# How Vertex Pharmaceuticals makes money

CXProWealth Business Lens · Vertex Pharmaceuticals (VRTX) · Q2 FY2026

Read from the 10-Q for the period 2026-04-01 to 2026-06-30, filed 2026-08-04 with the SEC (accession 0000875320-26-000259): https://www.sec.gov/Archives/edgar/data/875320/000087532026000259/

Business Lens explains how a company earns, spends and keeps its money, from its own filings. It is insight and context, never a view on the shares, a target, or advice. Figures are raw units as filed; percentages are percentage points.

## Headline figures

- Revenue: $3.3B (+12.5% on the year)
- Operating income: $1.2B (operating margin 37.4%)
- Net income: $1.1B (net margin 33.0%)
- Gross margin: 85.3%
- Free cash flow: $1.0B (30.4% of revenue)
- Cash conversion (operating cash flow / net income): 1.02x
- Capital expenditure: 3.4% of revenue

## Where the money goes (Q2 FY2026)

- Trikafta/kaftrio → Total revenues: $2.5B
- Alyftrek → Total revenues: $573.6M
- Other CF product revenues → Total revenues: $137.1M
- Casgevy → Total revenues: $76.4M
- Journavx → Total revenues: $49.6M
- Total revenues → Total costs and expenses: $2.1B
- Total costs and expenses → Acquired in-process research and development expenses: $21.4M
- Total costs and expenses → Change in fair value of contingent consideration: $400.0K
- Total costs and expenses → Research and development expenses: $993.8M
- Total costs and expenses → Selling, general and administrative expenses: $582.2M
- Total costs and expenses → Cost of sales: $489.2M
- Total revenues → Income from operations: $1.2B
- Income from operations → Income before Provision for income taxes: $1.2B
- Interest income, net → Income before Provision for income taxes: $120.6M
- Other income (expense), net → Income before Provision for income taxes: $24.3M
- Income before Provision for income taxes → Provision for income taxes: $292.0M
- Income before Provision for income taxes → Net income: $1.1B

## Where the revenue comes from

### Products and services (Segment Information - Schedule of Revenues by Product (Details))

| Member | Value | Share |
|---|---:|---:|
| Trikafta/kaftrio | $2.5B | 74.9% |
| Alyftrek | $573.6M | 17.2% |
| Other CF product revenues | $137.1M | 4.1% |
| Casgevy | $76.4M | 2.3% |
| Journavx | $49.6M | 1.5% |

The members sum to total revenue.

### Regions (Segment Information - Schedule of Revenue by Geographic Location (Details))

| Member | Value | Share |
|---|---:|---:|
| Europe | $977.7M | 29.3% |
| Other | $299.8M | 9.0% |

The members do not sum to total revenue.

## Income statement, as filed

| Line | Q2 FY2026 | Of revenue |
|---|---:|---:|
| Total revenues | $3.3B | 100% |
|   Product revenues, net | $3.3B | 100.0% |
|   Other revenues | $0 | 0.0% |
| Cost of sales | $489.2M | 14.7% |
| Research and development expenses | $993.8M | 29.8% |
| Acquired in-process research and development expenses | $21.4M | 0.6% |
| Selling, general and administrative expenses | $582.2M | 17.5% |
| Intangible asset impairment charge | $0 | 0.0% |
| Change in fair value of contingent consideration | $400.0K | 0.0% |
| **Total costs and expenses** | $2.1B | 62.6% |
| **Income from operations** | $1.2B | 37.4% |
| Interest income, net | $120.6M | 3.6% |
| Other income (expense), net | $24.3M | 0.7% |
| **Income before Provision for income taxes** | $1.4B | 41.7% |
| Provision for income taxes | $292.0M | 8.8% |
| **Net income** | $1.1B | 33.0% |
| Basic (in dollars per share) | $4 | 0.0% |
| Diluted (in dollars per share) | $4 | 0.0% |
| Basic (in shares) | 253,700,000 |  |
| Diluted (in shares) | 255,200,000 |  |

