---

---

ITEM 1.	BUSINESS

•

Tezacaftor (VX-661) is a corrector compound that we are evaluating in a Phase 3 development program in combination with ivacaftor in multiple CF patient populations who have at least one copy of the F508del mutation in their CFTR gene. We expect data from this Phase 3 development program in the first half of 2017. If supported by data from the Phase 3 development program, we plan to submit a New Drug Application, or NDA, to the United States Food and Drug Administration, or FDA for tezacaftor in combination with ivacaftor in the second half of 2017.

•	VX-152, VX-440, VX-659 and VX-445 are next-generation CFTR corrector compounds that we are evaluating as part of combination treatment regimens. We have initiated Phase 2 clinical trials of VX-152 and VX-440 and expect data from these clinical trials in the second half of 2017. We have initiated Phase 1 clinical trials of VX-659 and VX-445.

•	VX-371 is an investigational epithelial sodium channel, or ENaC, inhibitor that is being evaluated in a Phase 2 development program and which we exclusively licensed from Parion Sciences, Inc., or Parion, in 2015.

---

---

•	Two copies of the F508del in their CFTR gene: We have completed enrollment in this clinical trial and expect data from this clinical trial to be available in the first half of 2017;

•	One copy of the F508del mutation in their CFTR gene and a second mutation in their CFTR gene that results in residual CFTR function: We have completed enrollment in this clinical trial and expect data from this clinical trial to be available in the first half of 2017; and

•	One copy of the F508del mutation in their CFTR gene and a second mutation in their CFTR gene that results in a gating defect in the CFTR protein: We plan to complete enrollment in this clinical trial in the first half of 2017. Data from this clinical trial are not expected to be included in the initial regulatory applications for tezacaftor in combination with ivacaftor.

•	VX-440 to evaluate the safety and efficacy of four-week dosing of VX-440 in combination with tezacaftor and ivacaftor in approximately 40 patients with CF who have one copy of the F508del mutation in their CFTR gene and a second mutation that results in minimal CFTR function and approximately 25 patients with CF who have two copies of the F508del mutation in their CFTR gene; and

•	VX-152 to evaluate the safety and efficacy of two-week dosing of VX-152 in combination with tezacaftor and ivacaftor in approximately 35 patients with CF who have one copy of the F508del mutation in their CFTR gene and a second mutation that results in minimal CFTR function and approximately 25 patients with CF who have two copies of the F508del mutation in their CFTR gene.

---

---

---

---

---

•	U.S. and foreign patent applications covering CF potentiators, correctors and ENaC inhibitors, including ivacaftor, lumacaftor, tezacaftor, VX-371, VX-152, VX-440, VX-659 and VX-445 and many other related compounds, and the use of those potentiators, correctors and ENaC inhibitors to treat CF.

•	U.S. and foreign patents and patent applications covering VX-150 and VX-241 and the use of VX-150 and VX-241 to treat pain indications.

•	U.S. and foreign patents and patent applications covering VX-210 and the use of VX-210 to treat neurology indications.

---

•	U.S. and foreign patents and patent applications covering the manufacture, pharmaceutical compositions, related solid forms, formulations, dosing regimens and methods of use of these compounds, including ivacaftor and lumacaftor.

---

---

•	refusal to approve or delay in review of pending applications;

•	withdrawal of an approval or the implementation of limitations on a previously approved indication for use;

•	imposition of a clinical hold, a risk mitigation and evaluation strategy or other safety-related limitations;

•	warning letters or “untitled letters”;

•	product seizures;

•	total or partial suspension of production or distribution; or

•	injunctions, fines, disgorgement, refusals of government contracts, or civil or criminal penalties.

•	completion of preclinical laboratory tests, animal studies and formulation studies conducted according to Good Laboratory Practices, or GLP, and other applicable regulations;

•	submission to the FDA of an investigational new drug, or IND, application, which must become effective before clinical trials in the United States may begin;

•	performance of adequate and well-controlled clinical trials according to Good Clinical Practices, or GCP, to establish the safety and efficacy of the proposed drug for its intended use;

•	submission to the FDA of an NDA;

•	satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product will be produced to assess compliance with cGMP to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity; and

•	FDA review and approval of the NDA.

---

•

Phase 1. The drug initially is introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, metabolism, distribution and elimination. In the case of some drug candidates for severe or life-threatening diseases, such as cancer, especially when the drug candidate may be inherently too toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients.

•	Phase 2. Clinical trials are initiated in a limited patient population intended to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the drug candidate for specific targeted diseases and to determine dosage tolerance and optimal dosage.

•	Phase 3. Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk-benefit ratio of the drug candidate and provide an adequate basis for regulatory approval and product labeling.

---

---

•	record-keeping requirements;

•	reporting of adverse experiences with the product;

•	providing the FDA with updated safety and efficacy information;

•	drug sampling and distribution requirements;

•	notifying the FDA and gaining its approval of specified manufacturing or labeling changes;

•	complying with certain electronic records and signature requirements; and

•	complying with FDA promotion and advertising requirements.

---

---

---

---

---

---

---

---

---

---

---

•	our ability to obtain, and the timing and terms of obtaining, reimbursement for ORKAMBI in ex-U.S. markets;

•	the number of additional patients who begin treatment with ORKAMBI, including patients six to eleven years of age in the United States;

•	the rate at which additional patients initiate treatment;

•	the proportion of initiated patients who remain on treatment; and

•	the compliance rate for patients who remain on treatment.

---

---

---

•	prevalence and severity of adverse side-effects;

•	lack of reimbursement availability from third-party payors;

•	lower demonstrated efficacy, safety and/or tolerability compared to alternative treatment methods;

•	lack of cost-effectiveness;

•	a decision to wait for the approval of other therapies in development that have significant perceived advantages over our drug;

•	convenience and ease of administration;

•	other potential advantages of alternative treatment methods; and

•	ineffective sales, marketing and/or distribution support.

---

---

---

•	offer therapeutic or other improvement over existing competitive therapies;

•	be proven safe and effective in clinical trials;

•	meet applicable regulatory standards;

•	be capable of being produced in commercial quantities at acceptable costs; or

---

•	if approved for commercial sale, be successfully marketed as pharmaceutical products.

---

•	ongoing discussions with the FDA or comparable foreign authorities regarding the scope or design of our clinical trials and the number of clinical trials we must conduct;

•	delays in enrolling volunteers or patients into clinical trials, including as a result of low numbers of patients that meet the eligibility criteria for the trial;

•	a lower than anticipated retention rate of volunteers or patients in clinical trials;

•	the need to repeat clinical trials as a result of inconclusive results, unforeseen complications in testing or clinical investigator error;

•	inadequate supply or deficient quality of drug candidate materials or other materials necessary for the conduct of our clinical trials;

•	unfavorable FDA or foreign regulatory authority inspection and review of a manufacturing facility that supplied clinical trial materials or its relevant manufacturing records or a clinical trial site or records of any clinical or preclinical investigation;

•	unfavorable scientific results from clinical trials;

•	serious and unexpected drug-related side-effects experienced by participants in our clinical trials or by participants in clinical trials being conducted by our competitors to evaluate drug candidates with similar mechanisms of action or structures to drug candidates that we are developing;

•	favorable results in testing of our competitors’ drug candidates, or FDA or foreign regulatory authority approval of our competitors’ drug candidates; or

•	action by the FDA or a foreign regulatory authority to place a clinical hold or partial clinical hold on a trial or compound or deeming the clinical trial conduct as problematic.

