \| $ / shares				37.81
Weighted average exercise price exercisable at the end of the period (in dollars per share) \| $ / shares	30.59
Total exercisable or expected to vest, weighted average exercise price (in dollars per share) \| $ / shares				$ 33.94
Weighted-average Exercise Price outstanding at end of period (in dollars per share) \| $ / shares	$ 34.23	$ 30.50
Weighted-average Remaining Contractual Life
Weighted-average Remaining Contractual Life, outstanding (in years) \| Y				6.84
Weighted-average Remaining Contractual Life, exercisable (in years) \| Y	5.55
Weighted-average Remaining Contractual Life, total exercisable or expected to vest (in years) \| Y	6.74
Aggregate Intrinsic Value
Aggregate intrinsic value, outstanding \| $				$ 56,376
Aggregate intrinsic value, exercisable \| $				53,552
Aggregate intrinsic value, total exercisable or expected to vest \| $				$ 56,108
Aggregate intrinsic value of shares, market price (in dollars per share) \| $ / shares				$ 32.92
Total Intrinsic Value and Cash Received
Total intrinsic value of stock options exercised \| $	$ 90,500	$ 10,500	$ 36,400
Total cash received from employees as a result of employee stock option exercises \| $	$ 109,600	$ 22,200	$ 38,200
Stock options
Share-based Compensation Arrangement by Share-based Payment Award
Awards outstanding (in shares)	20,923,000	21,293,000		20,923,000	21,293,000
Maximum period within which stock options expires (in years) \| Y	10
Outstanding and vested options
Stock options outstanding at beginning of period (in shares)	21,293,000
Stock options granted (in shares)	5,754,000
Stock options exercised (in shares)	(4,119,000)
Stock options forfeited (in shares)	(1,554,000)
Stock options expired (in shares)	(451,000)
Stock options outstanding at end of period (in shares)	20,923,000	21,293,000
Stock options exercisable at end of period (in shares)	12,225,000
Total exercisable or expected to vest, stock options (in shares)				19,922,000
2006 Stock and Option Plan
Share-based Compensation Arrangement by Share-based Payment Award
Awards outstanding (in shares)	19,889,776			19,889,776
Additional awards authorized for grant (in shares)				8,631,417
Approved increase in number of shares authorized for issuance (in shares)		12,000,000	7,700,000
Outstanding and vested options
Stock options outstanding at end of period (in shares)	19,889,776
1996 Stock and Option Plan
Share-based Compensation Arrangement by Share-based Payment Award
Awards outstanding (in shares)	3,177,457			3,177,457
Outstanding and vested options
Stock options outstanding at end of period (in shares)	3,177,457
Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award
Common stock authorized for employee stock purchase plan				482,000
Number of shares (in shares)	557,000
Average price paid per share \| $ / shares				$ 27.47
Offering period for employee stock purchase plan	twelve-month offering
Bifurcation of offering period	two six-month
Purchase of shares at discounted fair market value of common stock (as a percent)	85.00%

