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VRTX, Vertex Pharmaceuticals Incorporated

Pharmaceuticals consumer brand Cyclical

Vertex is a drug company. It discovers, makes, and sells prescription medicines, and the heart of the business is a set of treatments for cystic fibrosis, an inherited disease, sold to the patients who carry it through their doctors and paid for largely by the insurers and health plans that cover them. It earns its money the way a branded drugmaker does: a medicine costs a great deal to invent and prove out, then very little to manufacture once approved, so nearly all the revenue from each prescription drops toward profit while the patent holds.

We use the brand name for our products when we refer to the product that has been approved and with respect to the indications on the approved label.

Otherwise, we refer to our product candidates by their scientific (or generic) name or VX developmental designation.

Latest annual: FY2025 10-K

VRTX · Vertex Pharmaceuticals Incorporated

The business

What it sells, where the money comes from, the kind of company it is.

Revenue · FY2025

$12.0B

+8.9% YoY · 14% 5-yr CAGR

Vital signs · TTM, with 5-yr average

Revenue $12.2B 5-yr avg $9.9B

Gross margin 86% 5-yr avg 87%

Operating margin 38.3% 5-yr avg 31.3%

ROIC 28% 5-yr avg 48%

Owner-earnings margin 33% 5-yr avg 27%

Free cash flow margin 30% 5-yr avg 26%

The business in brief

read the 10-K →

What this business is and what moves its needle, from its own SEC filings.

Situation: Cyclical. Margins collapse and recover repeatedly across the record; a single year, good or bad, misstates the through-cycle earning power.
What moves the needle: The first test is whether the cystic fibrosis franchise is a true franchise or a lease on patents: Vertex treats a disease defined by genetics where it has stood largely alone, so watch whether physicians and the payors who foot the bill keep accepting the medicines and the price — the filing names exactly that physician, patient, and payor acceptance as a risk, and a single-source supplier as another. The second is the reinvestment runway: the business leans on one therapeutic area, and management says plainly that its success depends on its ability to develop and commercialize additional medicines, so the question is whether heavy research spending produces the next franchise before the current patents lapse. The bad case is a narrow company whose moat is a clock, with payors pressing on the price and the pipeline failing to replace what time takes away. The record below holds the margins, the returns on capital, and the balance sheet.
Is it a good business?: Return on capital has run high across the record (median 36%, above 15% in 8 of 9 years), though buybacks and expensed R&D and brands shrink the capital base, so the figure overstates the underlying economics. The steadier read is owner earnings: roughly 34% of revenue reaches owners as cash, consistently. Whether these returns reflect real pricing power or an accounting artifact is the judgment the 10-K is for.

Drafted from the company's filings and reviewed by hand; every number is shown in full in the sections below.

Where the money comes from

read the 10-K →

37% of revenue comes from outside the United States.

Revenue by geography, FY2025

United States63%$7.5B
Europe29%$3.5B
Other8%$992M

From the segment footnote of the company's own 10-K. Shares are of total revenue; the profit bar shows each segment's share of segment operating profit, before unallocated corporate costs.

The record

Ten years of arithmetic, read across the cycle.