---

•	failure to successfully further develop the acquired or licensed drugs or technology or to achieve strategic objectives, including successfully developing and commercializing the drugs, drug candidates or technologies that we acquire or license;

---

•	inadequate or unfavorable data from clinical trials evaluating the acquired or licensed drug or drug candidates;

•	entry into markets in which we have no or limited direct prior experience or where competitors in such markets have stronger market positions;

•	disruption of our ongoing business and distraction of our management and employees from other opportunities and challenges;

•

potential failure of the due diligence processes to identify significant problems, liabilities or other shortcomings or challenges of an acquired company, or acquired or licensed product or technology, including but not limited to, problems, liabilities or other shortcomings or challenges with respect to intellectual property, product quality, safety, accounting practices, employee, customer or third party relations and other known and unknown liabilities;

•	liability for activities of the acquired company or licensor before the acquisition or license, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities, and other known and unknown liabilities;

•	exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of an acquisition or license, including but not limited to, claims from terminated employees, customers, former equity holders or other third-parties;

•	difficulty in integrating the drugs, drug candidates, technologies, business operations and personnel of an acquired company; and

•	difficulties in the integration of the acquired company’s departments, systems, including accounting, human resource and other administrative systems, technologies, books and records, and procedures, as well as in maintaining uniform standards, controls, including internal control over financial reporting required by the Sarbanes-Oxley Act of 2002 and related procedures and policies.

•

Our collaborators may change the focus of their development and commercialization efforts or may have insufficient resources to effectively develop our drug candidates. The ability of some of our products and drug candidates to reach their potential could be limited if collaborators decrease or fail to increase development or commercialization efforts related to those products or drug candidates. Our collaboration agreements provide our collaborators with a level of discretion in determining the amount and timing of efforts and resources that they will apply to these collaborations.

•	Any future collaboration agreements may have the effect of limiting the areas of research and development that we may pursue, either alone or in collaboration with third parties.

---

•	Collaborators may develop and commercialize, either alone or with others, drugs that are similar to or competitive with the drugs or drug candidates that are the subject of their collaborations with us.

•

Disagreements with collaborators, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or termination of the research, development or commercialization of drug candidates, might lead to additional responsibilities for us with respect to drug candidates, or might result in litigation or arbitration. Any such disagreements would divert management attention and resources and be time-consuming and expensive.

•	Collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation.

•	Collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability.

•	Investigations and/or compliance or enforcement actions against a collaborator, which may expose us to indirect liability as a result of our partnership with such collaborator.

•	Our collaboration agreements are subject to termination under various circumstances.

---

---

---

---

•	differing regulatory requirements for drug approvals and regulation of approved drugs in foreign countries;

•	varying reimbursement regimes and difficulties or the inability to obtain reimbursement for our products in a timely manner;

•	differing patient treatment infrastructures, particularly since our business is focused on the treatment of rare diseases that are typically prescribed by specialist physicians;

•	collectibility of accounts receivable;

•	changes in tariffs, trade barriers and regulatory requirements, the risks of which appear to have increased in the current political environment;

•	economic weakness, including recession and inflation, or political instability in particular foreign economies and markets;

•	differing levels of enforcement and/or recognition of contractual and intellectual property rights;

•	complying with local laws and regulations, which are interpreted and enforced differently across jurisdictions and which can change significantly over time;

•	foreign taxes, including withholding of payroll taxes;

•	foreign currency fluctuations, which could result in reduced revenues or increased operating expenses, and other obligations incident to doing business or operating in another country;

•	workforce uncertainty in countries where labor unrest is more common than in the United States;

•	import and export licensing requirements, tariffs, and other trade and travel restrictions;

•	production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and

•	business interruptions resulting from geo-political actions, including war and terrorism.

---

•	implement and clearly communicate our corporate-wide strategies;

•	enhance our operational and financial infrastructure, including our controls over records and information;

•	enhance our operational, financial and management processes, including our cross-functional decision-making processes and our budget prioritization systems;

•	train and manage our global employee base;

•	transition from a U.S.-centric company into an organization capable of developing and commercializing multiple drug candidates in international markets; and

•	enhance our compliance and legal resources.

---

---

•	the information contained in our quarterly earnings releases, including our net product revenues and operating expenses for completed periods and guidance regarding future periods;

•	announcements of FDA actions with respect to our drugs or our competitors’ drugs, or regulatory filings for our drug candidates or those of our competitors, or announcements of interim or final results of clinical trials or nonclinical studies relating to our drugs, drug candidates or those of our competitors;

•	prescription data and other information disclosed by third parties regarding our business or products;

•	technological innovations or the introduction of new drugs by our competitors;

•	government regulatory action;

•	public concern as to the safety of drugs developed by us or our competitors;

•	developments in patent or other intellectual property rights or announcements relating to these matters;

•	developments in domestic and international governmental policy or regulation, for example, relating to intellectual property rights;

•	developments relating specifically to other companies and market conditions for pharmaceutical and biotechnology stocks or stocks in general;

•	business development, capital structuring or financing activities; and

•	general worldwide or national economic, political and capital market conditions.

---

---

---

•	our expectations regarding the amount of, timing of and trends with respect to our revenues, costs and expenses and other gains and losses, including those related to net product revenues from KALYDECO and ORKAMBI;

•

our expectations regarding clinical trials, development timelines and regulatory authority filings and submissions for ivacaftor, lumacaftor, tezacaftor, VX-371, VX-440, VX-152, VX-659, VX-445, VX-150 and VX-210, as well as the MAA for ORKAMBI for patients with CF six to eleven years of age who are homozygous for the F508del mutation in their CFTR gene and the NDA for tezacaftor in combination with ivacaftor;

•	our ability to obtain reimbursement for ORKAMBI in ex-U.S. markets and our ability to otherwise successfully market ORKAMBI and KALYDECO or any of our other drug candidates for which we obtain regulatory approval;

•	our expectations regarding the timing and structure of clinical trials of our drugs and drug candidates, including ivacaftor, lumacaftor, tezacaftor, VX-371, VX-440, VX-152, VX-659, VX-445, VX-150 and VX-210, and the expected timing of our receipt of data from our ongoing and planned clinical trials;

•	the data that will be generated by ongoing and planned clinical trials and the ability to use that data to advance compounds, continue development or support regulatory filings;

•	our beliefs regarding the support provided by clinical trials and preclinical and nonclinical studies of our drug candidates for further investigation, clinical trials or potential use as a treatment;

•	our plan to continue investing in our research and development programs and our strategy to develop our drug candidates, alone or with third party-collaborators;

•	the establishment, development and maintenance of collaborative relationships;

•	potential business development activities;

•	potential fluctuations in foreign currency exchange rates;

•	our ability to use our research programs to identify and develop new drug candidates to address serious diseases and significant unmet medical needs; and

•	our liquidity and our expectations regarding the possibility of raising additional capital.