Preferred Stock, Common Stock and Equity Plans (Details 2) $ / shares in Units, shares in Thousands, $ in Millions	12 Months Ended
	Dec. 31, 2011 USD ($) Y $ / shares shares	Dec. 31, 2010 USD ($) $ / shares shares	Dec. 31, 2009 USD ($) shares
Restricted stock
Restricted stock, as of the beginning of the period (in shares) \| shares	1,931	0
Restricted stock, granted (in shares) \| shares	1,185
Restricted stock, vested (in shares) \| shares	(747)
Restricted stock, cancelled (in shares) \| shares	(269)
Restricted stock, as of the end of the period (in shares) \| shares	2,100	1,931	0
Restricted stock, weighted-average grant-date fair value
Weighted-average grant-date fair value, as of the beginning of the period (in dollars per share)	$ 33.35
Weighted-average grant-date fair value, granted (in dollars per share)	41.04
Weighted-average grant-date fair value, vested (in dollars per share)	33.97
Weighted-average grant-date fair value, cancelled (in dollars per share)	36.01
Weighted-average grant-date fair value, as of the end of the period (in dollars per share)	$ 37.13	$ 33.35
Total fair value of restricted stock vesting measured on the date of vesting \| $	$ 34.6	$ 20.1	$ 26.5
Range of Exercise Prices, $9.07-$20.00
Restricted stock, weighted-average grant-date fair value
Exercise price, low end of range (in dollars per share)	$ 9.07
Exercise price, high end of range (in dollars per share)	$ 20.00
Exercise price range, options outstanding (in shares) \| shares	2,751
Exercise price range, options outstanding, weighted-average remaining contractual life (in years) \| Y	2.99
Exercise price range, options outstanding, weighted-average exercise price (in dollars per share)	$ 15.52
Exercise price range, options exercisable (in shares) \| shares	2,689
Exercise price range, options exercisable, weighted-average exercise price (in dollars per share)	$ 15.44
Range of Exercise Prices, $20.01-$30.00
Restricted stock, weighted-average grant-date fair value
Exercise price, low end of range (in dollars per share)	20.01
Exercise price, high end of range (in dollars per share)	$ 30.00
Exercise price range, options outstanding (in shares) \| shares	1,902
Exercise price range, options outstanding, weighted-average remaining contractual life (in years) \| Y	6.71
Exercise price range, options outstanding, weighted-average exercise price (in dollars per share)	$ 28.89
Exercise price range, options exercisable (in shares) \| shares	1,363
Exercise price range, options exercisable, weighted-average exercise price (in dollars per share)	$ 28.61
Range of Exercise Prices, $30.01-$40.00
Restricted stock, weighted-average grant-date fair value
Exercise price, low end of range (in dollars per share)	30.01
Exercise price, high end of range (in dollars per share)	$ 40.00
Exercise price range, options outstanding (in shares) \| shares	13,790
Exercise price range, options outstanding, weighted-average remaining contractual life (in years) \| Y	7.16
Exercise price range, options outstanding, weighted-average exercise price (in dollars per share)	$ 35.70
Exercise price range, options exercisable (in shares) \| shares	7,804
Exercise price range, options exercisable, weighted-average exercise price (in dollars per share)	$ 35.17
Range of Exercise Prices, $40.01-$50.00
Restricted stock, weighted-average grant-date fair value
Exercise price, low end of range (in dollars per share)	40.01
Exercise price, high end of range (in dollars per share)	$ 50.00
Exercise price range, options outstanding (in shares) \| shares	403
Exercise price range, options outstanding, weighted-average remaining contractual life (in years) \| Y	9.04
Exercise price range, options outstanding, weighted-average exercise price (in dollars per share)	$ 44.53
Exercise price range, options exercisable (in shares) \| shares	69
Exercise price range, options exercisable, weighted-average exercise price (in dollars per share)	$ 44.54
Range of Exercise Prices, $50.01-$57.27
Restricted stock, weighted-average grant-date fair value
Exercise price, low end of range (in dollars per share)	50.01
Exercise price, high end of range (in dollars per share)	$ 57.27
Exercise price range, options outstanding (in shares) \| shares	2,077
Exercise price range, options outstanding, weighted-average remaining contractual life (in years) \| Y	9.47
Exercise price range, options outstanding, weighted-average exercise price (in dollars per share)	$ 52.17
Exercise price range, options exercisable (in shares) \| shares	300
Exercise price range, options exercisable, weighted-average exercise price (in dollars per share)	$ 53.12

