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VERTEX PHARMACEUTICALS INCORPORATED

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A Letter from our Executive Chairman and Chief Executive Officer

Dear Shareholders:

2022 was an outstanding year for Vertex. We secured more reimbursement agreements and served more people with cystic fibrosis (“CF”) than in any previous year. Our research and development (“R&D”) strategy, which focuses on validated targets that address causal human biology, predictive assays and biomarkers, rapid paths to approval, and product candidates with transformative potential, drove substantial advancement of our pipeline. We also continued to strengthen our financial profile. These important advances in 2022 lay the foundation for sustained leadership in CF, multiple near term global commercial launches outside of CF, and significant value creation for patients and shareholders for many years to come.

Net product revenues from our CF franchise grew to $8.9 billion in 2022, representing an 18% increase from 2021, and a near tripling of revenues since 2018. We continued to invest significantly in both internal and external innovation in support of our differentiated R&D approach, which has leveraged serial innovation to produce four transformational medicines for patients with CF and has now delivered assets into the clinic across eight disease areas and multiple modalities. Numerous programs, including in CF, sickle cell disease, beta thalassemia, acute pain, APOL1-mediated kidney disease and type 1 diabetes, are past the proof-of-concept stage and multiple assets hold the potential for near-term commercialization.

Our CF franchise exemplifies the patient impact and financial success that can be achieved through our business model and R&D strategy. Broad reimbursement and access to our medicines is now available in over 40 countries and, in 2022, we treated more people with CF than ever before. We reached lower age groups with the successful launches of TRIKAFTA/KAFTRIO in Europe and Canada for children with CF aged 6 to 11 years and of ORKAMBI in the U.S. for children with CF aged 1 to 2 years, which helped generate another year of double-digit revenue growth. In addition, we submitted U.S. and European regulatory filings for TRIKAFTA/KAFTRIO in children with CF aged 2 to 5 years and for KALYDECO in 1- to 4-month-old infants with CF. We also continued our strategy of serial innovation by completing enrollment of the Phase 3 trials of our triple combination of vanzacaftor/tezacaftor/deutivacaftor; entering the clinic with a messenger RNA therapeutic designed for the estimated 5,000 people with CF who cannot benefit from our current medicines; and advancing multiple next generation potentiators and correctors that have the potential to deliver even greater benefits to people living with CF.

Beyond CF, our differentiated R&D strategy has delivered a broad, deep and advanced pipeline with multiple potentially transformative mid- and late-stage assets, each representing multi-billion dollar market opportunities.

	In sickle cell disease and transfusion dependent beta thalassemia, we completed the European Union and U.K. regulatory submissions for exa-cel, a one-time gene therapy that has the potential to be a functional cure for people living with these diseases. Both submissions have been validated by the respective regulatory agencies. We also initiated a rolling regulatory submission in the U.S., which we recently completed. In addition, our teams made meaningful progress in pre-launch preparation, and in establishing the infrastructure necessary to ensure patient access to this therapy.
	In pain, we announced positive Phase 2 results for VX-548 in acute pain and initiated Phase 3 studies, while also initiating a Phase 2 study in chronic neuropathic pain. Pre-launch preparations for acute pain are underway.
	In APOL1-mediated kidney disease, we commenced pivotal clinical development of inaxaplin and obtained breakthrough therapy and PRIME designations in the U.S. and European Union, respectively.

In type 1 diabetes, we achieved proof-of-concept for our VX-880 stem-cell-derived islet cell therapy program and continued to enroll patients in the ongoing Phase 1/2 clinical trial. In addition, we progressed our VX-264 program, in which the cells are encapsulated in an immunoprotective device, into the clinic, while also continuing pre-clinical development for our hypoimmune VX-880 cell program. Furthermore, we completed the acquisition of ViaCyte, Inc., a company focused on stem-cell-derived cell replacement therapies for type 1 diabetes with complementary assets, capabilities, and technologies that we believe will accelerate our current programs to bring forward a functional cure for the disease.

In alpha-1 antitrypsin (“AAT”) deficiency, we initiated a first-in-human clinical trial for VX-634, the first in a series of next-wave AAT correctors with significantly improved potency and drug-like properties compared to our prior AAT correctors. We also initiated a second Phase 2 study of VX-864, a first-generation AAT corrector, to assess the impact of longer-term treatment on the liver and on levels of functional AAT in the plasma.

In addition to our focus on discovering transformative medicines and growing our business, we remained committed to supporting patients, our local communities and our workforce, and progressed our environmental, social, and governance practices. We advanced our progress in 2022 by continuing to integrate sustainability best practices in our operations, exceeding our environmental targets, and making a positive impact in the communities where we live and work. We also celebrated the 5^th anniversary of the Vertex Foundation, which works to improve the lives of people with serious diseases and contribute to our local communities, with a focus on education, innovation, and health. In 2022, Vertex and the Vertex Foundation contributed nearly $35 million in charitable giving to local communities globally. Our employees also continued to participate in community service throughout the year, with 57% of Vertexians participating in our global Day of Service, which resulted in more than 6,300 hours of volunteer work across 90 projects in 20 countries. We also continued to nurture our culture, focus on the well-being of our people, and develop our talent, all while successfully transitioning to a hybrid work environment.

As Executive Chairman and Chief Executive Officer, we are committed to the continued execution of our strategy of serial innovation that will be critical to our long-term success in bringing more transformative medicines to patients. Looking to the future, we are focused on sustaining and expanding our leadership in CF, preparing for multiple new product launches outside of CF, bringing the next wave of innovation to patients, and continuing to deliver revenue growth and industry-leading operating margins. We believe our focus on transforming and curing serious diseases, combined with the experience and passion of our workforce and our strong financial profile, will fuel our continued success for both patients and shareholders in 2023 and beyond.

Sincerely,

Jeffrey M. Leiden, M.D., Ph.D. Executive Chairman		Reshma Kewalramani, M.D. Chief Executive Officer and President

Notice of Annual Meeting of Shareholders
Wednesday, May 17, 2023 9:00 a.m. (Eastern Time) https://meetnow.global/MSC2Z5F   Dear Shareholders:   You are invited to attend the Vertex Pharmaceuticals Incorporated 2023 Annual Meeting of Shareholders. At the annual meeting, shareholders will vote:
	to elect the nine director nominees that are set forth in the attached proxy statement to our board of directors to serve for a one-year term until the 2024 annual meeting of shareholders and until such person’s successor has been duly elected and qualified;
	to ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for 2023;
	to hold an advisory vote on our 2022 named executive officer compensation; and
	to hold an advisory vote on the frequency of future advisory votes on our executive compensation.
Shareholders also will transact any other business that may properly come before the annual meeting or any adjournment or postponement of the annual meeting.   MEETING INFORMATION   PROXY MATERIALS:   We are using the “Notice and Access” method of providing proxy materials to you via the Internet. We are mailing to you a Notice of Internet Availability of Proxy Materials instead of paper copies of this notice, our proxy statement, and our Annual Report on Form 10-K for the year ended December 31, 2022 (“Annual Report”). Notice and Access provides a convenient way for you to access our proxy materials. The Notice of Internet Availability of Proxy Materials includes instructions on how to access this notice, our proxy statement, and our Annual Report and how to vote your shares. The Notice of Internet Availability of Proxy Materials also contains instructions on how to receive a paper copy of the proxy materials and our Annual Report, if you prefer.   MEETING ACCESS:   THE ANNUAL MEETING WILL BE HELD VIRTUALLY VIA WEBCAST. A VIRTUAL MEETING WILL FACILITATE SHAREHOLDER ATTENDANCE AND PARTICIPATION BY ENABLING SHAREHOLDERS TO PARTICIPATE FROM ANY LOCATION AND AT NO COST. YOU WILL BE ABLE TO PARTICIPATE IN THE MEETING ONLINE, VOTE YOUR SHARES ELECTRONICALLY, AND SUBMIT YOUR QUESTIONS DURING THE MEETING BY VISITING HTTPS://MEETNOW.GLOBAL/MSC2Z5F. THERE IS NO PHYSICAL LOCATION FOR THE ANNUAL MEETING.   Shareholders will need their unique control number, which appears on the Notice of Internet Availability of Proxy Materials or proxy card (printed in the shaded bar), or within the body of the email sending the proxy statement. If you hold shares beneficially through a bank, broker or other nominee (that is, in “street name”), you must register in advance to gain access to the virtual meeting and to vote shares electronically during the meeting. To register, you will need to obtain a legal proxy from your bank, broker or other nominee. Once you

SUMMARY

 

In 2022, we continued to execute on our strategy of investing in scientific innovation to create transformative medicines for people with serious diseases, with a focus on specialty markets. We delivered our medicines to more people with cystic fibrosis (“CF”) than ever before, made great strides in advancing our broad and diverse pipeline, prepared for potential near-term global commercial launches in multiple new disease areas, and further strengthened our financial profile.

 

Today, our medicines are collectively being used to treat more than two two-thirds of the approximately 88,000 people with CF in North America, Europe and Australia. These medicines are approved, have broad reimbursement and are accessible in more than 40 countries outside of the U.S. As we look to the future, we expect to grow our CF business through continued uptake of our medicines and label expansions of our commercialized medicines, as well as increases in the number of people living with CF. We also continue to serially innovate in CF, as demonstrated by the completion of enrollment in our Phase 3 clinical trials of our next-generation triple combination and the initiation of clinical trials for a messenger RNA (“mRNA”) therapeutic designed for people with CF who cannot benefit from our existing medicines.

 

Beyond CF, our robust research and development (“R&D”) pipeline includes multiple mid- and late-stage clinical programs that have already achieved proof-of-concept, including sickle cell disease, beta thalassemia, acute pain, APOL1-mediated kidney disease, and type 1 diabetes, as well as earlier-stage programs in pre-clinical development in diseases such as Duchenne muscular dystrophy and myotonic dystrophy type 1.

 

In addition to significant R&D pipeline advancement, our outstanding financial performance in 2022 resulted in net product revenues of $8.93 billion and strong operating margins. As a result, we are well-positioned to continue creating long-term value for both patients and shareholders with a portfolio of high-value medicines for CF, a broad and deep pipeline beyond CF, clinical programs in multiple therapeutic modalities that range from small molecules to genetic and cell therapies, and a strong financial profile.

 

Financial Performance

 

Our CF medicines, TRIKAFTA/KAFTRIO, SYMDEKO/SYMKEVI, ORKAMBI, and KALYDECO, are transforming the lives of eligible patients around the globe and continue to drive our financial performance.

 

Our CF net product revenues increased to $8.93 billion in 2022, up 18% or approximately $1.4 billion, from our 2021 net product revenues.

Our total R&D, acquired in-process research and development (“AIPR&D”) and selling, general and administrative (“SG&A”) expenses decreased to $3.6 billion compared to $3.9 billion in 2021. The decrease was primarily due to lower AIPR&D as a result of the one-time $900 million upfront payment to CRISPR Therapeutics AG (“CRISPR”) in 2021, partially offset by increased investment in support of multiple programs that have advanced to mid- and late-stage clinical development and the costs to support launches of Vertex’s therapies globally.

 

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Marketed Products

 

Our successful strategy of serial innovation has sustained and expanded our leadership position in CF and continues to propel us toward our goal of delivering highly effective treatments to all patients with CF. In January 2012, KALYDECO was first approved to treat approximately 1,000 patients with the G551D mutation in the U.S. Since then, we have focused on expanding the number of patients eligible for our medicines, expanding access to our medicines in additional geographies, and seeking improved treatment options for all patients with CF.

 

Our four approved medicines have broad reimbursement, are accessible in more than 40 countries, and are being used to treat more than two-thirds of the approximately 88,000 people with CF in North America, Europe, and Australia. Yet, as of the beginning of the year, there were more than 25,000 untreated patients in these geographies who could benefit from our therapies. We expect to grow our CF business with (i) continued uptake by patients in countries where we are early on the launch curve, such as those with recently achieved reimbursement agreements, (ii) label expansions, including into younger patient groups, (iii) the development of mRNA therapies for people with CF who are not eligible for our approved CFTR modulators, and (iv) growth in the number of people living with CF.

 

 

Since the beginning of 2022, notable progress includes:

 

	The European Commission and the Medicines and Healthcare products Regulatory Agency (“MHRA”) granted marketing authorization for KAFTRIO for the treatment of children with CF 6 through 11 years of age who have at least one F508del mutation in the CFTR gene.
	Health Canada granted marketing authorization for TRIKAFTA for children with CF 6 through 11 years of age who have at least one F508del mutation.
	The U.S. Food and Drug Administration (“FDA”) approved the use of ORKAMBI for children with CF 12 to less than 24 months of age who are homozygous for the F508del mutation.
	We submitted global regulatory filings for TRIKAFTA/KAFTRIO in children with CF 2 through 5 years of age and for KALYDECO in children with CF from 1 month to less than 4 months of age.

 

Potential Near-Term Launch Opportunities

 

We are preparing for the following near-term launches of new products:

 

	Exa-cel in severe sickle cell disease (“SCD”) and transfusion-dependent beta thalassemia (“TDT”). We completed European Union and U.K. regulatory submissions for exagamglogene autotemcel (“exa-cel”), an ex-vivo CRISPR gene-editing therapy, in the fourth quarter of 2022 and initiated a rolling submission in the U.S., which we recently completed. The European Medicines Agency (“EMA”) and MHRA have validated the exa-cel marketing authorization application (“MAA”) for their respective jurisdictions.
	VX-548 in acute pain. We continue to enroll the Phase 3 pivotal program for VX-548 for the treatment of moderate to severe acute pain and expect to complete the pivotal program in late 2023 or early 2024.
	Vanzacaftor/tezacaftor/deutivacaftor, the next-in-class triple combination, in CF. We continued our strategy of serial innovation by completing enrollment of the Phase 3 trials of our once-daily triple combination of vanzacaftor/tezacaftor/deutivacaftor. Our clinical and preclinical data indicate that the vanzacaftor/tezacaftor/deutivacaftor triple combination has the potential to provide enhanced benefit beyond TRIKAFTA/KAFTRIO for people who have at least one mutation in their CFTR gene responsive to CFTR modulators. This regimen also has the benefit of once-daily dosing and has substantially decreased royalties compared with TRIKAFTA.