---

ITEM 1B.	UNRESOLVED STAFF COMMENTS

ITEM 2.	PROPERTIES

ITEM 3.	LEGAL PROCEEDINGS

---

ITEM 4.	MINE SAFETY DISCLOSURES

---

ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

---

---

ITEM 6.	SELECTED FINANCIAL DATA

(1)	In 2013, we recorded $203.4 million of collaborative revenues from Janssen NV, which were primarily attributable to a 2013 amendment to our collaboration agreement with Janssen NV. See Note B, “Collaborative Arrangements.”

(2)

Total costs and expenses included (i) in 2013 and 2012, an aggregate of $10.4 million and $133.2 million, respectively, of write-offs for excess and obsolete inventories, (ii) in 2013 and 2012, total costs and expenses included intangible asset impairment charges of $412.9 million and $105.8 million, respectively and (iii) in 2016, 2015, 2014 and 2013, $1.3 million, $2.2 million, $50.9 million and $40.5 million, respectively, of restructuring charges. See Note H, “Inventories,” Note J, “Intangible Assets and Goodwill” and Note Q, “Restructuring Expenses.”

(3)	(Loss) income from discontinued operations attributable to Vertex relates to our collaboration with Alios BioPharma, Inc., in 2012 through 2013, which we deconsolidated as of December 31, 2013. See Note B, “Collaborative Arrangements.”

(4)	In 2016, we borrowed $300.0 million pursuant to a revolving credit facility that matures in October 2021. In February 2017, we repaid the $300.0 million that was outstanding under our revolving credit facility. See Note L, “Long Term Obligations.”

(5)	In 2013, our convertible senior subordinated notes (due 2015) with an aggregate principal amount of $400.0 million were converted into common stock or redeemed. During 2016, we terminated and repaid all outstanding obligations under our term loan. See Note L, “Long Term Obligations.”

(6)	In 2011, we entered into two leases for our corporate headquarters, which we occupied in December 2013. We are deemed for accounting purposes to be the owner of the buildings. See Note L, “Long Term Obligations.”

---

ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

•

Tezacaftor (VX-661) is a corrector compound that we are evaluating in a Phase 3 development program in combination with ivacaftor in multiple CF patient populations who have at least one copy of the F508del mutation in their CFTR gene. We expect data from this Phase 3 development program in the first half of 2017. If supported by data from the Phase 3 development program, we plan to submit a New Drug Application, or NDA, to the United States Food and Drug Administration, or FDA for tezacaftor in combination with ivacaftor in the second half of 2017.

•	VX-152, VX-440, VX-659 and VX-445 are next-generation CFTR corrector compounds that we are evaluating as part of combination treatment regimens. We have initiated Phase 2 clinical trials of VX-152 and VX-440 and expect data from these clinical trials in the second half of 2017. We have initiated Phase 1 clinical trials of VX-659 and VX-445.

•	VX-371, an investigational epithelial sodium channel, or ENaC, inhibitor, is being evaluated in a Phase 2 development program and which we exclusively licensed from Parion Sciences, Inc., or Parion, in 2015.

---

•	CRISPR Therapeutics AG, or CRISPR, pursuant to which we are collaborating on the discovery and development of potential new treatments aimed at the underlying genetic causes of human diseases using CRISPR-Cas9 gene editing technology;

•	Parion Sciences, Inc., or Parion, pursuant to which we are developing epithelial sodium channel, or ENaC, inhibitors for the treatment of pulmonary diseases;

•	Moderna Therapeutics, Inc., or Moderna, pursuant to which we are seeking to identify and develop mRNA therapeutics for the treatment of CF; and

•	BioAxone Biosciences, Inc., or BioAxone, pursuant to which we are evaluating VX-210 as a potential treatment for patients who have spinal cord injuries.

•	Merck KGaA, pursuant to which Merck KGaA will, subject to regulatory approval, obtain rights to four oncology research and development programs; and

•	Janssen Pharmaceuticals, Inc. which is developing JNJ-3872 (formerly VX-787) for the treatment of influenza.

---

---

---

---

---

---

---

---

---

---

•

CFFT: CFFT has the right to tiered royalties ranging from single digits to sub-teens on any approved drugs first synthesized and/or tested during a research term on or before February 28, 2014, including KALYDECO, ORKAMBI, lumacaftor and tezacaftor and royalties ranging from low single digits to mid-single digits on potential sales of certain compounds first synthesized and/or tested between March 1, 2014 and August 31, 2016.

•	Parion: Parion has the potential to receive milestone and royalty payments, including up to $490.0 million in development and regulatory milestone payments for the development of VX-371 and/or VX-551 to treat CF.

•	CRISPR: CRISPR has the potential to receive milestone and royalty payments, including up to $420.0 million in development, regulatory and commercial milestone payments for each of up to six targets pursuant to the collaboration.

•	Moderna: Moderna has the potential to receive milestone and royalty payments, including up to $275.0 million in development and regulatory milestones.

•	BioAxone: BioAxone has the potential to receive milestone and royalty payments, including up to $90.0 million in development and regulatory milestone payments (including a license continuation fee).

---

•	revenue recognition;

•	intangible assets;

•	collaborations and variable interest entities;

•	research and development accruals;

•	commercial supplies and inventories;

•	income taxes;

•	leases;

•	restructuring expenses; and

•	stock-based compensation expense.

•	there is persuasive evidence that an arrangement exists between us and our customer;

•	collectability is reasonably assured; and

•	the price is fixed or determinable.

---

---

•

In each period, we record net income (loss) attributable to our VIEs noncontrolling interest. This net income (loss) reflects our VIEs net income (loss) for the period as adjusted for gains and losses in the fair value of the contingent payments, which consist of milestone, royalty and option payments, payable by us to our VIEs. Determining the fair value of the contingent payments payable by us to our VIEs requires us to make significant estimates regarding the probability and potential timing of achieving each of the milestones pursuant to the agreement, future potential net sales of licensed products and appropriate discount rates. We expect that the net income (loss) attributed to noncontrolling interest will continue to be affected by changes in the fair value of the contingent payments. In 2016, 2015 and 2014, the fair value of contingent payments payable by us increased by $54.9 million, $4.5 million and $0.5 million, respectively. The increase in fair value of the contingent payments in 2016 primarily related to a Phase 2 clinical trial of VX-371, a compound in-licensed from Parion, achieving its primary safety endpoint in the second quarter of 2016. The increases in the fair value of contingent payments increased our net loss attributable to Vertex on a dollar-for-dollar basis.