## History

| Period | Revenue | Operating income | Net income | Operating cash flow | Capital expenditure | Free cash flow |
|---|---:|---:|---:|---:|---:|---:|
| FY2008 | $175.5M | -$462.7M | -$459.9M | -$226.5M | $32.2M | -$258.7M |
| FY2009 | $101.9M | -$614.0M | -$642.2M | -$427.6M | $23.5M | -$451.1M |
| FY2010 | $143.4M | -$696.1M | -$754.6M | -$635.4M | $38.1M | -$673.5M |
| FY2011 | $1.4B | $113.8M | $29.6M | $143.7M | $34.6M | $109.1M |
| FY2012 | $1.5B | $46.7M | -$107.0M | $267.8M | $71.1M | $196.7M |
| FY2013 | $1.2B | -$610.0M | -$445.0M | -$60.7M | $51.4M | -$112.1M |
| FY2014 | $580.4M | -$692.4M | -$738.6M | -$573.1M | $51.2M | -$624.3M |
| FY2015 | $1.0B | -$466.9M | -$556.3M | -$365.4M | $45.3M | -$410.7M |
| FY2016 | $1.7B | $9.9M | -$112.1M | $236.1M | $56.6M | $179.5M |
| FY2017 | $2.5B | $123.2M | $263.5M | $844.9M | $99.4M | $745.5M |
| FY2018 | $3.0B | $635.2M | $2.1B | $1.3B | $95.4M | $1.2B |
| FY2019 | $4.2B | $1.2B | $1.2B | $1.6B | $75.4M | $1.5B |
| FY2020 | $6.2B | $2.9B | $2.7B | $3.3B | $259.8M | $3.0B |
| FY2021 | $7.6B | $2.8B | $2.3B | $2.6B | $235.0M | $2.4B |
| FY2022 | $8.9B | $4.3B | $3.3B | $4.1B | $204.7M | $3.9B |
| FY2023 | $9.9B | $3.8B | $3.6B | $3.5B | $200.4M | $3.3B |
| FY2024 | $11.0B | -$232.9M | -$535.6M | -$492.6M | $297.7M | -$790.3M |
| FY2025 | $12.0B | $4.2B | $4.0B | $3.6B | $437.6M | $3.2B |

Latest trend (the newest full year against the year before; a reading, not a forecast):

- Revenue: +8.9% (year before +11.7%): slowing
- Operating income: -1,691.9% (year before -106.1%): slowing
- Net income: -638.1% (year before -114.8%): slowing
- Free cash flow: -304.1% (year before -123.7%): slowing

## Operating figures stated in the filing

- Countries reimbursing ALYFTREK: 25 countries (as of 2026-06-30). "bringing the total number of countries where ALYFTREK is reimbursed to 25" (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- JOURNAVX prescriptions filled in the quarter: 535,000 prescriptions (as of 2026-06-30). "In the second quarter and first six months of 2026, approximately 535,000 and 900,000 prescriptions, respectively," (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- JOURNAVX prescriptions filled in the first half: 900,000 prescriptions (as of 2026-06-30). "In the second quarter and first six months of 2026, approximately 535,000 and 900,000 prescriptions, respectively," (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)
- People with reimbursed access to JOURNAVX: 260,000,000 people (as of 2026-06-30). "approximately 260 million individuals have reimbursed access to JOURNAVX across a wide range of commercial" (Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations)

## Key insights

### Alyftrek supplied the growth Trikafta no longer does

Trikafta/Kaftrio fell 2.1% while Alyftrek rose 265.8% to $573.6M, so revenue grew 12.45% with the best seller shrinking.

Trikafta/Kaftrio revenue fell 2.1% to $2.50B and its share of revenue dropped 11.15 points to 74.9%. Alyftrek rose 265.8% to $573.6M and gained 11.92 points to 17.2% of revenue. Older CF medicines fell 29.2% to $137.1M. Total revenues still grew 12.45% to $3.33B. _(from the filing)_
The filing attributes U.S. growth to continued strong patient demand, "including from new initiations of ALYFTREK", and to higher realized net prices in CF. Outside the U.S. it cites ALYFTREK uptake across multiple geographies. Reimbursement for Alyftrek reached 25 countries in the quarter. _(from the filing)_
By Vertex's reading of its agreement with the Cystic Fibrosis Foundation, Alyftrek carries a lower royalty than Trikafta/Kaftrio. The filing credits a lower blended CF royalty rate with partly offsetting the product-mix rise in cost of sales, which reached 14.7% of revenue. _(from the filing)_
Analysis: moving patients to its own successor keeps the revenue inside the franchise and can improve unit economics at the same time. The price is that the leading product's own growth turns negative, so the CF total, not any single medicine, is the measure of whether the franchise is still growing. _(analysis)_

### Flat research spending paid for the launch build-out

SG&A gained 3.14 points of revenue while R&D gave up 3.19, so the 1.43-point margin slip came from cost of sales and acquired research.