The record, 2016–2025

realized figures from each filing · older years to the left

2016’16	2017’17	2018’18	2019’19	2020’20	2021’21	2022’22	2023’23	2024’24	2025’25	TTMTTMMar 2026
											Income statement
$1.7B	$2.5B	$3.0B	$4.2B	$6.2B	$7.6B	$8.9B	$9.9B	$11.0B	$12.0B	$12.2B	RevenueRevenue
88%	89%	87%	87%	88%	88%	88%	87%	86%	86%	86%	Gross marginGross mgn
25%	20%	18%	16%	12%	11%	11%	12%	13%	15%	15%	SG&A / revenueSG&A/rev
62%	53%	46%	42%	29%	40%	28%	32%	33%	33%	32%	R&D / revenueR&D/rev
$10M	$123M	$635M	$1.2B	$2.9B	$2.8B	$4.3B	$3.8B	($233M)	$4.2B	$4.7B	Operating incomeOp. inc.
0.6%	5.0%	20.8%	28.8%	46.0%	36.7%	48.2%	38.8%	−2.1%	34.8%	38.3%	Operating marginOp. mgn
($112M)	$263M	$2.1B	$1.2B	$2.7B	$2.3B	$3.3B	$3.6B	($536M)	$4.0B	$4.3B	Net incomeNet inc.
—	—	—	16%	13%	14%	22%	17%	—	15%	16%	Effective tax rateTax rate
											Cash flow & returns
$236M	$845M	$1.3B	$1.6B	$3.3B	$2.6B	$4.1B	$3.5B	($493M)	$3.6B	$4.2B	Operating cash flowOp. cash
$61M	$61M	$72M	$107M	$110M	$126M	$148M	$181M	$207M	$210M	$217M	DepreciationDeprec.
$46M	$227M	($1.2B)	($75M)	$3M	($266M)	$168M	($845M)	($863M)	($1.2B)	($1.0B)	Working capital & otherWC & other
$57M	$99M	$95M	$75M	$260M	$235M	$205M	$200M	$298M	$438M	$530M	CapexCapex
3.3%	4.0%	3.1%	1.8%	4.2%	3.1%	2.3%	2.0%	2.7%	3.6%	4.3%	Capex / revenueCapex/rev
$180M	$784M	$1.2B	$1.5B	$3.1B	$2.5B	$4.0B	$3.3B	($700M)	$3.4B	$4.0B	Owner earningsOwner earn.
10.5%	31.5%	39.3%	35.9%	50.7%	33.2%	44.6%	33.8%	−6.4%	28.5%	32.9%	Owner earnings marginOE mgn
$180M	$746M	$1.2B	$1.5B	$3.0B	$2.4B	$3.9B	$3.3B	($790M)	$3.2B	$3.7B	Free cash flowFCF
10.5%	30.0%	38.5%	35.9%	48.2%	31.8%	44.0%	33.8%	−7.2%	26.6%	30.4%	Free cash flow marginFCF mgn
—	$0	$0	$1.2B	$0	$0	$296M	$0	$0	—	$0	AcquisitionsAcquis.
$0	$0	$350M	$186M	$539M	$1.4B	$0	$428M	$1.2B	$2.0B	—	BuybacksBuybacks
—	34%	36%	34%	92%	72%	99%	44%	-1%	26%	28%	ROICROIC
-10%	13%	47%	19%	31%	23%	24%	21%	-3%	21%	22%	Return on equityROE
−10%	13%	47%	19%	31%	23%	24%	21%	−3%	21%	22%	Retained to equityRetained/eq
											Balance sheet
$1.4B	$2.1B	$3.2B	$3.8B	$6.7B	$7.5B	$10.9B	$13.7B	$11.2B	$12.3B	$13.0B	Cash & investmentsCash+inv
$200M	$281M	$410M	$634M	$885M	$1.1B	$1.4B	$1.6B	$1.6B	$2.1B	$2.0B	ReceivablesReceiv.
$78M	$112M	$124M	$168M	$281M	$353M	$461M	$739M	$1.2B	$1.7B	$1.8B	InventoryInvent.
$61M	$74M	$111M	$88M	$155M	$195M	$304M	$365M	$413M	$462M	$489M	Accounts payablePayables
$217M	$319M	$423M	$713M	$1.0B	$1.3B	$1.6B	$1.9B	$2.4B	$3.3B	$3.3B	Operating working capitalOper. WC
$1.8B	$2.6B	$3.8B	$4.8B	$8.1B	$9.6B	$13.2B	$14.1B	$9.6B	$11.2B	$11.7B	Current assetsCur. assets
$793M	$807M	$1.1B	$1.3B	$1.9B	$2.1B	$2.7B	$3.5B	$3.6B	$3.9B	$3.9B	Current liabilitiesCur. liab.
2.3×	3.3×	3.4×	3.6×	4.3×	4.5×	4.8×	4.0×	2.7×	2.9×	3.0×	Current ratioCurr. ratio
$50M	$50M	$50M	$1.0B	$1.0B	$1.0B	$1.1B	$1.1B	$1.1B	$1.1B	$1.1B	GoodwillGoodwill
$2.9B	$3.5B	$6.2B	$8.3B	$11.8B	$13.4B	$18.2B	$22.7B	$22.5B	$25.6B	$26.5B	Total assetsAssets
—	1.8×	8.8×	20.5×	49.1×	—	78.6×	86.9×	-7.6×	313.8×	352.0×	Interest coverageInt. cov.
$1.2B	$2.0B	$4.4B	$6.1B	$8.7B	$10.1B	$13.9B	$17.6B	$16.4B	$18.7B	$19.4B	Shareholders’ equityEquity
14.1%	11.8%	10.7%	8.7%	6.9%	5.8%	5.5%	5.9%	6.3%	5.7%	5.6%	Stock comp / revenueSBC/rev
											Per share
245M	253M	259M	261M	263M	260M	259M	261M	258M	258M	256M	Shares out (diluted)Shares
$6.96	$9.83	$11.76	$15.97	$23.56	$29.14	$34.47	$37.89	$42.73	$46.52	$47.67	Revenue / shareRev/sh
$-0.46	$1.04	$8.09	$4.51	$10.29	$9.01	$12.82	$13.89	$-2.08	$15.32	$16.93	EPS (diluted)EPS
$0.73	$3.09	$4.62	$5.73	$11.94	$9.69	$15.37	$12.81	$-2.71	$13.26	$15.70	Owner earnings / shareOE/sh
$0.73	$2.94	$4.53	$5.73	$11.37	$9.27	$15.15	$12.81	$-3.06	$12.38	$14.48	Free cash flow / shareFCF/sh
$0.23	$0.39	$0.37	$0.29	$0.99	$0.90	$0.79	$0.77	$1.15	$1.70	$2.07	Cap. spending / shareCapex/sh
$4.73	$8.01	$17.11	$23.34	$32.98	$38.86	$53.70	$67.49	$63.63	$72.35	$75.54	Book value / shareBVPS