•

We recorded $255.3 million and $29.0 million, respectively, of intangible assets on our consolidated balance sheet based on our estimate of the fair value of Parion’s and BioAxone’s in-process research and development assets as of the transaction date and made significant estimates regarding: the probability of obtaining regulatory approval of licensed products; the timing and expected costs of clinical trials and other development activities; future potential cash flows from sales of drugs and the appropriate discount rates. If we are successful in developing a drug candidate, we will amortize the carrying value of the relevant intangible asset as part of cost of product revenues. We test these in-process research and development assets 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. If the fair value of a licensed program becomes impaired as the result of safety or efficacy data from any ongoing or future clinical trial conducted by us or our competitors or because of any other information regarding the prospects of successfully developing or commercializing the licensed drug candidate, we could incur significant charges in the period in which the impairment occurs. We determined the fair value of these in-process research and development assets using probability-weighted present-value models.

---

•	The revenues and expenses of our VIEs that are unrelated to the programs that we in-license from our VIEs and that are consolidated into our financial statements are set forth in the table below and represent less than 1% of our revenues and expenses in each period:

•

We reflect all of our VIEs' cash and cash equivalents under the heading “restricted cash and cash equivalents (VIE)” on our consolidated balance sheets. We do not have any rights to our VIEs cash or cash equivalents, these resources are not available to fund research and development programs pursuant to the collaborations and these amounts do not provide us with any additional liquidity. Our VIEs have control over the restricted cash and cash equivalents (VIE), including the ability to distribute the restricted cash and cash equivalents to their equity holders, and as a result, these assets, although carried on our consolidated balance sheets, are not included in the discussion of our liquidity and should be disregarded when evaluating our financial condition.

---

---

ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

---

ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A.	CONTROLS AND PROCEDURES

•	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

•	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

•	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

---

---

ITEM 9B.	OTHER INFORMATION

---

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

ITEM 11.	EXECUTIVE COMPENSATION

ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES

---

ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

---

---

†	Confidential portions of this document have been filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

---

---

---

---

---

---

---

---

A.	Nature of Business and Accounting Policies

---

---

---

---

---

---

---

---

---

---

B.	Collaborative Arrangements

---

---

---

---

---

---

---

C.	Earnings Per Share

D.	Fair Value Measurements

---

---

---

E.	Marketable Securities

---

F.	Accumulated Other Comprehensive Income

G.	Hedging

---

---

H.	Inventories

I.	Property and Equipment

J.	Intangible Assets and Goodwill

---

K.	Additional Balance Sheet Detail

L.	Long Term Obligations

---

---

M.	Common Stock, Preferred Stock and Equity Plans

---

---

---

N.	Stock-based Compensation Expense

---

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

---

•	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.

O.	Other Arrangements

---

P.	Income Taxes

---

---

---

Q.	Restructuring Expenses

---

---

R.	Employee Benefits

---

S.	Commitments and Contingencies

---

---

T.	Segment Information

---

---

U.	Quarterly Financial Data (unaudited)

---

1.	In the second quarter of 2016, the Company incurred research and development expenses of approximately $10.0 million to acquire certain early-stage research assets. In the third quarter of 2016, the Company incurred research and development expenses related to a $20.0 million upfront payment to Moderna Therapeutics, Inc. See Note B, “Collaborative Arrangements,” for further information.

2.	In the fourth quarter of 2015, the Company made a $75.0 million upfront payment to CRISPR Therapeutics in connection with the collaboration, which was recorded as a research and development expense. See Note B, “Collaborative Arrangements,” for further information.

V.	Subsequent Events

---

---

(i)	[***]Net Sales of Original Drug Products in the Field that are [***];

(ii)	[***]Net Sales of Original Drug Products in the Field [***].

---

i.	For Additional Products containing Additional Compounds first synthesized and/or tested by or under the direction of Vertex during the period commencing on [***]and ending on and including [***]: [***] of annual Net Sales of such Additional Product in the Field;

ii.	For Additional Products containing Additional Compounds first synthesized and/or tested by or under the direction of Vertex during the period commencing on [***] and ending on and including [***]: [***] of annual Net Sales of such Additional Products in the Field; and

iii.	For Additional Products containing Additional Compounds first synthesized and/or tested by or under the direction of Vertex during the period commencing on [***]and ending on and including [***]: [***] of annual Net Sales of such Additional Products in the Field.

---

---

---

---

---

---

By:	Wilmington Trust Company, not in its individual capacity but solely in its capacity as owner trustee

---

---

---

---

---

---

---

---

---

Schedule 1.01(c)	Responsible Officers

Schedule 1.01(d)	Existing Letters of Credit

Schedule 5.19(a)	Subsidiaries, Joint Ventures, Partnerships and Equity Investments

Schedule 5.19(b)	Loan Parties

Schedule 5.20(b)	Documents, Instrument, and Tangible Chattel Paper

Schedule 5.20(c)(i)	Deposit Accounts & Securities Accounts

Schedule 5.20(c)(ii)	Electronic Chattel Paper & Letter-of-Credit Rights

Schedule 5.20(d)	Commercial Tort Claims

Schedule 5.20(e)	Pledged Equity Interests

Schedule 5.20(f)	Other Properties

Schedule 6.19	Post-Closing Items

Schedule 7.01	Existing Liens

Schedule 7.02	Existing Indebtedness

Schedule 7.03	Existing Investments

Schedule 7.09	Burdensome Agreements

Schedule 11.06	DQ List

Schedule 1.01(a)	Certain Addresses for Notices

Schedule 1.01(b)	Commitments and Applicable Percentages

Exhibit A	Form of Administrative Questionnaire

Exhibit B	Form of Assignment and Assumption

Exhibit C	Form of Compliance Certificate

Exhibit D	Form of Joinder Agreement

Exhibit E	Form of Loan Notice

Exhibit F	Form of Permitted Acquisition Certificate

Exhibit G	Form of Revolving Note

Exhibit H	Form of Secured Party Designation Notice

Exhibit I	Form of Solvency Certificate

Exhibit J	Form of Swingline Loan Notice

Exhibit K	Forms of U.S. Tax Compliance Certificates

Exhibit L	Form of Funding Indemnity Letter

Exhibit M	Form of Landlord Waiver

Exhibit N	[Reserved]

Exhibit O	Form of Notice of Loan Prepayment

Exhibit P	Form of Letter of Credit Report

Exhibit Q	Form of Notice of Additional L/C Issuer

---

1.01	Defined Terms.

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

1.02	Other Interpretive Provisions.

---

1.03	Accounting Terms.

---

1.04	Rounding.

1.05	Times of Day.

1.06	Letter of Credit Amounts.

---

1.07	UCC Terms.

1.08	Rates; Currency Equivalents.

---

1.09	Additional Alternative Currencies.

1.10	Change of Currency.

---

2.01

Revolving Loans. Subject to the terms and conditions set forth herein, each Revolving Lender severally agrees to make loans (each such loan, a “Revolving Loan”) to the Borrower, in Dollars from time to time, on any Business Day during the Availability Period, in an aggregate amount not to exceed at any time outstanding the amount of such Lender’s Revolving Commitment; provided, however, that after giving effect to any Revolving Borrowing, (i) the Total Revolving Outstandings shall not exceed the Aggregate Revolving Commitments, and (ii) the Revolving Exposure of any Lender shall not exceed such Revolving Lender’s Revolving Commitment. Within the limits of each Revolving Lender’s Revolving Commitment, and subject to the other terms and conditions hereof, the Borrower may borrow Revolving Loans, prepay under Section 2.05, and reborrow under this Section 2.01. Revolving Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein; provided, however, any Revolving Borrowings made on the Closing Date shall be made as Base Rate Loans unless the Borrower delivers a Funding Indemnity Letter not less than three (3) Business Days prior to the date of such Revolving Borrowing.