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Research and Development

 

We invest in research and development to discover and develop transformative medicines for people with serious diseases, with a focus on specialty markets. Our research and development strategy combines transformative advances in the understanding of human disease and the science of therapeutics to dramatically advance human health. This approach has yielded a broad and deep pipeline and increases the speed and likelihood of successfully bringing medicines to patients, as demonstrated by our success in moving novel product candidates into clinical trials and obtaining marketing approvals, including for TRIKAFTA/KAFTRIO, SYMDEKO/SYMKEVI, ORKAMBI, and KALYDECO for the treatment of CF. The strategy was designed to deliver transformative medicines for serious diseases at high rates of success, and it has delivered just that. Beyond CF, our approach to drug discovery has yielded clinical proof-of-concept in five additional disease areas: SCD and beta thalassemia with exa-cel, acute pain with VX-548, APOL1-mediated kidney disease (“AMKD”) with inaxaplin, and type 1 diabetes (“T1D”) with VX-880, a stem cell-derived islet cell therapy.

 

Our research and development approach also includes pursuing multiple modalities tailored to the specific disease area target under investigation, using biomarkers that translate from the bench to the bedside, and advancing multiple candidates into clinical trials with the goal of bringing first-in-class, followed by best-in-class, therapies to patients. In addition to expanding our small molecule programs, we have also advanced an industry-leading portfolio of programs in cell and gene therapies.

 

Our advancements across multiple disease areas and modalities include:

 

	Cystic Fibrosis. We continue to pursue next-in-class, small molecule CFTR modulator therapies as well as genetic therapies for people with CF who do not make CFTR protein and, as a result, cannot benefit from our current CF medicines. In the past year, we significantly advanced our program for VX-522, a CF mRNA therapeutic designed to treat the underlying cause of CF in these people by enabling cells in the lungs to produce functional CFTR protein. The FDA cleared our investigational new drug (“IND”) application in December 2022 and we have initiated a clinical trial for VX-522 in people with CF; the trial is active and enrolling.
	Sickle Cell Disease and Beta Thalassemia. The Phase 3 studies of exa-cel in patients 12 years of age and older is ongoing, as is a long-term follow-up study. Two additional Phase 3 studies in pediatric patients continue to enroll.
	Neuropathic Pain. We have initiated a Phase 2 clinical trial of VX-548 in diabetic peripheral neuropathy, a common form of chronic peripheral neuropathic pain.
	APOL-1 Mediated Kidney Disease. We initiated pivotal development of inaxaplin and continue to enroll the Phase 2/3 adaptive clinical trial in patients with AMKD.
	Type 1 Diabetes. We are evaluating VX-880, an investigational stem-cell derived fully-differentiated islet cell therapy, for the treatment of T1D in a Phase 1/2 clinical trial in which patients receive immunosuppressive therapy to protect the islet cells from immune rejection. Our Clinical Trial Application (“CTA”) in Canada and our IND in the U.S. for our second program in T1D, VX-264, in which the implanted islet cells are encapsulated in an immunoprotective device, were authorized and we plan to begin screening, enrollment and dosing in both Canada and the U.S. in the coming months. We have also continued pre-clinical development of our hypoimmune program utilizing VX-880 cells, and our second hypoimmune program that we are developing in partnership with CRISPR is the subject of a Phase 1/2 study that is active and enrolling patients.
	Alpha-1 Antitrypsin Deficiency (“AATD”). We initiated a first-in-human clinical trial for VX-634, which is the first in a series of next-wave investigational small molecules with significantly improved potency and drug-like properties as compared to our previous alpha-1 antitrypsin (“AAT”) correctors. We also initiated a second Phase 2 clinical trial of VX-864, a first-generation AAT corrector, to assess the impact of longer-term treatment on the liver, as well as the levels of functional AAT in the plasma.
	Duchenne muscular dystrophy (“DMD”). We are conducting IND-enabling studies for our first in vivo gene-editing therapy for DMD, and we expect to submit an IND for this program in 2023.
	Myotonic dystrophy type 1 (“DM1”). We are exploring multiple approaches to address the underlying causal biology for DM1, and are collaborating with Entrada Therapeutics, Inc. (“Entrada”) on IND-enabling studies for an endosomal escape vehicle therapeutic.
	In addition to the programs listed above, we have several earlier-stage research programs aimed at diseases that fit our R&D strategy.

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Corporate Responsibility

 

We are a leading global biotechnology company that serially innovates to bring transformative medicines to people with serious diseases. We remain committed to corporate responsibility through robust programs and annual disclosures. Our progress and efforts in corporate responsibility, community engagement, and workplace practices were recognized broadly in 2022. A selection of awards and recognitions include Forbes’ World’s Best Employers, JUST Capital’s list of the top 100 Companies Supporting Healthy Families and Communities, Newsweek’s America’s Most Responsible Companies, PEOPLE Magazine’s 100 Companies That Care, Points of Light’s Civic 50, Science Magazine’s Top Employers, Seramount’s 100 Best Companies, and many others.

 

	Community	Vertex and the Vertex Foundation contributed nearly $35 million in charitable giving in 2022. The Vertex Foundation, a 501(c)(3) nonprofit organization, seeks to improve the lives of people with serious diseases and contribute to the communities where Vertex is located through education, innovation and health. In 2022, it supported nearly 2,000 nonprofit organizations through Vertex Volunteers and the Vertex Foundation Matching Gift programs. In 2022, on our 14th annual Day of Service, 57% of employees volunteered in their local communities around the globe.
	Workplace	Our commitment to inclusion, diversity, and equity on our board of directors and in our workforce is long-standing and deeply ingrained in our culture. Three of our nine director nominees, including our chief executive officer (“CEO”), are women, and four of our nine director nominees are from underrepresented ethnic and racial groups. As of December 31, 2022, women represented 54% of our global workforce and 39% of our global leadership (vice president and above). In the U.S., as of December 31, 2022, employees from underrepresented ethnic and racial groups represented approximately 40% of our workforce and 51% of new hires. We are pleased to have been recognized by numerous best workplace lists, including Seramount’s 100 Best Companies & 100 Best Companies for Dads.
	Environment	We are committed to limiting our environmental impact and to operating our business in a sustainable manner. In 2022, our Scope 1 and Scope 2 absolute greenhouse gas (“GHG”) emissions were 21.4% below our 2018 baseline. This exceeds our goal to reduce GHG emissions by 20% by the end of 2023. We performed well on the CDP Climate Change survey, obtaining a score of B, which demonstrates that we have addressed the environmental impacts of our business and have ensured good environmental management, and which was higher than the global average score of C. We continue to source 100% renewable electricity for our U.K. facilities. 83% of the square footage of our buildings globally are, or are expected to be, green certified by the end of 2023. We also have ongoing efforts to minimize waste across all of our sites through employee engagement initiatives, vendor takeback programs and improved product distribution processes.

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Director Nominees

 

The following table provides summary information regarding our nine director nominees. For detailed information about each nominee’s background and areas of expertise, please see Proposal No. 1: Election of Directors.

 

								Committees
Name, Occupation or Experience		Age		Director Since		Independent		AC		MDCC		CGNC*		S&T
Jeffrey Leiden Executive Chairman, Vertex Former CEO and President, Vertex		67		2009		No
Reshma Kewalramani CEO and President, Vertex		50		2020		No
Sangeeta Bhatia John J. and Dorothy Wilson Professor of Health Sciences & Technology/Electrical Engineering & Computer Science, MIT		54		2015		Yes
Lloyd Carney Former CEO, Brocade Communications		61		2019		Yes
Alan Garber Provost, Harvard University		67		2017		Yes
Terrence Kearney Former Chief Operating Officer, Hospira		68		2011		Yes
Diana McKenzie Former Chief Information Officer, Workday Former Chief Information Officer, Amgen		58		2020		Yes
Bruce Sachs General Partner, Charles River Ventures		63		1998		Yes
Suketu Upadhyay Executive Vice President and Chief Financial Officer, Zimmer Biomet		54		2022		Yes

 

*	Margaret McGlynn currently serves as the Chair of the Corporate Governance and Nominating Committee (“CGNC”). Ms. McGlynn is not standing for re-election at the annual meeting. Following the annual meeting, Lloyd Carney is expected to become the Chair of our CGNC and we expect to make additional changes to the composition of our committees.
=	Chair

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2022 Compensation Decisions and Pay-for Performance

 

In 2022, our executive compensation program received substantial support, with approval by approximately 93% of the votes cast at the annual meeting. We believe this support is consistent with our shareholders’ understanding of our business model and the long-term value we are creating. Our management development and compensation committee (“MDCC”) and our board of directors reviewed our compensation programs and made the following key decisions with respect to 2022 compensation:

 

	We increased the base salary and target equity level for Dr. Reshma Kewalramani, our CEO and President, based on a comparative analysis of companies in our peer group, and maintained her target cash bonus as a percentage of base salary.
	We increased compensation for select named executive officers (“NEOs”), including Dr. David Altshuler and Mr. Charles Wagner, based on a comparative analysis of companies in our peer group.
	We extended Dr. Jeffrey Leiden’s employment agreement by one year, until 2025. Under his amended employment agreement, Dr. Leiden continues to receive no cash compensation for his role as Executive Chairman other than an annual cash payment intended to facilitate participation in the company’s benefit plans, and he will continue to receive equity awards for his fourth and fifth years of service as Executive Chairman.
	Our outstanding performance in 2022 resulted in the board determining that we had achieved a leading rating for 2022 (145 out of a potential 150), with the payment of annual cash bonuses commensurate with this high level of performance.
	The MDCC approved special, one-time equity award grants for Mr. Stuart Arbuckle, our Chief Operating Officer (“COO”). These performance-based and time-based grants are intended to incentivize and retain Mr. Arbuckle, who is in a key commercialization role, during a critical period where we expect to launch multiple transformational therapies in disease areas outside of CF.
	We maintained the mix of equity granted to our NEOs with 50% consisting of performance stock units (“PSUs”) that vest upon achievement of specific performance goals and 50% consisting of time-vesting restricted stock units (“RSUs”). This mix rewards stock price appreciation and incentivizes long-term tenure.

 

Shareholder Engagement

 

We believe that a robust shareholder outreach program is an important component of maintaining our strong corporate governance practices. We strive for a collaborative approach with shareholders to solicit and understand a variety of perspectives and interests, and our practice has been to engage with our shareholders regularly over the course of the year.

 

During 2022, we solicited feedback regarding our corporate governance practices from our top 40 shareholders representing approximately 65% of our outstanding shares. Our integrated outreach team included leaders from our Investor Relations, Human Resources, Corporate Responsibility, and Legal teams, and we discussed numerous topics of shareholder interest, including our business strategy, R&D approach, diversity initiatives and metrics, employee engagement and development, political and lobbying disclosures, executive compensation, and sustainability and climate change matters.

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Table of Contents

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PROXY STATEMENT

This proxy statement is being made available to shareholders of Vertex Pharmaceuticals Incorporated in connection with the solicitation by our board of directors of proxies to be voted at our 2023 annual meeting of shareholders and at any postponement or adjournment thereof. The annual meeting will be held on Wednesday, May 17, 2023, at 9:00 a.m. (Eastern Time) as a virtual meeting conducted exclusively via live webcast at https://meetnow.global/MSC2Z5F. See Frequently Asked Questions Regarding the Annual Meeting - How May I Attend the Annual Meeting? below for information regarding attending the virtual annual meeting.

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PROPOSAL NO. 1: ELECTION OF DIRECTORS

Our board of directors has nominated the following current directors - Sangeeta Bhatia, Lloyd Carney, Alan Garber, Terrence Kearney, Reshma Kewalramani, Jeffrey Leiden, Diana McKenzie, Bruce Sachs, and Suketu Upadhyay for election at our 2023 annual meeting of shareholders to hold office until our 2024 annual meeting of shareholders. Yuchun Lee and Margaret McGlynn, both current directors, are not standing for re-election at our 2023 annual meeting of shareholders.

Each of the nominees has agreed to be named in this proxy statement and to serve if elected. We believe that all of the nominees will be able and willing to serve if elected. However, if any nominee should become unable or unwilling to serve for any reason, proxies may be voted for another person nominated as a substitute by our board or our board may reduce the number of directors.

Our board of directors is our company’s ultimate decision-making body, except with respect to those matters reserved to the shareholders. Our board selects our senior management team, which in turn is responsible for the day-to-day operations of our company. Our board acts as an advisor and counselor to senior management and oversees its performance.

Board Structure and Composition

The corporate governance and nominating committee (“CGNC”) of our board of directors is responsible for the composition and structure of our board, including identifying, developing, and recommending qualified candidates for board membership. The CGNC regularly reviews director competencies, qualities, skills, and experiences with the goal of ensuring that our board consists of directors who function collegially and effectively and who are able to apply their experience toward meaningful contributions to general corporate strategy and oversight of corporate performance, risk management, organizational development, and succession planning.

Our by-laws provide that the size of our board may range between three and eleven members. We currently have eleven members on our board and expect to have nine members of our board immediately following the 2023 annual meeting of shareholders. Our CGNC may seek additional director candidates in the future who meet the criteria below to complement the qualifications and experience of our existing board members. Our CGNC may engage a search firm to recommend candidates who satisfy such criteria.

Director Criteria, Qualifications and Experience; Diversity

The CGNC seeks to recommend for nomination experienced directors who have substantive knowledge of our business and industry or who can bring to the board specific and valuable strategic or management capabilities acquired in other industries. The committee expects each of our directors to have proven leadership, sound judgment, the highest ethics and integrity, and a commitment to our success. It also seeks personal qualities that foster a respectful environment in which our directors listen to one another and engage in robust and constructive discussions. These goals for our board composition presuppose a diverse range of viewpoints, experiences, and specific expertise. The CGNC considers a nominee’s personal characteristics and business experience relative to those of our existing board members, including the type of prior management experience, levels of expertise relevant to our business, prior board service, reputation in the business community, personal characteristics such as gender and race, and other factors that the committee believes to be important. When considering whether or not to re-nominate a director for board service, the CGNC also considers whether the director has served as a member of our board for more than 20 years and whether the director is over 72 years of age.

Our commitment to diversity and inclusion is demonstrated by the composition of our board nominees, which includes three women and four members from underrepresented ethnic and racial groups.