Per-share growththe realized rate an owner's share compounded

	9-yr	5-yr
Revenue / share	+23.5%/yr	+14.6%/yr
Owner earnings / share	+37.9%/yr	+2.1%/yr
EPS	—	+8.3%/yr
Capital spending / share	+24.8%/yr	+11.5%/yr
Book value / share	+35.4%/yr	+17.0%/yr

The record, charted

FY2016–2025

Each measure over its full record; the current point and the worst year marked.

Share count

258Mpeak FY2020

ROIC

26%low FY2024

Gross margin

86%low FY2024

Owner earnings vs. net income

Owner earningsNet income

The accountant's number, and the cash an owner can take; the gap is the tell.

$3.4Bowner earningsvs.$4.0Bnet incomelow FY2024

Where the cash went

ReinvestBuybacksDividendsAcquisitionsRetained

Each year's operating cash, by what management did with it: the mix, and how it drifts.

FY2016FY2025

Owner-earnings bridge

FY2021–FY2025cash-flow statement, SEC EDGAR →

Net income is the accountant's number; owner earnings is the cash an owner could take out. The walk between them, off the cash-flow statement, and whether the gap is widening or holding.

In fiscal 2025 the business earned $3.4B of owner earnings, the operating cash left after the $210M it takes just to hold its position. It put $228M more into growth; free cash flow, after that spending, was $3.2B.

Reported net income$4.0B

Owner earnings$3.4B · 29% of revenue

	FY2025	FY2024	FY2023	FY2022	FY2021
Reported net income	$4.0B	($536M)	$3.6B	$3.3B	$2.3B
Depreciation & amortizationnon-cash charge added back	+$210M	+$207M	+$181M	+$148M	+$126M
Stock-based compensationreal costnon-cash, but a real cost	+$686M	+$699M	+$581M	+$491M	+$441M
Working capital & othertiming of cash in and out, other non-cash items	−$1.2B	−$863M	−$845M	+$168M	−$266M
Cash from operations	$3.6B	($493M)	$3.5B	$4.1B	$2.6B
Maintenance capital expenditurethe spending needed just to hold position and volume	−$210M	−$207M	−$200M	−$148M	−$126M
Owner earnings	$3.4B	($700M)	$3.3B	$4.0B	$2.5B
Growth capital expenditurediscretionary; spent to get bigger, not to stand still	−$228M	−$91M	—	−$56M	−$109M
Free cash flow	$3.2B	($790M)	$3.3B	$3.9B	$2.4B
Owner-earnings marginowner earnings ÷ revenue	29%	-6%	34%	45%	33%

Owner earnings is the cash an owner could pull out without starving the business: operating cash less the maintenance capital it must spend to hold its position (here about $210M, roughly its depreciation, the rate its assets wear out). The other $228M of its capital spending is growth it chose, not upkeep it owed; charged only with the maintenance it must do, the business earns well more than the year's free cash flow shows. The cash-flow statement also adds stock comp back as non-cash, but it is a real cost paid in shares; counted as the expense it is (less $686M), owner earnings is nearer $2.7B.