2.02	Borrowings, Conversions and Continuations of Loans.

---

---

2.03	Letters of Credit.

---

---

---

---

---

---

---

---

---

---

---

2.04	Swingline Loans.

---

---

---

---

2.05	Prepayments.

---

---

2.06	Termination or Reduction of Commitments.

2.07	Repayment of Loans.

---

2.08	Interest and Default Rate.

2.09	Fees.

---

2.10	Computation of Interest and Fees; Retroactive Adjustments of Applicable Rate.

---

2.11	Evidence of Debt.

---

2.12	Payments Generally; Administrative Agent’s Clawback.

---

---

2.13	Sharing of Payments by Lenders.

---

2.14	Cash Collateral.

---

---

2.15	Defaulting Lenders.

---

---

2.16	Increase in Revolving Commitments.

---

---

---

3.01	Taxes.

---

---

---

---

---

3.02	Illegality.

---

3.03	Inability to Determine Rates.

---

3.04	Increased Costs; Reserves on Eurodollar Rate Loans.

---

---

3.05	Compensation for Losses.

---

3.06	Mitigation Obligations; Replacement of Lenders.

3.07	Survival.

4.01	Conditions of Initial Credit Extension.

---

---

---

4.02	Conditions to all Credit Extensions.

---

5.01	Existence, Qualification and Power.

5.02	Authorization; No Contravention.

5.03	Governmental Authorization; Other Consents.

---

5.04	Binding Effect.

5.05	Financial Statements; No Material Adverse Effect.

---

5.06	Litigation.

5.07	No Default.

5.08	Ownership of Property.

5.09	Environmental Compliance.

---

5.10	Insurance.

5.11	Taxes.

5.12	ERISA Compliance.

---

5.13	Margin Regulations; Investment Company Act.

---

5.14	Disclosure.

5.15	Compliance with Laws.

---

5.16	Solvency.

5.17	Sanctions Concerns and Anti-Corruption Laws.

5.18	Responsible Officers.

---

5.19	Subsidiaries; Equity Interests; Loan Parties.

5.20	Collateral Representations.

---

5.21	[Reserved].

5.22	Intellectual Property; Licenses, Etc.

---

5.23	EEA Financial Institutions.

6.01	Financial Statements.

---

6.02	Certificates; Other Information.

---

---

6.03	Notices.

---

6.04	Payment of Obligations.

6.05	Preservation of Existence, Etc.

---

6.06	Maintenance of Properties; Intellectual Property.

6.07	Maintenance of Insurance.

6.08	Compliance with Laws.

6.09	Books and Records.

---

6.10	Inspection Rights.

6.11	Use of Proceeds.

6.12	[Reserved].

6.13	Covenant to Guarantee Obligations.

---

6.14	Covenant to Give Security.

---

6.15	Further Assurances.

---

6.16	Compliance with Environmental Laws.

6.17	Approvals and Authorizations.

---

6.18	Anti-Corruption Laws.

6.19	Post-Closing Covenant.

7.01	Liens.

---

---

---

7.02	Indebtedness.

---

---

---

7.03	Investments.

---

---

---

7.04	Fundamental Changes.

---

---

7.05	Dispositions.

---

---

7.06	Restricted Payments.

---

7.07	Change in Nature of Business.

7.08	Transactions with Affiliates.

---

7.09	Burdensome Agreements.

---

7.10	Use of Proceeds.

7.11	Financial Covenants.

7.12	Amendments of Organization Documents; Fiscal Year; Legal Name, State of Formation; Form of Entity and Accounting Changes.

---

7.13	Sale and Leaseback Transactions.

7.14	Prepayments, Etc. of Indebtedness.

---

7.15	Amendment, Etc. of Indebtedness.

7.16	Sanctions.

7.17	Anti-Corruption Laws.

7.18	Massachusetts Security Corporation.

7.19	Unrestricted Subsidiaries.

8.01	Events of Default.

---

---

---

8.02	Remedies upon Event of Default.

---

8.03	Application of Funds.

---

9.01	Appointment and Authority.

---

9.02	Rights as a Lender.

9.03	Exculpatory Provisions.

---

---

9.04	Reliance by Administrative Agent.

9.05	Delegation of Duties.

---

9.06	Resignation of Administrative Agent.

---

9.07	Non-Reliance on Administrative Agent and Other Lenders.

---

9.08	No Other Duties, Etc.

9.09	Administrative Agent May File Proofs of Claim; Credit Bidding.

---

9.10	Collateral and Guaranty Matters.

---

9.11	Secured Cash Management Agreements and Secured Hedge Agreements.

---

10.01	Guaranty.

---

10.02	Rights of Lenders.

10.03	Certain Waivers.

10.04	Obligations Independent.

---

10.05	Subrogation.

10.06	Termination; Reinstatement.

10.07	Stay of Acceleration.

10.08	Condition of Borrower.

10.09	Appointment of Borrower.

---

10.10	Right of Contribution.

10.11	Keepwell.

11.01	Amendments, Etc.

---

---

---

11.02	Notices; Effectiveness; Electronic Communications.

---

---

11.03	No Waiver; Cumulative Remedies; Enforcement.

---

11.04	Expenses; Indemnity; Damage Waiver.

---

---

---

11.05	Payments Set Aside.

11.06	Successors and Assigns.

---

---

---

---

---

---

---

11.07	Treatment of Certain Information; Confidentiality.

---

11.08	Right of Setoff.

---

11.09	Interest Rate Limitation.

11.10	Counterparts; Integration; Effectiveness.

---

11.11	Survival of Representations and Warranties.

11.12	Severability.

11.13	Replacement of Lenders.

---

11.14	Governing Law; Jurisdiction; Etc.

---

11.15	Waiver of Jury Trial.

---

11.16	Subordination.

11.17	No Advisory or Fiduciary Responsibility.

---

11.18	Electronic Execution.

11.19	USA PATRIOT Act Notice.

---

11.20	Acknowledgement and Consent to Bail-In of EEA Financial Institutions.

11.21	Judgment Currency.

---

11.22	ENTIRE AGREEMENT.

---

---

---

---

---

---

---

---

---

---

Section 1.	Amendments to Credit Agreement.