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The following table and charts provide information regarding our director nominees:

Leadership Experience. We believe that directors who have held significant leadership positions over extended periods of time provide our company with special insights.
Industry Knowledge. We seek directors with substantive knowledge of the healthcare and biotechnology industries to successfully advise and oversee the strategic development and direction of our company.
Financial Expertise. We believe that an understanding of finance is important for members of our board, and our budgeting processes and financial and strategic transactions require our directors to be financially knowledgeable.
International Perspective. We have significant operations outside the United States and value directors with experience in the operation of complex multinational organizations.
Public Policy and Regulation. We operate in a highly-regulated industry and seek directors who have experience in public policy and the regulation of medicines.
Academic Experience or Technological Background. As a biotechnology company that seeks to develop transformative medicines for patients with serious diseases, we look for directors with backgrounds in academia, science and technology and, in particular, the research and development of pharmaceutical products.
Commitment to Company Values and Goals. We seek directors who are committed to our company and its values and goals and who value the contributions that can be provided by individuals who believe in our company and its prospects for success.
Independence	Y	Y	Y	Y	N	N	Y	Y	Y
Age	54	61	67	68	50	67	58	63	54
Tenure on Board	7	4	5	11	3	13	3	24	1
Gender	F	M	M	M	F	M	F	M	M
Underrepresented Ethnic and Racial Groups

VERTEX PHARMACEUTICALS INCORPORATED - 2023 Proxy Statement    19

Board Diversity Matrix

Our commitment to diversity and inclusion is also demonstrated by the current composition of our board, which includes four women and five members from underrepresented ethnic and racial groups. The table below provides certain self-identified characteristics of our current directors, in accordance with Nasdaq Rule 5605(f).

Shareholder-Recommended Director Candidates

The CGNC will consider director candidates recommended by shareholders using the same criteria for director selection described above under Director Criteria, Qualifications and Experience; Diversity. Shareholders recommending candidates for consideration should submit any pertinent information regarding the candidate, including biographical information and a statement by the proposed candidate that the candidate is willing to serve if nominated and elected, by mail to our corporate secretary at our offices at 50 Northern Avenue, Boston, Massachusetts 02210. If a shareholder wishes to nominate a candidate to be considered for election as a director at the 2024 annual meeting of shareholders using the procedures set forth in our by-laws, the shareholder must follow the procedures described in our by-laws and summarized in the section titled Other Information—Shareholder Proposals and Nominations for Director for the 2024 Annual Meeting on page 84 of this proxy statement. If a shareholder wishes to solicit proxies for a shareholder nominee for election to our board at the 2024 annual meeting of shareholders pursuant to Rule 14a-19 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the shareholder must follow the procedures set forth in Rule 14a-19 of the Exchange Act and our by-laws.

Our by-laws provide for proxy access, a process that allows qualifying shareholders to nominate a director candidate for consideration at an annual meeting of shareholders and have such candidate be included in our proxy materials for the applicable shareholder meeting. The key elements of our proxy access by-law are as follows:

The above table is only a summary of our proxy access by-law and is qualified in its entirety by our by-laws. A shareholder who wishes to nominate a proxy access nominee to be considered for election as a director at the 2024 annual meeting of shareholders must follow the procedures set forth in our by-laws as well as those described in Other Information—Shareholder Proposals and Nominations for Director for the 2024 Annual Meeting on page 84 of this proxy statement.

VERTEX PHARMACEUTICALS INCORPORATED - 2023 Proxy Statement    20

Majority Votes Cast Standard

Our by-laws provide for a majority votes cast standard for uncontested elections of our directors. Under our by-laws, director nominees in an uncontested election who receive more votes cast “for” such director nominee than “against” such director nominee are elected. Our board’s policy is that any nominee for director in an uncontested election who receives a greater number of votes “against” than votes “for” the nominee’s election shall promptly tender their resignation to the chair of our board following certification of the shareholder vote. The CGNC will promptly consider the tendered resignation. Based on all factors it deems in its discretion to be relevant, the CGNC will recommend that our board either accept or reject the resignation and may recommend that the board adopt measures designed to address any issues perceived to underlie the election results. Our board will then act on the CGNC’s recommendation. We will promptly disclose our board’s decision, including, if applicable, the reasons for rejecting the tendered resignation. Any director whose resignation is being considered under this policy will not participate in the CGNC or board considerations, recommendations or actions with respect to the tendered resignation.

Director Nominees

Other Public Company Boards:      None		Sangeeta Bhatia
		Age: 54   Director Since: 2015	Board Committees:      Chair – Science and Technology Committee    Member – Corporate Governance and Nominating Committee
		Experience:    Professor at the Massachusetts Institute of Technology (“MIT”); John J. and Dorothy Wilson Professor of Health Sciences  & Technology/Electrical Engineering & Computer Science, since 2005    Co-founder of Port Therapeutics, a private company focused on thermal bioswitches in oncology, since 2022    Co-founder of Satellite Bio, a private company focused on developing satellite organs as living therapeutic solutions, since 2020    Co-founder of Glympse Bio, a private company focused on developing in vivo sensing technology dedicated to disease monitoring, since 2018    Professor of bioengineering and medicine at the University of California at San Diego, from 1998 through 2005    Investigator for the Howard Hughes Medical Institute, a member of the Department of Medicine at Brigham and Women’s Hospital, a member of the Broad Institute and a member of the Koch Institute for Integrative Cancer Research    Holds a Sc.B. in biomedical engineering from Brown University, an S.M. and Ph.D. in Mechanical Engineering from MIT, and an M.D. from Harvard Medical School   Key Skills and Qualifications: Dr. Bhatia is a leading academic scientist and medical researcher. Her extensive experience in the field of biomedical engineering and in-depth understanding on the use of advanced technologies in medical research provide valuable insights to our board of directors, including with respect to our key research and development initiatives.

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Other Public Company Boards:      Visa Inc.    Grid Dynamics Holdings Inc.		Lloyd Carney
		Age: 61   Director Since: 2019	Board Committees:      Member – Audit and Finance Committee    Member – Management Development and Compensation Committee
		Experience:      Chief Acquisition Officer of Carney Technology Acquisition Corp. II, a special purpose acquisition corporation, from October 2020 until February 2023    Chief Executive Officer of ChaSerg Technology Acquisition Corp., a technology acquisition company, from September 2018 until March 2020    Chief Executive Officer of Brocade Communications Systems Inc., a global supplier of networking hardware and software, from 2013 until it was acquired by Broadcom in 2017    Chief Executive Officer of Xsigo Systems, a cloud-based infrastructure solutions provider, until it was acquired by Oracle in 2012    Chief Executive Officer and Chairman of Micromuse Inc., a software solutions provider for business and service assurance, from 2003 until it was acquired by IBM in 2006    Previously held senior leadership roles at Juniper Networks, Inc., Nortel Networks Inc., and Bay Networks, Inc.    Member of the Board of Directors of Nuance Communications Inc., a publicly traded AI-enabled communication company, until it was acquired by Microsoft Corp in March 2022    Holds a Bachelor of Science degree in Electrical Engineering Technology from Wentworth Institute of Technology, a Master of Science degree in Applied Business Management from Lesley College, and an Honorary Doctorate degree in Engineering from Wentworth Institute of Technology     Key Skills and Qualifications:   Mr. Carney brings strong business judgment, honed through his time as a senior executive and board member of multiple global technology companies, to our board of directors. Mr. Carney has extensive corporate leadership experience, including service as the chief executive officer of several technology companies, as well as financial expertise.

Other Public Company Boards:      Exelixis, Inc.		Alan Garber
		Age: 67   Director Since: 2017	Board Committees:    Member – Audit and Finance Committee    Member – Science and Technology Committee
		Experience:      Provost of Harvard University and the Mallinckrodt Professor of Health Care Policy at Harvard Medical School, a Professor of Economics in the Faculty of Arts and Sciences, Professor of Public Policy in the Harvard Kennedy School of Government, and Professor in the Department of Health Policy and Management in the Harvard T.H. Chan School of Public Health, since 2011    Henry J. Kaiser Jr. Professor, a Professor of Medicine, and a Professor (by courtesy) of Economics, Health Research and Policy, and of Economics in the Graduate School of Business at Stanford University, from 1998 until 2011    Member of the National Academy of Medicine, the American Society of Clinical Investigation, the Association of American Physicians, and the American Academy of Arts and Sciences    Fellow of the American Association for the Advancement of Science, the American College of Physicians, and the Royal College of Physicians    Former Research Associate with the National Bureau of Economic Research and served for nineteen years as founding Director of its Health Care Program    Previously served as a member of the National Advisory Council on Aging at the National Institutes of Health, as a member of the Board of Health Advisers of the Congressional Budget Office, and as Chair of the Medicare Evidence Development and Coverage Advisory Committee at the Centers for Medicare and Medicaid Services    Holds an A.B. summa cum laude, an A.M. and a Ph.D., all in Economics, from Harvard University, and an M.D. with research honors from Stanford University     Key Skills and Qualifications:   Dr. Garber brings extensive leadership experience and knowledge regarding science, medicine, and the healthcare industry and in particular healthcare economics to our board of directors. His expertise in health care policy and as an advisor to government agencies provides our board important insights and perspectives on the issues facing our company.

VERTEX PHARMACEUTICALS INCORPORATED - 2023 Proxy Statement    22

Other Public Company Boards:      None		Terrence Kearney
		Age: 68   Director Since: 2011	Board Committees:    Chair – Audit and Finance Committee    Member – Management Development and Compensation Committee
		Experience:      Chief Operating Officer of Hospira, Inc., a specialty pharmaceutical and medication delivery company, from 2006 until 2011    Senior Vice President, Finance, and Chief Financial Officer of Hospira from 2004 to 2006    Vice President and Treasurer of Abbott Laboratories, from 2001 to 2004    Divisional Vice President and Controller for Abbott’s International Division, from 1996 until 2001    Member of the following Boards of Directors of Levo Therapeutics, Inc., a biotechnology company focused on developing treatments for Prader-Willi Syndrome, from 2018 to June 2022; Acceleron Pharma Inc., a publicly traded biopharmaceutical company, from 2014 until it was acquired by Merck in November 2021; Innoviva (formerly known as Theravance, Inc.), a publicly traded royalty management company, from 2014 through 2016; and AveXis, Inc., a publicly traded gene therapy company, from 2016 until it was acquired by Novartis in 2018    Holds a B.S. in biology from the University of Illinois and an M.B.A. from the University of Denver     Key Skills and Qualifications:   Mr. Kearney’s corporate leadership experience, industry knowledge and financial expertise make him a valuable contributor to our board of directors. He has a practical perspective on the management of global pharmaceutical operations, including commercial, manufacturing and research and development activities, and financial management strategies. Mr. Kearney is an “audit committee financial expert,” as defined by the Securities and Exchange Commission (“SEC”), with particular experience in pharmaceuticals.

Other Public Company Boards:      Ginkgo Bioworks Holdings, Inc.		Reshma Kewalramani
		Age: 50   Director Since: 2020	Position:    Chief Executive Officer and President
		Experience:      Chief Executive Officer and President of Vertex Pharmaceuticals Incorporated since April 2020    Executive Vice President and Chief Medical Officer of Vertex from 2018 through March 2020    Senior Vice President, Late Development of Vertex from 2017 until 2018    Served in roles of increasing responsibility at Amgen Inc. from 2004 to 2017, most recently as Vice President and Head of U.S. Medical Organization    Industry representative to the FDA’s Endocrine and Metabolic Drug Advisory Committee from 2014 through 2019    Holds a B.A. from Boston University and an M.D. from Boston University School of Medicine; Dr. Kewalramani completed her internship and residency in Internal Medicine at the Massachusetts General Hospital and her fellowship in nephrology at the Massachusetts General Hospital and Brigham and Women’s Hospital combined program    Dr. Kewalramani also completed the General Management Program at Harvard Business School and is an alumna of the school     Key Skills and Qualifications:   Dr. Kewalramani possesses strong leadership qualities, industry experience, and research, development and commercialization expertise in drug development, demonstrated through her services as a senior executive in the biotechnology sector. She is a physician-executive with extensive industry knowledge garnered through her scientific and medical roles and experience as a global senior leader across multiple disease areas and all stages of drug development. She provides our board of directors with in-depth knowledge of our company gained during her various senior management roles within Vertex and through the day-to-day leadership of our executives as CEO.

VERTEX PHARMACEUTICALS INCORPORATED - 2023 Proxy Statement    23

Other Public Company Boards:      None		Jeffrey Leiden
		Age: 67   Director Since: 2009	Position:      Executive Chairman
		Experience:      Chief Executive Officer and President of Vertex Pharmaceuticals Incorporated from 2012 through March 2020    Chairman of Board of Directors of Vertex since 2012; previously served as lead independent director from 2010 through 2011    Managing Director at Clarus Ventures, a life sciences venture capital firm, from 2006 to 2012    President and Chief Operating Officer of Abbott Laboratories, Pharmaceuticals Products Group and a member of the Board of Directors of Abbott Laboratories from 2001 to 2006    Held several academic appointments from 1987 to 2000, including the Rawson Professor of Medicine and Pathology and Chief of Cardiology and Director of the Cardiovascular Research Institute at the University of Chicago, the Elkan R. Blout Professor of Biological Sciences at the Harvard School of Public Health, and Professor of Medicine at Harvard Medical School    Elected member of both the American Academy of Arts and Sciences and the Institute of Medicine of the National Academy of Sciences    Member of the Board of Directors of Massachusetts Mutual Life Insurance Company, an insurance company    Member of the Board of Directors of Quest Diagnostics Incorporated, a publicly traded medical diagnostics company, from 2014 to May 2019; member of the Board of Directors and non-executive Vice Chairman of Shire plc, a specialty biopharmaceutical company, from 2006 to 2012; Chairman of Revolution Healthcare Acquisition Corp., a special purpose acquisition corporation, from April 2021 to December 2022     Key Skills and Qualifications:   Dr. Leiden possesses strong leadership qualities, demonstrated through his service as a senior executive in the biotechnology and pharmaceutical industries and as a life sciences venture capitalist, and has extensive knowledge of the science underlying drug discovery and development through his experiences as a distinguished physician, scientist, and teacher. As our former CEO and as a former senior executive at Abbott Laboratories, he brings a global perspective to our business and public policy issues facing our company. He also provides our board of directors with in-depth knowledge of our company and our corporate strategy.