Maintenance capex is estimated as depreciation where a growing business invests above it; free cash flow is the figure the scorecard's free-cash margin reads.

III

Quality & stewardship

Returns, the balance sheet, capital allocation, and pay.

Owner’s Scorecard

FY2025 10-K · source on SEC EDGAR →

Will it survive?

Can it pay its interest? 313.8×

Comfortable

Operating income $4.2B ÷ interest expense $13M

What this means
Operating profit covers interest with the kind of margin Graham wanted for a defensive holding. Necessary, not sufficient, it says solvent, not cheap.
How heavy is the debt, net of cash? +$6.5B

Net cash

Cash $5.1B + ST investments $1.5B − debt $125M

What this means
Cash and short-term investments exceed every dollar of debt by $6.5B, on net the company owes nothing, and can act from strength when others can't. It also holds $5.7B in longer-dated marketable securities; counting those, it sits at net cash of $12.2B. Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.
How long is cash tied up? 333d

Long (60+ days)

DSO 62 + DIO 373 − DPO 102 days

What this means
Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash.

Is it a good business?

Return on invested capital 36%

Very high (≥25%) through the cycle

9-yr median, range -1%–99%; 26% latest = NOPAT $3.6B ÷ invested capital $13.7B

Industry peers: median 2%

What this means
The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; a return below the cost of capital (~8%) erodes value as a business grows rather than building it — the test Buffett weighs most. The headline is the median of the last 9 years (it ran 26% most recently), so one peak or trough year doesn't set the verdict. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.
Owner-earnings margin 33%

High through the cycle

10-yr median margin, range -6%–51%; latest $3.4B = operating cash $3.6B − maintenance capex $210M

Industry peers: median 13%

What this means
What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's 29% of revenue this year, a 33% median across 10 years. Treating stock comp as the real expense it is (less $686M of SBC) leaves $2.7B.
Are earnings backed by cash? 0.92×

Mostly cash-backed

Cash from ops $3.6B ÷ net income $4.0B

What this means
How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.

How is the cash used?

Where do the earnings go? 59%

Returns about half

Dividends + buybacks $2.0B ÷ Owner Earnings $3.4B

What this means
Of $3.4B Owner Earnings, $2.0B (59%) went back to shareholders, $0 dividends, $2.0B buybacks. Net of $686M stock comp, the real buyback was about $1.3B. Returning most of it is the mark of a mature business with little left to reinvest at a high return; reinvesting most could mean a long runway, or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.
Investing or harvesting? 2.09×

Expanding

Capex $438M ÷ depreciation $210M

What this means
Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.

Graham’s defensive tests · 4 of 6 met

Graham’s numerical criteria for the defensive investor (The Intelligent Investor, ch. 14), run on the filings. A floor of safety, not a buy signal; many fine modern businesses fail his strictest liquidity rules by design.

Adequate size Pass

Revenue ≥ $2B · $12.0B

What this means
Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.
Strong liquidity Pass

Current ratio ≥ 2× · 2.90×

What this means
Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.
Conservative debt Pass

Debt ≤ working capital · $125M vs $7.3B WC

What this means
Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.
Earnings stability Miss

A profit every year (10-yr record) · 2 loss years

What this means
Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.
Dividend record Miss

Uninterrupted dividends · none paid

What this means
An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.
Earnings growth Pass

Earnings +33% over the record · +213%

What this means
At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.
Moderate price —

P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price

What this means
Graham's valuation gate, the wall he kept between a sound business and a sound investment. Three-year average earnings are $9.24/share (latest year $15.58), the averaged base the calculator's gate runs on, and book value is $73.54/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.