Stock-based Compensation Expense (Details)	12 Months Ended
Stock-based Compensation Expense (Details)	Dec. 31, 2011 USD ($) Y $ / shares	Dec. 31, 2010 USD ($) Y $ / shares	Dec. 31, 2009 USD ($) Y $ / shares
Stock-based compensation expense:
Total stock-based compensation expense included in costs and expenses	$ 118,226,000	$ 91,124,000	$ 86,722,000
Less stock-based compensation expense capitalized to inventories	$ (1,042,000)
Weighted-average assumptions for options and ESPP subscriptions granted
Weighted average fair value (in dollars per share) \| $ / shares	$ 41.04
Weighted-average grant-date fair value, granted (in dollars per share) \| $ / shares	$ 20.88	$ 18.52	$ 19.11
Employee Stock Purchase Plan
Weighted-average assumptions for options and ESPP subscriptions granted
Expected stock price volatility (as a percent)	51.32%	43.92%	54.22%
Risk-free interest rate (as a percent)	0.08%	0.24%	0.39%
Expected term (in years) \| Y	0.72	0.71	0.76
Weighted average fair value (in dollars per share) \| $ / shares	$ 9.80	$ 10.19	$ 11.31
Expected annual dividends estimate	$ 0.00
Stock options
Stock-based compensation expense:
Total stock-based compensation expense included in costs and expenses	83,098,000	$ 64,005,000	$ 63,397,000
Type of award:
Unrecognized Expense, Net of Estimated Forfeitures	$ 139,165,000
Weighted-average Recognition Period (in years) \| Y	2.73
Stock-based compensation expense for individual arrangement:
Compensation expense related to accelerated vesting and modification of stock options			$ 12,700,000
Weighted-average assumptions for options and ESPP subscriptions granted
Expected stock price volatility (as a percent)	49.53%	52.17%	57.77%
Risk-free interest rate (as a percent)	2.09%	2.44%	2.85%
Expected term (in years) \| Y	5.74	5.71	6.31
Expected annual dividends estimate	$ 0
Restricted stock and restricted stock units
Stock-based compensation expense:
Total stock-based compensation expense included in costs and expenses	30,708,000	$ 22,960,000	$ 18,983,000
Type of award:
Unrecognized Expense, Net of Estimated Forfeitures	$ 44,744,000
Weighted-average Recognition Period (in years) \| Y	2.25
Stock-based compensation expense for individual arrangement:
Compensation expense related to accelerated vesting of award(s)			2,200,000
ESPP share issuances
Stock-based compensation expense:
Total stock-based compensation expense included in costs and expenses	$ 5,462,000	4,159,000	4,342,000
Type of award:
Unrecognized Expense, Net of Estimated Forfeitures	$ 5,128,000
Weighted-average Recognition Period (in years) \| Y	0.65
Research and development expenses
Stock-based compensation expense:
Total stock-based compensation expense included in costs and expenses	$ 75,574,000	65,198,000	64,128,000
Sales, general and administrative expenses
Stock-based compensation expense:
Total stock-based compensation expense included in costs and expenses	$ 42,652,000	$ 25,926,000	$ 22,594,000

September 2009 Financial Transactions (Details) $ in Thousands	1 Months Ended			12 Months Ended
	Oct. 31, 2011 USD ($)	Feb. 28, 2011 USD ($)	Sep. 30, 2009 USD ($) agreements	Dec. 31, 2011 USD ($)	Dec. 31, 2010 USD ($)	Dec. 31, 2009 USD ($)
2012 Notes
Face amount of 2012 Notes			$ 155,000
Proceeds from issuance of 2012 Notes			122,200
Security interest in future milestone payments pursuant to the Janssen collaboration			$ 155,000
Proceeds from milestone payment related to the acceptance of Janssen's MAA		$ 50,000
Portion of 2012 Notes redeemed upon achievement of certain approval milestone pursuant to the Janssen collaboration				$ 50,000
Earned remaining milestone payment to be received in the fourth quarter of 2011	$ 105,000
Sale of Contingent Milestone Payments
Number of purchase agreements entered into related to sale of contingent launch milestone payments pursuant to the Janssen collaboration \| agreements			2
Proceeds from sale of potential contingent launch milestone payments pursuant to the Janssen collaboration			$ 32,800
Value of potential contingent launch milestone payments sold pursuant to the Janssen collaboration	$ 95,000
Expenses and Losses (Gains):
Interest expense related to 2012 Notes				21,687	$ 15,068	$ 3,465
Change in fair value of embedded derivative related to 2012 Notes				(400)	1,637	(200)
Change in fair value of free-standing derivatives related to the sale of milestone payments				17,201	39,592	2,047
Total September 2009 financial transaction expenses				$ 38,488	56,297	$ 5,312
Liabilities:
2012 Notes, excluding fair value of embedded derivative					124,902
Embedded derivative related to 2012 Notes					12,089
Derivatives related to the sale of milestone payments					77,799
Total liabilities related to September 2009 financial transactions					$ 214,790

