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VERTEX   PHARMACEUTICALS INCORPORATED

130   WAVERLY STREET ·   CAMBRIDGE, MA 02139-4242

TEL. 617.444.6100 · FAX 617.444.7117

http://www.vrtx.com

July 11,   2012

Delivered via EDGAR

Securities and Exchange Commission
 Division of Corporation Finance

100 First Street, N.E.

Mail Stop 4720

Washington, DC 20549

Attn:

Jim B. Rosenberg, Senior Assistant Chief Accountant

Lisa Vanjoske, Assistant Chief Accountant

James Peklenk, Staff Accountant

Re:

Vertex Pharmaceuticals Incorporated

Form 10-K for the Fiscal Year Ended December 31,   2011

Filed February 22, 2012

Form 10-Q for the Quarterly Period Ended   March 31, 2012

Filed May 10, 2012

Form 8-K dated April 26, 2012

Filed April 26, 2012

Form 8-K dated February 2, 2012

Filed February 2, 2012

File No. 000-19319

Ladies and Gentlemen:

The purpose of this letter is to respond to the comments from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) to Vertex Pharmaceuticals Incorporated (the “Company”) set forth in the Staff’s letter to Ian F. Smith dated June 26, 2012 (the “Comment Letter”) regarding the Company’s filings with the Commission referenced above. The comments from the Comment Letter are reproduced below together with the Company’s responses to those comments.

Form 8-K filed February 2, 2012 and Form 8-K filed April 26, 2012

Exhibit 99.1

Comment 1

In these exhibits you present entire statements of operations to reconcile your GAAP earnings to non-GAAP earnings.  Please represent to us that you will no longer present these tables in future Item 2.02 Forms 8-K or elsewhere.  Please see Question 102.10 of our Compliance & Disclosure Interpretations for Non-GAAP Financial Measures (http://www.sec.gov/divisions/corpfin/guidance/-

nongaapinterp.htm).   Please also see Instruction 2 to Item 2.02 of Form 8-K which indicates that the provisions of Item 10(e)(1)(i) apply to these public disclosures.

Response 1

The Company confirms that in future earnings releases, Item 2.02 Forms 8-K and elsewhere, it will no longer present its GAAP/non-GAAP reconciliation in tables in the form that was included in its earnings releases for the three months and year ended December 31, 2011 and the three months ended March 31, 2012.

In preparing the Company’s earnings releases and related tables and its Forms 8-K, the Company considered the importance of providing information to investors as clearly as possible, the relative prominence of the GAAP and non-GAAP financial measures included in its earnings releases, and the Staff’s interpretive guidance in Question 102.10 of its Compliance & Disclosure Interpretations and related regulations.  The Company provides non-GAAP net income (loss) excluding certain items, as a complement to results provided in accordance with GAAP, in order to help indicate underlying trends in the Company’s business and to allow meaningful comparisons of current results with prior period results. The Company also uses non-GAAP financial measures to establish budgets and operational goals that are communicated internally and externally, and to manage the Company’s business and to evaluate its performance.  In particular, the Company believes that providing information regarding the Company’s collaboration with Alios BioPharma, Inc., which is accounted for as a variable interest entity, in a line-item format enhances clarity and helps investors better understand how the Company accounts for this variable interest entity and how that accounting affects both the Company’s GAAP income (loss) and non-GAAP income (loss).  The Company has taken steps to avoid giving undue prominence to the non-GAAP financial measures by (1) having the table showing the GAAP statements of operations precede the tables showing the reconciliation of GAAP to non-GAAP financial information and (2) providing less detailed information on a line-item basis in the GAAP/non-GAAP reconciliation than the information provided in the GAAP statements of operations.

The Company proposes to modify its approach in future earnings releases by including tables in substantially the form included as Exhibit A to this letter presenting data for the three months ended March 31, 2012 and 2011.  These tables reformat the tables to provide the non-GAAP information in a manner distinct from the format of Company’s full statement of operations, and provide fewer line items than in the original earnings releases at issue.  In this manner, the Company proposes to address the Staff’s concern, expressed in Question 102.10 of its Compliance & Disclosure Interpretations, that the presentation of the non-GAAP reconciliation not attach undue prominence to the non-GAAP information, while preserving the benefit to investors of the insight provided by the non-GAAP information.

