Insmed

INSMED INC

FORM 10-K
(Annual Report)

Filed 02/25/16 for the Period Ending 12/31/15

Address

Telephone
CIK
Symbol
SIC Code
Industry

10 FINDERNE AVENUE
BUILDING 10
BRIDGEWATER, NJ 08807
908-977-9900
0001104506
INSM
2834 - Pharmaceutical Preparations
Biotechnology & Drugs

Sector Healthcare

Fiscal Year

12/31

http://www.edgar-online.com
© Copyright 2016, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

  
  
Table
of
ContentsUNITED
STATES
SECURITIES
AND
EXCHANGE
COMMISSION
Washington,
D.C.
20549FORM
10-KCommission
File
Number
0-30739INSMED
INCORPORATED
(Exact
name
of
registrant
as
specified
in
its
charter)Virginia
(State
or
other
jurisdiction
of
incorporation
or
organization)
54-1972729
(I.R.S.
employer
identification
no.)10
Finderne
Avenue,
Building
10
Bridgewater,
New
Jersey
08807
(Address
of
principal
executive
offices)
(908)
977-9900
(Registrant's
telephone
number
including
area
code)Securities
registered
pursuant
to
Section
12(b)
of
the
Act:Title
of
each
class
Name
of
each
exchange
on
which
registeredCommon
Stock,
par
value
$0.01
pershare
Nasdaq
Global
Select
MarketSecurities
registered
pursuant
to
Section
12(g)
of
the
Act:
NoneIndicate
by
check
mark
if
the
registrant
is
a
well-known
seasoned
issuer,
as
defined
in
Rule
405
of
the
Securities
Act.
Yes
[
ü
]



No
[

]Indicate
by
check
mark
if
the
registrant
is
not
required
to
file
reports
pursuant
to
Section
13
or
Section
15(d)
of
the
Act.
Yes
[

]



No
[
ü
]Indicate
by
check
mark
whether
the
registrant
(1)
has
filed
all
reports
required
to
be
filed
by
Section
13
or
15(d)
of
the
Securities
Exchange
Act
of
1934
during
thepreceding
12
months
(or
for
such
shorter
period
that
the
registrant
was
required
to
file
such
reports),
and
(2)
has
been
subject
to
such
filing
requirements
for
thepast
90
days.
Yes
[
ü
]



No
[

]Indicate
by
check
mark
whether
the
registrant
has
submitted
electronically
and
posted
on
its
corporate
Web
site,
if
any,
every
Interactive
Data
File
required
to
besubmitted
and
posted
pursuant
to
Rule
405
of
Regulation
S-T
(§
232.405
of
this
chapter)
during
the
preceding
12
months
(or
for
such
shorter
period
that
theregistrant
was
required
to
submit
and
post
such
files).
Yes
[
ü
]



No
[

]Indicate
by
check
mark
if
disclosure
of
delinquent
filers
pursuant
to
Item
405
of
Regulation
S-K
is
not
contained
herein,
and
will
not
be
contained,
to
the
best
ofregistrant's
knowledge,
in
definitive
proxy
or
information
statements
incorporated
by
reference
in
Part
III
of
this
Form
10-K
or
any
amendment
to
this
Form
10-K.
[

]Indicate
by
check
mark
whether
the
registrant
is
a
large
accelerated
filer,
an
accelerated
filer,
a
non-accelerated
filer,
or
a
small
reporting
company
(See
thedefinitions
of
"large
accelerated
filer,"
"accelerated
filer,"
and
"small
reporting
company"
in
Rule
12b-2
of
the
Exchange
Act).
Large
accelerated
filer
[
ü
]Accelerated
filer
[

]
Non-accelerated
filer
[

]
Small
reporting
company
[

]Indicate
by
check
mark
whether
the
registrant
is
a
Shell
Company
(as
defined
in
Rule
12b-2
of
the
Exchange
Act).
Yes
[

]



No
[
ü
]The
aggregate
market
value
of
the
voting
and
non-voting
common
equity
held
by
non-affiliates
of
the
registrant
on
June
30,
2015,
was
$1,491.2
million
(based
onthe
closing
price
for
shares
of
the
registrant's
common
stock
as
reported
on
the
Nasdaq
Global
Select
Market
on
that
date).
In
determining
this
figure,
the
registranthas
assumed
solely
for
this
purpose
that
all
of
its
directors,
executive
officers,
persons
beneficially
owning
10%
or
more
of
the
registrant's
outstanding
commonstock
and
certain
other
stockholders
of
the
registrant
may
be
considered
to
be
affiliates.
This
assumption
shall
not
be
deemed
conclusive
as
to
affiliate
status
for
thisor
any
other
purpose.(Mark
One)

ý
ANNUAL
REPORT
PURSUANT
TO
SECTION
13
OR
15(d)
OF
THE
SECURITIES
EXCHANGE
ACT
OF
1934For
the
fiscal
year
ended
December
31,
2015ORo
TRANSITION
REPORT
PURSUANT
TO
SECTION
13
OR
15(d)
OF
THE
SECURITIES
EXCHANGE
ACT
OF
1934For
the
transition
period
from





































to





































On
February
1,
2016,
there
were
61,857,549
shares
of
the
registrant's
common
stock,
$0.01
par
value,
outstanding.DOCUMENTS
INCORPORATED
BY
REFERENCE
















Portions
of
the
registrant's
definitive
Proxy
Statement
for
its
2016
Annual
Meeting
of
Shareholders
to
be
filed
with
the
Securities
and
ExchangeCommission
no
later
than
April
29,
2016
and
to
be
delivered
to
shareholders
in
connection
with
the
2016
Annual
Meeting
of
Shareholders,
are
herein
incorporatedby
reference
in
Part
III
of
this
Form
10-K.Table
of
ContentsINSMED
INCORPORATED
INDEX
In
this
Form
10-K,
we
use
the
words
"Insmed
Incorporated"
to
refer
to
Insmed
Incorporated,
a
Virginia
corporation,
and
we
use
the
words
"Company,"
"Insmed,""Insmed
Incorporated,"
"we,"
"us"
and
"our"
to
refer
to
Insmed
Incorporated
and
its
consolidated
subsidiaries.
Insmed,
ARIKAYCE,
and
IPLEX
are
trademarks
ofInsmed
Incorporated.
This
Form
10-K
also
contains
trademarks
of
third
parties.
Each
trademark
of
another
company
appearing
in
this
Form
10-K
is
the
property
ofits
owner.2








PAGE
REPORT:
FORM
10-K



CAUTIONARY
NOTE
REGARDING
FORWARD-LOOKING
STATEMENTS

3
PART
I





4


ITEM
1
BUSINESS

4


ITEM
1A
RISK
FACTORS

36


ITEM
1B
UNRESOLVED
STAFF
COMMENTS

68


ITEM
2
PROPERTIES

68


ITEM
3
LEGAL
PROCEEDINGS

68


ITEM
4
MINE
SAFETY
DISCLOSURES

68
PART
II





69


ITEM
5
MARKET
FOR
REGISTRANT'S
COMMON
EQUITY,
RELATEDSTOCKHOLDER
MATTERS
AND
ISSUER
PURCHASES
OF
EQUITYSECURITIES

69


ITEM
6
SELECTED
FINANCIAL
DATA

70


ITEM
7
MANAGEMENT'S
DISCUSSION
AND
ANALYSIS
OF
FINANCIALCONDITION
AND
RESULTS
OF
OPERATIONS

72


ITEM
7A
QUANTITATIVE
AND
QUALITATIVE
DISCLOSURES
ABOUT
MARKETRISK

87


ITEM
8
FINANCIAL
STATEMENTS
AND
SUPPLEMENTARY
DATA

87


ITEM
9
CHANGES
IN
AND
DISAGREEMENTS
WITH
ACCOUNTANTS
ONACCOUNTING
AND
FINANCIAL
DISCLOSURE

87


ITEM
9A
CONTROLS
AND
PROCEDURES

88


ITEM
9B
OTHER
INFORMATION

89
PART
III





89


ITEM
10
DIRECTORS,
EXECUTIVE
OFFICERS
AND
CORPORATE
GOVERNANCE

89


ITEM
11
EXECUTIVE
COMPENSATION

89


ITEM
12
SECURITIES
OWNERSHIP
OF
CERTAIN
BENEFICIAL
OWNERS
ANDMANAGEMENT
AND
RELATED
STOCKHOLDER
MATTERS

89


ITEM
13
CERTAIN
RELATIONSHIPS
AND
RELATED
TRANSACTIONS
ANDDIRECTOR
INDEPENDENCE

89


ITEM
14
PRINCIPAL
ACCOUNTING
FEES
AND
SERVICES

89
PART
IV





90


ITEM
15
EXHIBITS
AND
FINANCIAL
STATEMENT
SCHEDULES

90
SIGNATURES





91
REPORTS
OF
INDEPENDENT
REGISTERED
PUBLIC
ACCOUNTING
FIRM

92
CONSOLIDATED
FINANCIAL
STATEMENTS

94
EXHIBIT
INDEX

123
Table
of
ContentsCAUTIONARY
NOTE
REGARDING
FORWARD-LOOKING
STATEMENTS















This Annual Report on Form 10-K contains forward looking statements. "Forward-looking statements," as that term is defined in the Private SecuritiesLitigation Reform Act of 1995, are statements that are not historical facts and involve a number of risks and uncertainties. Words herein such as "may," "will,""should," "could," "would," "expects," "plans," "anticipates," "believes," "estimates," "projects," "predicts," "intends," "potential," "continues," and similarexpressions (as well as other words or expressions referencing future events, conditions or circumstances) identify forward-looking statements.














Forward-looking statements are based upon our current expectations and beliefs, and involve known and unknown risks, uncertainties and other factors,which may cause our actual results, performance and achievements and the timing of certain events to differ materially from the results, performance,achievements or timing discussed, projected, anticipated or indicated in any forward-looking statements. Such factors include, among others, the factors discussedin Item 1A "Risk Factors" as well as those discussed in Item 7 under the section entitled "Management's Discussion and Analysis of Financial Condition andResults of Operations" and elsewhere throughout this Annual Report on Form 10-K and the following: our ability to complete development of, receive regulatoryapproval for, and successfully commercialize ARIKAYCE, or liposomal amikacin for inhalation (LAI), and INS1009, inhaled treprostinil prodrug; our estimates ofexpenses and future revenues and profitability; our plans to develop and market new products and the timing of these development programs; status, timing, andthe results of preclinical studies and clinical trials and preclinical and clinical data described herein; the timing of responses to information and data requestsfrom the US Food and Drug Administration (the "FDA"), the European Medicines Agency ("the EMA"), and other regulatory authorities; our clinical developmentof product candidates; our ability to obtain and maintain regulatory approval for our product candidates; our expectation as to the timing of regulatory review andapproval; our estimates regarding our capital requirements and our needs for additional financing; our estimates of the size of the potential markets for ourproduct candidates; our selection and licensing of product candidates; our ability to attract third parties with acceptable development, regulatory andcommercialization expertise; the benefits to be derived from corporate license agreements and other third party efforts, including those relating to the developmentand commercialization of our product candidates; the degree of protection afforded to us by our intellectual property portfolio; the safety and efficacy of ourproduct candidates; sources of revenues and anticipated revenues, including contributions from license agreements and other third party efforts for thedevelopment and commercialization of products; our ability to create an effective direct sales and marketing infrastructure for products we elect to market and selldirectly; the rate and degree of market acceptance of our product candidates; the timing, scope and rate of reimbursement for our product candidates; the successof other competing therapies that may become available; and the availability of adequate supply and manufacturing capacity and quality for our productcandidates.














We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. We disclaim anyobligation, except as specifically required by law and the rules of the Securities and Exchange Commission, to publicly update or revise any such statements toreflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood thatactual results will differ from those set forth in the forward-looking statements.3Table
of
ContentsPART
I
ITEM
1.



BUSINESS
Business
Overview













Insmed
is
a
global
biopharmaceutical
company
focused
on
the
unmet
needs
of
patients
with
rare
diseases.
Our
lead
product
candidate
is
ARIKAYCE™,
orliposomal
amikacin
for
inhalation
(LAI),
which
is
in
late-stage
development
for
patients
with
nontuberculous
mycobacteria
(NTM)
lung
disease,
a
rare
and
oftenchronic
infection
that
is
capable
of
causing
irreversible
lung
damage
and
can
be
fatal.
Our
earlier
stage
pipeline
includes
INS1009,
a
nebulized
prodrug
formulationof
treprostinil,
a
vasodilator
of
pulmonary
arterial
vascular
beds.
We
believe
INS1009
may
offer
a
differentiated
product
profile
with
therapeutic
potential
inpulmonary
arterial
hypertension
(PAH),
idiopathic
pulmonary
fibrosis
(IPF),
sarcoidosis,
and
severe
refractory
asthma.













We
are
conducting
a
global
phase
3
clinical
study
of
ARIKAYCE
(the
212
or
CONVERT
study)
in
adult
patients
with
NTM
lung
disease
caused
byMycobacterium avium complex
(MAC),
the
predominant
infective
species
in
NTM
lung
disease
in
the
United
States
(US),
Europe,
and
Japan.
The
EuropeanMedicines
Agency
(EMA)
Committee
for
Medicinal
Products
for
Human
Use
(CHMP)
is
reviewing
our
marketing
authorization
application
(MAA)
seekingapproval
of
ARIKAYCE
for
the
treatment
of
MAC
lung
disease
in
adult
patients
who
have
persistent
positive
sputum
cultures
despite
the
use
of
medicallyappropriate
first-line
therapy.
We
are
also
advancing
a
phase
1
study
of
INS1009
in
healthy
subjects.
In
addition
to
INS1009,
our
earlier-stage
pipeline
includespreclinical
compounds
that
we
are
evaluating
in
multiple
rare
diseases
of
unmet
medical
need,
including
methicillin-resistant
staph
aureus
(MRSA),
NTM,
PAHand
sarcoidosis.
We
are
also
evaluating
additional
formulations
and
delivery
options
for
treprostinil,
including
delivery
via
a
metered
dose
inhaler.
To
complementour
internal
research,
we
actively
seek
in-licensing
and
acquisition
opportunities
for
a
broad
range
of
rare
diseases.4Table
of
Contents













The
table
below
summarizes
the
current
status
and
anticipated
milestones
for
ARIKAYCE
and
INS1009.Corporate
History













We
were
incorporated
in
the
Commonwealth
of
Virginia
on
November
29,
1999.
On
December
1,
2010,
we
completed
a
business
combination
withTransave,
Inc.
(Transave),
a
privately
held,
New
Jersey-based
company
focused
on
the
development
of
differentiated
and
innovative
inhaled
pharmaceuticals
forthe
site-specific
treatment
of
serious
lung
infections.5














Product
Candidate/TargetIndications




Status




Next
Expected
Milestones





ARIKAYCE
foradult
patients
withrefractory
NTMlung
infectionscaused
by
MAC



•We
are
advancing
the
CONVERT
study,
arandomized,
open-label
global
phase
3clinical
study
of
ARIKAYCE
in
adultpatients
with
treatment
refractory
NTMlung
disease
caused
by
MAC.•In
late
2015,
we
responded
to
the
EMA's120-day
questions,
which
are
a
standardpart
of
the
MAA
evaluation
process
in
theEU.•The
US
FDA
has
designated
ARIKAYCEas
an
orphan
drug,
a
breakthrough
therapyand
a
qualified
infectious
disease
product(QIDP).
Breakthrough
therapy
featuresintensive
guidance
on
efficient
drugdevelopment
and
offers
the
potential
for
arolling
review.
A
QIDP-designated
productqualifies
for
fast
track
designation
and
iseligible
for
priority
review.•The
Committee
for
Orphan
MedicinalProducts
of
the
EMA
has
issued
a
positiveopinion
for
orphan
designation
ofARIKAYCE.


•We
expect
to
achieve
our
patientenrollment
objective
in
the
CONVERTstudy
in
the
second
half
of
2016.•We
expect
to
receive
the
CHMP's
180-daylist
of
outstanding
issues
(LOI)
related
toour
MAA
in
the
first
quarter
of
2016.•We
anticipate
responding
to
the
LOI
andparticipating
in
an
oral
hearing
with
theCHMP
in
the
second
quarter
of
2016
toaddress
the
LOI
on
our
MAA
forARIKAYCE.
We
continue
to
expect
theCHMP
to
render
an
opinion
around
themiddle
of
2016.•If
approved,
we
expect
ARIKAYCE
wouldbe
the
first
approved
inhaled
antibiotictreatment
specifically
indicated
for
NTMlung
infections
in
North
America,
Europe,and
Japan.•If
approved,
we
plan
to
commercializeARIKAYCE
in
certain
countries
in
Europeand
in
the
US,
and
eventually
Canada,Japan
and
certain
other
countries.