Durability & moat, 2016–2025

Whether the record’s returns held, and what the capital reinvested earned.

Profitable years 8 of 10

What this means
Lost money in 2 year(s), look at what happened there before trusting the average.
Operating margin 9% → 24% (3-yr avg ends)

What this means
Through the cycle the operating margin widened — about 9% early to 24% lately, median 29% — pricing power intact or improving.
Owner earnings growth +12%/yr

What this means
Owner earnings grew about 12% a year over the record.
Worst year 2024 · −2.1% op. margin

What this means
Operations went underwater in 2024, understand why before trusting the good years.
Share count +0.6%/yr

What this means
Roughly flat share count, little dilution, little buyback.

Does AI threaten the moat?

Low contestability

The moat is physical, regulated or balance-sheet-funded, the kind AI cuts costs within but does not contest.

In its own filing A competitive risk, new this year

Its FY2025 10-K names artificial intelligence as a competitive threat, in language that was not in the prior year's filing.

“We also face competitive risks if we do not implement artificial intelligence or other machine learning technologies in a timely fashion. 35 Our operations may be disrupted by the occurrence of a natural disaster, catastrophic event, or by other serious accidents occurring at our facilities.…”

AI is unlikely to contest a moat that is physical, regulated or balance-sheet-funded; here it reads more as a cost tool than a threat.

Read from the filing's own risk factors, paired with the industry's structure under its SIC code; the durability is read above, the price below.

All figures as filed; the source filing is linked above.

Current Position

as of the latest quarter, Mar 31, 2026

Can the business pay what it owes this year, off the freshest balance sheet: the quality of the assets, the debt actually coming due, and what a low ratio means here.

Current assets$11.7B

Cash & short-term investments$7.2B
Receivables$2.0B
Inventory$1.8B
Other current assets$721M

Current liabilities$3.9B

Accounts payable$489M
Other current liabilities$3.4B

Current ratio3.02×all current assets ÷ what's due · Graham looked for 2×

Quick ratio2.57×stricter: inventory excluded

Cash ratio1.87×strictest: cash alone against what's due

Working capital$7.8Bthe cushion left after near-term bills

Revenue, latest quarter vs. a year ago+7.8%the freshest read on whether the business is still growing

Current ratio, recent quarters2.5× → 3.0×

Deeper floors

Tangible book value$17.9Bequity stripped of goodwill & intangibles

Net current asset value$4.6BGraham's net-net: current assets less all liabilities

Debt incl. operating leases$2.2B$2.1B of it operating leases; with finance leases, “total fixed claims” below reaches $2.2B (annual-report basis)

Deferred revenue$7Mcustomer cash collected before delivery; operating float

From the company's latest filing.

Lease obligations

the lease note, SEC EDGAR →

Debt by another name. What the business owes on the property, aircraft, stores and equipment it rents rather than owns is a fixed claim due on a schedule; added back to the debt, it is the true leverage. That ladder, operating and finance leases together, and what it adds to the debt on the page above.

Operating leasesFinance leases

'26$166M

'27$209M

'28$206M

'29$152M

'30$211M

later$2.4B

Lease payments by year, scaled to the largest; “later” is everything beyond year five, shown apart. These are the contractual cash payments, before the interest the filing imputes back out to the balance-sheet liability.

Due in the next 12 months$166Ma fixed cash payment, owed whether or not the business has a good year

Total lease payments$3.4Bevery year plus the tail, undiscounted: the full cash the leases will take

On the balance sheet$2.0Bthe present value of those payments, the recognised lease liability

True leverage: debt plus leases

On-balance-sheet debt$125M

Lease obligations (present value)$2.0B

Total fixed claims on the business$2.2B

Counting the leases the way Buffett does, the fixed claims on this business come to $2.2B, of which the leases are 94%, more than the debt itself. The lease wall above and the debt schedule together are the calendar of what must be paid, and when.

Lease ladder read from the ASC 842 tags in the company’s Dec 31, 2025 annual report and reconciled: the yearly buckets sum to the undiscounted total, which less the imputed interest equals the balance-sheet liability; a ladder that doesn’t tie out is withheld.

How the cash was used, 2016–2025

Over the record, the business generated $20.6B of operating cash; how management split it reads as a cash builder, a large share of cash simply built up on the balance sheet.