Selling, general and administrative expenses rose 37.1% to $582.2M against revenue growth of 12.45%. The filing attributes the rise to increased internal headcount and commercial investment to support JOURNAVX and the anticipated launch of povetacicept in IgAN. _(from the filing)_
Research and development rose only 1.57% to $993.8M and fell 3.19 points to 29.8% of revenue. The filing says outsourced services and other direct expenses were lower after certain clinical programs were discontinued in the prior year. _(from the filing)_
With those two moves nearly cancelling out, the 1.43-point fall in operating margin to 37.4% traces to cost of sales, up 0.93 points of revenue on product mix, and to acquired in-process R&D of $21.4M against $2.2M a year earlier, up 0.57 points. _(from the filing)_
Analysis: the swap kept the margin close to steady while two launches were funded. It relies on research spending staying flat. If the kidney, diabetes and pain programs need more money while launch spending stays high, the margin would have to absorb both at once. _(analysis)_

### A higher tax rate pulled net growth below operating growth

Operating income rose 8.32% but net income only 6.48%, as taxes climbed to 21.0% of pretax income from 19.5% a year earlier.

Income from operations rose 8.32% to $1.25B. Net income rose 6.48% to $1.10B. The provision for income taxes grew 16.75% to $292.0M, equal to 21.0% of pretax income of $1.39B, against 19.5% of pretax income a year earlier. _(from the filing)_
The filing says its effective tax rate fluctuates with the global mix of taxable earnings and with excess tax benefits from stock-based compensation, and that recent U.S. tax legislation could affect future tax rates, liabilities and cash taxes. _(from the filing)_
Per-share results moved the other way. Diluted shares fell to 255.2M from 258.9M, with financing cash going primarily to share repurchases, and diluted earnings per share rose to $4.31 from $3.99, a faster climb than net income's 6.48%. _(from the filing)_
Analysis: the operating story and the bottom line diverged for reasons outside the medicines. A reader comparing profit growth across periods should separate the tax rate and the share count from what the business itself earned. _(analysis)_

### Competitive edge

- **One quarter now out-earns a full year eight years ago** Quarterly operating income of $1.25B is nearly double the $635.2M of a full year eight years earlier, on revenue only a little larger.
- **An 85.3% gross margin with royalties already paid** Cost of sales, mainly CF royalties, took 14.7% of revenue, leaving room for R&D at 29.8% and an operating margin of 37.4%.
- **Payer access is built ahead of revenue** About 260 million people have reimbursed access to Journavx, and 59.4% of its first-half prescriptions were filled in the latest quarter.

### What to watch

- **Trikafta/Kaftrio still carries 74.9% of revenue** Casgevy and Journavx grew 151.3% and 313.3% but supply 2.3% and 1.5% of revenue, so cystic fibrosis still funds nearly everything.
- **The Alyftrek switch rests on a disputed royalty** The royalty holder's arbitration claims a higher Alyftrek royalty than the rate Vertex applies, on a medicine now selling $573.6M a quarter.
- **Crinetics trades interest income for integration risk** Net interest income of $120.6M equals 8.7% of pretax income, and the filing expects it to decrease once cash and a term loan fund Crinetics.

## Investor view

**Vertex is replacing its own best seller: Alyftrek reached 17.2% of revenue as Trikafta's share fell**

### How it makes money

Vertex earns almost everything by selling its own medicines, and most of that from cystic fibrosis. Product sales made up all of the quarter's $3.33B in revenue; a year earlier $20.7M came from other revenues, a partner's upfront payment. Trikafta/Kaftrio brought in $2.50B, 74.9% of revenue, Alyftrek $573.6M, 17.2%, and older CF medicines $137.1M, 4.1%. The filing describes its CF medicines as ones that "treat the underlying cause" of the disease. _(from the filing)_
The medicines cost little to make relative to what payers pay for them. Cost of sales was $489.2M, 14.7% of revenue, for a gross margin of 85.3%. The filing says cost of sales consists primarily of third-party royalties payable on CF sales, plus the cost of producing inventory, so much of the gap between price and gross profit is a royalty rather than manufacturing. _(from the filing)_
Research is the largest cost. R&D was $993.8M, 29.8% of revenue, larger than cost of sales and larger than selling, general and administrative expenses of $582.2M, 17.5% of revenue. Even after that spending, operating income was $1.25B, a 37.4% operating margin, and free cash flow was $1.01B, 30.4% of revenue. _(from the filing)_
Payers, not patients, decide most of the revenue. The filing says sales depend "to a large degree" on reimbursement by government health programs, commercial insurers and managed care, and that outside the U.S. reimbursement is sought country by country for each new medicine and each label expansion. Europe supplied $977.7M of the quarter's revenue, 29.3% of the total. _(from the filing)_