INS1009(nebulizedtreprostinilprodrug)
for
PAH,IPF,
sarcoidosisand
severerefractory
asthma


•In
the
fourth
quarter
of
2015
we
initiated
aphase
1
randomized,
double-blind,
placebo-controlled
single
ascending
dose
study
ofINS1009
for
inhalation
to
determine
itssafety,
tolerability,
and
pharmacokinetics
inhealthy
volunteers.


•We
expect
to
present
the
results
of
ourphase
1
study
of
INS1009
at
a
futuremedical
meeting.

Table
of
ContentsOur
Strategy













Our
strategy
focuses
on
the
needs
of
patients
with
rare
diseases.
We
are
currently
focused
on
the
development
and
commercialization
of
ARIKAYCE,
orLAI.
There
are
currently
no
inhaled
products
specifically
indicated
to
treat
NTM
lung
disease
in
North
America,
Europe
or
Japan.
While
we
believe
thatARIKAYCE
has
the
potential
to
treat
many
different
diseases,
we
are
prioritizing
securing
regulatory
approval
of
ARIKAYCE
in
NTM
lung
disease
caused
byMAC.
We
are
also
advancing
earlier-stage
programs
in
other
rare
disorders,
including
a
phase
1
study
of
INS1009,
our
nebulized
prodrug
formulation
oftreprostinil.













Our
current
priorities
are
as
follows:·Enrolling
the
CONVERT
study;·Securing
approval
of
ARIKAYCE
in
the
European
Union
for
the
treatment
of
MAC
lung
disease
in
adult
patients
who
have
persistent
positivesputum
cultures
despite
the
use
of
medically
appropriate
first-line
therapy;·Preparing
our
US
NDA
submission
based
on
the
results
of
the
CONVERT
study;·Ensuring
our
product
supply
chain
will
support
the
clinical
development
and
if
approved,
commercialization
of
ARIKAYCE;·Preparing
for
potential
commercialization
of
ARIKAYCE
in
certain
countries
in
the
EU
and
the
US;·Defining
further
research
and
lifecycle
management
strategies
for
ARIKAYCE,
including
investigator-initiated
studies;·Completing
the
phase
1
study
of
INS1009,
our
nebulized
treprostinil
prodrug,
and
investigating
its
use
in
multiple
indications;·Presenting
preclinical
findings
from
our
earlier-stage
program(s);
and·Expanding
our
rare
disease
pipeline
through
corporate
development.Product
PipelineARIKAYCE for patients with NTM lung disease













Our
lead
product
candidate
is
ARIKAYCE,
or
LAI,
a
novel,
once-daily
formulation
of
amikacin
that
is
in
late-stage
clinical
development
for
patients
withNTM
lung
disease,
a
rare
and
often
chronic
infection
that
is
capable
of
causing
irreversible
lung
damage
and
which
can
be
fatal.
Amikacin
solution
for
parenteraladministration
is
an
established
drug
that
is
effective
against
a
variety
of
NTM;
however,
its
use
is
limited
by
the
need
to
administer
it
intravenously
and
by
toxicityto
hearing,
balance,
and
kidney
function
(Peloquin
et
al.,
2004).
Our
advanced
pulmonary
liposome
technology
uses
charge-neutral
liposomes
to
deliver
amikacindirectly
to
the
lung
where
it
is
taken
up
by
the
lung
macrophages
where
the
NTM
infection
resides.
This
prolongs
the
release
of
amikacin
in
the
lungs
whileminimizing
systemic
exposure
thereby
offering
the
potential
for
decreased
systemic
toxicities.
ARIKAYCE's
ability
to
deliver
high
levels
of
amakacin
directly
tothe
lung
distinguishes
it
from
intravenous
amakacin.
ARIKAYCE
is
administered
once-daily
using
an
optimized,
investigational
eFlow®
Nebulizer
Systemmanufactured
by
PARI
Pharma
GmbH,
a
novel,
highly
efficient
and
portable
aerosol
delivery
system.The CONVERT study













ARIKAYCE
is
currently
being
evaluated
in
a
phase
3
randomized,
open-label,
global
clinical
study
designed
to
confirm
the
culture
conversion
results
seenin
our
phase
2
clinical
trial.
This
phase
3
study,
which
is
known
as
the
CONVERT
(or
212)
study,
is
enrolling
non-cystic
fibrosis
(non-CF)
patients
18
years
andolder
with
an
NTM
lung
infection
caused
by
MAC
that
is
refractory
to
a
stable
multi-drug
regimen
for
at
least
six
months
with
the
regimen
either
ongoing
orcompleted
within
12
months
of
screening.
In
our
completed
phase
2
study,
the
subgroup
of
non-CF
patients
with
NTM6Table
of
Contentslung
infection
caused
by
MAC
demonstrated
the
greatest
response
to
treatment
with
ARIKAYCE.
We
believe
this
clinical
trial
will
confirm
the
culture
conversionsseen
in
the
phase
2
study
and
provide
the
basis
for
submitting
a
New
Drug
Application
(NDA)
to
the
US
Food
and
Drug
Administration
(FDA),
as
well
asregulatory
submissions
in
Japan
and
other
countries.













After
a
screening
period
of
approximately
10
weeks,
eligible
subjects
will
be
randomized
2:1
to
once-daily
ARIKAYCE
plus
a
multi-drug
regimen
or
amulti-drug
regimen
without
ARIKAYCE.
For
every
two
patients
that
are
randomized
to
receive
ARIKAYCE
plus
a
multi-drug
regimen,
one
patient
is
randomizedto
receive
a
multi-dose
regimen
without
ARIKAYCE.
The
primary
efficacy
endpoint
is
the
proportion
of
subjects
who
achieve
culture
conversion
at
Month
6(defined
as
three
consecutive
negative
sputum
cultures
collected
monthly)
in
the
ARIKAYCE
plus
multi-drug
regimen
arm
compared
to
the
arm
in
which
subjectsreceive
a
multi-drug
regimen
without
ARIKAYCE.
The
study's
key
secondary
endpoints
include
the
change
from
baseline
in
the
six-minute
walk
test
and
off-treatment
assessments
to
evaluate
durability
of
effect.
The
study
also
includes
a
comprehensive
pharmacokinetic
sub-study
in
Japanese
subjects
in
lieu
of
a
separatelocal
pharmacokinetic
study
in
Japanese
subjects.













At
Month
8,
after
all
sputum
culture
results
are
known
up
to
and
including
Month
6,
subjects
will
be
assessed
as
converters
or
non-converters
for
theprimary
efficacy
endpoint.
A
converter
is
defined
as
a
patient
with
three
consecutive
monthly
sputum
samples
at
Month
6
that
test
negative
for
the
presence
ofMAC
NTM.
All
converters
will
continue
on
their
randomized
treatment
regimen
for
12
months
beginning
from
the
first
negative
culture
that
defined
cultureconversion.
All
converters
will
return
for
off-treatment
follow-up
visits.
A
12-month
off-treatment
study
visit
will
be
the
last
study
visit
for
the
CONVERT
study.All
non-converters
in
the
study
at
Month
8
will
be
eligible
to
enter
a
separate
open-label
study
(the
312
study).
The
primary
objective
of
the
312
study
is
to
evaluatethe
long-term
safety
and
tolerability
of
ARIKAYCE
for
up
to
12
months.
The
secondary
endpoints
of
the
312
study
include
evaluating
the
proportion
of
subjectsachieving
culture
conversion
(three
consecutive
negative
sputum
cultures
without
relapse
or
recurrence)
by
Month
6
and
the
proportion
of
subjects
achievingculture
conversion
by
Month
12
(end
of
treatment).













The
protocol
for
the
CONVERT
study
incorporates
feedback
from
the
FDA
and
the
EMA
via
its
scientific
advice
working
party
process,
as
well
as
localhealth
authorities,
including
Japan's
Pharmaceuticals
and
Medical
Devices
Agency,
and
was
approved
in
the
US
by
a
central
Institutional
Review
Board
(IRB).
Weinitiated
the
global
trial
in
early
2015
and
expect
to
complete
patient
enrollment
in
the
second
half
of
2016.
If
the
CONVERT
study
meets
the
primary
endpoint
ofculture
conversion
at
Month
6,
we
believe
we
would
be
eligible
to
submit
an
NDA
pursuant
to
21
CFR
314
Subpart
H
(Accelerated
Approval
of
New
Drugs
forSerious
or
Life-Threatening
Illnesses),
which
permits
FDA
to
approve
a
drug
based
on
a
"surrogate
endpoint"
provided
the
sponsor
commits
to
study
the
drugfurther
to
verify
and
describe
the
drug's
clinical
benefit.
We
believe
that
efficacy
data
from
the
CONVERT
study
after
Month
6
will
suffice
to
meet
thiscommitment.
We
are
currently
conducting
CONVERT
at
over
115
sites
in
the
US,
Europe,
Australia,
New
Zealand,
Asia
and
Canada.
The
CONVERT
study
isdesigned
to
enroll
enough
subjects
to
ensure
at
least
261
subjects
are
evaluable
for
the
primary
endpoint
at
Month
6.Phase 2 study (the 112 study)













Our
completed
phase
2
study,
which
is
also
known
as
the
112
study,
was
a
randomized,
double-blind,
placebo-controlled
study
that
evaluated
the
efficacyand
safety
of
ARIKAYCE
in
adults
with
NTM
lung
disease
due
to
MAC
or
Mycobacterium abscessus (
M. abscessus )
that
was
refractory
to
guideline-basedtherapy.
The
study
included
an
84-day
double-blind
phase
in
which
subjects
were
randomized
1:1
either
to
ARIKAYCE
once-daily
plus
a
multi-drug
regimen
or
toplacebo
once-daily
plus
a
multi-drug
regimen.
After
completing
the
84-day
double-blind
phase,
subjects
had
the
option
of
continuing
in
an
84-day
open-label
phaseduring
which
all
subjects
received
ARIKAYCE
plus
a7Table
of
Contentsmulti-drug
regimen.
The
study
also
included
28-day
and
12-month
off-ARIKAYCE
follow-up
assessments
to
evaluate
safety
and
durability
of
effect.













Eighty-nine
subjects
were
randomized
and
dosed
in
the
study.
Of
the
80
subjects
who
completed
the
84-day
double-blind
phase,
78
subjects
elected
tocontinue
in
the
open-label
phase
and
received
ARIKAYCE
plus
a
multi-drug
regimen
for
an
additional
84
days.
Seventy-six
(76)
percent
(59/78)
of
subjects
whoelected
to
continue
in
the
open-label
phase
of
the
study
completed
the
open-label
study.













The
primary
efficacy
endpoint
of
the
study
was
the
change
from
baseline
(day
1)
to
the
end
of
the
double-blind
phase
of
the
trial
(day
84)
in
a
semi-quantitative
measurement
of
mycobacterial
density
on
a
seven-point
scale.
ARIKAYCE
did
not
meet
the
pre-specified
level
for
statistical
significance
althoughthere
was
a
positive
trend
(p=0.072)
in
favor
of
ARIKAYCE.
The
p-value
for
the
key
secondary
endpoint
of
culture
conversion
to
negative
at
Day
84
was
0.003,
infavor
of
ARIKAYCE.













After
establishing
the
primary
endpoint
for
the
phase
3
CONVERT
study,
we
explored
the
microbiologic
outcomes
from
the
112
study
using
the
morestringent
definition
of
culture
conversion,
which
is
defined
as
at
least
three
consecutive
monthly
sputum
samples
that
test
negative
for
NTM
bacteria.
Thisdefinition
of
culture
conversion
is
in
the
American
Thoracic
Society/Infectious
Disease
Society
of
America
(ATS/IDSA)
Guidelines
(Griffith
et
al.
2007)
and
usedin
clinical
practice.
The
preliminary
results
of
these
analyses
are
summarized
below:·Twenty
subjects
who
received
ARIKAYCE
in
the
112
study
achieved
culture
conversion
status
over
the
168-day
treatment
phase
(13
receivedARIKAYCE
in
the
double-blind
phase
and
seven
received
ARIKAYCE
in
the
open-label
phase).·Three
additional
subjects
who
started
ARIKAYCE
in
the
open-label
phase
achieved
culture
conversion
by
the
28-day
off-ARIKAYCE
follow-upassessment.













The
112
study
included
a
12-month
off-ARIKAYCE
follow
up
visit
in
order
to
collect
sputum
culture
results.
These
results
were
collected
and
analyzed
toassess
the
durability
of
the
ARIKAYCE
treatment
effect
for
both
the
group
of
subjects
who
achieved
culture
conversion
and
the
group
of
subjects
who
did
notachieve
culture
conversion
during
the
168-day
treatment
phase.
The
preliminary
results
of
these
analyses
are
summarized
below:·Seventeen
of
the
total
23
subjects
who
achieved
culture
conversion
during
the
study
attended
their
12-month
off-ARIKAYCE
follow-up
visit.
TheNTM
sputum
culture
results
for
these
17
subjects
are
as
follows:·Eleven
subjects
remained
culture
negative;
nine
of
these
subjects
were
non-CF
subjects
with
MAC
(eight
of
these
nine
subjects
wereoff
all
NTM
treatments
at
this
time)
and
two
were
subjects
with
non-CF
M. abscessus at
the
time
of
study
entry
(both
subjects
werecontinuing
treatment
for
M. abscessus ).·Three
non-CF
subjects
with
MAC
could
not
produce
sputum
despite
reasonable
attempts.
These
same
subjects
were
off
all
NTMtreatments
at
this
time.
This
is
consistent
with
the
achievement
of
treatment
success
during
the
follow-up
period
as
the
lack
ofsputum
production
is
indicative
of
symptom
resolution.·Two
non-CF
subjects
with
MAC
were
broth
culture
positive
only,
which
may
represent
contamination
(a
false
positive)
or
a
newinfection
rather
than
a
relapse.·One
non-CF
subject
with
M. abscessus was
also
broth
culture
positive
only.
·Twenty
eight
of
the
subjects
who
did
not
achieve
culture
conversion
during
the
168-day
treatment
phase
of
the
study
provided
sputum
at
the
12-month
follow
up
visit,
of
which
228Table
of
Contentssubjects
continued
to
have
positive
sputum
cultures
with
six
subjects
showing
a
negative
culture,
with
approximately
50%
of
subjects
continuing
onNTM
treatment.













Eligibility
for
the
112
study
required
subjects
to
have
been
on
ATS/IDSA
Guideline
therapy
for
at
least
six
months
prior
to
screening
and
to
have
hadpersistently
positive
sputum
mycobacterial
cultures.













During
the
double-blind
phase,
the
majority
of
the
subjects
in
both
treatment
groups
experienced
at
least
one
treatment-emergent
adverse
event
(TEAE).All
of
the
most
common
TEAEs,
except
diarrhea,
occurred
more
frequently
in
the
ARIKAYCE
group
than
in
the
placebo
group.
Renal
TEAEs
were
reportedinfrequently.
Audiovestibular
TEAEs
were
reported
in
similar
proportions
of
subjects
in
the
two
treatment
groups
in
the
double-blind
phase
and
were
reportedinfrequently
in
the
open-label
phase.
TEAEs
considered
related
by
the
investigator
were
reported
more
frequently
in
the
ARIKAYCE
group
than
in
the
placebogroup
in
the
double-blind
phase
(ARIKAYCE:
72.7%,
placebo:
37.8%).
However,
in
the
open-label
phase,
the
overall
incidence
of
treatment-related
adverse
eventswas
lower
in
the
group
of
subjects
who
had
received
ARIKAYCE
during
the
double-blind
phase
of
the
trial
than
in
the
group
of
subjects
who
had
received
placeboduring
the
double-blind
phase
of
the
trial
(ARIKAYCE:
48.6%,
placebo:
60.5%).