Reinvested$2.0B · 10%
Buybacks$6.1B · 30%
Retained (debt / cash)$12.5B · 61%

Returned to owners$6.1B
32% of the owner earnings the business produced over the span, $0 as dividends and $6.1B as buybacks.
Source of fundingOperating cash
Operating cash covered reinvestment and returns; over the span debt rose $118M and cash and short-term investments rose $5.8B.
Average price paid for buybacks$364.62
Across the years where the filing reports a share count, 11M shares were bought for $4.0B, about $364.62 each. Year to year the price paid ranged from $167.17 (2018) to $435.96 (2024); its heaviest year, 2025, paid $420.29 ($2.0B).
Net change in share count4.7%
The diluted count rose from 245M to 256M: issuance (stock pay, deals) outran any buybacks, so owners were diluted on net.
Dividend record—
No dividend line was reported in the filing data over the span; the record here neither confirms nor rules out a payout.
Return on what it retained10%
Of the earnings it kept rather than paid out ($12.7B over the span), annual owner earnings (first three years vs last three) grew $1.3B, so each retained $1 added about 0.10 of yearly owner earnings. Buffett's test, run on owner earnings instead of market value.

Buybacks are gross of stock issued to staff; the share-count line above is the net of that, the figure that decides whether owners gained. The average price paid blends a year of purchases (and any accelerated repurchase), so it is close, not exact. The record of where the cash went and on what terms.

Management, ownership & pay

read the proxy →

From the proxy: how much of the business the people running it own, and how they are paid, beside what the business earned for its owners in the same years.

Fiscal year	Chief executive	Pay, as filed	“Actually paid”	Owner earnings
2021	Reshma Kewalramani	$15.2M	$18.3M	$2.5B
2022	Reshma Kewalramani	$15.9M	$29.5M	$4.0B
2023	Reshma Kewalramani	$20.6M	$44.2M	$3.3B
2024	Reshma Kewalramani	$21.5M	$43.6M	($700M)
2025	Reshma Kewalramani	$21.1M	$38.2M	$3.4B

Both pay figures are the company’s own, from the pay-versus-performance table its proxy statement files. “As filed” is the Summary Compensation Table total: salary, bonus, and equity awards at their value on the day of grant. “Actually paid” is the SEC’s prescribed recalculation, which re-marks those equity awards to what they became as they vested; it can swing far above or below the filed figure in either direction, and negative years occur. Owner earnings are the whole business's, from the record above, for the same fiscal years.

Insider ownership0.2%
The stake all directors and executive officers hold together, per the 2026 proxy: skin in the game, the first thing Munger reads.
CEO pay ratio80:1
What the chief earns for every dollar the median employee makes, per the 2026 proxy. A high ratio alone settles nothing; some businesses are genuinely top-heavy in scarce skill. A runaway figure is where Buffett starts asking whether the board is doing its job.
Stock-based compensation$686M
The slice of the business handed to employees in shares this year, 6% of revenue, equal to 16% of operating profit. Buffett's oldest accounting fight: this is compensation, compensation is an expense, real whether or not the headline earnings admit it. One trap: the cash-flow statement adds SBC back, so the operating cash, and the owner earnings drawn from it, are flattered by exactly this amount; counted as the cost it is, what an owner keeps is lower.

Inverting the record

Invert: instead of why Vertex Pharmaceuticals Incorporated is a good business, the question is what would make owning it a mistake, and whether those marks are in the record. Disconfirming tests across 2016–2025.

2 of the 6 tests turned up something to look into; the other 4 came back clean.

Look hereDid the share count rise anyway?4.7%
Diluted shares grew 4.7% over 2016–2025, even as the company spent $6.1B on buybacks. The repurchases were a treadmill: stock issued to staff outran them, so owners' slice still shrank. Read the buyback line beside this one, not on its own.
Look hereDid receivables and inventory outpace sales?16% → 31% of sales
Receivables and inventory grew from $278M to $3.8B while revenue grew 618%: working capital is climbing faster than sales (16% of revenue then, 31% now). That can mean customers paying slower, stock building up, or revenue pulled forward. The filing's cash-flow and receivables notes say which.