---

---

---

---

(i)	the Executive’s duties are materially diminished to an extent that results in either (A) the Executive no longer being an “officer,” as such term is defined in Rule 16a-1(f) promulgated under the Securities Exchange Act of 1934; or (B) the Executive ceases to be a member of the executive management team of the Company; or

(ii)	the Executive’s Base Salary is decreased unless such reduction is part of an across-the-board proportionate reduction in the salaries of the Company’s senior management team; or

(iii)	the office to which the Executive is assigned is relocated to a place 35 or more miles away and such relocation is not at the Executive’s request or with the Executive’s prior agreement (and other than, for Executives assigned to the Company’s principal executive offices, in connection with a change in location of the Company’s principal executive offices);

---

---

---

(i)	Base Salary earned by Executive but not paid through the date of termination of Executive’s employment under this Section 9(b); and

(ii)	any amounts earned, accrued or owing to the Executive but not yet paid under Sections 5, 6, or 7 above.

(i)	Base Salary earned by Executive but not paid through the date of termination of Executive’s employment under this Section 9(c);

(ii)	all incentive compensation awards earned by Executive but not paid prior to the date of termination of Executive’s employment under this Section 9(c);

(iii)

a cash payment to the Executive in an amount equal to the Severance Payment, payable within ten days after the execution of a general release and expiration, without revocation, of any applicable revocation periods under the general release provided that if the 60-day period during which the release is required to become effective and irrevocable begins in one calendar year and ends in another calendar year, the Severance Payment shall not be made before the first day of the second calendar year;

(iv)	any amounts earned, accrued or owing to the Executive but not yet paid under Sections 5, 6 or 7 above;

(v)	if COBRA coverage is elected by the Executive, the Company shall pay the cost of insurance continuation premiums on the Executive’s behalf (whether or not covered by COBRA) to continue standard medical, dental and life insurance

---

(A)	the date 12 months after the date the Executive’s employment is terminated; or

(B)	the date, or dates, on which the Executive receives equivalent coverage and benefits under the plans, programs and/or arrangements of a subsequent employer (such coverage and benefits to be determined on a coverage-by-coverage or benefit-by-benefit basis).

---

---

---

---

---

I.	Definitions. For the purposes of this Amended and Restated Change of Control Agreement (this “Agreement”), capitalized terms shall have the following meanings:

1.	“Cause” shall mean:

(a)	your conviction of a crime involving moral turpitude;

(b)

your willful refusal or failure to follow a lawful directive or instruction of the Company’s Board of Directors or the individual(s) to whom you report, provided that you receive prior written notice of the directive(s) or instruction(s) that you failed to follow, and provided further that the Company, in good faith, gives you 30 days to correct such failure and further provided that if you correct the failure(s), any termination of your employment on account of such failure shall not be treated for purposes of this Agreement as a termination of employment for “Cause”;

(c)	in carrying out your duties you commit (i) willful gross negligence, or (ii) willful gross misconduct, resulting in either case in material harm to the Company, unless such act, or failure to act, was believed by you, in good faith, to be in the best interests of the Company; or

(d)	your violation of the Company’s policies made known to you regarding confidentiality, securities trading or inside information.

2.	“Change of Control” shall mean that:

(a)	any “person” or “group” as such terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 (the “Act”), becomes a beneficial owner, as such term is used in Rule 13d-3 promulgated under the Act, of securities of the Company

---

(b)

all or substantially all the business or assets of the Company are sold or disposed of, or the Company or a subsidiary of the Company combines with another company pursuant to a merger, consolidation, or other similar transaction, other than (i) a transaction solely for the purpose of reincorporating the Company or one of its subsidiaries in a different jurisdiction or recapitalizing or reclassifying the Company’s stock; or (ii) a merger or consolidation in which the shareholders of the Company immediately prior to such merger or consolidation continue to own at least a majority of the outstanding voting securities of the Company or the surviving entity immediately after the merger or consolidation.

3.	“Code” shall mean the Internal Revenue Code of 1986, as amended.

4.	“Disability” shall mean a disability as determined under the Company's long-term disability plan or program in effect at the time the disability first occurs, or if no such plan or program exists at the time of disability, then a “disability” as defined Section 22(e)(3) of the Code.

5.	“Good Reason” shall mean one of the following events has occurred without your consent:

(a)	You suffer a material reduction in the authorities, duties or job title and responsibilities associated with your position as Executive Vice President, Chief Legal Officer for the Company as of the date hereof;

(b)	your annual base salary is decreased;

(c)	the office to which you are assigned is relocated to a place 35 or more miles away; or

(d)	following a Change of Control, the Company’s successor fails to assume the Company’s rights and obligations under this Agreement;

6.	“Termination Date” shall mean the last day of your employment with the Company.

---

II.	Severance Benefits upon Change of Control. If:

(A)	your employment is terminated by the Company (except for termination for Cause or due to a Disability) and the Termination Date is within 90 days prior to a Change of Control or within 12 months after a Change of Control; or

(B)	you, of your own initiative, (i) terminate your employment for Good Reason (in accordance with the notice and cure provisions set forth in Section I.5 above) and (ii) the event giving rise to Good Reason occurs within 90 days prior to a Change of Control or within 12 months after a Change of Control;

1.

Severance Payment. In exchange for your execution within 60 days of the Termination Date of a general release, in a form satisfactory to the Company, of all claims against the Company, its subsidiaries, and its and their officers, directors and representatives, that becomes enforceable and irrevocable within such 60-day period, the Company shall make a cash payment (the “Severance Payment”) to you in an amount equal to:

(a)

(i) your annual base salary (provided, however, that if you terminate your employment for Good Reason based on a reduction in your annual base salary, then the annual base salary to be used in calculating the Severance Payment shall be your annual base salary in effect immediately prior to such reduction in annual base salary) plus your target bonus under any bonus program applicable to you for the year in which the Termination Date occurs; plus

(b)	a prorata portion of your target bonus for the portion of the year in which the Termination Date occurs under any bonus program applicable to you; plus

(c)	all cash incentive compensation awards earned by you but not paid prior to the Termination Date; provided that, if a fiscal year has been completed and the incentive award for such fiscal year has not been determined, the incentive compensation for such completed fiscal year shall equal the target bonus for such fiscal year.

---

2.	Accelerated Vesting.

(a)

On the Termination Date, stock options for the purchase of the Company’s securities held by you as of the Termination Date and not then exercisable shall immediately become exercisable in full. The options to which this accelerated vesting applies shall remain exercisable until the earlier of (a) the end of the 90-day period immediately following the later of (i) the Termination Date or (ii) the date of the Change of Control and (b) the date the stock option(s) would otherwise expire; and

(b)	On the Termination Date, the Company’s lapsing repurchase right with respect to shares of restricted stock held by you shall lapse in full (subject to your making satisfactory arrangements with the Company providing for the payment to the Company of all required withholding taxes).

3.	Continued Insurance Coverage. If COBRA coverage is elected by you, the Company shall pay the cost of insurance continuation premiums on your behalf (whether or not covered by COBRA) to continue standard medical, dental and life insurance coverage for you (or the cash equivalent of same if you are ineligible for continued coverage) until the earlier of (i)

---

4.