One
subject
died
during
the
double-blind
phase
of
pneumonia
and
acute
respiratory
distress
syndrome
and
one
subject
died
during
the
open-label
phase
ofmulti-organ
failure,
intestinal
ischemia,
and
urosepsis.
None
of
the
events
in
either
subject
were
considered
to
be
related
to
the
study
drug
by
the
investigator.
All
ofthese
events
were
assessed
by
the
Data
Monitoring
Committee,
with
no
change
in
their
assessment
of
the
risk
benefit
of
ARIKAYCE.
In
the
double-blind
phase,serious
adverse
events
were
reported
for
a
greater
proportion
of
subjects
in
the
ARIKAYCE
group
than
in
the
placebo
group
(18.2%
versus
8.9%,
respectively).
Inthe
double-blind
phase,
a
greater
proportion
of
subjects
in
the
ARIKAYCE
treatment
group
than
in
the
placebo
group
reported
adverse
events
leading
to
study
drugdiscontinuation
(ARIKAYCE:
18.2%;
placebo:
0%).
The
most
commonly
reported
TEAEs
leading
to
study
drug
discontinuation
in
the
ARIKAYCE
group
wereinfective
exacerbation
of
underlying
bronchiectasis
(6.8%)
and
dyspnea
(4.5%).
The
incidence
of
adverse
events
leading
to
discontinuation
did
not
increase
in
theARIKAYCE
group
with
longer
exposure
to
the
study
drug
in
the
open-label
phase
compared
with
the
double-blind
phase
(17.1%
and
18.2%,
respectively).
In
theopen-label
phase,
27.9%
of
subjects
who
had
received
placebo
during
the
double-blind
phase
of
the
trial
reported
adverse
events
leading
to
study
drugdiscontinuation.













No
clinically
significant
changes
in
laboratory
values,
vital
signs,
BMI,
and
pulmonary
function
tests
were
observed
over
the
course
of
the
study.
Theresults
discussed
above
are
preliminary
findings
based
on
currently
available
data.MAA for NTM













We
are
currently
seeking
EU
approval
of
ARIKAYCE
for
the
treatment
of
NTM
lung
disease
caused
by
MAC
in
adult
patients
who
have
persistentpositive
sputum
cultures
despite
the
use
of
medically
appropriate
first-line
therapy.
Our
MAA
filing
is
based
on
data
from
the
112
study.
We
submitted
ourresponses
to
the
CHMP's
120-day
questions
in
December
2015.
We
expect
to
receive
the
CHMP's
180-day
LOI
in
the
first
quarter
of
2016.
We
anticipateresponding
to
the
LOI
and
participating
in
an
oral
hearing
with
the
CHMP
in
the
second
quarter
of
2016
to
address
the
LOI
on
our
MAA
for
ARIKAYCE.
The
120-day
and
180-day
communications
are
part
of
CHMPs
official
review
timetable.
We
expect
the
CHMP
to
render
an
opinion
on
our
MAA
around
the
middle
of
2016.













We
initially
filed
our
MAA
with
the
EMA
seeking
approval
of
ARIKAYCE
in
the
EU
for
the
treatment
of
NTM
lung
infections
as
well
as
Pseudomonaslung
infections
in
CF
patients.
In
the
third9Table
of
Contentsquarter
of
2015,
the
CHMP
adopted
our
request
to
withdraw
the
Pseudomonas indication
from
our
MAA.
We
chose
to
withdraw
the
Pseudomonas indication
afterreceiving
a
request
from
EMA
for
additional
information
with
respect
to
the
similarity
of
ARIKAYCE
to
the
TobiPodhaler
given
this
product's
orphan
designation.While
it
is
our
view
that
ARIKAYCE
is
not
similar
to
the
TobiPodhaler,
a
comprehensive
response
to
the
EMA's
request
would
have
required
us
to
divertsignificant
resources
from
and
potentially
delay
the
regulatory
advancement
of
the
NTM
indication.
Given
the
significant
need
for
approved
medications
forpatients
with
NTM
lung
disease,
we
concluded
the
most
appropriate
near-term
course
of
action
for
ARIKAYCE
was
to
focus
exclusively
on
advancing
theregulatory
review
process
for
the
NTM
indication.NTM Market Opportunity













NTM
is
a
rare
and
serious
disorder
associated
with
increased
morbidity
and
mortality.
There
is
an
increasing
rate
of
lung
disease
caused
by
NTM
and
thisis
an
emerging
public
health
concern
worldwide.
Patients
with
NTM
lung
disease
may
experience
a
multitude
of
symptoms
such
as
fever,
weight
loss,
cough,
lackof
appetite,
night
sweats,
blood
in
the
sputum,
and
fatigue.
Patients
with
NTM
lung
disease
frequently
require
lengthy
hospital
stays
to
manage
their
condition.There
are
no
products
specifically
indicated
for
the
treatment
of
NTM
lung
disease
in
the
US,
Europe
and
Canada.
Current
guideline-based
approaches
involvemulti-drug
regimens
that
may
cause
severe
side
effects
and
treatment
can
be
as
long
as
two
years
or
more.













The
prevalence
of
human
disease
attributable
to
NTM
has
increased
over
the
past
two
decades.
In
a
decade-long
study
(1997-2007),
researchers
found
thatthe
prevalence
of
NTM
in
the
US
is
increasing
at
approximately
8%
per
year
and
that
NTM
patients
on
Medicare
over
the
age
of
65
are
40%
more
likely
to
die
overthe
period
of
the
study
than
those
who
did
not
have
the
disease
(Adjemian
et
al.,
2012).
A
2015
publication
from
co-authors
from
several
US
governmentdepartments
stated
that
prior
year
statistics
led
to
a
projected
181,037
national
annual
cases
in
2014
costing
the
US
healthcare
system
approximately
$1.7
billion(Strollo
et
al.,
2015).













Our
market
research
indicates
that
there
are
approximately
100,000
patients
in
the
US,
the
EU5
(France,
Germany,
Italy,
Spain
and
the
United
Kingdom),and
Japan
who
have
a
confirmed
diagnosis
of
NTM
lung
disease,
of
which
an
estimated
10
to
30
percent
are
refractory
to
current
treatments.
In
2012,
incollaboration
with
the
NIH,
we
funded
a
study
performed
by
Clarity
Pharma
Research
that
showed
there
were
an
estimated
50,000
cases
of
pulmonary
diseaseattributable
to
NTM
in
the
US
in
2011
and
that
such
cases
were
estimated
to
be
growing
at
a
rate
of
10%
per
year.
In
2013,
we
engaged
Clarity
Pharma
Research
toperform
a
similar
chart
audit
study
of
NTM
in
Europe
and
Japan.
Based
on
results
of
this
study,
researchers
estimated
that
there
are
approximately
20,000
cases
ofpulmonary
disease
attributable
to
NTM
within
the
EU5
and
approximately
30,000
in
the
28
countries
comprising
the
EU.
In
addition,
there
are
nearly
32,000
casesin
Japan.
Although
population-based
data
on
the
epidemiology
of
NTM
infections
in
Europe
are
limited,
consistent
with
US
prevalence
trends,
recent
publishedstudies
concur
that
prevalence
in
Europe
is
increasing
and,
according
to
a
study
published
in
the
Japanese
journal
Kekkaku
in
2011,
Japan
has
one
of
the
world'shighest
NTM
disease
rates.













NTM
currently
includes
over
150
species.
MAC
is
the
predominant
pathogenic
species
in
NTM
pulmonary
disease
in
the
US,
Japan
and
Europe,
followedby
M. abscessus .
Thus
far,
we
have
studied
ARIKAYCE
in
both
MAC
and
M. abscessus .













We
are
studying
the
economic
and
societal
implications
of
NTM
lung
infections.
We
have
conducted
a
burden
of
illness
study
in
the
US
with
a
majormedical
benefits
provider.
This
study
showed
that
patients
with
NTM
lung
infections
are
costly
to
healthcare
plans
and
ATS/IDSA
guideline-based
treatmentresults
in
healthcare
savings
as
opposed
to
suboptimal
treatment.10Table
of
Contents













In
partnership
with
one
of
the
nation's
largest
Medicare
insurance
providers,
we
recently
presented
the
results
of
three
claims-based
studies.·At
the
Interscience
Conference
of
Antimicrobial
Agents
and
Chemotherapy
in
September
2015
researchers
reported
a
36.1%
increase
(p<0.001)
inthe
incidence
of
NTM
infections
between
2008
and
2013
with
the
greatest
incidence
(56.3%)
for
those
members
65
to
74
years
of
age.
Followingdiagnosis
with
NTM
infection,
over
50%
of
members
were
still
in
the
plan
after
six
years
(Abraham
et
al.).·At
Infectious
Disease
Week
in
October
2015
researchers
reported
that
patients
with
NTM
are
using
significantly
greater
healthcare
resources
in
theperiod
preceding
their
diagnosis.
Ordering
mycobacterial
testing
of
sputum
earlier
may
help
in
preventing
a
misdiagnosis
or
delaying
a
diagnosis(Holt
et
al.).·At
the
Academy
of
Managed
Care
Pharmacy
conference
in
October
2015,
researchers
reported
significantly
higher
resource
utilization
and
costpatterns
for
patients
with
NTM
lung
infections
than
their
matched
controls
both
pre-
and
post-diagnosis.
Patients
who
received
optimal
treatmentbased
on
the
2007
ATS/IDSA
guidelines
showed
lower
healthcare
resource
utilization
and
total
medical
costs
than
patients
who
received
suboptimaltreatment.
These
data
suggest
that
healthcare
plans
should
consider
mechanisms
to
identify
and
appropriately
treat
patients
with
NTM
lung
disease(Abraham
et
al.).













We
plan
to
repeat
this
type
of
research
globally
in
support
of
our
overall
disease
awareness
and
education
efforts.













The
FDA
has
designated
ARIKAYCE
as
an
orphan
drug,
a
breakthrough
therapy,
and
a
QIDP
for
NTM
lung
disease.
Orphan
designation
features
sevenyears
of
post-approval
market
exclusivity
and
QIDP
features
an
additional
five
years
of
post-approval
exclusivity.
A
QIDP-designated
product
is
eligible
for
fasttrack
and
priority
review
designations.
A
priority
review
designation
for
a
drug
that
is
not
a
new
molecular
entity
(NME)
means
the
FDA's
goal
is
to
take
action
onthe
NDA
within
six
months
of
the
FDA's
accepting
the
application
as
filed
compared
to
10
months
under
a
standard
review.INS1009













INS1009
is
an
investigational
sustained-release
nebulized
treprostinil
prodrug
that
has
the
potential
to
address
certain
of
the
current
limitations
of
existinginhaled
prostanoid
therapies.
We
believe
that
INS1009
prolongs
duration
of
effect
and
may
provide
greater
consistency
in
pulmonary
arterial
pressure
reductionover
time.
Current
inhaled
prostanoid
therapies
must
be
dosed
four
to
nine
times
per
day
for
the
treatment
of
PAH.
Reducing
dose
frequency
has
the
potential
toease
patient
burden
and
improve
compliance.
Additionally,
we
believe
that
INS1009
over
time
may
reduce
side
effects,
including
elevated
heart
rate,
low
bloodpressure,
and
severity
and/or
frequency
of
cough,
associated
with
high
initial
drug
levels
and
local
upper
airway
exposure
when
using
current
inhaled
prostanoidtherapies.
We
believe
INS1009
may
have
therapeutic
potential
in
PAH,
IPF,
sarcoidosis,
and
severe
refractory
asthma.













In
late
2014,
we
had
a
pre-investigational
new
drug
(pre-IND)
meeting
with
the
FDA
for
INS1009
and
clarified
that,
subject
to
final
review
of
thepreclinical
data,
INS1009
could
be
eligible
for
an
approval
pathway
under
Section
505(b)(2)
of
the
Federal
Food,
Drug,
and
Cosmetic
Act
(FDCA)
("505(b)(2)approval").
Like
a
traditional
NDA
that
is
submitted
under
Section
505(b)(1)
of
the
FDCA,
a
505(b)(2)
NDA
must
establish
that
the
drug
is
safe
and
effective,
butunlike
a
traditional
NDA
the
applicant
may
rely
at
least
in
part
on
studies
not
conducted
by
or
for
the
applicant
and
for
which
the
applicant
does
not
have
a
right
ofreference.
The
ability
to
rely
on
existing
third-party
data
to
support
safety
and/or
effectiveness
can
reduce
the
time
and
cost
associated
with
traditional
NDAs.11Table
of
Contents













In
the
fourth
quarter
of
2015
we
submitted
an
IND
application
and
subsequently
commenced
a
phase
1
study
of
INS1009.
The
phase
1
study
is
arandomized,
double-blind,
placebo-controlled
single
ascending
dose
study
of
INS1009
for
inhalation
to
determine
its
safety,
tolerability,
and
pharmacokinetics
inhealthy
volunteers.













We
believe
INS1009
may
have
therapeutic
potential
in
PAH,
IPF,
sarcoidosis,
and
severe
refractory
asthma.PAH













There
is
no
cure
for
PAH.
PAH
is
a
serious,
progressive
rare
disease
affecting
approximately
100,000
patients
globally,
including
approximately
25,000treated
patients
in
the
US
(Yang
et
al.,
2006;
Peacock
et
al.
2007;
and
Humbert
et
al.
2006).
PAH
ultimately
leads
to
heart
failure
and
the
disease
has
a
15%
one-year
mortality
rate
(Kane
et
al.,
2011).
Several
medications
are
used
to
treat
PAH:·Non-specific
treatments
such
as
anticoagulants,
diuretics,
and
oxygen
may
be
used.
These
drugs
are
not
specifically
approved
for
the
treatment
ofPAH,
but
are
commonly
utilized.
In
specific
circumstances,
drugs
such
as
digoxin
or
calcium
channel
blockers
may
also
be
used
to
treat
PAH.·Several
drugs
are
approved
specifically
for
the
treatment
of
PAH.
These
drugs
address
three
target
pathophysiologic
pathways:
the
endothelinpathway;
the
nitric
oxide
pathway;
and
the
prostacyclin
pathway.
They
may
be
used
alone
or
in
combination.IPF













Idiopathic
Pulmonary
Fibrosis
(IPF)
is
a
rare,
chronic,
progressive,
interstitial
lung
disease
of
unknown
etiology
that
affects
around
five
million
patientsworldwide.
Patients
with
IPF
are
generally
middle-aged
or
older
at
the
time
of
diagnosis.
Disease
progression
is
variable
but
progressive
fibrosis
(scarring)
leadsultimately
to
death,
with
a
median
survival
of
three
to
five
years
after
diagnosis.
Symptoms
often
include
shortness
of
breath,
dry
cough,
unintended
weight
loss,fatigue,
and
clubbing
of
the
fingers
and
toes.
Over
time,
IPF
can
lead
to
a
debilitating
loss
of
physical
ability.
The
prevalence
of
IPF
in
the
US
ranges
from
between90,000
and
190,000
patients,
a
range
similar
to
that
reported
in
Europe
(Lee
et
al.,
2014).Sarcoidosis













Sarcoidosis
is
a
granulomatous
inflammatory
disease
that
is
induced
by
unknown
antigen(s)
in
a
genetically
susceptible
host
(Mortaz
et
al.
2014).
Thisrare,
chronic
systemic
disease
most
commonly
affects
the
lung.
Several
features
of
sarcoidosis
tend
to
obscure
the
diagnosis,
leading
to
an
under-appreciation
of
thepotential
impact
of
the
disease
on
the
health
care
system
and
society
as
a
whole.
Sarcoidosis
frequently
presents
with
non-specific
complaints,
ranging
from
fatigueand
depression,
"asthma
symptoms"
(wheezing,
cough),
to
arthritis
and
muscle
pain
or
weakness.
As
such,
sarcoidosis
can
mimic
other
diseases,
leading
tomisdiagnosis
and
inappropriate
treatments.
The
prevalence
of
sarcoidosis
in
the
US
is
unknown,
with
estimates
ranging
widely
from
one
to
40
per
100,000
(Erdal
etal.
2012).Severe refractory asthma













Severe
refractory
asthma
is
characterized
by
a
difficulty
to
achieve
disease
control
despite
high-intensity
treatment.
Prevalence
figures
of
severe
refractoryasthma
are
lacking,
whereas
longstanding
estimates
vary
between
five
and
10%
of
all
asthmatic
patients.
To
make
a
reliable
estimate
of
the
prevalence
of
severerefractory
asthma
as
defined
by
the
Innovative
Medicine
Initiative
consensus,
Hekking
et
al.
analyzed
prescription
data
from
65
Dutch
pharmacy
databases,representing
500,500
adult
inhabitants.
Of
asthmatic
adults,
3.6%
qualified
for
a
diagnosis
of
severe
refractory
asthma;
therefore,
the
prevalence
of
severerefractory
asthma
might
be
lower
than
estimated
by
expert
opinion,
which
implies
that
currently
recognized
severe
asthma
phenotypes
could
meet
the
criteria
ofrare
disease.
(Hekking
et
al.
October
2014).12Table
of
ContentsResearch
and
Development