Other Public Company Boards:      MetLife Inc.    agilon health, inc.		Diana McKenzie
		Age: 58   Director Since: 2020	Board Committees:    Member – Corporate Governance and Nominating Committee    Member – Science and Technology Committee
		Experience:      Chief Information Officer of Workday, Inc., a cloud-based financial and human capital management software company, from 2016 until April 2019    Held roles of increasing responsibility at Amgen Inc., a biotechnology company, for 12 years, most recently serving as Senior Vice President and Chief Information Officer    Held various leadership roles at Eli Lilly and Company, a pharmaceutical company, for 17 years, focused on drug development, reducing time to market and improving technology and security standards    Member of the Board of Directors of Paradox AI; Special Advisor to Brighton Park Capital    Member of the Board of Directors of Change Healthcare, Inc., a publicly traded healthcare technology company, from August 2019 until it was acquired by United Health Group in October 2022    Holds a Bachelor of Science degree in Computer Information Systems from Purdue University and completed the Information Technology Management Program at University of California, Los Angeles and the CERT Certification for Cybersecurity Oversight from Carnegie Mellon’s Software Engineering Institute     Key Skills and Qualifications:   Ms. McKenzie has corporate leadership experience and industry knowledge that make her a valuable contributor to our board of directors. Her service as an executive and innovator in the biotechnology and technology industries and as a member of the board of directors of public companies involved in healthcare issues provide her with multiple perspectives on our industry. Ms. McKenzie brings extensive experience growing, scaling, and transforming global businesses in the healthcare and software industries.

VERTEX PHARMACEUTICALS INCORPORATED - 2023 Proxy Statement    24

Other Public Company Boards:      None		Bruce Sachs
		Age: 63   Director Since: 1998	Board Committees:      Chair – Management Development and Compensation Committee    Member – Corporate Governance and Nominating Committee
		Experience:      General Partner at Charles River Ventures, a venture capital firm, since 1999    Executive Vice President and General Manager of Ascend Communications, Inc. from 1998 to 1999    President and Chief Executive Officer of Stratus Computer, Inc. from 1997 to 1998    Executive Vice President and General Manager of the Internet Telecom Business Group at Bay Networks, Inc. from 1995 to 1997    President and Chief Executive Officer of Xylogics, Inc. from 1993 to 1995    Holds a B.S.E.E. in electrical engineering from Bucknell University, an M.E.E. in electrical engineering from Cornell University, and an M.B.A. from Northeastern University     Key Skills and Qualifications:   Mr. Sachs brings strong business judgment, honed through his experience developing business strategy as a senior executive and in venture capital, to our board of directors. Mr. Sachs has a deep understanding of our business and the global business environment along with expertise in the technology that supports our infrastructure and operations. In addition, Mr. Sachs has extensive business leadership experience, including service as a technology company CEO, as well as financial expertise.

Other Public Company Boards:      None		Suketu “Suky” Upadhyay
		Age: 54   Director Since: 2022	Board Committees:      Member – Audit and Finance Committee
		Experience:      Executive Vice President and Chief Financial Officer of Zimmer Biomet, a leading global innovator and manufacturer of orthopedic solutions, since July 2019    Senior Vice President, Global Financial Operations at Bristol-Myers Squibb from 2016 to June 2019    Executive Vice President and Chief Financial Officer of Endo International from 2013 to 2016    Previously served as interim Chief Financial Officer and Senior Vice President of Finance, Corporate Controller and Principal Accounting Officer of Becton Dickinson and Senior Vice President of Global Financial Planning and Analysis and Vice President and Chief Financial Officer of Becton Dickinson’s international business    Previously held a number of global finance and strategy roles across AstraZeneca and Johnson & Johnson, including Research and Development, Supply Chain, Commercial Operations and Business Development    Spent the early part of his career in public accounting with KPMG, earning his CPA designation and his CMA designation (each designation currently inactive)    Holds a Bachelor of Science in Finance from Albright College and an MBA from The Fuqua School of Business at Duke University     Key Skills and Qualifications:   Mr. Upadhyay has extensive experience in the health care industry in financial roles covering all major areas of a fully integrated life sciences business. His service as an executive in the pharmaceutical, hospital supply, and medical device industries provide him with multiple perspectives on our industry. His knowledge and expertise make him a valuable contributor to our board of directors and management.

Board Recommendation

In each of the director nominee biographies, we highlight the specific experience, qualifications, attributes, and skills that led the board of directors to conclude that the director nominee should serve on our board at this time.

Our board of directors unanimously recommends that you vote FOR each of the nominees.

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CORPORATE GOVERNANCE AND RISK MANAGEMENT

We are committed to good corporate governance and integrity in our business dealings. Our governance practices are documented in our Statement of Corporate Governance Principles, which addresses the role and composition of our board of directors and the functioning of the board and its committees. You can find our governance documents, including our Statement of Corporate Governance Principles, charters for each committee of the board, and our Code of Conduct, on our website www.vrtx.com under “Investors—Corporate Governance—Governance Documents.”

Director Independence

Our board of directors has determined that nine of our eleven current directors and seven of our nine director nominees qualify as “independent” under the definition of that term adopted by The Nasdaq Stock Market LLC (“Nasdaq”). Our independent director nominees are Dr. Bhatia, Mr. Carney, Dr. Garber, Mr. Kearney, Ms. McKenzie, Mr. Sachs, and Mr. Upadhyay. Our independent directors meet in executive session without management at each regularly scheduled board meeting. Each of the board committees is composed of independent directors.

Board Leadership Structure

Our board recognizes that one of its key responsibilities is to periodically evaluate the optimal leadership structure to ensure robust independent oversight of management and an engaged and effective board with complementary qualities, perspectives, and experiences. Given the dynamic and competitive environment in which we operate, the board believes that its optimal leadership structure may vary as circumstances warrant. The board values the flexibility to determine its optimal model for board leadership at any given time. As such, the board annually reviews its leadership structure and may choose a different leadership structure if circumstances should arise that lead it to believe that such structure would promote the long-term interests of our shareholders.

Our governing documents permit the roles of Chair of the board and CEO to be filled by the same or different individuals. To ensure robust independent leadership on the board, our corporate governance guidelines also require our independent directors to elect a Lead Independent Director if the Chair of the board is a member of management or does not otherwise qualify as independent under the company’s director independence standards.

Currently, the board believes it is in the best interests of the company and our shareholders for the roles of Chair of the board and CEO to be separated, supported by a Lead Independent Director who has oversight responsibilities. Separating these positions at this time allows our CEO to focus on strategic decisions and our day-to-day business operations and performance, allows the Chair, our former CEO, to drive organization and effectiveness of the board in addition to his specifically delineated executive responsibilities, and allows our Lead Independent Director to lead the board in its fundamental role of providing advice to and independent oversight of management, including promoting communication between management and our board and supporting our board’s oversight of risk and other key governance matters. The board believes that this structure provides our board with independent leadership, while providing the benefit of having our former CEO chair regular board meetings and our current CEO participate in regular board meetings as a director.

The board annually evaluates whether combining or separating the roles of Chair of the board and CEO is in the best interests of the company and our shareholders. In its evaluation, the board considers a number of factors, including: (1) the individuals currently in the roles of CEO, Chair and Lead Independent Director and their record of leadership and performance in their roles; (2) current composition of the board; (3) the effectiveness of the policies, practices, and people in place to help ensure strong, independent board oversight; (4) the company’s performance and the effect the leadership structure could have on its performance; (5) the board’s performance and the effect the leadership structure could have on the board’s performance; (6) the Chair and Lead Independent Director’s performance in their respective roles; and (7) the views of our shareholders. A change in any of these factors could lead the board to determine in the future that it is more appropriate to have a different board leadership structure. Any such changes to our board leadership structure would be communicated to our shareholders through our annual proxy statement and as otherwise required by law.

Executive Chair of the Board

Since 2020, Dr. Leiden has served as our Executive Chairman. In this role, Dr. Leiden not only serves as the Chair of our board, but also continues to have executive responsibilities, as described below, with our corporate business development function, our cell and genetic therapy programs, and our external communications and government affairs activities. The board believes this leadership structure is currently in the best interest of shareholders because Dr. Leiden, as a long-time executive of the company, has a vast knowledge and deep understanding of the company and its strategic plans, people, and operations. This company-specific experience, along with Dr. Leiden’s extensive knowledge

VERTEX PHARMACEUTICALS INCORPORATED - 2023 Proxy Statement    26

of the industry and comparable organizations and broad involvement in drug discovery and development, as well as his distinguished tenure as Chair of the board since 2012 and wide-ranging experience in corporate governance and leadership, provide him with outstanding advising and oversight capabilities as Chair of the board. Dr. Leiden’s specific responsibilities include:

	overseeing the corporate business development function;
	providing guidance on our cell and genetic therapy programs;
	supporting external communications, including with our shareholders;
	assisting the CEO with specific government affairs activities;
	collaborating with CGNC, the Lead Independent Director, and the CEO on the identification, evaluation, and recruitment of potential candidates for board membership and consideration of overall board composition;
	collaborating with CGNC and the Lead Independent Director on the recommendation to the board of individual directors to serve as members and chairs of each board committee;
	collaborating with CGNC and the Lead Independent Director on development and recommendation to the board of the annual self-evaluation process for the board and its committees; and
	collaborating with CGNC and the lead independent director on the oversight of the CEO succession planning process, including assistance in recruiting and identifying potential candidates for the CEO position.

Lead Independent Director

Our board believes that strong, independent board leadership is a critical aspect of effective corporate governance. Our corporate governance guidelines require that if the Chair is not an independent director, the independent directors shall elect a Lead Independent Director. Since December 2011, Mr. Sachs has served as our Lead Independent Director or Co-Lead Independent Director. Mr. Sachs’ extensive business leadership experience as a CEO, a venture capitalist, and a director of the company, combined with his financial expertise, strongly positions him to provide independent leadership of the board and its responsibility for identifying and assessing company risks and providing guidance on risk mitigation strategies.

The board recognizes the importance of appointing a strong Lead Independent Director to maintain a counterbalancing structure to ensure that the board functions in an appropriately independent manner and to hold management accountable for our continued success. As such, the responsibilities of the Lead Independent Director are designed to ensure that our independent directors are empowered to provide robust guidance to, and oversight of, management. Our Lead Independent Director’s responsibilities include:

	calling and leading regular and special meetings of the independent directors;
	serving as a liaison between our management and independent directors;
	facilitating discussion and open dialogue among the independent directors, including with respect to the consideration of company risks and risk mitigation strategies;
	presiding at executive sessions of the independent directors;
	reviewing the planned dates for regularly scheduled board meetings and the primary agenda items for each meeting, which allows the Lead Independent Director to provide input and direction with respect to the matters that come before the board, including risk matters;
	providing board leadership if the Chair of the board or CEO may be (or may be perceived to be) in conflict with the best interests of the company and its shareholders;
	representing the board in certain communications with shareholders when requested and as appropriate;
	collaborating with CGNC, the Chair of the board, and the CEO on the identification, evaluation, and recruitment of potential candidates for board membership and consideration of overall board composition;
	collaborating with CGNC and the Chair of the board on the recommendation to the board of individual directors to serve as members and chairs of each board committee;
	collaborating with CGNC and the Chair of the board on development and recommendation to the board of an annual self-evaluation process for the board and its committees; and
	collaborating with CGNC and the Chair of the board on the oversight of the CEO succession planning process, including assistance in recruiting and identifying potential candidates for the CEO position.

We believe our board structure provides consistent and strong independent oversight of management, while also facilitating a collaborative and collegial environment for board deliberations and decision-making.

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Board Committees

Our board of directors has established various committees, each of which has a written charter, to assist in discharging its duties: the audit and finance committee (“audit committee”), the CGNC, the MDCC, and the science and technology committee (“S&T committee”). Each member of the audit committee, CGNC, MDCC and S&T committee is an independent director as that term is defined by the applicable SEC and Nasdaq rules. The primary responsibilities of each of the committees are set forth below, and the committee memberships are provided in the table appearing on page 30 of this proxy statement.

Each of the committees has the authority, as its members deem appropriate, to engage outside legal counsel or other experts or consultants to assist the committee in carrying out its responsibilities. Each board committee has the authority to delegate any of its responsibilities to one or more subcommittees comprised of at least one member of the committee to the extent deemed appropriate but subject always to the general oversight of the board.

Audit and Finance Committee

The primary purposes of the audit committee are to:

	assist our board’s oversight of our accounting and financial reporting processes, including financial controls and audits of our financial statements;
	appoint, oversee, and replace, if necessary, our independent registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review, or attestation services;
	review and discuss our annual audit, quarterly reviews and related disclosures, and oversee our internal audit function;
	review and make recommendations to our board concerning our financial structure, financial strategy, and risks;
	oversee our policies and programs and address risks related to our programs, our financial and accounting systems, accounting policies and investment strategies, internal audit function, and cybersecurity, and review material tax matters, including tax structure and strategies;
	address risks arising from related person transactions; and
	assist our board’s oversight of our Code of Conduct, related policies and procedures, and ongoing compliance matters as needed.

Our independent registered public accounting firm reports directly to, and is held accountable by, our audit committee in connection with the audit of our annual financial statements and related services.

Mr. Kearney, the chair of our audit committee, is our “audit committee financial expert” as that term is defined in applicable rules and regulations of the SEC, and is independent according to the applicable listing standards of Nasdaq. In addition, other members of the audit committee are qualified to serve as an audit committee financial expert under the SEC rules and regulations. The report of the audit committee appears on page 39 of this proxy statement.

Our audit committee reviews and approves all transactions with related persons that are required to be disclosed by us pursuant to Item 404(a) of Regulation S-K promulgated by the SEC, except for transactions, if any, related to the employment of executive officers, which would be recommended for board approval by the MDCC. Our policies and procedures with respect to transactions with related persons are governed by our written Related Party Transaction Policy. Pursuant to this policy, related party transactions include transactions, arrangements or relationships in which our company is a participant, the amount involved exceeds $120,000, and one of our executive officers, directors, director nominees or 5% shareholders or their immediate family members, whom we refer to as related persons, has a direct or indirect material interest, except where disclosure of such transaction would not be required pursuant to Item 404(a) of Regulation S-K. As appropriate for the circumstances, our audit committee reviews and considers the related person’s interest in the related party transaction and such other factors as it deems appropriate. In 2022, we had no transactions considered to be a related party transaction pursuant to Item 404(a) of Regulation S-K.