No Mitigation. You shall not be required to mitigate the amount of the Severance Payment or any other benefit provided under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Agreement be reduced (except as provided in Article II Section 3(ii)) by any compensation earned by you as the result of other employment, by retirement benefits, or be offset against any amount claimed to be owed by you to the Company or otherwise (except for any required withholding taxes); provided, that if the Company makes any other severance payments to you under any other program or agreement, such amounts shall be offset against the payments the Company is obligated to make pursuant to this Agreement.

III.	Miscellaneous.

1.

Employee’s Obligations. Upon the termination of employment, you shall promptly deliver to the Company all property of the Company and all material documents, statistics, account records, programs and other similar tangible items which may by in your possession or under your control and which relate in a material way to the business or affairs of the Company or its subsidiaries, and no copies of any such documents or any part thereof shall be retained by you.

2.

Entire Agreement. This Agreement and the “Employee Non-Disclosure, Non-Competition & Inventions Agreement” previously executed by you covers the entire understanding of the parties as to the subject matter hereof, superseding all prior understandings and agreements related hereto, including the previous Change of Control Agreement between you and the Company. No modification or amendment of the terms and conditions of this Agreement shall be effective unless in writing and signed by the parties or their respective duly authorized agents, provided, however, that the Company may, without your consent, unilaterally adopt amendments that may be required so that this Agreement continues to comply with applicable law or regulation, including without limitation Section 409A of the Code, provided such amendments do not adversely affect the benefits to be provided to you under Section II of this Agreement.

3.	Governing Law. This Agreement shall be governed by the laws of The Commonwealth of Massachusetts, as applied to contracts entered into and performed entirely in Massachusetts by Massachusetts residents.

4.

Successors and Assigns. This Agreement may be assigned by the Company upon a sale, transfer or reorganization of the Company. Upon a Change of Control, the Company shall require the successor to assume the Company’s rights and obligations under this Agreement. The Company’s failure to do so shall constitute a material breach of this Agreement. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors, permitted assigns, legal representatives and heirs.

---

---

(i)

the Executive is assigned to any duties or responsibilities that are inconsistent, in any significant respect, with the scope of duties and responsibilities customarily associated with the position and office of Senior Vice President, Global Government Strategy, Market Access and Value, or other position at the level of at least Senior Vice President and Member of the Executive Team, provided that such reassignment of duties or responsibilities is not due to the Executive’s Disability or performance, nor is at the Executive’s request; or

(ii)

the Executive suffers a reduction in the authorities, duties, and responsibilities associated with the Executive’s position as Senior Vice President, Global Government Strategy, Market Access and Value, provided that any modification to the Executive's authorities, duties and responsibilities that do not result in the Executive ceasing to be a member of the executive management team of the Company at a level at least equivalent to Senior Vice President shall not for purposes of this Agreement be a reduction in the authorities duties and responsibilities associated with Executive's position as Senior Vice President Global Government Strategy, Market Access and Value, and further provided that such reassignment of duties or responsibilities is not due to the Executive’s Disability or the Executive’s performance, and is not at the Executive’s request or with the Executive’s prior agreement; or

(iii)	the Executive’s Base Salary is decreased below Base Salary, other than a reduction that is part of an across-the-board proportionate reduction in the salaries of the senior management team; or

(iv)	the Executive’s office is relocated thirty-five (35) or more miles from Washington, D.C. (other than in connection with relocation of the Company’s offices);

---

---

(i)	Base Salary earned by Executive but not paid through the date of termination of Executive’s employment under this Section 9(b); and

(ii)	any amounts earned, accrued or owing to the Executive but not yet paid under Sections 5, 6, or 7 above.

(i)	Base Salary earned by Executive but not paid through the date of termination of Executive’s employment under this Section 9(c);

(ii)	all incentive compensation awards earned by Executive but not paid prior to the date of termination of Executive’s employment under this Section 9(c);

(iii)	a cash payment to the Executive in an amount equal to the Severance Payment, payable within ten days after the execution of a general release and expiration, without revocation,

---

(iv)	any amounts earned, accrued or owing to the Executive but not yet paid under Sections 5, 6 or 7 above;

(v)	if COBRA coverage is elected by the Executive, the Company shall pay the cost of insurance continuation premiums on the Executive’s behalf (whether or not covered by COBRA) to continue standard medical, dental and life insurance coverage for the Executive (or the cash equivalent of same in the event the Executive is ineligible for continued coverage) until the earlier of:

(A)	the date 12 months after the date the Executive’s employment is terminated; or

(B)	the date, or dates, on which the Executive receives equivalent coverage and benefits under the plans, programs and/or arrangements of a subsequent employer (such coverage and benefits to be determined on a coverage-by-coverage or benefit-by-benefit basis).

(vi)

all stock options held by the Executive as of the date of the termination under this Section 9(c) that are not exercisable as of that date shall be deemed to have been held by the Executive for an additional 18 months, for purposes of vesting and exercise rights, and any options that become exercisable shall remain exercisable until the earlier of (1) the end of the 90-day period following the date of termination of employment or (2) the date the stock option would otherwise expire; and

(vii)	the Company’s lapsing repurchase right shall lapse with respect to the Pro-Rata Share of Restricted Stock.

---

---

---

I.	Definitions. For the purposes of this Agreement, capitalized terms shall have the following meaning:

1.	“Cause” shall mean:

(a)	your conviction of a crime of moral turpitude;

(b)

your willful refusal or failure to follow a lawful directive or instruction of the Company’s Board of Directors or the individual(s) to whom you report, provided that you receive prior written notice of the directive(s) or instruction(s) that you failed to follow, and provided further that the Company, in good faith, gives you 30 days to correct such failure and further provided if you correct the failure(s), any termination of your employment on account of such failure shall not be treated for purposes of this Agreement as a termination of employment for “Cause;”

(c)	in carrying out your duties you commit (i) willful gross negligence, or (ii) willful gross misconduct, resulting in either case in material harm to the Company, unless such act, or failure to act, was believed by you, in good faith, to be in the best interests of the Company; or

(d)	your violation of the Company’s policies made known to you regarding confidentiality, securities trading or inside information.

2.	“Change of Control” shall mean that:

(a)

any “person” or “group” as such terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 (the “Act”), becomes a beneficial owner, as such term is used in Rule 13d-3 promulgated under the Act, of securities of the Company representing more than 50% of the combined voting power of the outstanding securities of the Company having the right to vote in the election of directors; or

---

(b)

all or substantially all the business or assets of the Company are sold or disposed of, or the Company or a subsidiary of the Company combines with another company pursuant to a merger, consolidation, or other similar transaction, other than (i) a transaction solely for the purpose of reincorporating the Company or one of its subsidiaries in a different jurisdiction or recapitalizing or reclassifying the Company’s stock; or (ii) a merger or consolidation in which the shareholders of the Company immediately prior to such merger or consolidation continue to own at least a majority of the outstanding voting securities of the Company or the surviving entity immediately after the merger or consolidation.