Research
and
development
expenses
consist
primarily
of
salaries,
benefits
and
other
related
costs,
including
stock-based
compensation,
for
personnelserving
in
our
research
and
development
functions.
Expenses
also
include
other
internal
operating
expenses,
the
cost
of
manufacturing
our
drug
candidate
forclinical
study,
the
cost
of
conducting
clinical
studies,
and
the
cost
of
conducting
preclinical
and
research
activities.
Our
expenses
related
to
manufacturing
our
drugcandidate
for
clinical
study
are
primarily
related
to
activities
at
contract
manufacturing
organizations
that
manufacture
ARIKAYCE
for
our
use.
Our
expensesrelated
to
clinical
trials
are
primarily
related
to
activities
at
contract
research
organizations
that
conduct
and
manage
clinical
trials
on
our
behalf.
We
incurredapproximately
$74.3
million,
$56.3
million,
and
$44.3
million
for
research
and
development
expenses
in
2015,
2014
and
2013,
respectively.Corporate
Development













We
plan
to
develop,
acquire,
in-license
or
co-promote
other
products
that
address
rare
diseases.
We
are
focused
broadly
on
rare
disease
therapeutics
andprioritizing
those
areas
that
best
align
with
our
core
competencies
and
current
therapeutic
focus
in
the
fields
of
pulmonology
and
infectious
disease.Manufacturing













ARIKAYCE
is
manufactured
by
Ajinimoto
Althea,
Inc.,
a
Delaware
corporation
(Althea),
in
the
US
at
a
50
liter
scale.
In
September
2015,
we
entered
intoa
commercial
fill/finish
services
agreement
with
Althea
to
produce
ARIKAYCE.
Althea
has
the
right
to
terminate
this
agreement
upon
written
notice
for
ouruncured
material
breach,
if
we
are
the
subject
of
specified
bankruptcy
or
liquidation
events,
or
without
cause
with
24
months'
prior
written
notice.
In
February2014,
we
entered
into
a
contract
manufacturing
agreement
with
Therapure
Biopharma
Inc.,
a
Canadian
corporation
(Therapure)
for
the
manufacture
of
ARIKAYCEat
a
200
liter
scale
which
we
believe
will
be
necessary
to
support
commercialization.
We
have
also
identified
certain
second
source
suppliers
for
our
supply
chain,and
plan
to
implement
supply
and
quality
agreements
in
preparation
for
commercialization
of
ARIKAYCE.
In
July
2014,
we
entered
into
a
commercializationagreement
with
PARI
Pharma
GmbH
(PARI),
the
manufacturer
of
our
drug
delivery
nebulizer,
to
address
our
commercial
supply
needs.
We
currently
produceINS1009,
our
investigational
nebulized
treprostinil
prodrug,
and
plan
to
utilize
third
parties
to
manufacture
INS1009
at
a
larger
scale
and
the
drug
delivery
device.Intellectual
PropertyARIKAYCE Patents and Trade Secrets













We
own
or
license
rights
to
more
than
200
issued
patents
and
pending
patent
applications
in
the
US
and
in
foreign
countries,
including
more
than
120issued
patents
and
pending
patent
applications
related
to
ARIKAYCE.
Our
success
depends
in
part
on
our
ability
to
maintain
proprietary
protection
surrounding
ourproduct
candidates,
technology
and
know-how;
to
operate
without
infringing
the
proprietary
rights
of
others;
and
to
prevent
others
from
infringing
our
proprietaryrights.
We
actively
seek
patent
protection
by
filing
patent
applications,
including
on
inventions
that
are
important
to
the
development
of
our
business
in
the
US,Europe,
Canada,
and
selected
other
foreign
markets
that
we
consider
key
for
our
product
candidates.
These
international
markets
generally
include
Australia,
Japan,China,
India,
Israel,
and
Mexico.













Our
patent
strategy
includes
obtaining
patent
protection,
where
possible,
on
compositions
of
matter,
methods
of
manufacture,
methods
of
use,
methods
oftreatment,
dosing
and
administration
regimens
and
formulations.
We
also
rely
on
trade
secrets,
know-how,
continuing
technological
innovation,
in-licensing
andpartnership
opportunities
to
develop
and
maintain
our
proprietary
position.13Table
of
Contents













We
monitor
for
activities
that
may
infringe
our
proprietary
rights,
as
well
as
the
progression
of
third-party
patent
applications
that
may
have
the
potentialto
create
blocks
to
our
products
or
otherwise
interfere
with
the
development
of
our
business.
We
are
aware,
for
example,
of
US
patents,
and
correspondinginternational
counterparts,
owned
by
third
parties
that
contain
claims
related
to
treating
lung
infections
using
inhaled
antibiotics.
If
any
of
these
patents
were
to
beasserted
against
us,
we
do
not
believe
that
our
proposed
products
would
be
found
to
infringe
any
valid
claim
of
these
patents.













Reflecting
our
commitment
to
safeguarding
proprietary
information,
we
require
our
employees,
consultants,
advisors,
collaborators
and
other
third-partypartners
to
sign
confidentiality
agreements
to
protect
the
exchange
of
proprietary
materials
and
information.
We
also
seek
to
preserve
the
integrity
andconfidentiality
of
our
data
and
trade
secrets
by
maintaining
physical
security
of
our
premises
and
physical
and
electronic
security
of
our
information
technologysystems.













We
own
six
US
patents
that
cover
the
ARIKAYCE
composition
and
its
use
in
treating
NTM.
Upon
ARIKAYCE
approval
for
the
treatment
of
NTM,
thesepatents
may
be
eligible
for
listing
in
the
FDA
Orange
Book.
These
patents
and
their
expiration
dates
(not
taking
into
account
any
potential
patent
term
extension)are
as
follows:·US
Patent
No.
7,718,189
(expires
June
6,
2025)·US
Patent
No.
8,226,975
(expires
August
15,
2028)·US
Patent
No.
8,632,804
(expires
December
5,
2026)·US
Patent
No.
8,802,137
(expires
April
8,
2024)·US
Patent
No.
8,679,532
(expires
December
5,
2026)·US
Patent
No.
8,642,075
(expires
December
5,
2026)













In
addition,
we
own
four
pending
US
patent
applications
that
cover
the
ARIKAYCE
composition
and
its
use
in
treating
NTM.
Upon
ARIKAYCE
approvalfor
the
treatment
of
NTM,
these
patents
would
be
listed
in
the
FDA
Orange
Book.
We
also
own
a
pending
US
application
that
covers
methods
for
makingARIKAYCE.













Three
patents
have
been
granted
by
the
European
Patent
Office
("EPO")
(European
Patent
Nos.
1581236,
1909759
and
2363114)
that
cover
ARIKAYCEand
its
use
in
treating
NTM.
In
addition,
we
have
three
applications
pending
before
the
EPO
that
cover
ARIKAYCE
and
its
use
in
treating
NTM
and
one
additionalinternational
application
that
will
be
filed
in
the
EPO
on
or
before
November
15,
2016
that
covers
methods
of
treating
NTM
with
ARIKAYCE.
We
also
own
apending
European
application
that
covers
methods
of
making
ARIKAYCE.
Thirty
eight
patents
have
also
been
issued
in
major
foreign
markets,
e.g.,
Japan,
China,Korea,
Australia,
and
India,
which
cover
ARIKAYCE
and
methods
of
using
ARIKAYCE
for
treating
NTM.
Thirty
seven
foreign
patent
applications
are
pendingthat
cover
the
ARIKAYCE
composition
and
its
use
in
treating
NTM.
We
anticipate
that
in
the
US,
we
will
have
potential
patent
coverage
for
ARIKAYCE
and
itsuse
in
treating
NTM,
through
at
least
February
2029,
which
includes
a
potential
six
months
of
pediatric
exclusivity.













Through
our
agreements
with
PARI,
we
have
license
rights
to
US
and
foreign
patents
and
applications
that
cover
the
eFlow
Nebulizer
System
medicaldevice.
We
have
rights
to
use
the
nebulizers
in
clinical
trials
and
we
have
entered
into
a
commercial
supply
agreement
with
PARI.













The
basic
terms
of
utility
patents
issued
in
the
US
are
the
longer
of
17
years
from
the
issue
date
or
20
years
from
the
earliest
effective
filing
date,
if
thepatent
was
in
force
on
or
was
issued
from
a
patent
application
that
was
filed
prior
to
June
8,
1995;
or
20
years
from
the
earliest
effective
filing
date,
if
the
patentapplication
was
filed
on
or
after
June
8,
1995.14Table
of
Contents













The
basic
term
of
foreign
utility
patents
may
vary
in
accordance
with
provisions
of
applicable
local
law,
but
is
typically
20
years
from
the
earliest
effectivefiling
date.INS1009 Patents













We
own
US
Patent
No.
9,255,064
(expires
October
24,
2034),
which
is
the
first
patent
to
issue
with
claims
covering
INS1009.
Other
treprostinil
prodrugsare
also
claimed
and
described
in
the
patent.
Methods
of
using
treprostinil
prodrugs,
including
INS1009,
are
described
in
the
patent.













We
own
pending
patent
applications
that
if
granted,
would
cover
treprostinil
analogs
including
INS1009,
nanoparticle
formulations
of
such
treprostinil
andprostacyclin
analogs
and
methods
for
using
such
treprostinil
analogs
and
nanoparticle
formulations
comprising
the
same
in
treating
patients
with
pulmonary
arterialhypertension
and
other
diseases,
as
well
as
methods
for
manufacturing
such
prostacyclin
analogs.Trademarks













In
addition
to
our
patents
and
trade
secrets,
we
have
filed
applications
to
register
certain
trademarks
in
the
US
and/or
abroad,
including
INSMED,ARIKAYCE,
and
IPLEX.
At
present,
we
have
received
either
registration
or
a
notice
of
allowance
for
these
marks
from
the
US
Patent
and
Trademark
Office.
Wehave
also
received
foreign
allowances
or
issued
foreign
registrations
for
certain
of
these
marks.
In
October
2013,
we
learned
that
the
EMA
had
no
objection
to
ouruse
of
the
name
ARIKAYCE.
In
early
2014,
we
learned
that
the
FDA
conditionally
approved
our
use
of
the
name
ARIKAYCE
as
our
proposed
trade
name
for
ourliposomal
amikacin
for
inhalation
product
candidate.
Our
ability
to
obtain
and
maintain
trademark
registrations
will
in
certain
geographical
locations
depend
onmaking
use
of
the
mark
in
commerce
on
or
in
connection
with
our
products
and
approval
of
the
trademarks
for
our
products
by
regulatory
authorities
in
eachcountry.License
and
Collaboration
AgreementsARIKAYCE-related License and Collaboration AgreementsAjinomoto Althea, Inc.













In
September
2015,
we
entered
into
a
Commercial
Fill/Finish
Services
Agreement
(the
"Fill/Finish
Agreement")
with
Althea
to
produce,
on
a
non-exclusive
basis,
ARIKAYCE
in
finished
dosage
form.
Under
the
Fill/Finish
Agreement,
we
are
obligated
to
pay
a
minimum
of
$2.7
million
for
the
batches
ofARIKAYCE
produced
by
Althea
each
calendar
year
during
the
term
of
the
Fill/Finish
Agreement.
The
Fill/Finish
Agreement
is
effective
as
of
January
1,
2015,
hasan
initial
term
that
ends
on
December
31,
2017
and
may
be
extended
for
additional
two
year
periods
upon
mutual
written
agreement
of
the
Company
and
Althea
atleast
one
year
prior
to
the
expiration
of
its
then-current
term.













Either
we
or
Althea
may
terminate
the
Fill/Finish
Agreement
upon
the
occurrence
of
certain
events,
including
(i)
material
breach
of
the
Fill/FinishAgreement
by
either
party,
provided
such
breach
is
not
cured
within
30
days
after
receipt
by
the
breaching
party
of
written
notice
of
the
breach
or
(ii)
insolvency
orbankruptcy
of
the
other
party.
In
addition,
we
may
terminate
the
Fill/Finish
Agreement
without
cause
with
12
months'
prior
written
notice
to
Althea,
and
Altheamay
terminate
the
Agreement
without
cause
with
24
months'
prior
written
notice.15Table
of
ContentsPARI Pharma GmbH













We
currently
have
a
licensing
agreement
with
PARI
for
use
of
the
optimized
eFlow
Nebulizer
System
for
delivery
of
ARIKAYCE
in
treating
patients
withNTM
infections,
CF
and
bronchiectasis.
Under
the
licensing
agreement,
we
have
rights
under
several
US
and
foreign
issued
patents,
and
patent
applicationsinvolving
improvements
to
the
optimized
eFlow
Nebulizer
System,
to
exploit
such
system
with
ARIKAYCE
for
the
treatment
of
such
indications,
but
we
cannotmanufacture
such
nebulizers
except
as
permitted
under
our
Commercialization
Agreement
with
PARI
(as
discussed
below).
We
currently
have
rights
to
use
thenebulizers
in
clinical
trials
and
also
entered
into
a
commercial
supply
agreement
with
PARI.
Outside
the
EU,
the
eFlow
Nebulizer
System
is
labeled
asinvestigational
for
use
in
our
clinical
trials
in
the
US,
Canada,
Australia
and
Japan.













We
have
certain
obligations
under
this
licensing
agreement
in
relation
to
specified
licensed
indications.
With
respect
to
CF,
we
are
obligated
to
usecommercially
reasonable
efforts
to
develop,
obtain
regulatory
and
reimbursement
approval,
market
and
sell
ARIKAYCE
in
two
or
more
major
European
countries.With
respect
to
NTM,
CF
and
bronchiectasis,
we
have
specific
obligations
to
use
commercially
reasonable
efforts
to
achieve
certain
developmental
and
regulatorymilestones
by
set
deadlines.
Additionally,
for
NTM,
we
are
obligated
to
use
commercially
reasonable
efforts
to
achieve
certain
commercial
milestones
in
the
US,Europe
and
Canada.
The
consequences
of
our
failing
to
use
commercially
reasonable
efforts
to
achieve
these
milestones
are
context-specific,
but
include
endingPARI's
non-compete
obligation,
making
the
license
non-exclusive
and
terminating
the
license,
in
each
case
with
respect
to
the
applicable
indication.
Under
thelicensing
agreement,
we
paid
PARI
an
upfront
license
fee
and
PARI
is
entitled
to
receive
milestone
payments
up
to
an
aggregate
of
€4.3
million
either
in
cash,qualified
stock
or
a
combination
of
both,
at
PARI's
discretion,
based
on
achievement
of
certain
future
milestone
events
including
first
acceptance
of
MAAsubmission
(or
equivalent)
in
the
US
of
ARIKAYCE
and
the
device,
first
receipt
of
marketing
approval
in
the
US
for
ARIKAYCE
and
the
device,
and
first
receiptof
marketing
approval
in
a
major
EU
country
for
ARIKAYCE
and
the
device.
In
addition,
PARI
is
entitled
to
receive
royalty
payments
in
the
mid-single
digits
onthe
net
commercial
sales
of
ARIKAYCE
pursuant
to
the
licensing
agreement,
subject
to
certain
specified
annual
minimum
royalties.













This
license
agreement
will
remain
in
effect
on
a
country-by-country
basis
until
the
final
royalty
payments
have
been
made
with
respect
to
the
last
countryin
which
ARIKAYCE
is
sold,
or
until
the
agreement
is
otherwise
terminated
by
either
party.
We
have
the
right
to
terminate
this
license
agreement
upon
writtennotice
for
PARI's
uncured
material
breach,
if
PARI
is
the
subject
of
specified
bankruptcy
or
liquidation
events,
or
if
PARI
fails
to
reach
certain
specifiedmilestones.
PARI
has
the
right
to
terminate
this
license
agreement
upon
written
notice
for
our
uncured
material
breach,
if
we
are
the
subject
of
specified
bankruptcyor
liquidation
events,
if
we
assign
or
otherwise
transfer
the
agreement
to
a
third
party
that
does
not
agree
to
assume
all
of
our
rights
and
obligations
set
forth
in
theagreement,
or
if
we
fail
to
reach
certain
specified
milestones.













In
July
2014,
we
entered
into
a
Commercialization
Agreement
(the
"PARI
Agreement")
with
PARI
for
the
manufacture
and
supply
of
eFlow
nebulizersystems
and
related
accessories
(the
"Device")
as
optimized
for
use
with
our
proprietary
liposomal
amikacin
for
inhalation.
The
PARI
Agreement
envisages
thatPARI
will
undertake
the
manufacturing
of
the
Device
except
in
the
case
of
certain
defined
supply
failures,
when
we
will
have
the
right
to
make
the
Device
andhave
it
made
by
third
parties
(but
not
certain
third
parties
deemed
under
the
PARI
Agreement
to
compete
with
PARI).
The
PARI
Agreement
has
an
initial
term
offifteen
years
from
the
first
commercial
sale
of
ARIKAYCE
pursuant
to
the
licensing
agreement
(the
"Initial
Term").
The
term
of
the
PARI
Agreement
may
beextended
by
us
for
an
additional
five
years
by
providing
written
notice
to
PARI
at
least
one
year
prior
to
the
expiration
of
the
Initial
Term.16Table
of
ContentsTherapure Biopharma Inc.