Corporate Governance and Nominating Committee

The primary purposes of the CGNC are to:

	assist our board of directors in developing and implementing our corporate governance principles;
	recommend the size, composition, and leadership structure of our board and its committees;
	identify and recommend to our board qualified individuals for board membership, accounting for the appropriate balance of knowledge, experience, skills, expertise, tenure, and diversity;

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	oversee the CEO succession planning process and assist the board in recruiting and evaluating potential candidates;
	develop and recommend to our board an annual self-evaluation process to assess the effectiveness of our board and its committees, and coordinate this process;
	oversee risks related to the company’s governance structure; and
	review and make recommendations with respect to our committee charters.

Management Development and Compensation Committee

The primary purposes of the MDCC are to:

	assess the overall compensation programs of the company and adopt a written statement of compensation philosophy and objectives;
	oversee and make recommendations to the board regarding compensation and development of our executives;
	recommend to the board (i) ratings for the company performance against company goals for the prior year and (ii) goals and weighting of goals for the next year;
	oversee risks associated with our compensation policies, management resources and structure, and management development and selection processes;
	oversee and make recommendations to the board regarding the compensation of our non-employee directors; and
	review and approve our benefit and equity plans.

See Compensation Discussion and Analysis—Detailed Discussion and Analysis below for a discussion of the MDCC’s role in overseeing executive compensation.

The report of the MDCC appears on page 66 of this proxy statement.

Science and Technology Committee

Our S&T committee assists our board of directors in its responsibilities relating to the oversight of our investment in pharmaceutical R&D. In furtherance of that oversight function, the S&T committee:

	reviews and assesses our current and planned R&D programs and technology initiatives from a scientific perspective;
	oversees risks related to our R&D investments;
	assesses the depth and breadth of our scientific personnel and resources; and
	provides strategic advice to our board regarding emerging science and technology issues and trends.

Compensation Committee Interlocks and Insider Participation

Messrs. Carney, Kearney, Lee, and Sachs served on the MDCC during 2022. Each member of the MDCC was an independent director while serving on the MDCC. None of the members of the MDCC has been an officer or employee of the company. None of the members of our MDCC had a relationship with the company or any of its subsidiaries during 2022 that would be required to be disclosed pursuant to Item 404(a) of Regulation S-K. During 2022, none of our executive officers served as a member of the board of directors or compensation committee of another company that has one or more executive officers serving as a member of our board or MDCC.

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Board Attendance, Committee Meetings, and Committee Membership

During 2022, our board of directors met seven times. Each of our incumbent directors attended 100% of the total meetings of the board and the board committees on which the director served that were held during the time that person was a director in 2022. All of our current directors attended our 2022 Annual Meeting of Shareholders.

The following table provides information regarding our current board of directors. We expect that in May 2023, (i) Mr. Carney will join the Corporate Governance and Nominating Committee as Chair, and (ii) we will make additional changes to our committee memberships resulting from the departures of Mr. Lee and Ms. McGlynn following the 2023 Annual Meeting of Shareholders.

Director

Independence

Board

Audit Committee

CGNC

MDCC

S&T Committee

Sangeeta N. Bhatia

Lloyd Carney

Alan Garber

Terrence C. Kearney

Reshma Kewalramani

Yuchun Lee

Jeffrey M. Leiden

Margaret G. McGlynn

Diana McKenzie

Bruce I. Sachs

Suketu Upadhyay

2022 Meetings

7

8

5

6

5

	= Member
	= Chair
	= Lead Independent Director

Risk Management

Our board oversees an enterprise-wide approach to risk management, which is designed to support execution of our strategy and achievement of our goals to improve long-term operational and financial performance and generate long-term value for our shareholders. Our board believes that a fundamental part of risk management is understanding the risks that we face, adopting appropriate controls and mitigation activities for such risks, monitoring these risks, and responding to emerging developments with respect to such risks.

In performing its risk oversight responsibilities, the board relies, in part, upon the results and information gained through our annual Enterprise Risk Management (“ERM”) Program. The ERM Program is overseen by our Chief Risk & Compliance Officer, who reports to our Chief Legal Officer, and is designed to identify key enterprise risks and ensure appropriate monitoring of, and controls over, those risks. As part of our ERM Program, we obtain input from our senior management and relevant subject-matter experts, evaluate industry trends and benchmarks, and consult external advisors as appropriate to identify the risks associated with our business based on likelihood of occurrence and potential impact to the business, as well as root causes of those risks. The ERM Program also assigns members of management responsibility for implementing controls and mitigations to reduce the likelihood or impact of each risk. The identified risks and related controls and mitigations are actively monitored by the board and regularly reviewed with senior management.

The board’s role in our risk management process also includes reviewing regular reports and updates from senior management on both near-term, medium-term and long-term risks to the company. The board reviews and discusses strategic, operational, financial, compliance, legal, social (e.g., human capital management), environmental, governance, cybersecurity, and other risks. The board also receives updates from management regarding various enterprise risks related to our research, development, and commercialization plans, such as the competitive environment, manufacturing capabilities, and drug pricing and reimbursement. These activities enable the board to understand and assess our risk environment, risk management, and risk mitigation strategies.

Near- and medium-term enterprise risks are afforded significant attention by the board. The board and its committees have the opportunity to provide input and direction as to the management of those risks in a variety of manners, including through the ERM Program review, regular operational and financial updates and review of development programs, regular updates from our Chief Legal Officer, internal audit updates, talent reviews and succession planning, updates on cyber-security, healthcare compliance updates, reviews of executive compensation, budget

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reviews, and reviews of significant transactions. Longer term risks are addressed by the board through the annual strategic planning process, during which the board discusses and reviews our long-term operating plans and overall corporate strategy. Other risks that do not rise to the level of enterprise risks also are regularly assessed, discussed, managed, and monitored, including discussion with the board, as appropriate.

Cross-functional members of management, including from our finance, accounting, investor relations, legal, compliance, information security, facilities, corporate communications, manufacturing, and disease strategy teams, work to ensure that material incidents and risks, including matters relating to significant actual or threatened litigation, significant regulatory matters and other matters that may have material financial, legal or reputational impacts on the Company are timely reported to the Board and senior management and disclosed to our shareholders, as appropriate. In addition, we disclose our significant environmental, social and governance progress, strategies, and commitments in our annual Corporate Responsibility Report.

While the board has the ultimate oversight responsibility for risk management, the board also manages risk through the division of responsibility within its committee structure, with each board committee being responsible for overseeing risk within its area of focus.

At each regular meeting, or more frequently as needed, the board receives and considers committee reports, and such reports may provide additional detail on risk management issues and management’s response. The board and each committee also have the authority, in their sole discretion, to consult with and retain outside advisors and experts in connection with performance of its duties and responsibilities. Such outside advisors and experts are retained on a regular basis to assist the board and its committees in evaluating, managing, and anticipating risks, and include external auditors, legal counsel, compensation consultants, and business consultants, as appropriate. We have also established robust standards of business conduct that apply to all employees globally and provides numerous methods for employees to elevate risk concerns directly to management or through anonymous channels.

Code of Conduct

We have adopted a Code of Conduct that applies to all of our directors and employees, including our CEO and chief financial and accounting officers. We routinely review our Code of Conduct and make updates, as necessary. Our Code of Conduct is available on our website www.vrtx.com under “Investors—Corporate Governance—Governance Documents.” Disclosure regarding any amendments to, or waivers from, provisions of the Code of Conduct that apply to our principal executive, financial or accounting officers, or controller or persons performing similar functions will be posted on our website or included in a Current Report on Form 8-K within four business days following the date of the amendment or waiver.

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Public Policy and Engagement

Vertex recognizes the importance of public policy in supporting our mission of creating transformative medicines for people with serious diseases. We engage with various policymakers and trade and industry groups to help promote an environment in which we can continue to innovate and develop transformative medicines for the benefit of patients with serious diseases.

Our board has oversight over our public policy activities and reviews our public policy and lobbying priorities at least annually. Our Head of U.S. Public Affairs is responsible for approving all corporate political contributions and ensuring that they align with our mission and business priorities.

We meet all federal, state and local laws and reporting requirements governing corporate political contributions. We file quarterly reports listing the issues for which we conduct federal lobbying activities in compliance with the Honest Leadership and Open Government Act of 2007. These reports are available to the public at the U.S. Senate Office of Public Records website and U.S. House of Representatives Office of the Clerk website. Our website includes links to federal and state websites where we file lobbying reports, as well as a list of contributions made to support state and local candidates and political organizations.

We are a member of select industry and trade groups that are generally aligned with our business objectives and political contribution philosophy. These organizations represent the biotechnology industry and/or businesses more broadly in engaging with policy makers on issues that affect our industry. The industry and trade organizations to which Vertex paid more than $25,000 in dues have been disclosed on our website. Our governmental affairs executives regularly evaluate our participation in these organizations to ensure that they continue to be aligned with our contribution criteria and principles. We do not direct, nor do we have discretion over, how our membership dues are used and do not always agree with positions taken by these organizations and/or their members.

We do not make independent political expenditures or make payments to influence ballot measures.

At times, we may contribute to certain 501(c)(4) organizations that engage in lobbying or political activity. We will disclose such organizations annually on our website, and, to the extent available to us, the portion of those payments used for activities that are not deductible under Chapter 162(e) of the Internal Revenue Code. We do not contribute funds intended for elections to 501(c)(4) organizations.

We recognize that increasingly, investors are asking public companies to provide additional visibility regarding their political engagement and contributions and to provide information about accountability and oversight. We have made available on our website our political engagement principles, which provide transparency on our approach to political contributions, including lobbying activities. We have shared this with shareholders, engaged in productive dialogues on this topic, and update this information annually.

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DIRECTOR COMPENSATION

Non-Employee Director Compensation Program

We have designed and implemented our compensation program for our non-employee directors to attract, motivate and retain highly experienced individuals who have strong industry knowledge, are committed to our values and goals, and who have the expertise and experience that we need to achieve those goals.

The compensation program for our non-employee directors is:

Each of our non-employee directors is eligible to defer 50% or 100% of the cash and restricted stock unit portion of their compensation set forth above and elect to receive deferred stock units that are paid out in common stock upon the earliest to occur of (i) termination of the non-employee director’s service on our board of directors, (ii) a change of control, and (iii) the non-employee director’s disability or death. Our non-employee directors also are reimbursed for their business-related expenses incurred in connection with attendance at board and committee meetings and related activities.

Our two employee directors, Dr. Leiden and Dr. Kewalramani, do not receive compensation for their service as directors.

We annually review the compensation program for our non-employee directors. We did not make any material changes to the compensation program for our non-employee directors in 2022.

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2022 Summary Compensation

2022 Equity Grants

Outstanding Equity

As of December 31, 2022, our non-employee directors had outstanding restricted stock units, deferred stock units and stock options to purchase our common stock as follows:

Non-Employee Director Stock Ownership Guidelines

We have stock ownership guidelines for our non-employee directors pursuant to which our non-employee directors should, within five years of becoming subject to the guidelines, hold shares of (a) our common stock, (b) unvested restricted stock units, and/or (c) deferred stock units, having a value of at least five times the annual cash retainer. Our stock ownership guidelines exclude unexercised stock options. As of March 31, 2023, each of our non-employee directors was in compliance with our stock ownership guidelines, and each of our non-employee directors satisfied the individual holding requirements. Mr. Upadhyay joined our board of directors in May 2022 and has five years to satisfy the individual holding requirements.

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CORPORATE RESPONSIBILITY

Community

 

We are a leading global biotechnology company that serially innovates to bring transformative medicines to people with serious diseases. We are committed to making a positive difference in the communities where we are located, including through a ten-year $500 million corporate giving commitment previously announced by the company. Our progress and efforts in corporate responsibility, community engagement, and workplace practices were recognized broadly in 2022. A selection of awards and recognitions include JUST Capital’s list of the top 100 Companies Supporting Healthy Families and Communities, Newsweek’s America’s Most Responsible Companies, PEOPLE Magazine’s 100 Companies That Care, Points of Light’s Civic 50, and many others.

 

Volunteering and giving back are core to our culture. In 2022, we supported nearly 2,000 nonprofit organizations in more than 25 countries through Vertex Volunteers and the Vertex Foundation Matching Gift Program.

 

The Vertex Foundation, a 501(c)(3) nonprofit organization, seeks to improve the lives of people with serious diseases and contribute to the communities where Vertex is located through education, innovation and health. In 2022, the Vertex Foundation awarded $8.4 million to support STEAM education, social innovation, and healthy families with a focus on projects and organizations demonstrating a strong commitment to inclusion, diversity, and equity.

 

Throughout the year, we encourage our employees to participate in community service through the Vertex Volunteers program, including activities such as pro bono service conducted by members of our legal and compliance group and our 14^th annual Day of Service. Last year, 57% of Vertex employees around the globe volunteered during Day of Service, contributing more than 6,300 volunteer hours to their local communities.

 

Our corporate giving extends and expands our long-term commitment to patients with serious diseases and our communities, with an on-going focus on STEAM education. In 2022, we continued to offer opportunities to scores of teachers and hundreds of students through our Learning Lab programs in Boston, San Diego, and Oxford, U.K., and the Vertex Foundation provided dozens of scholarships to people with CF and their family members who are pursuing higher education. The Vertex Foundation is also committed to supporting programs and initiatives in the countries in which we operate to nurture the next generation of innovators, enable innovative solutions to community challenges, and support the quality of life of families with members living with serious diseases.

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Workplace

 

We are committed to building an outstanding, dedicated, and passionate team at Vertex. Our ability to create transformative medicines for people with serious diseases relies on both the diversity of our people and an inclusive and equitable culture where all points of view are respected and heard. We are pleased to have been awarded listings on Seramount’s 100 Best Companies & 100 Best Companies for Dads, Boston Globe’s Top Places to Work, Forbes’ World’s Best Employers, Science Magazine’s Top Employers, and San Diego Business Journal’s Best Places to Work.