And these came back clean

Is it less profitable than it was?
Did debt outgrow the business?
Did reported profit become cash?
Are "one-time" charges a yearly habit?

Each test is read from the filings and is noisy alone; a flag can mark a cyclical trough or a year of heavy investment as easily as a problem. The filing says which.

What an owner would ask, FY2025

read the 10-K →

Which reported numbers are a judgment call?
Management names Revenue recognition, Income taxes, Acquisitions, Contingencies as critical estimates
each rests partly on management's judgment; the filing's note sets out the assumptionsverify →

The questions the record and the charts do not answer on their own; each carries the figure and the place to look.

Peers, Pharmaceuticals

The same industry, side by side on owner economics. Each figure is a through-cycle median, so a peak or trough year can’t distort it; the group median at the foot is the line to read each against.

Company	Revenue	Gross margin	Op. margin	ROIC	Owner earn. margin
TEVATeva Pharmaceutical Industries Limited	$17.3B	48%	-2.2%	-2%	6%
REGNRegeneron Pharmaceuticals Inc.	$14.3B	—	34.6%	21%	31%
VTRSViatris	$14.3B	34%	2.5%	0%	14%
VRTXVertex Pharmaceuticals Incorporated	$12.0B	87%	31.8%	36%	34%
BHCBausch Health Companies Inc.	$10.3B	76%	5.5%	2%	13%
ZTSZoetis Inc.	$9.5B	69%	34.2%	26%	22%
OGNOrganon	$6.2B	62%	25.0%	17%	12%
ONCBeOne Medicines Ltd.	$5.3B	86%	-124.4%	-46%	-112%
Group median	—	69%	15.2%	10%	14%

The price

What a price has to assume.

What the price implies

reverse-DCF

Type today's close and see the owner-earnings growth you'd have to believe to justify it, beside what Vertex Pharmaceuticals Incorporated has delivered.

Today’s price $

Through the cycle, Vertex Pharmaceuticals Incorporated earns about $4.0B on its 33.5% median owner-earnings margin. This year’s 28.5% margin runs in line with that. Normalize, below, values the price on that through-cycle figure rather than the latest year.

Base Normalize · through-cycle ($4.0B) Net of stock comp (−$686M) Steady-state · maintenance capex ($4.0B)

—

The assumptions Required return 9% Years of high growth 10 Terminal growth 2.5%

9.0% = the 4.55% 10-year Treasury (Jul 15, 2026) + 4.45 points of equity premium. The rate you require is yours to set.

Enter a price above to run it.

Implied by the price—

Owner-earnings growth · ’21→’25−20%/yr

Owner-earnings growth · ’16→’25+11%/yr

Owner-earnings yield—

P/E (3-yr earnings ’23–’25)—

P/B—

Graham’s price gate—

Graham capped the multiple at 15×; Buffett and Munger let that rule go: a wonderful business can deserve 50× if the thesis holds. The gate marks the bargain-hunter's floor.

Against a high-grade bond: Graham’s yardstick bond yield%

Prefilled with the 10-year Treasury (4.55%, as of Jul 15, 2026). Edit it for today’s exact figure, or a AAA corporate yield.

Graham measured a stock against the bond you could own instead, the heart of his margin of safety. Enter a price above to weigh the owner-earnings yield against this bond.

Free cash flow $3.7B on 254M shares outstanding, per the 10-Q cover, as of 2026-04-30; net cash $12.9B. The base is the latest year by default; Normalize values it on the through-cycle median owner-earnings margin (to avoid paying on a peak year). Net of stock comp treats option pay as the expense it is. Capex ($530M) runs well above depreciation ($217M), so this is a build-out; Steady-state swaps total capex for maintenance (≈ depreciation), lifting the base to about $4.0B, the cash it would throw off if it stopped expanding. The dials set the multiple a growth belief justifies; the price, and every dollar on this page, is yours.

Weigh VRTX against another business →

Cite: Owner Scorecard, "Vertex Pharmaceuticals Incorporated (VRTX), the owner's record," https://ownerscorecard.com/c/VRTX, data as of 2026-07-09.

Manual order: ← VRTS its page in the Manual VSAT →

Industry order: ← VRDN the Pharmaceuticals chapter VSTM →