3.	“Code” shall mean the Internal Revenue Code of 1986, as amended.

4.	“Disability” shall mean a disability as determined under the Company's long-term disability plan or program in effect at the time the disability first occurs, or if no such plan or program exists at the time of disability, then a “disability” as defined Section 22(e)(3) of the Code.

5.	“Good Reason” shall mean one of the following events has occurred without your consent:

(a)

you are assigned to any duties or responsibilities that are inconsistent, in any significant respect, with the scope of duties and responsibilities customarily associated with the position and office of Senior Vice President, Global Government Strategy, Market Access and Value, provided that such reassignment of duties or responsibilities is not due to your Disability or performance, nor is at your request;

(b)	you suffer a reduction in the authorities, duties, and responsibilities customarily associated with your position as Senior Vice President, Global Government Strategy, Market Access and Value, provided that such reassignment of authorities, duties and responsibilities is not due to your Disability or your performance, and is not at your request or with your prior agreement;

(c)	your annual base salary is decreased;

(d)	the office to which you are assigned (currently Washington, D.C.) is relocated to a place 35 or more miles away; or

(e)	following a Change of Control, the Company’s successor fails to assume the Company’s rights and obligations under both this Agreement and the Employment Agreement, as it may be amended from time to time;

---

6.	“Termination Date” shall mean the last day of your employment with the Company.

II.	Severance Benefits upon Change of Control. If:

(A)	your employment is terminated by the Company (except for termination for Cause or due to a Disability) and the Termination Date is within 90 days prior to a Change of Control or within 12 months after a Change of Control; or

(B)	you, of your own initiative, (i) terminate your employment for Good Reason (in accordance with the notice and cure provisions set forth in Section I.5 above) and (ii) the event giving rise to Good Reason occurs within 90 days prior to a Change of Control or within 12 months after a Change of Control;

1.

Severance Payment. In exchange for your execution within 60 days of the Termination Date of a general release, in a form satisfactory to the Company, of all claims against the Company, its subsidiaries, and its and their officers, directors and representatives, that becomes enforceable and irrevocable within such 60-day period, the Company shall make a cash payment (the “Severance Payment”) to you in an amount equal to

(a)

your annual base salary (provided, however, that if you terminate your employment for Good Reason based on a reduction in your annual base salary, then the annual base salary to be used in calculating the Severance Payment shall be your annual base salary in effect immediately prior to such reduction in annual base salary) plus your target bonus under any bonus program applicable to you for the year in which the Termination Date occurs; plus

(b)	a pro rata portion of your target bonus for the year in which the Termination Date occurs under any bonus program applicable to you; plus

(c)	all cash incentive compensation awards earned by you but not paid prior to the Termination Date; provided that, if a fiscal year has been completed and the incentive award for such fiscal year has not been determined, the incentive compensation for such completed fiscal year shall equal the target bonus for such fiscal year.

---

2.	Accelerated Vesting.

(a)

On the Termination Date, stock options for the purchase of the Company’s securities held by you as of the Termination Date and not then exercisable shall immediately become exercisable in full. The options to which this accelerated vesting applies shall remain exercisable until the earlier of (a) the end of the 90-day period immediately following the later of (i) the Termination Date or (ii) the date of the Change of Control or (b) the date the stock option(s) would otherwise expire; and

(b)	On the Termination Date, the Company’s lapsing repurchase right with respect to shares of restricted stock held by you shall lapse in full (subject to your making satisfactory arrangements with the Company providing for the payment to the Company of all required withholding taxes).

3.	Continued Insurance Coverage. If COBRA coverage is elected by you, the Company shall pay the cost of insurance continuation premiums on your behalf (whether or not covered by COBRA) to continue standard medical, dental and life insurance coverage for you (or the cash equivalent of same if you are ineligible for continued coverage) for a maximum of 12 months after the Termination Date.

---

4.

No Mitigation. You shall not be required to mitigate the amount of the Severance Payment or any other benefit provided under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Agreement be reduced by any compensation earned by you as the result of other employment, by retirement benefits, or be offset against any amount claimed to be owed by you to the Company or otherwise (except for any required withholding taxes); provided, that if the Company makes any other severance payments to you under any other program or agreement, including any payments under the Employment Agreement, such amounts shall be offset against the payments the Company is obligated to make pursuant to this Agreement.

III.	Miscellaneous.

1.

Employee’s Obligations. Upon the termination of employment, you shall promptly deliver to the Company all property of the Company and all material documents, statistics, account records, programs and other similar tangible items which may by in your possession or under your control and which relate in a material way to the business or affairs of the Company or its subsidiaries, and no copies of any such documents or any part thereof shall be retained by you.

2.

Entire Agreement. This Agreement, the Employment Agreement, and the “Employee Non-Disclosure, Non-Competition & Inventions Agreement” previously executed by you covers the entire understanding of the parties as to the subject matter hereof, superseding all prior understandings and agreements related hereto. No modification or amendment of the terms and conditions of this Agreement shall be effective unless in writing and signed by the parties or their respective duly authorized agents.

3.	Governing Law. This Agreement shall be governed by the laws of The Commonwealth of Massachusetts, as applied to contracts entered into and performed entirely in Massachusetts by Massachusetts residents.

4.

Successors and Assigns. This Agreement may be assigned by the Company upon a sale, transfer or reorganization of the Company. Upon a Change of Control, the Company shall require the successor to assume the Company’s rights and obligations under this Agreement. The Company’s failure to do so shall constitute a material breach of this Agreement. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors, permitted assigns, legal representatives and heirs.

---

---

(1)	Registration Statement (Form S-3 No. 333-211096) of Vertex Pharmaceuticals Incorporated,

(2)	Registration Statement (Form S-8 No. 333-104362) pertaining to the Vertex Pharmaceuticals Incorporated 1996 Stock and Option Plan, as amended,

(3)	Registration Statement (Form S-8 Nos. 333-134482, 333-150946, 333-160442, 333-166803 and 333-184787) pertaining to the Vertex Pharmaceuticals Incorporated Amended and Restated 2006 Stock and Option Plan (formerly known as the Vertex Pharmaceuticals Incorporated 2006 Stock and Option Plan),

(4)	Registration Statement (Form S-8 No. 333-184784) pertaining to the Vertex Pharmaceuticals Incorporated Employee Stock Purchase Plan, and

(5)	Registration Statement (Form S-8 Nos. 333-188737, 333-197466 and 333-206075) pertaining to the Amended and Restated Vertex Pharmaceuticals Incorporated 2013 Stock and Option Plan (formerly known as the Vertex Pharmaceuticals Incorporated 2013 Stock and Option Plan);

1.	I have reviewed this Annual Report on Form 10-K of Vertex Pharmaceuticals Incorporated;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

1.	I have reviewed this Annual Report on Form 10-K of Vertex Pharmaceuticals Incorporated;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.