In
February
2014,
we
entered
into
a
Contract
Manufacturing
Agreement
with
Therapure
for
the
manufacture
of
ARIKAYCE.
Pursuant
to
the
Agreement,we
collaborated
with
Therapure
to
construct
a
production
area
for
the
manufacture
of
ARIKAYCE
in
Therapure's
existing
manufacturing
facility
in
Mississauga,Ontario,
Canada.
Therapure
manufactures
ARIKAYCE
for
us
on
a
non-exclusive
basis.
The
agreement
has
an
initial
term
of
five
years
from
the
first
date
on
whichTherapure
delivers
ARIKAYCE
to
us
after
we
obtain
permits
related
to
the
manufacture
of
ARIKAYCE,
and
will
renew
automatically
for
successive
periods
oftwo
years
each,
unless
terminated
by
either
party
by
providing
the
required
two
years'
prior
written
notice
to
the
other
party.
Notwithstanding
the
foregoing,
theparties
have
rights
and
obligations
under
the
agreement
prior
to
the
commencement
of
the
initial
term.
Under
the
agreement,
we
are
obligated
to
pay
certainminimum
amounts
for
the
batches
of
ARIKAYCE
produced
each
calendar
year.
The
agreement
allows
for
termination
by
either
party
upon
the
occurrence
ofcertain
events,
including
(i)
the
material
breach
by
the
other
party
of
any
provision
of
the
agreement
or
the
quality
agreement
expected
to
be
entered
into
betweenthe
parties,
or
(ii)
the
default
or
bankruptcy
of
the
other
party.
In
addition,
we
may
terminate
the
agreement
for
any
reason
upon
no
fewer
than
one
hundred
eightydays'
advance
notice.
Costs
incurred
under
this
agreement
are
being
recorded
as
a
component
of
research
and
development
expense
until
such
time
as
we
receiveUS
FDA
approval
for
ARIKAYCE.SynteractHCR, Inc.













On
December
30,
2014,
we
entered
into
Work
Order
1,
pursuant
to
a
Master
Agreement
for
Services
with
SynteractHCR,
Inc.,
("Synteract")
dated
as
ofAugust
27,
2014,
as
amended
on
December
23,
2014,
pursuant
to
which
we
retained
Synteract
to
perform
implementation
and
management
services
in
connectionwith
certain
clinical
trials
pursuant
to
a
specific
protocol
of
pharmaceutical
products
under
development
by
us
or
under
our
control.
Synteract
is
providingcomprehensive
services
for
the
212
study.
Prior
to
the
execution
of
the
Work
Order,
Synteract
was
providing
such
services
pursuant
to
a
Letter
of
Intent,
datedAugust
25,
2014.
Based
on
work
orders
signed
to
date
for
the
212
study,
we
anticipate
that
aggregate
costs
relating
to
the
Synteract
work
orders
will
beapproximately
$40
million
over
the
period
of
the
study.
In
addition,
we
signed
work
orders
with
Synteract
related
to
the
follow-on
312
study.
Based
on
work
orderssigned
to
date
for
the
312
study,
we
anticipate
that
aggregate
costs
relating
to
the
Synteract
work
orders
will
be
approximately
$20
million
over
the
period
of
thestudy.Cystic Fibrosis Foundation Therapeutics, Inc.













In
2004
and
2009,
we
entered
into
research
funding
agreements
with
Cystic
Fibrosis
Foundation
Therapeutics,
Inc.
(CFFT)
whereby
we
received$1.7
million
and
$2.2
million
for
each
respective
agreement
in
research
funding
for
the
development
of
ARIKAYCE.
If
ARIKAYCE
becomes
an
approved
productfor
CF
in
the
US,
we
will
owe
a
payment
to
CFFT
of
up
to
$13.4
million
that
is
payable
over
a
three-year
period
after
approval
as
a
commercialized
drug
in
the
US.Furthermore,
if
certain
global
sales
milestones
are
met
within
5
years
of
the
drug
commercialization,
we
would
owe
an
additional
payment
of
$3.9
million.
Underthe
2009
agreement,
in
the
event
we
terminate
development
of
ARIKAYCE
prior
to
first
commercial
sale
of
a
product
containing
ARIKAYCE
for
a
period
of
360continuous
days,
and
such
termination
is
not
for
reasons
outside
of
our
reasonable
control,
then
at
CFFT's
election
and
within
180
days
of
such
termination,
CFFT(1)
may
elect
to
develop
ARIKAYCE
and
(2)
will
have
the
right
to
receive
from
us
an
exclusive
(subject
to
certain
exceptions),
royalty-free,
sub-licensable
licenseto
use,
develop,
sell
and
commercialize
a
product
containing
ARIKAYCE
in
the
treatment
of
certain
infections
in
CF
patients
or
pulmonary
disease.17Table
of
ContentsINS1009-related License and Other Collaboration AgreementsDevice Supply and Clinical Investigation Agreement Relating to INS1009              Respironics —In
November
2015,
we
entered
into
an
agreement
with
Respironics
Inc.,
a
division
of
Philips
(Respironics),
for
the
clinical
supply
ofdevices
to
be
used
in
the
development
of
INS1009
for
PAH.
The
agreement
calls
for
payments
to
Respironics
upon
the
achievement
of
certain
clinical
milestonesrelating
to
the
development
of
INS1009
aggregating
$7.6
million.
In
addition,
we
will
be
required
to
pay
a
royalty
on
net
sales
of
the
product,
if
any.License Agreements and Other Collaboration Agreements              Ipsen and Genentech —Prior
to
2007,
we
focused
on
development
and
commercialization
of
IPLEX
for
the
treatment
of
growth
failure
in
children
withsevere
primary
IGF-deficiency.
IPLEX
was
approved
by
the
FDA
for
treatment
of
severe
primary
IGF-1
deficiency
in
December
2005
and
was
commerciallylaunched
in
the
second
quarter
of
2006.
We
subsequently
withdrew
IPLEX
from
the
market
in
connection
with
a
patent
infringement
settlement
agreement
amongus,
Ipsen
(formerly
Tercica),
and
Genentech.
In
connection
with
the
settlement,
we
were
granted
a
license
or
sublicense
as
applicable
to
patents
held
by
Ipsen
andGenentech
to
develop
IPLEX
in
certain
medical
indications
in
the
US
and
foreign
territories,
subject
to
certain
opt-in
and
other
rights
retained
by
Ipsen
andGenentech.
In
November
2008
we
gained
Royalty-Free
Worldwide
Rights
for
IPLEX
from
Ipsen
and
Genentech
in
connection
with
potential
expanded
access
ALSprograms.              Eleison —In
February
2011,
we
entered
into
an
agreement
with
Eleison
Pharmaceuticals
whereby
we
granted
Eleison
an
exclusive
license
for
InhaledCISPLATIN
Lipid
Complex.
The
license
gives
Eleison
the
right
to
develop,
manufacture
and
commercialize
inhaled
CISPLATIN
Lipid
Complex
for
cancersaffecting
the
lung.
Payments
totaling
$1.0
million
were
received
in
2011
and
were
recorded
in
license
fees.              Premacure (now Shire plc) —In
May
2012,
we
entered
into
an
agreement
with
Premacure
pursuant
to
which
we
granted
to
Premacure
an
exclusive,worldwide
license
to
develop
manufacture
and
commercialize
IGF-1,
with
its
natural
binding
protein,
IGFBP-3,
for
the
prevention
and
treatment
of
complicationsof
preterm
birth
(the
"Premacure
License
Agreement").
In
March
2013,
we
amended
the
Premacure
License
Agreement
to
provide
Premacure
with
the
option
topay
us
$11.5
million
and
assume
any
of
our
royalty
obligations
to
other
parties
in
exchange
for
a
fully
paid
license.
In
March
2013,
Shire
plc
announced
that
theyacquired
Premacure.
In
April
2013
Shire
exercised
this
option
and
paid
us
$11.5
million,
and
as
a
result
we
are
not
entitled
to
future
royalties
from
Shire.Competition













The
biotechnology
and
pharmaceutical
industries
are
highly
competitive.
We
face
potential
competitors
from
many
different
areas
including
commercialpharmaceutical,
biotech
and
device
companies,
academic
institutions
and
scientists,
other
smaller
or
earlier
stage
companies
and
non-profit
organizationsdeveloping
anti-infective
drugs
and
drugs
for
respiratory
diseases.
Many
of
these
companies
have
greater
human
and
financial
resources
and
may
have
productcandidates
in
more
advanced
stages
of
development
and
may
reach
the
market
before
our
product
candidates.
Competitors
may
develop
products
that
are
moreeffective,
safer
or
less
expensive
or
that
have
better
tolerability
or
convenience.
We
also
may
face
generic
competitors
where
third-party
payers
will
encourage
useof
the
generic
products.
Although
we
believe
that
our
formulation
delivery
technology,
respiratory
and
anti-infective
expertise,
experience
and
knowledge
in
ourspecific
areas
of
focus
provide
us
with
competitive
advantages,
these
potential
competitors
could
reduce
our
commercial
opportunity.18Table
of
ContentsNTM competitive overview













Our
major
competitors
include
pharmaceutical
and
biotechnology
companies
that
have
approved
therapies
or
therapies
in
development
for
the
treatment
ofchronic
lung
infections.
While
some
companies
have
expressed
interest
in
studying
their
products
for
NTM,
we
are
not
aware
of
any
companies
that
are
currentlyconducting
clinical
trials
for
the
treatment
of
NTM
lung
disease.
There
are
no
approved
inhaled
therapies
specifically
indicated
for
NTM
lung
infections
in
NorthAmerica,
Europe
or
Japan
but
there
is
an
ATS/IDSA-recommended
treatment
regimen
that
is
utilized.Government
RegulationOrphan
DrugsEuropean
Union













The
European
Commission
grants
orphan
drug
designation
to
promote
the
development
of
drugs
or
biologics
(1)
for
life-threatening
or
chronicallydebilitating
conditions
affecting
not
more
than
five
in
10,000
people
in
the
EU,
or
(2)
for
life
threatening,
seriously
debilitating
or
serious
and
chronic
condition
inthe
EU
where,
without
incentives,
sales
of
the
drug
in
the
European
Economic
Area
(the
European
Union
plus,
Iceland,
Lichtenstein,
and
Norway)
(EEA)
areunlikely
to
be
sufficient
to
justify
its
development.
Orphan
drug
designation
is
available
either
if
no
other
satisfactory
method
of
diagnosing,
preventing
or
treatingthe
condition
is
approved
in
the
EEA
or
if
such
a
method
does
exist
but
the
proposed
orphan
drug
will
be
of
significant
benefit
to
patients.













If
a
drug
with
an
orphan
drug
designation
subsequently
receives
a
marketing
authorization
for
a
therapeutic
indication
which
is
covered
by
suchdesignation,
the
drug
is
entitled
to
orphan
exclusivity.
Orphan
exclusivity
means
that
the
EMA
or
national
Medicines
Agency
may
not
accept
another
applicationfor
authorization,
or
grant
an
authorization,
for
a
same
or
similar
drug
for
the
same
therapeutic
indication.
Competitors
may
receive
such
a
marketing
authorizationdespite
orphan
exclusivity,
provided
that
they
demonstrate
that
the
existing
orphan
product
is
not
supplied
in
sufficient
quantities
or
that
the
'second'
drug
orbiologic
is
clinically
superior
to
the
existing
orphan
product.
The
'second'
drug
may
but
need
not
to
have
an
orphan
designation
as
well.
The
period
of
orphanexclusivity
is
ten
years,
which
can
be
extended
by
two
years
where
an
agreed
pediatric
investigation
plan
has
been
implemented
(see
Pediatric
Information
sectionbelow).
The
exclusivity
period
may
also
be
reduced
to
six
years
if
the
designation
criteria
are
no
longer
met,
including
where
it
is
shown
that
the
product
issufficiently
profitable
not
to
justify
maintenance
of
market
exclusivity.
Each
orphan
designation
carries
the
potential
for
one
market
exclusivity
for
all
thetherapeutic
indications
that
are
covered
by
the
designation.
A
product
that
has
several
separate
orphan
designations
has
several
separate
market
exclusivities.













Orphan
drug
designation
also
provides
opportunities
for
free
protocol
assistance
and
fee
reductions
for
access
to
the
centralized
regulatory
procedure
or
feeexemptions
for
companies
with
a
small
and
medium
enterprises
(SMEs)
status.
In
addition,
Member
States
may
provide
national
benefits
to
orphan
drugs,
such
asearly
access
to
the
reimbursement
procedure
or
exemption
from
the
turnover
tax
imposed
on
pharmaceutical
companies.













The
orphan
designation
may
be
applied
for
at
any
time
during
the
development
of
the
drug
but
before
the
application
for
marketing
authorization.
At
thetime
of
marketing
authorization,
the
criteria
for
orphan
designation
are
examined
again,
and
the
Commission
decides
on
the
maintenance
of
the
orphan
designation.The
non-maintenance
of
the
orphan
designation
means
that
the
drug
loses
its
orphan
status
and
thus
no
longer
benefit
from
orphan
exclusivity,
fee
reductions
orexemptions,
and
national
benefits.19Table
of
ContentsUnited
States













Under
the
Orphan
Drug
Act
(ODA),
the
FDA
may
grant
orphan
drug
designation
to
drugs
intended
to
treat
a
rare
disease
or
condition
("rare"
is
generallydefined
as
a
disease
or
condition
for
which
the
drug
intended
affects
fewer
than
200,000
people
in
the
US)
if
it
meets
certain
criteria
specified
in
the
ODA
andFDA's
implementing
regulations
at
21
CFR
Part
316.
After
the
FDA
grants
orphan
drug
designation,
the
drug
and
the
specific
intended
use(s)
for
which
it
hasobtained
designation
are
listed
by
FDA
in
a
publicly-accessible
database.













Orphan
drug
designation
qualifies
the
drug
sponsor
for
various
development
incentives
of
the
ODA,
including
tax
credits
for
qualified
clinical
testing,
anda
waiver
of
the
NDA
application
user
fee
(unless
the
application
seeks
approval
for
an
indication
not
included
in
the
orphan
drug
designation).
Orphan
drugdesignation
also
affords
the
company
a
period
of
marketing
exclusivity
upon
approval
of
the
drug.
Specifically,
the
first
NDA
applicant
with
an
FDA
orphan
drugdesignation
for
a
particular
active
moiety
to
receive
FDA
approval
of
the
drug
for
an
indication
covered
by
the
orphan
designation
is
entitled
to
a
seven-yearexclusive
marketing
period,
often
referred
to
as
orphan
drug
exclusivity,
in
the
US
for
that
drug
and
indication.
During
the
orphan
drug
exclusivity
period,
the
FDAmay
not
approve
any
other
applications
to
market
the
same
drug
for
the
same
indication
for
use,
except
in
limited
circumstances,
such
as
a
showing
of
clinicalsuperiority
to
the
product
that
has
orphan
drug
exclusivity.
Orphan
drug
exclusivity
does
not
prevent
the
FDA
from
approving
a
different
drug
for
the
same
diseaseor
condition,
or
the
same
drug
for
a
different
disease
or
condition.













However,
orphan
drug
designation
does
not
alter
the
timing
or
scope
of
the
regulatory
review
and
approval
process;
the
sponsor
must
still
submit
evidencefrom
clinical
and
non-clinical
studies
sufficient
to
demonstrate
the
safety
and
effectiveness
of
the
drug.Drug
ApprovalEuropean
UnionMarketing Authorization Application













To
obtain
approval
of
a
drug
under
the
EU
regulatory
system,
an
application
for
a
marketing
authorization
may
be
submitted
under
a
centralized,
adecentralized
or
a
national
procedure.
The
centralized
procedure,
which
is
compulsory
for
medicines
produced
by
certain
biotechnological
processes
or
for
orphandrugs,
provides
for
the
grant
of
a
single
marketing
authorization
that
is
valid
for
all
EU
member
states,
which
grants
the
same
rights
and
obligations
in
eachmember
states
as
a
national
marketing
authorization.
As
a
general
rule,
only
one
marketing
authorization
may
be
granted
for
drugs
approved
through
the
centralizedprocedure.
Pursuant
to
the
European
Economic
Agreement
between
the
European
Union
and
the
EFTA
countries,
the
marketing
authorization
is
also
relevant
forthe
three
EFTA
countries
(Iceland,
Lichtenstein,
Norway).