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Form 10-K for the Fiscal Year Ended December 31, 2011

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results Of Operations

Operating Costs and Expenses

Cost of product revenues, page 63

Comment 2

You state herein that you expensed most of the manufacturing costs of INCIVEK sold in 2011 as research and development expenses in periods prior to January 1, 2011 and expect your cost of INCIVEK to increase as a percentage of net sales in future periods.  In your Form 10-Q for the quarterly period ended March 31, 2012, you indicate that you expensed most of the manufacturing costs of INCIVEK and KALYDECO sold in the first quarter as research and development expenses in prior periods and expect your cost of revenues to increase as a percentage of net sales in future periods.  Please tell us the nature and amount of the manufacturing costs that you expensed as research and development expenses for each of the following periods:

·                  prior to January 1, 2011;

·                  the year ended December 31, 2011; and

·                  the quarter ended March 31, 2012.

Reconcile these amounts to the “drug supply cost” in comment 4 below and for any differences, provide us your analysis supporting classification as research and development expense.  Also, for the year ended December 31, 2011 and the quarter ended March 31, 2012, tell us the amount of third-party royalties included in cost of product revenues for each period.

Response 2 (this response includes the Company’s response to Comment 5 of the Comment Letter)

Drug supply costs

The “drug supply costs” in the Company’s detailed table for its development expenses included as part of its discussion of “Results of Operations” included all external manufacturing costs expensed as research and development expenses during the periods.  These drug supply costs consisted of:

(i)                                     Commercial drug supply costs incurred in connection with manufacturing telaprevir (which the Company markets under the brand name INCIVEK) and ivacaftor (which it markets under the brand name KALYDECO) prior to the dates that the Company began capitalizing manufacturing costs for these drug candidates. The costs incurred in connection with manufacture of drug candidates consisted of (a) raw material and manufacturing costs, (b) costs incurred for the Company’s third-party manufacturers to establish their infrastructure required to manufacture commercial supplies of the Company’s products and (c) costs of validating these third-party manufacturers’ systems, machinery and processes. The Company began capitalizing manufacturing costs for its first product, telaprevir (INCIVEK), on January 1, 2011 and for its second product, ivacaftor (KALYDECO), on January 1, 2012.  After the Company began capitalizing manufacturing costs for each product, the Company continued to establish second sources of supply for the products and incurred costs for infrastructure and validation at third-party

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manufacturers that did not meet the criteria for capitalization.  These costs were expensed as research and development expenses.

(ii)                                  Costs for manufacturing services the Company provided to its telaprevir research and development collaborators (both Mitsubishi Tanabe Pharma Corporation and Janssen Pharmaceutica, N.V. — see discussion below) through the Company’s third-party manufacturing network in connection with the research and development collaborations.

The following table sets forth the Company’s drug supply costs for the period from 2006 (when the Company began separately tracking drug supply costs) through the first quarter of 2012:

2006-2008

2009

2010

Total
   for period
   prior to
   January 1,
   2011

2011

Q1
   2012

(in thousands)

Telaprevir   (INCIVEK):

Commercial   drug supplies:

Raw   materials and manufacturing costs

$

42,387

$

10,849

$

38,975

$

92,211

$

—

$

—

Third-party   manufacturing infrastructure costs

18,374

1,503

772

20,649

—

—

Third-party   validation expenses

31,061

1,872

592

33,525

—

—

Costs   for establishing second source of supply

—

—

—

—

3,762

1,070

Manufacturing   services (collaborator supply)

28,350

6,170

22,922

57,442

28,258

6,376

Total   INCIVEK costs

$

120,172

$

20,394

$

63,261

$

203,827

$

32,020

$

7,446

Ivacaftor   (KALYDECO):

Commercial   drug supplies:

Raw   materials and manufacturing costs

$

—

$

—

$

—

$

—

$

383

$

—

Third-party   manufacturing infrastructure costs

182

81

27

290

401

—

Third-party   validation expenses

—

1,116

2,614

3,730

1,329

—

Costs   for establishing second source of supply

—

—

—

—

—

576

Total   KALYDECO costs

$

182

$

1,197

$

2,641

$

4,020

$

2,113

$

576

Total   drug supply costs

$

120,354

$

21,591

$

65,902

$

207,847

$

34,133

$

8,022

Basis for classification

Commercial Drug Supplies — telaprevir and ivacaftor

The Company applied guidance in ASC 330-10 and Statement of Financial Accounting Concepts No. 6, paragraph 25, in each period, to determine whether or not to capitalize the manufacturing costs related to its commercial supplies of telaprevir and ivacaftor (including raw materials and manufacturing costs).  Due to the stage of development of its drug candidates and the uncertainty of realizing future economic benefit, and consistent with established industry practices, the Company expensed INCIVEK manufacturing costs as research and development expenses until January 1, 2011, and expensed KALYDECO manufacturing costs as research and development expenses until January 1, 2012.  The Company determined that there was a high likelihood of marketing approval for INCIVEK effective on January 1, 2011 and for KALYDECO effective on January 1, 2012, and therefore began capitalizing the manufacturing costs related to the respective drug candidates as of such dates. Once the Company determined it was appropriate to begin capitalizing inventories for the applicable drug candidate, no drug supply costs related to the manufacture of the Company’s commercial quantities of the applicable drug candidate were expensed as research and development expenses.