Sale of HIV Protease Inhibitor Royalty Stream (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2008	Dec. 31, 2011
Sale of HIV Protease Inhibitor Royalty Stream
Gross proceeds from sale of royalty rights receivable from GlaxoSmithKline	$ 160.0
Deferred revenues related to the one-time cash payment agreement with GlaxoSmithKline		$ 94.0

Credit Agreement (Details) - Bank of America $ in Millions	Jan. 07, 2011 USD ($)
Line of credit facility
Revolving credit facility	$ 100.0
Loans under credit agreement, interest rate base	LIBOR
Loans under credit agreement, additional interest rate base	PRIME
Loans under credit agreement, interest rate above base (as a percent)	1.50%
Covenant to maintain cash, cash equivalents and marketable securities in domestic deposit and securities accounts	$ 400.0
Margined value of cash, cash equivalents and marketable securities	$ 100.0

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended				12 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Components of income (loss) before provision for (benefit from) income taxes
United States					$ 343,515	$ (719,859)	$ (621,455)
Foreign					(283,070)	(34,767)	(20,723)
Income (loss) before provision for income taxes	$ 210,801	$ 200,610	$ (174,870)	$ (176,096)	60,445	$ (754,626)	$ (642,178)
Current taxes:
United States					22,275
Foreign					(561)
State					8,655
Total					30,369
Deferred taxes:
United States					19,629
Foreign					(32,692)
State					1,960
Total					(11,103)
Provision for income taxes	$ 22,660	$ (27,842)	$ 24,448		$ 19,266

Income Taxes (Details 2) - USD ($)	3 Months Ended				12 Months Ended
Income Taxes (Details 2) - USD ($)	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Reconciliation of Income Tax Expense:
Federal statutory rate (as a percent)					35.00%	34.00%	34.00%
Income (loss) before provision for income taxes	$ 210,801,000	$ 200,610,000	$ (174,870,000)	$ (176,096,000)	$ 60,445,000	$ (754,626,000)	$ (642,178,000)
Expected tax provision (benefit)					21,156,000	(256,574,000)	(218,341,000)
State taxes, net of federal benefit					10,624,000	(46,108,000)	(38,965,000)
Foreign rate differential					43,629,000	632,000	674,000
Tax credits					(51,086,000)	(23,292,000)	(13,027,000)
Unbenefited operating losses					(6,286,000)	322,551,000	260,741,000
Non-deductible expenses					1,953,000	2,158,000	8,244,000
Other					(724,000)	633,000	674,000
Provision for income taxes	22,660,000	$ (27,842,000)	$ 24,448,000		19,266,000
Reconciliation of unrecognized tax benefits
Unrecognized tax benefits beginning of year				$ 2,374,000	2,374,000	1,858,000
Gross change for current year positions					2,564,000	516,000
Decrease due to settlements and payments					(23,000)
Decrease due to statute limitations					(560,000)
Uncrecognized tax benefits end of year	4,360,000				4,360,000	2,374,000	$ 1,858,000
Amount of unrecognized tax benefits that, if recognized, would result in a reduction of the Company's effective tax rate	4,400,000				4,400,000
Possible reduction in unrecognized tax benefits in next twelve months	500,000				500,000
Deferred tax assets:
Net operating loss	870,367,000				870,367,000	944,275,000
Tax credit carryforwards	167,759,000				167,759,000	112,467,000
Property and equipment	15,537,000				15,537,000	22,483,000
Intangibles	71,076,000				71,076,000
Deferred revenues	59,939,000				59,939,000	138,809,000
Stock-based compensation	90,563,000				90,563,000	81,211,000
Inventory	23,883,000				23,883,000	38,810,000
Accrued expenses and other	30,636,000				30,636,000	30,078,000
Unrealized Loss	245,000				245,000
Gross deferred tax assets	1,330,005,000				1,330,005,000	1,368,133,000
Valuation allowance	(1,329,775,000)				(1,329,775,000)	(1,368,133,000)
Total deferred tax assets	230,000				230,000
Deferred tax liabilities:
Contingent consideration	(14,241,000)				(14,241,000)
Acquired intangibles	(229,696,000)				(229,696,000)	(160,278,000)
Net deferred tax liabilities	(243,707,000)				(243,707,000)	$ (160,278,000)
Net amount of unrealized excess tax benefits					114,000,000
Gross amount of excess tax deduction in net operating loss carryforward	525,000,000				525,000,000
Decreased in valuation allowance					38,400,000
Federal
Tax Carryforwards
Operating Loss	2,700,000,000				2,700,000,000
Tax Credit	121,900,000				121,900,000
State
Tax Carryforwards
Operating Loss	1,800,000,000				1,800,000,000
Tax Credit	$ 56,000,000				$ 56,000,000