 

Five of our nine director nominees are women and/or from underrepresented ethnic and racial groups. As of December 31, 2022, women represented 54% of our global workforce. In the U.S., as of December 31, 2022, approximately 40% of our workforce and 51% of new hires were from underrepresented ethic and racial groups. As of December 31, 2022, 39% of our global leadership (vice president and above) were women and 20% of U.S. leadership were from underrepresented ethnic and racial groups.

 

 

Environment

 

We are committed to limiting our environmental impacts and to operating our business in a sustainable manner. We make strong local efforts to reduce our impact on the environment.

 

In 2022, our Scope 1 and Scope 2 absolute GHG emissions were 21.4% below our 2018 baseline. This exceeds our goal to reduce GHG emissions by 20% by the end of 2023. We performed well on the CDP Climate Change survey, obtaining a score of B, which demonstrates that we have addressed the environmental impacts of our business and have ensured good environmental management, and which was higher than the global average score of C. We continue to source 100% renewable electricity for our U.K. facilities. 83% of the square footage of our buildings globally are, or are expected to be, green certified by the end of 2023. We also have ongoing efforts to minimize waste across all of our sites through employee engagement initiatives, vendor takeback programs and improved product distribution processes.

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PROPOSAL NO. 2: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Engagement of Ernst & Young LLP

Our audit and finance committee is responsible for the appointment, compensation, and oversight of our independent registered public accounting firm. Ernst & Young LLP has been our independent registered public accounting firm since 2005, and we believe that the selection of Ernst & Young LLP as our independent registered accounting firm for the year ending December 31, 2023 is in the best interest of our company and our shareholders.

In determining whether to reappoint our independent registered public accounting firm, our audit committee undertakes an annual formal evaluation of the independent registered public accounting firm, during which it considers the quality of its discussions with, and the performance of, the lead audit partner, the audit team assigned to our account, the potential impact of changing our independent registered public accounting firm, the overall strength and reputation of the firm and issues pertaining to auditor independence, including fees that our independent registered public accounting firm receives for non-audit services. In accordance with applicable requirements, we are required to change our lead audit partner every five years.

Representatives of Ernst & Young LLP are expected to attend the annual meeting, will have the opportunity to make a statement if they desire to do so, and will be available to respond to appropriate questions from shareholders.

Effect of Vote

Although we are not required to have shareholders ratify the selection of Ernst & Young LLP, our board is submitting this proposal to our shareholders for ratification as a matter of good corporate practice. If our shareholders do not ratify the selection, our audit and finance committee will reconsider the selection of Ernst & Young LLP for the ensuing year, but may determine that continued retention of Ernst & Young LLP is in our company’s and our shareholders’ best interests. Even if the appointment is ratified, the audit and finance committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in our company’s and our shareholders’ best interests.

Independent Registered Public Accounting Firm Fees

The audit and finance committee works with our management to negotiate appropriate fees with Ernst & Young LLP and is ultimately responsible for approving those fees. The following is a summary and description of fees for services provided by Ernst & Young LLP in 2022 and 2021.

“Audit fees” represented the aggregate fees for professional services rendered for the audit of our annual consolidated financial statements, and our internal controls over financial reporting, for the reviews of the consolidated financial statements included in our Form 10-Q filings, for statutory audits of our international operations and providing consents with respect to registration statements.

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“Audit-related fees” refer to fees for accounting consultations.

“Tax fees” consisted of fees related to tax compliance, worldwide tax planning, and tax advice. The tax fees for 2022 and 2021 consisted of:

	tax compliance and preparation fees, including the preparation of original and amended tax returns and refund claims, and tax payment planning of $1,806,000 and $1,990,000, respectively; and
	tax advice and planning fees of $1,130,000 and $2,660,000, respectively.

“All other fees” consisted of licensing fees paid to Ernst & Young LLP for access to its proprietary accounting research database.

Audit and Finance Committee Pre-Approval Policies and Procedures

Our audit and finance committee has established a policy to pre-approve all audit and permissible non-audit services provided by our independent registered public accounting firm. Prior to the engagement of the firm for each year’s audit, management submits to our audit and finance committee for approval a description of services expected to be rendered during that year for each of the following four categories of services and a budget for those services in the aggregate.

	Audit fees include fees for audit work performed in the preparation of financial statements, as well as work that generally only our independent registered public accounting firm can reasonably be expected to provide, including comfort letters, statutory audits, consents, and attestation services.
	Audit-related fees relate to services for assurance and related services that traditionally are performed by the independent registered public accounting firm, including due diligence related to mergers and acquisitions, employee benefit plan audits, special procedures required to meet certain regulatory requirements, and consultation regarding financial accounting and/or reporting standards.
	Tax fees include fees for all services performed by the independent registered public accounting firm’s tax personnel except those services specifically related to the audit of our financial statements, and include fees in the areas of tax compliance, tax planning, and tax advice.
	All other fees are those associated with services not captured in the three preceding categories.

Prior to the engagement of our independent registered public accounting firm, our audit committee pre-approves these services by category of service. The fees are budgeted and our audit and finance committee requires the independent registered public accounting firm and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances, our audit and finance committee requires that we obtain its specific pre-approval for these services.

The audit and finance committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report any pre-approval decisions to our audit and finance committee at its next scheduled meeting.

All of the services set forth above in the categories “audit-related fees,” “tax fees,” and “all other fees” were pre-approved and none were approved by our audit and finance committee pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X, which relates to the approval of a de minimis amount of non-audit services after the fact but before completion of the audit.

The affirmative vote of a majority of the shares represented and entitled to vote on this matter is required for the approval of this proposal.

Our board of directors unanimously recommends that you vote FOR ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2023.

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AUDIT AND FINANCE COMMITTEE REPORT

The Audit and Finance Committee of the Board of Directors (the “Audit Committee”) oversees the company’s accounting, auditing and financial reporting process, financial risk assessment, and management process, and monitors compliance with certain regulatory and compliance matters, on behalf of the Board of Directors. Management of the company is responsible for preparing the financial statements, for establishing and maintaining adequate internal financial and disclosure controls, and for the public reporting process. Ernst & Young LLP (“Ernst & Young”), the company’s independent registered public accounting firm, is responsible for expressing an opinion on the conformity of the company’s audited financial statements with generally accepted accounting principles and on the company’s internal control over financial reporting.

The Audit Committee reviewed and discussed the company’s audited financial statements for the year ended December 31, 2022 with Ernst & Young and the company’s management, as well as Ernst & Young’s audit of the company’s internal control over financial reporting. In addition, the Audit Committee has discussed with Ernst & Young the matters that are required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (the “PCAOB”) and the SEC. These communications and discussions are intended to assist the Audit Committee in overseeing the financial reporting and disclosure process.

The Audit Committee also has received from Ernst & Young the written disclosures and the letter concerning independence as required by the applicable requirements of the PCAOB regarding Ernst & Young’s communications with the Audit Committee regarding independence, and has discussed with Ernst & Young the firm’s independence. The Audit Committee has also concluded that Ernst & Young’s provision of audit and non-audit services to the company is compatible with Ernst & Young’s independence from the Audit Committee and the company’s management.

Based on the review and discussions noted above, the Audit Committee recommended to the company’s Board of Directors that the audited financial statements for the year ended December 31, 2022 be included in the company’s Annual Report on Form 10-K for filing with the SEC. This report is provided by the following independent directors, who comprise the Audit Committee:

Terrence C. Kearney (Chair)
Lloyd Carney
Alan Garber
Yuchun Lee
Suketu Upadhyay

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PROPOSAL NO. 3: ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION

Our compensation program is designed to attract, retain, and motivate talented and experienced individuals across all areas of our business and to align the interests of our executive officers with the interests of our shareholders as we seek to create value through the discovery, development, and commercialization of transformative medicines.

In 2022, our annual advisory vote on executive compensation received support from approximately 93% of the votes cast at the annual meeting of shareholders. We believe this support is consistent with our shareholders’ understanding of our business model and the long-term value we are creating. We plan to continue a high level of shareholder engagement regarding our executive compensation program.

Our focus is and continues to be maintaining the strong link between our compensation programs and our ability to continue to develop transformative medicines while delivering sustained company performance, with 90% of our NEO compensation linked to performance. Our board and MDCC routinely review our compensation programs and made the following key decisions with respect to 2022 compensation:

	We increased the base salary and target equity level for Dr. Kewalramani, based on a comparative analysis of companies in our peer group. Dr. Kewalramani’s target cash bonus as a percentage of base salary was unchanged for 2022.
	Based on a comparative analysis of companies in our peer group, we increased compensation for Dr. Altshuler and for Mr. Wagner.
	We extended Dr. Leiden’s employment agreement by one year, until 2025. Under his amended employment agreement, Dr. Leiden continues to receive no cash compensation for his Executive Chairman role other than an annual cash payment intended to facilitate participation in the company’s benefit plans. Dr. Leiden will continue to receive equity awards for his fourth and fifth years in his Executive Chairman role.
	Our outstanding performance in 2022 resulted in the board determining that we had achieved a leading rating for 2022 (145 out of a potential 150), with the payment of annual cash bonuses commensurate with this high level of performance.
	The MDCC approved special, one-time equity award grants for Mr. Arbuckle. These performance-based and time-based grants are intended to incentivize and retain Mr. Arbuckle, who is in a key commercialization role, during a critical period where we expect to launch multiple transformational therapies in disease areas outside of CF.
	We maintained the mix of equity granted to our NEOs with 50% consisting of performance stock units that vest upon achievement of specific performance goals and 50% consisting of time-vesting restricted stock units. This mix rewards stock price appreciation and incentivizes long-term tenure.

Our executive compensation program, including our performance and the compensation of our NEOs, is discussed in greater detail in the Compensation Discussion and Analysis section beginning on page 42 of this proxy statement.

As required by Section 14(a) of the Exchange Act, our board of directors is asking that shareholders cast a non-binding, advisory vote FOR the following resolution:

RESOLVED, that the compensation of our named executive officers, as disclosed pursuant to the rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the Compensation and Equity Tables and the related narrative executive compensation disclosures contained in this proxy statement, is hereby APPROVED.

The vote on this resolution is advisory and not binding on the board. However, our MDCC and board intend to consider carefully the outcome of the shareholder vote when considering future executive compensation program matters.

Our board of directors unanimously recommends that you vote FOR the approval of the resolution set forth above.

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PROPOSAL NO. 4: ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION

In this proposal, we are asking our shareholders to vote on whether future advisory votes on executive compensation, similar to proposal 3 contained in this proxy statement, should occur every year, every two years, or every three years. While this say-on-pay frequency vote is advisory in nature and therefore will not bind us to adopt any particular frequency, our board of directors intends to consider carefully the shareholder vote resulting from this proposal in determining how frequently we will hold future “say-on-pay” votes.

Our board of directors has determined that an annual advisory vote on executive compensation will allow our shareholders to continue to provide timely, direct input on our executive compensation philosophy, policies and practices as disclosed in the proxy statement each year. In determining to recommend that shareholders vote for a frequency of once per year, our board of directors considered how an advisory vote at this frequency might over-emphasize short-term variations in compensation and business results, particularly in our industry, where a long-term focus for our executive compensation program is required because it can take 10-15 years to take a product from inception through to commercialization. On balance, however, our board of directors has determined that the advantages of receiving regular and prompt feedback from our shareholders on our executive compensation program continue to outweigh this concern at this time.

Our board of directors unanimously recommends that you vote 1 YEAR for the proposal concerning the frequency of future advisory votes on our executive compensation program.

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COMPENSATION DISCUSSION AND ANALYSIS

Letter from Management Development and Compensation Committee to Our Shareholders

VERTEX PHARMACEUTICALS INCORPORATED - 2023 Proxy Statement    42

Executive Summary

This section discusses the principles underlying our policies and decisions with respect to the compensation of our NEOs for 2022 and the factors we believe are relevant to an analysis of these policies and decisions. Our NEOs for 2022 are listed below.

Financial Performance

Our CF medicines, TRIKAFTA/KAFTRIO, SYMDEKO/SYMKEVI, ORKAMBI, and KALYDECO, are transforming the lives of eligible patients around the globe and continue to drive our financial performance.

Our CF net product revenues increased to $8.93 billion in 2022, up 18% or approximately $1.4 billion, from our 2021 net product revenues.

Our total R&D, AIPR&D and SG&A expenses decreased to $3.6 billion compared to $3.9 billion in 2021. The decrease was primarily due to lower AIPR&D as a result of the one-time $900 million upfront payment to CRISPR in 2021, partially offset by increased investment in support of multiple programs that have advanced to mid- and late-stage clinical development and the costs to support launches of Vertex’s therapies globally.

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Marketed Products

Our successful strategy of serial innovation has sustained and expanded our leadership position in CF and continues to propel us toward our goal of delivering highly effective treatments to all patients with CF. In January 2012, KALYDECO was first approved to treat approximately 1,000 patients with the G551D mutation in the U.S. Since then, we have focused on expanding the number of patients eligible for our medicines, expanding access to our medicines in additional geographies, and seeking improved treatment options for all patients with CF.

Our four approved medicines have broad reimbursement, are accessible in more than 40 countries, and are being used to treat more than two-thirds of the approximately 88,000 people with CF in North America, Europe, and Australia. Yet, as of the beginning of the year, there were more than 25,000 untreated patients in these geographies who could benefit from our therapies. We expect to grow our CF business with (i) continued uptake by patients in countries where we are early on the launch curve, such as those with recently achieved reimbursement agreements, (ii) label expansions, including into younger patient groups, (iii) the development of mRNA therapies for people with CF who are not eligible for our approved CFTR modulators, and (iv) growth in the number of people living with CF.

Since the beginning of 2022, notable progress includes:

	The European Commission and the MHRA granted marketing authorization for KAFTRIO for the treatment of children with CF 6 through 11 years of age who have at least one F508del mutation in the CFTR gene.
	Health Canada granted marketing authorization for TRIKAFTA for children with CF 6 through 11 years of age who have at least one F508del mutation.
	The FDA approved the use of ORKAMBI for children with CF 12 to less than 24 months of age who are homozygous for the F508del mutation.
	We submitted global regulatory filings for TRIKAFTA/KAFTRIO in children with CF 2 through 5 years of age and for KALYDECO in children with CF from 1 month to less than 4 months of age.