### What shifted

The CF franchise is moving to Alyftrek. Alyftrek revenue rose 265.8% year on year to $573.6M and gained 11.9 points of revenue share, while Trikafta/Kaftrio fell 2.1% and lost 11.2 points, and older CF medicines fell 29.2%. The filing attributes U.S. growth partly to patient demand "including from new initiations of ALYFTREK" and to higher realized net prices in CF. _(from the filing)_
Medicines outside CF grew fast from a small base. Casgevy revenue rose 151.3% to $76.4M, 2.3% of revenue, and Journavx rose 313.3% to $49.6M, 1.5% of revenue. The filing counts approximately 535,000 Journavx prescriptions filled in the quarter and 900,000 in the first half. _(from the filing)_
Costs grew faster than sales. Total costs and expenses rose 15.1% against revenue growth of 12.5%, so operating margin slipped 1.43 points to 37.4%. Selling, general and administrative expenses drove it, up 37.1% to $582.2M, which the filing ties to headcount and commercial investment for Journavx and the anticipated povetacicept launch. R&D rose only 1.6% and fell 3.2 points as a share of revenue. Cost of sales rose 20.1% on product mix, partly offset, the filing says, by a lower blended CF royalty rate. _(from the filing)_
Below operating income, net income grew 6.5% to $1.10B, slower than operating income's 8.3%, because the tax provision rose 16.8% to $292.0M, 21.0% of pretax income against 19.5% a year earlier. Fewer shares lifted per-share results: diluted shares fell to 255.2M from 258.9M, and diluted earnings per share rose to $4.31 from $3.99. _(from the filing)_

### Risks in the filing

The one risk factor added this quarter concerns Crinetics. The deal may not close, because of closing conditions, antitrust or other regulatory approvals, or litigation. If it closes, Vertex may fail to integrate the business, keep key employees or realize synergies, and management attention may be diverted. The filing says the expected benefits depend on Palsonify's sales and on atumelnant's development and approval. _(from the filing)_
Reimbursement "cannot be assured and may take significant periods of time to obtain", the filing says, and it has to be won again for each new medicine and each label expansion, country by country outside the U.S. The company describes dedicating substantial management resources to obtaining and keeping it. _(from the filing)_
Most drug candidates fail. The filing notes that across the industry most potential products never progress into development and most that do never receive approval, and that regulators interpret trial data themselves, which could delay, limit or prevent approval. Supply is a second named exposure: Vertex relies on a global network of third parties, including some in China, and cell and genetic therapies need more complex processes and facilities. _(from the filing)_
The royalty holder on CF sales has opened a confidential arbitration claiming a higher royalty on Alyftrek than Vertex's position, and seeks alleged unpaid royalties, damages, costs and interest. Vertex says the claim is contrary to the plain terms of the agreement and intends to defend its position; the filing records no material loss contingency accrued. _(from the filing)_
Of these, the numbers already show the cost of building beyond CF: commercial spending is growing far faster than revenue while the medicines it supports are still small, which is the commercialization risk in visible form. The royalty dispute and the Crinetics integration are not yet in the income statement. _(analysis)_

## Founder view: mechanisms

### Replace your own best seller

Vertex follows its leading CF drug with its own next-generation version and moves patients across before a competitor can offer them an alternative. The filing describes the aim as serial innovation: following first-in-class therapies with potential best-in-class ones. The switch also improves the economics, because Alyftrek carries a lower royalty than Trikafta, so a patient moved can be worth more gross profit at a similar price. _(analysis)_

### Early funding paid back as a royalty

The Cystic Fibrosis Foundation funded Vertex's early CF research in return for royalties on the resulting drugs. That money cost no equity, but the royalty lasts as long as the covered products sell: it is the main item in cost of sales, and the rights now sit with a royalty investor who disputes the rate on Alyftrek. The agreement covers only compounds first made within a defined window, so newer molecules can fall outside it. _(analysis)_

### One franchise's cash buys the next bets

Vertex uses CF cash to build and buy programs in other diseases: it acquired Alpine for povetacicept, has agreed to buy Crinetics, and runs development in kidney disease, pain, diabetes and blood disorders at once. Because acquired research is expensed when bought, a large purchase can turn a profitable year into a reported loss with no change in the underlying business. _(analysis)_

### Win payer access before revenue arrives

For a specialty medicine, approval is not the sale. Vertex spends on sales teams, payer negotiations and country-by-country reimbursement before revenue follows, and reports access as a milestone in its own right. Journavx shows the order: coverage first, prescriptions next, revenue last, with selling costs rising ahead of all three. _(analysis)_

## Member research

Signed-in members read, on the page: what Vertex Pharmaceuticals's numbers depend on from here, and the playbook behind each mechanism (what needs scale, what transfers, how to test it, the metric that would show it).

## Sources

- Vertex Pharmaceuticals 10-Q for the period to 2026-06-30: https://www.sec.gov/Archives/edgar/data/875320/000087532026000259/ (2026-08-04)

Methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-02 · as of 2026-11-02