Restructuring Expense (Details) $ in Thousands	1 Months Ended		3 Months Ended								12 Months Ended					96 Months Ended
Restructuring Expense (Details) $ in Thousands	Jun. 30, 2003 squarefeet	Jan. 31, 2003 Y	Dec. 31, 2011 USD ($)	Sep. 30, 2011 USD ($)	Jun. 30, 2011 USD ($)	Mar. 31, 2011 USD ($)	Dec. 31, 2010 USD ($)	Sep. 30, 2010 USD ($)	Jun. 30, 2010 USD ($)	Mar. 31, 2010 USD ($)	Dec. 31, 2011 USD ($)	Dec. 31, 2010 USD ($)	Dec. 31, 2009 USD ($)	Dec. 31, 2006 squarefeet	Dec. 31, 2003 USD ($)	Dec. 31, 2011 USD ($)
Restructuring Expense
Accrued restructuring expense, current portion			$ 4,932				$ 5,497				$ 4,932	$ 5,497				$ 4,932
Accrued restructuring expense, excluding current portion			21,381				24,098				21,381	24,098				21,381
Lease restructuring expense															$ 78,700
Lease operating expense															6,000
Restructuring activities
Lease restructuring liability at beginning of period						$ 29,595				$ 34,017	29,595	34,017	$ 34,064			69,526
Restructuring expense			992	$ (419)	$ 741	$ 760	(2,257)	$ 866	$ 2,112	$ 780	2,074	1,501	6,240		91,824	60,635
Cash payments											(14,904)	(14,759)	(14,924)		(17,816)	(148,844)
Non-cash write-off in 2003															(4,482)
Lease restructuring liability at end of period			$ 26,313				$ 29,595				$ 26,313	$ 29,595	$ 34,017		69,526	26,313
Lease restructuring and other operating lease expense
Restructuring activities
Lease restructuring liability at beginning of period																$ 69,526
Restructuring expense															84,726
Cash payments															(15,200)
Lease restructuring liability at end of period															69,526
Employee severance, benefits and related costs
Restructuring activities
Restructuring expense															2,616
Cash payments															(2,616)
Leasehold improvements and asset impairments
Restructuring activities
Restructuring expense															4,482
Non-cash write-off in 2003															$ (4,482)
Kendall Square Facility
Kendall Square Lease
Leased area (in square feet) \| squarefeet	290,000
Lease term (in years) \| Y		15
Occupied leased area (in square feet) \| squarefeet														120,000
Discount rate, lease restructuring liability (as a percent)															10.00%

Restructuring Expense (Details 2) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended				96 Months Ended
Restructuring Expense (Details 2) - USD ($) $ in Thousands	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2010	Sep. 30, 2010	Jun. 30, 2010	Mar. 31, 2010	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2003	Dec. 31, 2011
Restructuring activities
Lease restructuring liability at beginning of period				$ 29,595				$ 34,017	$ 29,595	$ 34,017	$ 34,064		$ 69,526
Cash payments									(14,904)	(14,759)	(14,924)	$ (17,816)	(148,844)
Cash received from subleases									9,548	8,836	8,637		55,014
Credit for portion of facility the entity decided to occupy in 2005													(10,018)
Restructuring expense	$ 992	$ (419)	$ 741	$ 760	$ (2,257)	$ 866	$ 2,112	$ 780	2,074	1,501	6,240	91,824	60,635
Lease restructuring liability at end of period	$ 26,313				$ 29,595				$ 26,313	$ 29,595	$ 34,017	$ 69,526	$ 26,313

Amount of any reversal and other adjustment made during the period to the amount of a previously accrued liability for a specified type of restructuring cost, excluding adjustments for costs incurred during the period, costs settled during the period, and foreign currency translation adjustments.