Potential Near-Term Launch Opportunities

We are preparing for the following near-term launches of new products:

	Exa-cel in SCD and TDT. We completed European Union and U.K. regulatory submissions for exa-cel, an ex-vivo CRISPR gene-editing therapy, in the fourth quarter of 2022 and initiated a rolling submission in the U.S., which we recently completed. The EMA and MHRA have validated the exa-cel MAA for their respective jurisdictions.
	VX-548 in acute pain. We continue to enroll the Phase 3 pivotal program for VX-548 for the treatment of moderate to severe acute pain and expect to complete the pivotal program in late 2023 or early 2024.
	Vanzacaftor/tezacaftor/deutivacaftor, the next-in-class triple combination, in CF. We continued our strategy of serial innovation by completing enrollment of the Phase 3 trials of our once-daily triple combination of vanzacaftor/tezacaftor/deutivacaftor. Our clinical and preclinical data indicate that the vanzacaftor/tezacaftor/deutivacaftor triple combination has the potential to provide enhanced benefit beyond TRIKAFTA/ KAFTRIO for people who have at least one mutation in their CFTR gene responsive to CFTR modulators. This regimen also has the benefit of once-daily dosing and has substantially decreased royalties compared with TRIKAFTA.

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Research and Development

We invest in research and development to discover and develop transformative medicines for people with serious diseases, with a focus on specialty markets. Our research and development strategy combines transformative advances in the understanding of human disease and the science of therapeutics to dramatically advance human health. This approach has yielded a broad and deep pipeline and increases the speed and likelihood of successfully bringing medicines to patients, as demonstrated by our success in moving novel product candidates into clinical trials and obtaining marketing approvals, including for TRIKAFTA/KAFTRIO, SYMDECO/SYMKEVI, ORKAMBI, and KALYDECO for the treatment of CF. The strategy was designed to deliver transformative medicines for serious diseases at high rates of success, and it has delivered just that. Beyond CF, our approach to drug discovery has yielded clinical proof-of-concept in five additional disease areas: SCD and beta thalassemia with exa-cel, acute pain with VX-548, AMKD with inaxaplin, and T1D with VX-880, a stem cell-derived islet cell therapy.

Our research and development approach also includes pursuing multiple modalities tailored to the specific disease area target under investigation, using biomarkers that translate from the bench to the bedside, and advancing multiple candidates into clinical trials with the goal of bringing first-in-class, followed by best-in-class, therapies to patients. In addition to expanding our small molecule programs, we have also advanced an industry-leading portfolio of programs in cell and gene therapies.

Our advancements across multiple disease areas and modalities include:

	Cystic Fibrosis. We continue to pursue next-in-class, small molecule CFTR modulator therapies as well as genetic therapies for people with CF who do not make CFTR protein and, as a result, cannot benefit from our current CF medicines. In the past year, we significantly advanced our program for VX-522, a CF mRNA therapeutic designed to treat the underlying cause of CF in these people by enabling cells in the lungs to produce functional CFTR protein. The FDA cleared our IND application in December 2022 and we have initiated a clinical trial for VX-522 in people with CF; the trial is active and enrolling.
	Sickle Cell Disease and Beta Thalassemia. The Phase 3 studies of exa-cel in patients 12 years of age and older is ongoing, as is a long-term follow-up study. Two additional Phase 3 studies in pediatric patients continue to enroll.
	Neuropathic Pain. We have initiated a Phase 2 clinical trial of VX-548 in diabetic peripheral neuropathy, a common form of chronic peripheral neuropathic pain.
	APOL1-Mediated Kidney Disease. We initiated pivotal development of inaxaplin and continue to enroll the Phase 2/3 adaptive clinical trial in patients with AMKD.
	Type 1 Diabetes. We are evaluating VX-880, an investigational stem-cell derived fully-differentiated islet cell therapy, for the treatment of T1D in a Phase 1/2 clinical trial in which patients receive immunosuppressive therapy to protect the islet cells from immune rejection. Our CTA in Canada and our IND in the U.S. for our second program in T1D, VX-264, in which the implanted islet cells are encapsulated in an immunoprotective device, were authorized and we plan to begin screening, enrollment and dosing in both Canada and the U.S. in the coming months. We have also continued pre-clinical development of our hypoimmune program utilizing VX-880 cells, and our second hypoimmune program that we are developing in partnership with CRISPR is the subject of a Phase 1/2 study that is active and enrolling patients.
	Alpha-1 Antitrypsin Deficiency. We initiated a first-in-human clinical trial for VX-634, which is the first in a series of next-wave investigational small molecules with significantly improved potency and drug-like properties as compared to our previous AAT correctors. We also initiated a second Phase 2 clinical trial of VX-864, a first-generation AAT corrector, to assess the impact of longer-term treatment on the liver, as well as the levels of functional AAT in the plasma.
	Duchenne muscular dystrophy. We are conducting IND-enabling studies for our first in vivo gene-editing therapy for DMD, and we expect to submit an IND for this program in 2023.
	Myotonic dystrophy type 1. We are exploring multiple approaches to address the underlying causal biology for DM1, and are collaborating with Entrada on IND-enabling studies for an endosomal escape vehicle therapeutic.
	In addition to the programs listed above, we have several of earlier-stage research programs aimed at diseases that fit our R&D strategy.

We will continue investing in our research and development programs and fostering scientific innovation by identifying additional product candidates through our internal research efforts and investing in business development transactions to access emerging technologies, products, and product candidates.

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The following chart represents our clinical stage pipeline and all follow-on assets for those programs by disease area, stage of development, and modality; it does not include all preclinical programs.

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Increasing Shareholder Value

Driven by our outstanding financial performance and pipeline successes, our stock price increased 31.5% from $219.60 per share at the end of 2021 to $288.78 per share at the end of 2022. While we are pleased with our stock performance in 2022, we believe biotechnology companies are best measured over the long term, as opposed to one-year or other shorter-term increments. The following charts show our total shareholder return relative to the NBI and S&P 500 index since the beginning of 2012, when KALYDECO was first approved, as well as our stock price performance over multiple periods. We believe the execution of our differentiated serial innovation strategy will continue to create shareholder value over the long term.

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2022 Compensation Decisions and Pay-for Performance

In 2022, our executive compensation program received substantial support from our shareholders, with approval by approximately 93% of the votes cast at the annual meeting of shareholders. We believe this support is consistent with our long-term shareholders’ understanding of our business model and the long-term value we are creating. Our executive compensation program is intended to align executive compensation with the company’s short- and long-term performance and to provide the compensation and incentives required to attract, motivate and retain our high-caliber executives who are crucial to Vertex’s long-term success. Our compensation program is highly performance-based, with 90% of our NEO compensation tied to performance. Retention of our talented executives is critical, as their outstanding performance has led to the company’s advancement and the creation of significant long-term shareholder value.

In 2022, our board of directors and MDCC reviewed our compensation programs and made the following key decisions:

	Program Design: We maintained our compensation program design that directly ties pay with performance and has contributed to our short- and long-term successes.
	Base Salary: In 2022, based on a comparative analysis of companies in our Peer Group (described below), we increased base salary compensation for Dr. Kewalramani, Dr. Altshuler and Mr. Wagner and maintained base salary compensation for Mr. Arbuckle. Under his employment agreement, Dr. Leiden no longer receives a base salary for his role of Executive Chairman.
	Annual Cash Bonus: We maintained the target cash bonus, which is a percentage of base salary, for all of our NEOs. Dr. Leiden does not receive an annual cash bonus pursuant to his employment agreement. The company’s outstanding performance in 2022, as described above, resulted in the board determining that the company had achieved a leading rating for 2022 (a rating of 145 out of a potential 150), and the payment of above-target annual cash bonuses. Please see Overview of Company Performance Rating & Achievement in 2022.
	Long-Term Equity Program:

Shareholder Engagement

We believe that a robust shareholder outreach program is an important component of maintaining our strong corporate governance practices. We strive for a collaborative approach with shareholders to solicit and understand a variety of perspectives and interests, and our practice has been to engage with our shareholders regularly over the course of the year.

During 2022, we solicited feedback regarding our corporate governance practices from our top 40 shareholders representing approximately 65% of our outstanding shares. Our integrated outreach team included leaders from our Investor Relations, Human Resources, Corporate Responsibility, and Legal teams, and we discussed numerous topics of shareholder interest, including our business strategy, R&D approach, our diversity initiatives and metrics, employee engagement and development, political and lobbying disclosures, executive compensation, sustainability and climate change matters.

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Compensation Governance Practices

We continue to implement and maintain leading practices in our compensation program, shareholder outreach and related areas.

Detailed Discussion and Analysis

Compensation Philosophy

Our MDCC regularly reviews the elements of the individual compensation packages for our executive officers to ensure that they continue to support the achievement of the following primary objectives:

	attract, retain, and motivate talented, experienced, and high-performing individuals across all areas of our business;
	align the interests of our executive officers with the interests of our shareholders as we seek to create value through the discovery, development, and commercialization of transformative medicines; and
	ensure that the vast majority of compensation is tied to company and individual performance.

Our executive officers have had long and varied careers and possess diverse backgrounds and skills that make them extremely valuable members of our executive team and our company as a whole. The leadership, stability and commitment of this team have been instrumental in building Vertex into the company it is today, with a leadership position in the treatment of CF, a pipeline of small molecule and cell and genetic therapies that has advanced significantly over the last several years, increasing revenues, and a strong financial profile. All of these factors position Vertex to achieve its strategic objectives in future years.

Our MDCC and board seek to connect the achievement of our strategic objectives with our compensation program in a number of ways, including through detailed and measurable company goals that underlie our annual cash bonuses and the performance goals that are used in our equity awards. Our company goals address several key objectives, including increasing revenues from our current products, achievement of commercial manufacturing and R&D objectives, enhancing organizational capabilities, and maintaining financial strength. We believe this mix provides an appropriate balance between near- and long-term objectives and financial and organizational development objectives. These objectives are selected specifically because they are considered by our MDCC and board to be measurable milestones that our company must achieve if it is to maintain its significant revenue growth, superior profitability, and ability to continue creating value over the long-term. Our MDCC and board expects to continue seeking balance in the use of financial metrics and R&D goals to motivate our executive team to achieve financial objectives, while providing appropriate incentives for our management to continue to make investments in our business for the long term.

In determining compensation, we consider compensation paid by similar companies as reference points, but do not strictly benchmark or target compensation at any particular level. Our MDCC retains flexibility to structure compensation based on good governance practices, our objectives of building our company and creating value for our shareholders, and, most importantly, discovering, developing, and delivering transformative medicines for patients who can benefit from them.

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Compensation Decision-Making Process

Role of MDCC, Executive Chairman, and CEO in Setting Executive Compensation

The MDCC has responsibility for overseeing the design, development, and implementation of the compensation program for our CEO and other executive officers. The MDCC evaluates the performance of our CEO and other executive officers. Our CEO, our Executive Chairman, and our human resources group assist the MDCC in evaluating the performance of our other executive officers, including the NEOs other than the CEO. Our CEO does not make any recommendations to the MDCC regarding CEO compensation and does not participate in the portions of MDCC meetings or meetings of the board of directors when CEO compensation is discussed and determined. Similarly, our Executive Chairman does not make any recommendations to the MDCC regarding his compensation and does not participate in portions of MDCC meetings or meetings of the board of directors when Executive Chairman compensation is discussed and determined.

The members of the MDCC, each of whom is an independent director, make a recommendation regarding executive compensation to the independent directors of the board, who together make final compensation decisions for the CEO and other executive officers based on these recommendations.

Role of Compensation Consultant

The MDCC (i) is directly responsible for the appointment and oversight of its compensation consultants, (ii) has the authority to determine the fees that we pay for services provided by such compensation consultants, and (iii) prior to engaging any compensation consultant, considers applicable factors potentially affecting the independence of the compensation consultant, including the factors set forth in Nasdaq Marketplace Rule 5605(d)(3).

Annually, the MDCC engages an independent compensation consultant to conduct an analysis of all elements of our executive officer compensation program compared to similar elements paid to similarly situated executives at companies in our Peer Group (as defined below) and to provide a written report and presentation of findings at the meeting of the MDCC that occurs in the summer each year. The compensation consultant also provides guidance on other matters that may arise from time to time and participates in regular discussions with the MDCC Chair, as requested. In 2022, the MDCC continued its engagement with Pearl Meyer as its independent compensation consultant. Pearl Meyer is compensated for advice provided at the direction of the MDCC.

The MDCC reviews Pearl Meyer’s independence in accordance with applicable Nasdaq and SEC rules. Based on this review, and other factors considered by the MDCC, the MDCC determined that Pearl Meyer’s work did not raise a conflict of interest.

Use of Peer Group Companies

In order to make judgments about elements of executive compensation on a competitive basis, the MDCC and our board of directors considers information about the compensation practices of a representative group of companies with whom we compete for executive talent (our “Peer Group”). We conduct a detailed analysis to select companies for this Peer Group on the basis of similarity and complexity of business model. Selecting a peer group for our company is difficult because of the limited number of companies that are similar in terms of complexity, including breadth of pipeline, variety of innovative therapies and level of revenues. As a result, we use a mix of quantitative and qualitative factors in order to establish our peers, including the following:

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Although we consider revenue as a factor, we do not emphasize it, as we do not believe that revenue alone adequately indicates whether a company has a similar business model or complexity. A company with similar revenues may not have global or commercial operations like we have, or it may focus on generic medicines rather than innovative therapies; either of these factors would result in a different business model that requires a relatively smaller investment in R&D. Moreover, companies with similar revenues may not focus on innovative therapies such as those designated as Breakthrough Therapies by the FDA, a designation which can expedite the development and review of medicines that are intended to treat serious conditions where preliminary clinical evidence indicates that the medicine may demonstrate substantial improvement over available therapy. As a result, we believe the factors listed above provide a better way to assess similarity versus a reliance on the combination of revenue and industry. We also note that it is unlikely for companies to align on all the factors listed above, so we look for companies meeting a majority of the criteria although we place greater weight on companies focused on innovation and the importance of medicines to patients and society as we believe these are the key drivers of our business model. On a regular basis, we review and revise the list of companies with the goal of maintaining a group of comparators comprised of at least twelve companies.