Under
the
centralized
procedure,
the
Committee
for
Human
Medicinal
Products
for
Human
Use
(CHMP),
the
EMA's
main
scientific
committee,
isrequired
to
adopt
an
opinion
on
a
valid
application
within
210
days,
excluding
clock
stops
when
additional
information
is
to
be
provided
by
the
applicant
inresponse
to
questions.
More
specifically,
on
day
120
of
the
procedure,
once
the
CHMP
has
received
the
preliminary
assessment
reports
and
opinions
from
theRapporteur
and
Co-Rapporteur
designated
by
the
CHMP,
it
adopts
a
list
of
questions,
which
are
sent
to
the
applicant
together
with
the
CHMP's
overall
conclusions.Applicants
then
have
three
months
to
respond
to
the
CHMP
(and
can
request
a
three-month
extension).
The
Rapporteur
and
Co-Rapporteur
assess
the
applicant'sreplies,
revise
the
assessment
report
as
necessary
and
may
prepare
a
list
of
outstanding
issues.
The
revised
assessment
report
and
list
of
outstanding
issues
are
sentto
the
applicant
together
with
the
CHMP's
recommendation
by
day
180
of
the
procedure.
Applicants
then
have
one
month
to
respond
to
the20Table
of
ContentsCHMP
(and
can
request
a
one
or
two-month
extension).
The
Rapporteur
and
Co-Rapporteur
assess
the
applicant's
replies,
submit
them
for
discussion
to
the
CHMPand
prepare
a
final
assessment
report.
Once
its
scientific
evaluation
is
completed,
the
CHMP
gives
a
favorable
or
unfavorable
opinion
as
to
whether
to
grant
themarketing
authorization.
After
the
adoption
of
the
CHMP
opinion,
a
decision
must
be
adopted
by
the
European
Commission,
after
consulting
the
StandingCommittee
of
the
Member
States.
The
European
Commission
prepares
a
draft
decision
and
circulates
it
to
the
member
states;
if
the
draft
decision
differs
from
theCHMP
opinion,
the
Commission
must
provide
detailed
explanations.
The
European
Commission
adopts
a
decision
within
15
days
of
the
end
of
the
consultationprocedure.Accelerated Procedure, Conditional Approval and Approval Under Exceptional Circumstances













Various
programs,
including
accelerated
procedure,
conditional
approval
and
approval
under
exceptional
circumstances,
are
intended
to
expedite
orsimplify
the
approval
of
drugs
that
meet
certain
qualifications.
The
purpose
of
these
programs
is
to
provide
important
new
drugs
to
patients
earlier
than
understandard
approval
procedures.













For
drugs
which
are
of
major
interest
from
the
point
of
view
of
public
health,
in
particular
from
the
viewpoint
of
therapeutic
innovation,
applicants
maysubmit
a
substantiated
request
for
accelerated
assessment.
If
the
CHMP
accepts
the
request,
the
review
time
is
reduced
from
210
to
150
days.













Furthermore,
for
certain
categories
of
medicinal
products,
marketing
authorizations
may
be
granted
on
the
basis
of
less
complete
data
than
is
normallyrequired
in
order
to
meet
unmet
medical
needs
of
patients
or
in
the
interest
of
public
health.
In
such
cases,
the
company
may
request,
or
the
CHMP
mayrecommend,
the
granting
of
a
marketing
authorization,
subject
to
certain
specific
obligations;
such
marketing
authorization
may
be
conditional
or
under
exceptionalcircumstances.
The
timelines
for
the
centralized
procedure
described
above
also
apply
with
respect
to
applications
for
a
conditional
marketing
authorization
ormarketing
authorization
under
exceptional
circumstances.













Conditional
marketing
authorizations
may
be
granted
for
products
designated
as
orphan
medicinal
products,
if
all
of
the
following
conditions
are
met:(1)
the
risk-benefit
balance
of
the
product
is
positive,
(2)
the
applicant
will
likely
be
in
a
position
to
provide
the
required
comprehensive
clinical
trial
data,
(3)
theproduct
fulfills
unmet
medical
needs,
and
(4)
the
benefit
to
public
health
of
the
immediate
availability
on
the
market
of
the
medicinal
product
concerned
outweighsthe
risk
inherent
in
the
fact
that
additional
data
are
still
required.













Conditional
marketing
authorizations
are
valid
for
one
year,
on
a
renewable
basis
until
the
holder
provides
a
comprehensive
data
package.
The
granting
ofconditional
marketing
authorization
depends
on
the
applicant's
ability
to
fulfill
the
conditions
imposed
within
the
agreed
upon
deadline.
They
are
subject
to"conditions",
i.e.
the
holder
is
required
to
complete
ongoing
studies
or
to
conduct
new
studies
with
a
view
to
confirming
that
the
benefit-risk
balance
is
positive
orto
fulfill
specific
obligations
in
relation
to
pharmacovigilance.
Once
the
holder
has
provided
a
comprehensive
data
package,
the
conditional
marketing
authorizationis
replaced
by
a
'regular'
marketing
authorization.













Marketing
authorizations
under
exceptional
circumstances
may
be
granted
where
the
applicant
demonstrates
that,
for
objective
and
verifiable
reasons,
he
isunable
to
provide
comprehensive
data
on
the
efficacy
and
safety
of
the
drug
under
normal
conditions
of
use.
Such
marketing
authorizations
are
subject
to
certainconditions,
in
particular
relating
to
safety
of
the
drug,
notification
of
incidents
relating
to
its
use
or
actions
to
be
taken.
They
are
valid
for
an
indefinite
period
oftime,
but
the
conditions
upon
which
they
are
based
are
subject
to
an
annual
reassessment
in
order
to
ensure
that
the
risk-benefit
balance
remains
positive.21Table
of
ContentsExclusivities













If
an
approved
drug
contains
a
new
active
substance,
it
is
protected
by
data
exclusivity
for
eight
years
as
from
the
notification
of
the
Commission
decisiongranting
the
marketing
authorization
and
then
by
marketing
protection
for
two
or
three
years.
Overall,
the
drug
is
protected
for
ten
or
eleven
years
against
genericcompetition,
and
no
additional
exclusivity
protection
is
granted
for
any
new
development
of
the
active
substance
it
contains.













During
the
eight-year
period
of
data
exclusivity,
competitors
may
not
refer
to
the
marketing
authorization
dossier
of
the
approved
drug
for
regulatorypurposes.
During
the
period
of
marketing
protection,
competitors
may
not
market
their
competitor
drugs.
The
period
of
marketing
protection
is
normally
two
yearsbut
may
become
three
years
if,
during
the
eight-year
data
exclusivity
period,
a
new
therapeutic
indication
is
approved
that
is
considered
as
bringing
a
significantclinical
benefit
over
existing
therapies.Medical Devices Regulations













In
the
EU,
the
marketing
of
medical
devices
is
not
subject
to
a
prior
approval
by
a
health
authority,
but,
depending
on
the
class
of
device,
may
require
priorreview
by
a
Notified
Body.
Notified
Bodies
are
technical
review
bodies
that
are
accredited
and
supervised
by
national
health
authorities.
They
conduct
conformityassessment
procedures
of,
among
others,
medical
devices.













Medical
devices
are
generally
governed
by
Directive
93/42/EEC
on
Medical
Devices
that
harmonizes
the
conditions
for
placing
medical
devices
on
theEuropean
market.
This
Directive
however
does
not
regulate
certain
important
marketing
aspects,
such
as
advertising
or
pricing
and
reimbursement,
which
remaingoverned
by
national
law.













Directive
93/42
requires
medical
devices
to
meet
the
essential
requirements
which
are
enumerated
in
the
annexes
to
the
Directive.
Compliance
with
thoserequirements
is
demonstrated
by
the
CE
mark
as
the
manufacturer
may
only
affix
the
CE
mark
if
he
may
declare
conformity
with
the
essential
requirement
for
eachmedical
device
that
is
marketed.
Directive
93/42
provides
recourse
to
harmonized
European
standards
in
order
to
facilitate
compliance
with
the
essentialrequirements.
Harmonized
standards
provide
a
presumption
of
conformity
with
the
essential
requirements.













Directive
93/42
institutes
several
conformity
assessment
procedure.
The
relevant
conformity
assessment
procedure
depends
on
the
type
of
medical
deviceand
the
risks
involved.
Devices
are
divided
in
four
groups:
Class
I,
Class
IIa,
Class
IIb,
and
Class
III.
Class
I
devices
present
the
lowest
level
of
risk
so
that,
formost
of
these
devices
the
manufacturer
can
self-certify
the
product
and
need
not
rely
on
certification
by
a
Notified
Body.
For
the
other
classes,
a
Notified
Bodymust
review
the
manufacturer's
procedures
and/or
the
product.
Every
device
is
initially
classified
by
the
manufacturer.
However,
the
Notified
Body
may
dispute
theclassification
and
assert
that
the
device
should
be
included
in
a
class
requiring
stricter
conformity
assessment
procedures.
Specific
rules
apply
to
custom-mademedical
devices,
medical
devices
that
are
used
in
clinical
trials,
and
medical
devices
that
incorporate
a
medicinal
ingredient.













For
classes
of
devices
other
than
Class
I,
a
manufacturer
must
have
a
Notified
Body
test
and
certify
conformity
of
its
design
and
production
procedures
orits
products
with
the
essential
requirements
of
Directive
93/42.
Certification
takes
the
form
of
a
certificate
of
conformity
issued
by
the
Notified
Body,
which
isvalid
throughout
the
European
Union.
Upon
certification
by
the
Notified
Body,
the
manufacturer
affixes
the
CE
mark
to
the
medical
device,
which
allows
theproduct
to
move
freely
within
the
European
Union
and
thus
prevents
EU
Member
States
from
restricting
sales
and
marketing22Table
of
Contentsof
the
devices,
unless
such
measure
is
justified
on
the
basis
of
evidence
of
non-compliance.
Ultimately,
the
manufacturer
is
responsible
for
the
conformity
of
thedevice
with
the
essential
requirements
and
for
the
affixing
of
the
CE
mark.













Manufacturers
of
medical
devices
are
subject
to
materiovigilance
obligations
that
require
reporting
of
incidents
or
near
incidents
related
to
the
use
of
amedical
device,
which
incidents
may
demonstrate
the
need
for
corrective
action
by
the
manufacturer.
In
addition,
Notified
Bodies
regularly
re-assess
theconformity
of
a
medical
device
to
the
essential
requirements
of
Directive
93/42
and
may
from
time
to
time
audit
the
manufacturer
and
may,
where
needed,
suspendor
withdraw
the
manufacturer's
certificate
of
conformity.United
States













In
the
United
States,
pharmaceutical
products
are
subject
to
extensive
regulation
by
the
FDA
and
other
government
bodies.
The
Federal
Food,
Drug,
andCosmetic
Act
(FDCA)
and
other
federal
and
state
statutes
and
regulations,
govern,
among
other
things,
the
research,
development,
testing,
manufacture,
storage,recordkeeping,
approval,
labeling,
promotion
and
marketing,
distribution,
post-approval
monitoring
and
reporting,
sampling
and
import
and
export
ofpharmaceutical
products.
Failure
to
comply
with
applicable
US
requirements
at
any
time
during
product
development,
approval,
or
after
approval
may
subject
acompany
to
a
variety
of
administrative
or
judicial
sanctions,
such
as
imposition
of
clinical
holds,
FDA
refusal
to
accept
for
filing
or
approve
new
drug
applications,warning
letters,
product
recalls,
product
seizures,
total
or
partial
suspension
of
production
or
distribution,
injunctions,
fines,
refusals
of
government
contracts,restitution,
disgorgement,
civil
penalties,
and
criminal
prosecution.













Pharmaceutical
product
development
in
the
US
may
include:·Completion
of
preclinical
laboratory
tests,
animal
studies
and
formulation
studies
in
compliance
with
the
FDA's
good
laboratory
practice,
or
GLP,regulations;·Submission
to
the
FDA
of
an
investigational
new
drug
application,
or
IND,
which
must
become
effective
before
clinical
trials
may
begin;·Approval
of
the
protocol
by
an
independent
institutional
review
board,
or
IRB
before
each
trial
may
be
initiated;·Performance
of
adequate
and
well-controlled
human
clinical
trials
in
accordance
with
good
clinical
practices,
or
GCP,
to
establish
the
safety
andefficacy
of
the
proposed
drug
for
each
indication;·Submission
to
the
FDA
of
a
NDA;·Satisfactory
completion
of
an
FDA
advisory
committee
review,
if
applicable;·Satisfactory
completion
of
an
FDA
inspection
of
the
manufacturing
facility
or
facilities
at
which
the
product
is
produced
to
assess
compliance
withcGMP,
and
to
assure
that
the
facilities,
methods
and
controls
are
adequate
to
preserve
the
drug's
identity,
strength,
quality
and
purity;
and·FDA
review
and
approval
of
the
NDA.













The
sponsor
must
submit
adequate
tests
by
all
methods
reasonably
applicable
to
show
that
the
drug
is
safe
for
use
under
the
conditions
prescribed,recommended
or
suggested
in
the
proposed
labeling.
The
sponsor
must
submit
substantial
evidence,
generally
consisting
of
adequate
and
well-controlled
clinicalinvestigations,
to
establish
that
the
drug
will
have
the
effect
it
purports
or
is
represented
to
have
under
the
conditions
of
use
prescribed,
recommended,
or
suggestedin
the
proposed
labeling.
In
certain
cases,
FDA
may
determine
that
a
drug
is
effective
based
on
one
clinical
study
plus
confirmatory
evidence.
Satisfaction
of
FDApre-market
approval
requirements
typically
takes23Table
of
Contentsmany
years
and
the
actual
time
required
may
vary
substantially
based
upon
the
type,
complexity
and
novelty
of
the
product
or
disease.Preclinical Studies













Preclinical
studies
include
laboratory
evaluation
of
product
chemistry,
formulation
and
toxicity,
pharmacology,
as
well
as
animal
trials
to
assess
thecharacteristics
and
potential
safety
and
efficacy
of
the
product.
The
conduct
of
the
preclinical
tests
must
comply
with
federal
regulations
and
requirementsincluding
FDA's
good
laboratory
practices
regulations
and
USDA's
regulations
implementing
the
Animal
Welfare
Act.
An
IND
sponsor
must
submit
the
results
ofthe
preclinical
tests,
together
with
manufacturing
information,
analytical
data,
any
available
clinical
data
or
literature,
and
a
proposed
clinical
trial
protocol,
amongother
things,
to
the
FDA
as
part
of
an
IND
application.
Certain
non-clinical
tests,
such
as
animal
tests
of
reproductive
toxicity
and
carcinogenicity,
may
continueeven
after
the
IND
is
submitted.
An
IND
automatically
becomes
effective
30
days
after
receipt
by
the
FDA,
unless
before
that
time
the
FDA
raises
concerns
orquestions
related
to
one
or
more
proposed
clinical
trials
and
places
the
clinical
trial
on
a
clinical
hold.
In
such
a
case,
the
IND
sponsor
and
the
FDA
must
resolveany
outstanding
concerns
before
the
clinical
trial
can
begin.
As
a
result,
submission
of
an
IND
may
not
result
in
the
FDA
allowing
clinical
trials
to
commence.Clinical Trials













Clinical
trials
involve
the
administration
of
the
investigational
new
drug
to
human
subjects
(healthy
volunteers
or
patients)
under
the
supervision
of
aqualified
investigator.
Clinical
trials
must
be
conducted:
(i)
in
compliance
with
all
applicable
federal
regulations
and
guidance,
including
those
pertaining
to
goodclinical
practice,
or
GCP,
standards
that
are
meant
to
protect
the
rights,
safety,
and
welfare
of
human
subjects
and
to
define
the
roles
of
clinical
trial
sponsors,investigators,
and
monitors;
as
well
as
(ii)
under
protocols
detailing,
among
other
things,
the
objectives
of
the
trial,
the
parameters
to
be
used
in
monitoring
safety,and
the
effectiveness
criteria
to
be
evaluated.
Each
protocol
involving
testing
of
a
new
drug
in
the
US
(whether
in
patients
or
healthy
volunteers)
must
be
includedin
the
IND
submission,
and
FDA
must
be
notified
of
subsequent
protocol
amendments.
In
addition,
the
protocol
must
be
reviewed
and
approved
by
an
IRB,
and
allstudy
subjects
must
provide
informed
consent.
Typically
each
institution
participating
in
the
clinical
trial
will
require
review
of
the
protocol
before
any
clinical
trialbefore
it
commences
at
that
institution.
Information
about
certain
clinical
trials
must
be
submitted
within
specific
timeframes
to
the
National
Institutes
of
Health,
orNIH,
for
public
dissemination
on
their
ClinicalTrials.gov
website.
Progress
reports
detailing
the
results
of
the
clinical
trials
must
be
submitted
at
least
annually
tothe
FDA
and
there
are
additional,
more
frequent
reporting
requirements
for
suspected
serious
adverse
events.