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Manufacturing Services — telaprevir

The Company began clinical development of telaprevir in 2004.  The Company considered the guidance in ASC 730-10 and determined that all amounts incurred in connection with the research and development of telaprevir should be expensed as incurred and should be classified as research and development expenses.

Subsequently, the Company entered into agreements to collaborate on the research and development of telaprevir with (i) Mitsubishi Tanabe Pharma Corporation (“Mitsubishi Tanabe”), a Japanese pharmaceutical company, in 2004, for certain countries in Asia and (ii) Janssen Pharmaceutica, N.V. (“Janssen”), a Johnson & Johnson company, in 2006, worldwide except for North America and Mitsubishi Tanabe’s territories.  The Company led the clinical development program for telaprevir, with Mitsubishi Tanabe and Janssen providing financial and other support pursuant to these collaboration arrangements.

In accordance with ASC 605-45 and ASC 730-10, the Company considered the nature and contractual terms of its arrangement with each collaborator and the nature of the Company’s business operations to determine the classification of all costs, including manufacturing services provided by the Company, under these collaborations.  The Company determined that because (i) the manufacturing services were performed in connection with the research and development collaboration arrangements pursuant to which the Company was sharing, among other things, the risks associated with developing telaprevir, and (ii) the Company is not otherwise engaged in the business of providing manufacturing services, the costs for manufacturing services should be reflected as research and development expenses (and included in drug supply costs) and corresponding revenues should be reflected as collaborative revenues.  This accounting treatment for manufacturing services pursuant to the Company’s collaboration agreements is consistent with the manner in which the Company accounts for all other costs associated with these collaborations.

Third-party royalties

The requested information regarding third-party royalties included in the cost of product revenues is set forth in the Company’s response to Comment 3.

Comment 3

It appears your cost of product revenues (including third party royalty expense on net sales) was only 6.7% of net product revenues for year 2011 and 6.9% for the quarter ended March 31, 2012.  Please tell us, by product (i.e. INCIVEK, KALYDECO) the amount of estimated revenues represented by inventory on hand at December 31, 2011 and March 31, 2012 for which manufacturing costs were expensed in prior periods as research and development expenses.  Tell us when you expect to finish selling these inventories.

Response 3

The following table sets forth the Company’s total cost of product revenues, broken out by cost of inventories and third-party royalties, as a percentage of total net product revenues for the year ended December 31, 2011 and the three months ended March 31, 2012:

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2011

Q1 2012

(in thousands, except percentages)

Cost of inventories

$

6,489

0.7

%

$

3,470

0.9

%

Third-party royalties

57,136

6.0

%

22,448

6.0

%

Total

$

63,625

6.7

%

$

25,918

6.9

%

On January 1, 2011, when the Company began capitalizing its manufacturing costs for supply of telaprevir, its supply chain for telaprevir included previously expensed raw materials, work-in-process and finished goods, and on January 1, 2012, when the Company began capitalizing its manufacturing costs for supply of ivacaftor, its supply chain for ivacaftor included previously expensed raw materials and work-in-process (collectively, “Zero Cost Inventories”). The following table sets forth (i) the “inventory” value of these Zero Cost Inventories for each of INCIVEK and KALYDECO as of January 1, 2011, December 31, 2011 and March 31, 2012 and (ii) the projected estimated “inventory” value of Zero Cost Inventories of each of INCIVEK and KALYDECO as of December 31, 2012 and December 31, 2013:

As of January
   1, 2011

As of December
   31, 2011

As of March 31,
   2012

Estimated as
   of December
   31, 2012

Estimated as
   of December
   31, 2013

(in thousands)

Value of Zero Cost Inventory:

INCIVEK

$

84,000

$

52,000

$

39,000

$

26,000

$

10,000

KALYDECO

—

3,800

3,600

2,500

850

The Company valued the Zero Cost Inventories based on the manufacturing costs of each of the raw materials, work-in-process and finished goods.

The following table sets forth the estimated value of net product revenues represented by Zero Cost Inventories on hand at December 31, 2011 and March 31, 2012:

December 31, 2011

March 31, 2012

(in thousands)

INCIVEK

$

1,800,000

$

1,400,000

KALYDECO

315,000

305,000

The estimate of net product revenues represented by Zero Cost Inventories on h