As a result of this analysis, and on the basis of the criteria listed above, the MDCC selected the following comparator companies for 2022. The peer group was modified in 2022 from 2021 to include three new companies (Alnylam Pharmaceuticals, Bristol-Myers Squibb Company and Moderna, Inc.) to replace three prior peer companies (Alexion, Alkermes and United Therapeutics). We replaced Alexion Pharmaceuticals, Inc. (“Alexion”) due to its acquisition by AstraZeneca PLC and Alkermes and United Therapeutics because of diminishing business model similarity.

Properties of Peer Group

We believe, based on our discussions with major shareholders, that the Peer Group identified by the MDCC is consistent with our shareholders’ views of our relevant peers in the biotechnology industry. In addition, the Peer Group companies have many of the business model characteristics that we seek in comparator companies as set forth in the following table.

																Innovative and Importance of Medicines
Company Information					R&D Expense(1)							Operational Focus				Orphan/		Breakthrough		Innovative Approved		Uses		Market Position
Company		Industry			$ (millions)			% of Revenue				Global		Commercial		Unmet Clinical Need		Therapy Designations(2)		Drugs in Last 12 Years(3)		Vertex as Peer		Nasdaq 100		S&P 500
AbbVie		Biotech			$	7,207			12	%								7		8
Alnylam		Biotech			$	883			85	%								3		2
Amgen		Biotech			$	4,434			17	%								2		9
Biogen		Biotech			$	2,231			22	%								—		6
BioMarin		Biotech			$	650			31	%								1		4
Bristol-Meyers		Pharma			$	10,324			22	%								12		15
Eli Lilly		Pharma			$	8,099			28	%								4		10
Gilead		Biotech			$	8,621			32	%								6		9
Incyte		Biotech			$	1,638			48	%								2		4
Jazz		Pharma			$	1,634			45	%								—		4
Moderna		Biotech			$	3,295			17	%								—		1
Regeneron		Biotech			$	3,593			30	%								8		7
Seagen		Biotech			$	1,344			69	%								4		3
Vertex		Biotech			$	2,540			28	%								8		5

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We do not strictly benchmark to a particular level of compensation relative to compensation levels at the Peer Group companies, but rather make a judgment about where each executive should fall in comparison with executives with similar responsibilities at the Peer Group companies. The MDCC looks at Peer Group information to confirm that our compensation levels are competitive with those of the Peer Group companies and consistent with our compensation philosophy. In addition, the MDCC reviews broader industry specific executive compensation surveys published by Radford, Mercer SIRS, and Willis Towers Watson, but does not make any material compensation decisions based on any particular company participants in such surveys.

Due to the low representation of the Chief Operating Officer role within the Peer Group, Pearl Meyer supplemented the Peer Group with broader life science industry companies for purposes of analyzing competitive compensation for this role. Pearl Meyer reviewed companies within the broader life sciences industry and included all companies who maintained a chief operating officer or similar role that also had greater than $2 billion revenues and greater than $10 billion market capitalization. The MDCC reviewed the compensation practices for the following broader life science industry companies when considering compensation for Mr. Arbuckle:

Elements of Annual Compensation

Our practice is to target total direct compensation including base salary, target annual cash incentives, and target long-term incentive awards at market competitive levels depending upon the NEO’s responsibilities, expertise, and experience. At superior levels of performance, we aim for the design of our executive compensation program to result in actual total direct compensation at or above the seventy-fifth percentile of peer executive compensation. Each year we review the mix of elements of our executive compensation program to ensure they are appropriately designed in light of our goals to align the program with our business strategy, the competitive environment and our shareholders’ interests.

Our executive compensation program emphasizes a mix of long-term equity compensation awards to incentivize and reward those individuals who make the greatest contribution to company performance over time. For the NEOs, this means compensation is primarily in the form of equity and directly tied to changes in shareholder value over time. For our 2022 equity grants, we maintained our mix of equity awards, including PSUs and time-based RSUs.

Compensation Program

As shown in the following charts, our compensation program places significant weight on performance-based compensation, with more than 90% of our NEO compensation tied to performance, or “at-risk” if performance is not achieved.

The charts above generally represent the values in the Summary Compensation Table for our NEOs using the target value for PSU grants. These charts exclude the compensation of our Executive Chairman and special, one-time equity award grants to Mr. Arbuckle in 2022.

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Performance-Based Value-Based Program

We have a performance-based program that is consistent with programs implemented by our peers and allows us to attract, retain, and motivate talented and highly experienced individuals across all areas of our business. We focus on the following performance-based elements:

Compensation Element	Performance Link
Annual Cash Bonus	Annual bonus dependent on both company and individual performance factors
Equity Awards	Grant date value of equity awards based on target award values by level with differentiation for individual performance    Value of shares granted based on target set by MDCC and Board, adjusted for individual performance ranging from 0% for below target individual performance, 100% at target performance, and up to 150% for above target individual performance
PSU Awards	50% of PSUs with range of shares issued 0% to 200% of target based on one year financial metrics (vesting in equal installments over a three year period)    50% of PSUs with range of shares issued 0% to 200% of target based on three-year non-financial metrics (cliff-vesting after three years)
Time-Based RSUs	Value of awards increases or decreases based on stock price over the three-year vesting period    We consider our time-vesting RSU awards to be performance-based awards because the target number of RSUs awarded may be adjusted based on the corresponding executive’s individual performance for the relevant performance period as well as the resulting value dependent upon increases or decreases in our stock price over the three-year vesting period

More specifically:

PSU Awards. Our CEO and executive vice presidents (“EVPs”) receive 50% of their annual equity compensation in the form of PSUs. 50% of the number of PSUs are eligible to vest based on the achievement of financial goals and the remaining 50% of the number of PSUs are eligible to vest based on the achievement of non-financial goals. The financial PSUs, if earned, vest in annual installments over a three-year period, and the non-financial PSUs, if earned, cliff vest after three years. The potential shares earned pursuant to these PSU awards range from 0% to 200% of the target number of shares, with the number of shares actually issued determined by the achievement of the financial and non-financial performance measures. The MDCC selected revenue and clinical development milestones because the MDCC determined that these milestones are important, measurable metrics, the achievement of which would indicate successful execution toward our short- and long-term strategic objectives and build considerable shareholder value.

Time-based RSUs. Our CEO and EVPs receive 50% of their annual equity compensation in the form of time-based RSUs that vest over a three-year period measured from the date of grant. With 50% of the annual long-term incentive award at risk pending successful execution of our strategic objectives pursuant to our PSUs, we believe that it is important to have the remaining half of the annual long-term equity award focused on retaining our key executive talent. As a result, we believe time-based RSUs encourage retention and focus on long-term value creation thereby aligning with the interests of our shareholders.

Base Salary

The MDCC recommends base salaries for our executive officers based on multiple factors, including a competitive market analysis on a position-by-position basis. Annually, the MDCC reviews a comparison of each executive’s prior year base salary and cash bonus opportunity, measured at the target level, to salaries and cash bonuses reported for executives with similar responsibilities at Peer Group companies. The MDCC does not strictly benchmark to a particular level of compensation relative to compensation levels at the Peer Group companies. Instead, the MDCC’s judgment about where each executive should fall in comparison with executives with similar responsibilities at the Peer Group companies takes into account the executive’s general level of experience and capability, the significance of the executive’s job responsibilities to the achievement of our business strategy and company goals, and general performance over time, including demonstration of corporate values. On the basis of that information, including compensation at Peer Group companies, and taking into consideration the executive’s base salary for the previous year or years, the MDCC recommends an appropriate base salary for each executive officer, subject to final approval by our independent directors. Our current base salaries reflect each individual executive’s past and expected future contributions, performance, experience, specific responsibilities relative to peer benchmarks, and competitive positioning within the range around the median base salaries for our Peer Group companies.

Dr. Kewalramani’s base salary for 2022 was increased to $1.50 million based on multiple factors, including her contributions as CEO and President since April 1, 2020, expected future contributions, experience and knowledge, and based on a comparative analysis of CEO compensation in our Peer Group.

In 2022, we increased the base salary of Dr. Altshuler from $800,000 to $825,000 in recognition of his contributions since becoming Chief Scientific Officer, expected future contributions, experience and knowledge, and based on a comparative analysis of compensation in our Peer Group.

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We also increased the base salary for Mr. Wagner from $770,000 to $825,000 in recognition of his contributions since becoming Chief Financial Officer in April of 2019, expected future contributions, experience and knowledge, and based on a comparative analysis of Chief Financial Officer compensation in our Peer Group. In 2022, we maintained Mr. Arbuckle’s base salary.

Maintenance of Broad-Based Equity Program While Reducing Dilution

Since our inception, we have compensated all eligible employees using a mix of cash and equity. The broad-based nature of our equity compensation program is an important element of our overall employee compensation program and reflects our philosophy that it is important for all of our employees to approach their jobs with a long-term commitment and perspective. Over the last several years, we have modified our equity compensation programs. These modifications are consistent with modifications other biotechnology companies have made as they matured from development-stage companies to commercial-stage companies with a strong financial profile. As a result of these changes, we granted, on an absolute basis, equity awards representing 47% fewer shares of common stock in 2022 as compared to 2018 and reduced our “gross burn rate” from 1.7% in 2018 to 0.9% in 2022.

Company and Individual Ratings

The amounts for two of the principal elements of our executive compensation program - annual cash bonus and annual equity awards - are determined on the basis of annual company and individual performance ratings.

Overview of Company Performance Rating & Achievement in 2022

At the beginning of each year, our MDCC and board of directors, in consultation with our CEO, establishes company-wide goals for that year. While our performance against these goals is the most important factor considered in assessing our corporate performance, our MDCC and board consider additional accomplishments and shortcomings and may increase or decrease the performance scores associated with these goals. The aggregate discretionary adjustment may not exceed 10% of the performance score and the total company score may not exceed 150. The MDCC and our board of directors discuss and analyze the company’s performance, including specific performance factors and accomplishment of company goals, and ultimately approve the company’s annual performance rating.

For 2022, the MDCC recommended and the board set company goals and assigned relative weights to such goals that reflected our operational, strategic, and financial objectives for the year and the importance of these goals in achieving short- and long-term growth and increasing profitability. Our revenue goals for marketed and approval stage products were designed to incentivize increasing access to our medicines through approvals of new transformative medicines, label-expansions for our existing medicines, and obtaining government reimbursement in ex-U.S. markets. Our commercial manufacturing, quality and operations goals were designed to incentivize supply chain resilience, efficiency in delivery of our CF medicines and commercial manufacturing readiness for medicines in our pipeline. Our pipeline goals and our budgets were established with the expectation that we would invest with discipline in R&D and external innovation with the goal of developing additional transformative medicines. We believe this mix of goals provides an appropriate balance between our near- and long-term objectives and between pipeline, financial, and organizational development objectives.

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Our 2022 weighted goals and the year-end score achieved by the company as recommended by the MDCC and approved by the board are set forth in the following table:

Our 2022 company performance score, as determined by the board, was 145 out of a potential of 150. Our 2023 company performance will be evaluated against the broad categories set forth above, but with slightly different weighting with respect to Pipeline Growth (59 points), Manufacturing, Quality and Operations (13 points), and Organizational Development and Capability (13 points).

Detailed Discussion of Company Performance Rating Factors and Achievements

Goals - Marketed and Approval-Stage Products

In 2022, we made significant progress with respect to our marketed and approval-stage products.

	CF net product revenues increased to $8.93 billion, up 18% as compared to 2021. Our CF net product revenues exceeded the mid-point of our initial CF net product revenues guidance by approximately $400 million ($8.93 billion actual as compared to the mid-point of our initial guidance of $8.5 billion) as a result of strong uptake of TRIKAFTA/KAFTRIO in multiple countries internationally and the continued steady performance of TRIKAFTA in the U.S. for children with CF 6 to 11 years of age.
	We executed strong commercial launches of KAFTRIO in multiple countries outside of the U.S.
	We advanced our cross-functional commercial readiness in advance of the anticipated launch of exa-cel, including with respect to critical hires, activation of treatment centers, and engagement with policymakers, payers and patient advocacy groups.

For marketed and approval-stage products goals, our board assigned the company a score of 50 out of 50, due to exceeding goals with respect to total CF net product revenues, successfully launching our CF medicines in younger age groups, and making meaningful progress in commercial launch preparation.

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Goals - Pipeline Growth (Late and Early-Stage)

In 2022, we made significant progress advancing our pipeline of CF and non-CF medicines.

	We completed enrollment in Phase 3 clinical trials evaluating our once-daily investigational triple combination of vanzacaftor/tezacaftor/ deutivacaftor.
	We advanced our CF mRNA program designed to address the patients not currently eligible for any of our products. In December 2022, the FDA cleared our IND for VX-522 and we have initiated a clinical trial in people with CF.
	We expanded the eligibility of our medicines to younger age groups in the U.S., Europe, Australia, and Canada and submitted regulatory filings for approval in younger age groups across the portfolio.
	We made significant progress advancing a broad pipeline of potentially transformative small molecule, cell, and genetic therapies aimed at treating serious diseases.
	We completed regulatory submissions in the European Union and U.K. for exa-cel for SCD and TDT, and initiated U.S. regulatory submissions. We also initiated two additional Phase 3 trials evaluating exa-cel in pediatric patients with SCD and TDT.
	We announced positive Phase 2 data for VX-548, a selective small molecule, non-opioid inhibitor of NaV1.8, for the treatment of acute pain and have initiated three Phase 3 trials. We have also initiated a Phase 2 clinical trial of VX-548 in peripheral neuropathic pain.
	We initiated pivotal development of inaxaplin, our small molecule inhibitor of APOL1 function for patients with AMKD.
	We achieved proof-of-concept for VX-880, our cell therapy designed to treat T1D, and achieved clearance to begin clinical trials in Canada for our second program in T1D, VX-264, our cells and device program.
	We initiated various first in human studies and delivered numerous preclinical candidates in our areas of therapeutic focus.

On the basis of the accomplishments in advancing our R&D programs and, in particular the completion of European Union and U.K. regulatory submissions for exa-cel, achievement of proof-of-concept for VX-548 and VX-880, advancements of other clinical trials, and advancement of multiple pre-clinical candidates across multiple modalities, and also taking into account the challenges experienced with certain clinical trials, our board assigned the company a score of 56.5 out of 63 for our pipeline growth goal.

Goals - Manufacturing, Quality and Operations