A
study
sponsor
might
choose
to
discontinue
a
clinical
trial
or
a
clinical
development
program
for
a
variety
of
reasons.
The
FDA
may
impose
a
temporaryor
permanent
clinical
hold,
or
other
sanctions,
if
it
believes
that
the
clinical
trial
either
is
not
being
conducted
in
accordance
with
FDA
requirements
or
presents
anunacceptable
risk
to
the
clinical
trial
subjects.
An
IRB
may
also
require
the
clinical
trial
at
the
site
to
be
halted,
either
temporarily
or
permanently,
for
failure
tocomply
with
the
IRB's
requirements,
or
may
impose
other
conditions.













Clinical
trials
to
support
NDAs
for
marketing
approval
are
typically
conducted
in
three
sequential
pre-approval
phases,
but
the
phases
may
overlap
or
becombined.
In
Phase
1,
short
term
(typically
less
than
a
few
months)
testing
is
conducted
in
a
small
group
of
subjects
(typically
20-100),
who
may
be
patients
withthe
target
disease
or
condition
or
healthy
volunteers,
to
evaluate
its
safety,
determine
a
safe
dosage
range,
and
identify
side
effects.
In
Phase
2,
the
drug
is
given
to
alarger
group
(up
to
several
hundred)
of
subjects
with
the
target
condition
to
further
evaluate
its
safety
and
gather24Table
of
Contentspreliminary
evidence
of
efficacy.
Phase
3
studies
typically
last
between
several
months
and
two
years.
In
Phase
3,
the
drug
is
given
to
a
large
group
of
subjects
withthe
target
disease
or
condition
(several
hundred
to
several
thousand),
often
at
multiple
geographical
sites,
to
confirm
its
effectiveness,
monitor
side
effects,
andcollect
data
to
support
drug
approval.
In
some
cases,
FDA
may
require
post-market
studies,
known
as
Phase
4
studies,
to
be
conducted
as
a
condition
of
approval
inorder
to
gather
additional
information
on
the
drug's
effect
in
various
populations
and
any
side
effects
associated
with
long-term
use.
Depending
on
the
risks
posedby
the
drugs,
other
post-market
requirements
may
be
imposed.
Only
a
small
percentage
of
investigational
drugs
complete
all
three
phases
and
obtain
marketingapproval.NDA Application













After
completion
of
the
required
clinical
testing,
an
NDA
can
be
prepared
and
submitted
to
the
FDA.
FDA
approval
of
the
NDA
is
required
beforemarketing
of
the
product
may
begin
in
the
US.
The
NDA
must
include
the
results
of
all
preclinical,
clinical
and
other
testing
and
a
compilation
of
data
relating
tothe
product's
pharmacology,
chemistry,
manufacture,
and
controls.
The
cost
of
preparing
and
submitting
an
NDA
is
substantial.
Under
federal
law,
the
submissionof
most
NDAs
is
additionally
subject
to
a
substantial
application
user
fee,
and
annual
product
and
establishment
user
fees
also
apply.
These
fees
are
typicallyincreased
annually.













The
FDA
has
60
days
from
its
receipt
of
a
NDA
to
determine
whether
the
application
will
be
accepted
for
filing
based
on
the
FDA's
thresholddetermination
that
it
is
sufficiently
complete
to
permit
substantive
review.
Once
the
submission
is
accepted
for
filing,
the
FDA
begins
a
substantive
review.
Underthe
statute
and
implementing
regulations,
FDA
has
180
days
(the
"initial
review
cycle")
from
the
date
of
filing
to
issue
either
an
approval
letter
or
a
completeresponse
letter,
unless
the
review
period
is
adjusted
by
mutual
agreement
between
FDA
and
the
applicant
or
as
a
result
of
the
applicant
submitting
a
majoramendment.
In
practice,
the
performance
goals
established
pursuant
to
the
Prescription
Drug
User
Fee
Act
have
effectively
extended
the
initial
review
cyclebeyond
180
days.
FDA's
current
performance
goals
call
for
FDA
to
complete
review
of
90
percent
of
standard
(non-priority)
NDAs
within
10
months
of
receipt
andwithin
six
months
for
priority
NDAs,
but
two
additional
months
are
added
to
standard
and
priority
NDAs
for
an
NME.













The
FDA
may
refer
applications
for
novel
drug
products
or
drug
products
that
present
difficult
questions
of
safety
or
efficacy
to
an
advisory
committee,typically
a
panel
that
includes
outside
clinicians
and
other
experts,
for
review,
evaluation
and
a
recommendation
as
to
whether
the
application
should
be
approved.The
FDA
is
not
bound
by
the
recommendation
of
an
advisory
committee,
but
it
generally
follows
such
recommendations.













Before
approving
a
NDA,
the
FDA
will
typically
inspect
one
or
more
clinical
sites
to
assure
compliance
with
Good
Clinical
Practice.
Additionally,
theFDA
will
typically
inspect
the
facility
or
the
facilities
at
which
the
drug
is
manufactured.
FDA
will
not
approve
the
product
unless
compliance
with
current
goodmanufacturing
practices
is
satisfactory
and
the
NDA
contains
data
that
provide
substantial
evidence
that
the
drug
is
safe
and
effective
in
the
indication
orindications
studied.
FDA
also
reviews
the
proposed
labeling
submitted
with
the
NDA
and
typically
requires
changes
in
the
labeling
text.













After
the
FDA
evaluates
the
NDA
and
the
manufacturing
and
testing
facilities,
it
issues
either
an
approval
letter
or
a
complete
response
letter.
Completeresponse
letters
generally
outline
the
deficiencies
in
the
submission
and
delineate
the
additional
testing
or
information
needed
in
order
for
the
FDA
to
reconsiderthe
application.
If
and
when
those
deficiencies
have
been
addressed
to
the
FDA's
satisfaction
in
a
resubmission
of
the
NDA,
the
FDA
will
issue
an
approval
letter.The
FDA
has25Table
of
Contentscommitted
to
reviewing
90
percent
of
resubmissions
within
two
or
six
months
from
receipt
depending
on
the
type
of
information
included.













An
approval
letter
authorizes
commercial
marketing
of
the
drug
for
the
approved
indication
or
indications
and
the
other
conditions
of
use
set
out
in
theapproved
prescribing
information.
Once
granted,
product
approvals
may
be
withdrawn
if
compliance
with
regulatory
standards
is
not
maintained
or
problems
areidentified
following
initial
marketing.













As
a
condition
of
NDA
approval,
the
FDA
may
require
substantial
post-approval
testing
and
surveillance
to
monitor
the
drug's
safety
or
efficacy
and
mayimpose
other
conditions,
including
labeling
restrictions
that
can
materially
affect
the
potential
market
and
profitability
of
the
drug.
As
a
condition
of
approval,
orafter
approval,
the
FDA
also
may
require
submission
of
a
risk
evaluation
and
mitigation
strategy,
or
REMS,
to
mitigate
any
identified
or
suspected
serious
risks.The
REMS
may
include
medication
guides,
physician
communication
plans,
assessment
plans,
and
elements
to
assure
safe
use,
such
as
restricted
distributionmethods,
patient
registries,
or
other
risk
minimization
tools.Expedited Review and Approval of Eligible Drugs













The
FDA's
21
CFR
314
Subpart
H
(Accelerated
Approval)
regulations
allow
certain
drugs,
for
serious
or
life-threatening
conditions,
to
be
approved
on
thebasis
of
surrogate
endpoints
(i.e.,
clinical
endpoints
other
than
survival
or
irreversible
morbidity),
which
can
substantially
reduce
time
to
approval.
As
a
conditionof
approval
under
Subpart
H,
the
FDA
may
require
certain
adequate
and
well-controlled
post-marketing
clinical
studies
to
verify
and
describe
clinical
benefit
of
theproduct,
and
may
impose
restrictions
on
distribution
to
assure
safe
use.
Post
marketing
studies
would
usually
be
required
to
be
studies
already
underway
at
the
timeof
the
accelerated
approval.
In
addition,
all
promotional
materials
for
an
accelerated
approval
drug
must
be
submitted
to
FDA
prior
to
use.
If
the
required
post-marketing
studies
fail
to
verify
the
clinical
benefit
of
the
drug,
or
if
the
applicant
fails
to
perform
the
required
post-marketing
studies
with
due
diligence,
the
FDAmay
withdraw
approval
of
the
drug
following
a
hearing
conducted
in
accordance
with
the
agency's
regulations.
Under
Subpart
H,
the
agency
may
also
withdrawapproval
of
a
drug
if,
among
other
things,
the
promotional
materials
for
the
product
are
false
or
misleading,
or
other
evidence
demonstrates
that
the
drug
product
isnot
shown
to
be
safe
or
effective
under
its
conditions
of
use.













The
FDA
also
has
various
programs—fast
track
designation,
priority
review,
and
breakthrough
designation—that
are
intended
to
expedite
or
streamline
theprocess
for
the
development
and
FDA
review
of
drugs
that
meet
certain
qualifications.
The
purpose
of
these
programs
is
to
provide
important
new
drugs
to
patientsearlier
than
under
standard
FDA
review
procedures.
The
programs
each
have
different
eligibility
criteria
and
provide
different
benefits,
and
can
be
applied
eitheralone
or
in
combination
depending
on
an
applicant's
circumstances.
Fast
track
designation
applies
to
a
drug
that
is
intended
to
treat
a
serious
condition
and
forwhich
nonclinical
or
clinical
data
demonstrate
the
potential
to
address
unmet
medical
need.
It
should
be
requested
at
the
time
of
IND
submission
or
ideally
no
laterthan
the
pre-NDA
meeting.
FDA
must
respond
to
requests
for
fast
track
designation
within
60
days
of
receipt
of
the
request.
If
granted,
the
manufacturer
is
eligiblefor
actions
to
expedite
development
and
review,
such
as
frequent
interaction
with
the
review
team,
as
well
as
for
rolling
review,
meaning
that
the
applicant
maysubmit
sections
of
the
application
as
they
are
available.
The
timing
of
FDA's
review
of
these
sections
depends
on
a
number
of
factors,
and
the
review
clock
doesnot
start
running
until
the
agency
has
received
a
complete
NDA
submission.
FDA
may
withdraw
fast
track
designation
if
the
agency
determines
that
the
designationis
no
longer
supported
by
data
emerging
in
the
clinical
trial
process.26Table
of
Contents













Priority
review
applies
to
an
application
(both
original
and
efficacy
supplement)
for
a
drug
that
treats
a
serious
condition
and
that,
if
approved,
wouldprovide
a
significant
improvement
in
safety
or
effectiveness.
It
also
applies
to
any
supplement
that
proposes
a
labeling
change
pursuant
to
a
report
on
a
pediatricstudy.
A
request
for
priority
review
is
submitted
at
the
time
of
NDA
or
supplemental
NDA
submission.
FDA
must
respond
within
60
days
of
receipt
of
the
request.If
granted,
the
review
time
is
shortened
from
the
standard
10
months
to
6
months,
with
two
additional
months
in
the
case
of
an
NME.













Breakthrough
therapy
designation
was
created
under
the
2012
Food
and
Drug
Administration
Safety
and
Innovation
Act
(FDASIA).
Breakthrough
therapydesignation
applies
to
a
drug
that
is
intended
to
treat
a
serious
condition
and
for
which
preliminary
clinical
evidence
indicates
that
the
drug
may
demonstratesubstantial
improvement
on
a
clinically
significant
endpoint(s)
over
available
therapies.
It
can
be
requested
with
the
IND
submission
and
ideally
no
later
than
theend-of-phase
2
meeting.
FDA
must
respond
within
60
days
of
receipt
of
the
request.
If
granted,
the
applicant
receives
intensive
guidance
on
efficient
drugdevelopment,
intensive
involvement
of
senior
managers
and
experienced
review
and
regulatory
health
project
management
staff
in
a
proactive,
collaborative,
cross-disciplinary
review,
rolling
review,
and
other
actions
to
expedite
review.
Designation
may
be
rescinded
if
the
product
no
longer
meets
the
criteria
for
breakthroughtherapy
designation.













The
2012
Generating
Antibiotic
Incentives
Now
(GAIN)
Act
created
new
incentives
for
the
development
of
new
therapies
for
serious
and
life-threateninginfections.
Drugs
that
are
designated
as
Qualified
Infectious
Disease
Products,
or
QIDPs,
are
eligible
for
priority
review
and
fast
track
designation,
and
well
asmarket
exclusivity.
A
product
is
eligible
if
it
is
an
antibacterial
or
anti-fungal
drug
for
human
use
that
is
intended
to
treat
serious
or
life-threatening
infections,including:
those
caused
by
an
anti-bacterial
or
anti-fungal
resistant
pathogen,
including
novel
or
emerging
infectious
pathogens;
or
caused
by
qualifying
pathogenslisted
by
the
FDA.
A
drug
sponsor
may
request
that
FDA
designate
its
product
as
a
QIDP
at
any
time
prior
to
NDA
submission.
FDA
must
make
a
QIDPdetermination
within
60
days
of
receiving
the
designation
request.Exclusivities













After
NDA
approval,
owners
of
relevant
drug
patents
may
apply
for
up
to
a
five-year
patent
extension
on
a
single
patent.
The
allowable
patent
termextension
is
calculated
as
half
of
the
drug's
testing
phase
(the
time
between
IND
application
and
NDA
submission)
and
all
of
the
review
phase
(the
time
betweenNDA
submission
and
approval)
up
to
a
maximum
of
five
years.
The
time
can
be
shortened
if
FDA
determines
that
the
applicant
did
not
pursue
approval
with
duediligence.
The
total
patent
term
after
the
extension
may
not
exceed
14
years.
For
patents
that
might
expire
during
the
application
phase,
the
patent
owner
mayrequest
an
interim
patent
extension.
An
interim
patent
extension
increases
the
patent
term
by
one
year
and
may
be
renewed
up
to
four
times.
For
each
interim
patentextension
granted,
the
post-approval
patent
extension
is
reduced
by
one
year.
The
director
of
the
United
States
Patent
and
Trademark
Office
must
determine
thatapproval
of
the
drug
covered
by
the
patent
for
which
a
patent
extension
is
being
sought
is
likely.
Interim
patent
extensions
are
not
available
for
a
drug
for
which
aNDA
has
not
been
submitted.













A
variety
of
non-patent
exclusivity
periods
are
available
under
the
FDCA
that
can
delay
the
submission
or
approval
of
certain
applications
for
competingproducts.













A
five-year
period
of
non-patent
exclusivity
within
the
United
States
is
granted
to
the
first
applicant
to
gain
approval
of
a
NDA
for
a
new
chemical
entity(NCE).
An
NCE
is
a
drug
that
contains
no
active
moiety
(the
molecule
or
ion
responsible
for
the
action
of
the
drug
substance)
that
has
been
approved
by
FDA
inany
other
application
submitted
under
section
505(b)
of
the
Act.
During
the27Table
of
Contentsexclusivity
period
for
a
new
chemical
entity,
the
FDA
may
not
accept
for
review
an
abbreviated
new
drug
application,
or
ANDA,
or
a
505(b)(2)
NDA
submitted
byanother
company
that
references
(i.e.,
relies
on
FDA
prior
approval
of)
the
NCE
drug.
However,
an
ANDA
or
505(b)(2)
NDA
may
be
submitted
after
four
years
ifit
contains
a
certification
of
patent
invalidity
or
non-infringement
with
respect
to
a
patent
listed
with
the
FDA
for
the
reference
NDA.













A
three
year
period
of
non-patent
exclusivity
is
granted
for
a
drug
product
that
contains
an
active
moiety
that
has
been
previously
approved,
when
theapplication
contains
reports
of
new
clinical
investigations
(other
than
bioavailability
studies)
conducted
or
sponsored
by
the
sponsor
that
were
essential
to
approvalof
the
application,
for
example,
for
new
indications,
dosages,
strengths
or
dosage
forms
of
an
existing
drug.
This
three-year
exclusivity
covers
only
the
conditionsof
use
associated
with
the
new
clinical
investigations,
which
means
that
FDA
may
approve
applications
for
other
versions
of
the
original,
unmodified
drug
product.Where
this
form
of
exclusivity
applies,
it
prevents
FDA
approval
of
an
ANDA
or
505(b)(2)
NDA
subject
to
the
exclusivity
for
the
three-year
period;
however,FDA
may
accept
and
review
ANDAs
or
505(b)(2)
NDAs
during
the
three
year
period.













Five
year
and
three
year
exclusivities
also
do
not
preclude
FDA
approval
of
a
505(b)(1)
application
for
a
duplicate
version
of
the
drug
during
the
period
ofexclusivity,
provided
that
the
505(b)(1)
conducts
or
obtains
a
right
of
reference
to
all
of
the
preclinical
studies
and
adequate
and
well-controlled
clinical
trialsnecessary
to
demonstrate
safety
and
effectiveness.













Products
with
QIDP
designation
may
receive
a
five
year
extension
of
other
non-patent
exclusivities
for
which
the
drug
is
also
eligible.
This
exclusivityapplies
only
with
respect
to
drugs
that
are
first
approved
on
or
after
July
9,
2012.
The
exclusivity
does
not
prevent
FDA
from
approving
a
subsequent
applicationfor
a
change
to
the
QIDP-designated
drug
that
results
in
a
new
indication,
route
of
administration,
dosing,
schedule,
dosage
form,
delivery
system,
delivery
device,or
strength.
For
example,
an
approved
product
with
orphan
designation
and
QIDP
designation
would
have
twelve
years
of
marketing
exclusivity.Medical Device Regulation













Medical
devices
may
receive
marketing
authorization
from
FDA
as
stand-alone
devices,
or
in
some
cases,
may
receive
marketing
authorization
as
part
of
acombination
product.
In
either
case,
the
ultimate
product
will
need
to
satisfy
FDA
requirements.
The
primary
pathways
for
marketing
authorization
for
devices
inthe
United
States
are
510(k)
clearance
or
premarket
approval
(PMA).













Medical
devices
are
also
subject
to
certain
post-clearance,
post-approval
requirements.
Those
requirements
include
continuing
Quality
System
Regulationcompliance,
Medical
Device
Reporting,
Correction
and
Removal,
and
requirements
governing
labeling
and
promotional
advertising.













The
FDCA
provides
for
the
exemption
of
medical
devices
intended
for
investigational
use
from
certain
regulatory
requirements
if
such
devices
complywith
prescribed
procedures
and
conditions.
For
example,
devices
intended
for
investigational
use
may
be
exempted
from
premarket
notification
and
premarketapproval
requirements.
Investigational
devices
must
bear
a
label
that
states
the
following:
"CAUTION—Investigational
device.
Limited
by
Federal
(or
US)
law
toinvestigational
use."
The
labeling
may
not
represent
that
the
device
is
safe
or
effective
for
the
purposes
for
which
it
is
being
investigated.28Table
of
ContentsCombination Products













A
combination
product
is
a
product
comprising
two
or
more
regulated
components
(e.g.,
a
drug
and
device)
that
are
combined
into
a
single
product,
co-packaged,
or
sold
separately
but
intended
for
co-administration,
as
evidenced
by
the
labeling
for
the
products.
A
drug
that
is
administered
using
an
inhaler
is
anexample
of
a
combination
drug/device
product.













FDA
is
divided
into
various
Centers,
which
each
have
authority
over
a
specific
type
of
product.
NDAs
are
reviewed
by
personnel
within
the
Center
forDrug
Evaluation
and
Research,
while
device
applications
and
premarket
notifications
are
reviewed
by
the
Center
for
Devices
and
Radiological
Health.
Whenreviewing
a
drug/device
combination
product,
FDA
must
assign
a
lead
Center
to
review
the
product,
based
on
the
combination
product's
primary
mode
of
action,
orPMOA,
which
is
the
single
mode
of
a
combination
product
that
provides
the
most
important
therapeutic
action
of
the
combination
product.
The
Center
thatregulates
that
portion
of
the
product
that
generates
the
PMOA
becomes
the
lead
evaluator.
If
there
are
two
independent
modes
of
action,
neither
of
which
issubordinate
to
the
other,
the
FDA
makes
a
determination
as
to
which
Center
to
assign
the
product
based
on
consistency
with
other
combination
products
raisingsimilar
types
of
safety
and
effectiveness
questions
or
to
the
Center
with
the
most
expertise
in
evaluating
the
most
significant
safety
and
effectiveness
questionsraised
by
the
combination
product.













When
evaluating
an
application,
a
lead
Center
may
consult
other
Centers
and
apply
the
standards
that
would
be
applicable
but
still
retain
completereviewing
authority,
or
it
may
collaborate
with
another
Center,
by
which
the
Center
assigns
review
of
a
specific
section
of
the
application
to
another
Center,delegating
its
review
authority
for
that
section.
Typically,
the
FDA
requires
a
single
marketing
application
submitted
to
the
Center
selected
to
be
the
lead
evaluator,although
the
agency
has
the
discretion
to
require
separate
applications
to
more
than
one
Center.
One
reason
to
submit
multiple
applications
is
if
the
applicantwishes
to
receive
some
benefit
that
accrues
only
from
approval
under
a
particular
type
of
application,
like
new
drug
product
exclusivity.
If
multiple
applications
aresubmitted,
each
may
be
evaluated
by
a
different
lead
Center.













Like
their
constituent
products—e.g.,
drugs
and
devices—combination
products
are
highly
regulated
and
subject
to
a
broad
range
of
post
marketingrequirements
including
cGMPs,
adverse
event
reporting,
periodic
reports,
labeling
and
advertising
and
promotion
requirements
and
restrictions.Disclosure of Clinical Trial Information













Under
US
and
certain
foreign
laws
intended
to
improve
clinical
trial
transparency,
sponsors
of
clinical
trials
may
be
required
to
register
and
disclosecertain
information
about
their
clinical
trials.
This
can
include
information
related
to
the
investigational
drug,
patient
population,
phase
of
investigation,
study
sitesand
investigators,
and
other
aspects
of
the
clinical
trial.
This
information
is
then
made
publicly
available.
Sponsors
also
may
be
obligated
to
disclose
the
results
oftheir
clinical
trials
after
completion.
Disclosure
of
the
results
of
these
trials
can
be
delayed
until
the
new
product
or
new
indication
being
studied
has
beenapproved.
Competitors
may
use
this
publicly-available
information
to
gain
knowledge
regarding
the
progress
of
development
programs.Other US Post-approval Regulatory Requirements













Once
an
NDA
is
approved,
a
product
will
be
subject
to
certain
post-approval
requirements,
including
those
relating
to
advertising,
promotion,
adverseevent
reporting,
recordkeeping,
and
good
manufacturing
practices,
as
well
as
registration,
listing,
and
inspection.
There
also
are
continuing,29Table
of
Contentsannual
user
fee
requirements
for
any
marketed
products
and
the
establishments
at
which
such
products
are
manufactured,
as
well
as
new
application
fees
forsupplemental
applications
with
clinical
data.













FDA
regulates
the
content
and
format
of
prescription
drug
labeling,
advertising,
and
promotion,
including
direct-to-consumer
advertising
and
promotionalInternet
communications.
FDA
also
establishes
parameters
for
permissible
non-promotional
communications
between
industry
and
the
medical
community,including
industry-supported
scientific
and
educational
activities.
The
FDA
and
other
agencies
actively
enforce
the
laws
and
regulations
prohibiting
the
promotionfor
uses
not
consistent
with
the
approved
labeling,
and
a
company
that
is
found
to
have
improperly
promoted
off-label
uses
or
otherwise
not
to
have
met
applicablepromotion
rules
may
be
subject
to
significant
liability
under
both
the
FDCA
and
other
statutes,
including
the
False
Claims
Act.













Manufacturers
are
subject
to
requirements
for
adverse
event
reporting
and
submission
of
periodic
reports
following
FDA
approval
of
a
NDA.













All
aspects
of
pharmaceutical
manufacture
must
conform
to
cGMPs
after
approval.
Drug
manufacturers
and
certain
of
their
subcontractors
are
required
toregister
their
establishments
with
FDA
and
certain
state
agencies,
and
are
subject
to
periodic
unannounced
inspections
by
the
FDA
during
which
the
FDA
inspectsmanufacturing
facilities
to
assess
compliance
with
cGMPs.
Changes
to
the
manufacturing
process
are
strictly
regulated
and
often
require
prior
FDA
approvalbefore
being
implemented.
FDA
regulations
also
require
investigation
and
correction
of
any
deviations
from
cGMP
and
impose
reporting
and
documentationrequirements
upon
the
sponsor
and
any
third-party
manufacturers
that
the
sponsor
may
decide
to
use.
Accordingly,
manufacturers
must
continue
to
expend
time,money
and
effort
in
the
areas
of
production
and
quality
control
to
maintain
compliance
with
cGMPs.













Drugs
may
be
marketed
only
for
the
approved
indications
and
in
accordance
with
the
provisions
of
the
approved
labeling.
Changes
to
some
of
theconditions
established
in
an
approved
application,
including
changes
in
indications,
labeling,
product
formulation,
or
manufacturing
processes
or
facilities,
requiresubmission
and
FDA
approval
of
a
new
NDA
or
NDA
supplement,
in
some
cases
before
the
change
may
be
implemented.
An
NDA
supplement
for
a
newindication
typically
requires
clinical
data
similar
to
that
in
the
original
application,
and
the
FDA
uses
the
same
procedures
and
actions
in
reviewing
NDAsupplements
as
it
does
in
reviewing
NDAs.













The
FDA
also
may
require
post
market
studies,
known
as
phase
4
studies,
and
may
require
a
REMS,
which
could
restrict
the
distribution
or
use
of
theproduct.













Later
discovery
of
previously
unknown
problems
with
a
product,
including
adverse
events
of
unanticipated
severity
or
frequency,
or
with
manufacturingprocesses,
or
failure
to
comply
with
regulatory
requirements,
or
failure
of
phase
4
studies
to
meet
their
specified
endpoints,
may
result
in
revisions
to
the
approvedlabeling
to
add
new
safety
information;
or
the
need
to
conduct
additional
post-market
studies
or
clinical
trials
to
assess
new
safety
risks;
or
imposition
ofdistribution
or
other
restrictions
under
a
REMS
program;
or
recall
of
the
product
and
withdrawal
of
the
NDA.













Noncompliance
with
postmarket
requirements
can
result
in
one
or
more
of
the
following
consequences:·Restrictions
on
the
marketing
or
manufacturing
of
the
product,
complete
withdrawal
of
the
product
from
the
market
or
product
recalls;·Warning
letters;·Holds
on
post-approval
clinical
trials;30Table
of
Contents·Refusal
of
the
FDA
to
approve
pending
NDAs
or
supplements
to
approved
NDAs,
or
suspension
or
revocation
of
product
license
approvals;·Product
seizure
or
detention,
or
refusal
to
permit
the
import
or
export
of
products;
or·Injunctions
or
the
imposition
of
civil
or
criminal
penalties.













In
addition,
the
distribution
of
prescription
pharmaceutical
products
is
subject
to
the
Prescription
Drug
Marketing
Act,
or
PDMA,
which
regulates
thedistribution
of
drugs
and
drug
samples
at
the
federal
level,
and
sets
minimum
standards
for
the
registration
and
regulation
of
drug
distributors
by
the
states.
Boththe
PDMA
and
state
laws
limit
the
distribution
of
prescription
pharmaceutical
product
samples
and
impose
requirements
to
ensure
accountability
in
distribution.Pediatric
InformationEuropean
Union













In
the
European
Union,
new
drugs
(i.e.
drugs
containing
a
new
active
substance)
for
adults,
must
also
be
tested
in
children.
This
mandatory
pediatrictesting
is
carried
out
through
the
implementation
of
a
pediatric
investigation
plan,
or
PIP,
which
is
proposed
by
the
applicant
and
approved
by
the
EMA.
A
PIPcontains
all
the
studies
to
be
conducted
and
measures
to
be
taken
in
order
to
support
the
approval
of
the
new
drug,
including
pediatric
pharmaceutical
forms,
in
allsubsets
of
the
pediatric
population.
Validation
of
the
marketing
authorization
application
for
adults
is
subject
to
the
implementation
of
the
PIP,
subject
to
one
ormore
waivers
or
deferrals.
On
the
one
hand,
the
PIP
may
allow
a
deferral
for
one
or
more
of
the
studies
or
measures
included
therein
in
order
not
to
delay
theapproval
of
the
drug
in
adults,
and,
on
another
hand,
the
EMA
may
grant
either
a
product-specific
waiver
for
the
(adult)
disease/condition
or
one
or
more
pediatricsubsets
or
a
class
waiver
for
the
disease/condition.
PIPs
are
subject
to
modifications
from
time
to
time,
when
they
no
longer
are
workable.
Prior
to
obtaining
thevalidation
of
a
marketing
authorization
application
for
adults,
the
applicant
has
to
demonstrate
compliance
with
PIP
at
the
time
of
submission
of
the
application.
Inthe
case
of
orphan
medicinal
products,
completion
of
an
approved
PIP
can
result
in
an
extension
of
the
market
exclusivity
period
from
ten
to
twelve
years.United
States













Under
the
Pediatric
Research
Equity
Act
of
2003,
or
PREA,
NDAs
and
NDA
supplements
must
contain
data
that
are
adequate
to
assess
the
safety
andeffectiveness
of
the
drug
for
the
claimed
indications
in
all
relevant
pediatric
subpopulations
and
to
support
dosing
and
administration
for
each
pediatricsubpopulation
for
which
the
drug
is
safe
and
effective.
The
FDA
may,
on
its
own
initiative
or
at
the
request
of
an
applicant,
grant
deferrals
for
submission
of
dataor
full
or
partial
waivers.
Unless
otherwise
required
by
regulation,
PREA
does
not
apply
to
any
drug
for
an
indication
for
which
orphan
designation
has
beengranted.
Under
the
Best
Pharmaceuticals
for
Children
Act
(BPCA),
pediatric
research
is
incentivized
by
the
possibility
of
six
additional
months
of
pediatricexclusivity,
which
if
granted,
is
added
to
existing
exclusivity
periods
and
patent
terms
listed
for
the
applicable
drug
in
the
FDA's
Orange
Book
at
the
time
thesponsor
satisfies
FDA's
"written
request"
for
pediatric
research.
Sponsors
may
seek
to
negotiate
the
terms
of
a
written
request
during
drug
development.
While
thesponsor
of
an
orphan
designated
drug
may
not
be
required
to
perform
pediatric
studies
under
PREA,
they
are
eligible
to
participate
in
the
incentives
under
theBPCA.Regulation Outside the US and Europe













In
addition
to
regulations
in
the
US
and
Europe,
we
will
be
subject
to
a
variety
of
regulations
in
other
jurisdictions
governing
clinical
studies
of
ourcandidate
products.
Whether
or
not
we
obtain31Table
of
ContentsFDA
approval
for
a
product,
we
must
obtain
approval
of
a
product
by
the
comparable
regulatory
authorities
of
countries
outside
the
US
before
we
can
commenceclinical
studies
or
marketing
of
the
product
in
those
countries.
The
requirements
for
approval
and
the
approval
process
vary
from
country
to
country,
and
the
timemay
be
longer
or
shorter
than
that
required
for
FDA
approval.
Furthermore,
we
must
obtain
any
required
pricing
approvals
in
addition
to
regulatory
approval
priorto
launching
the
product
in
the
approving
country.Health
Canada













Health
Canada
(HC)
is
the
government
agency
that
provides
regulatory
and
marketing
approval
for
drugs
and
therapeutic
products
in
Canada.
Theupcoming
Legislative
and
Regulatory
Modernization
(LRM)
is
the
most
significant
drug
regulatory
system
reform
in
Canada
in
more
than
50
years
and
is
expectedto
overhaul
Canada's
Food
and
Drugs
Act
and
Regulations.
The
LRM
supports
a
'lifecycle'
regulatory
approach
and
is
focused
on
strengthening
evidence-baseddecision
making,
good
regulatory
planning,
licensing,
post-licensing,
accountability,
authority
and
enforcement.
Through
this
framework,
HC
intends
to
improvethe
market
authorization
process
and
implement
necessary
regulatory
frameworks.
In
October
2010,
HC
accelerated
its
modernization
efforts.
This
included
theproposed
regulatory
pathways
for
Orphan
Drugs
(harmonized
with
US/EU
regulations).Japan













The
Minister
of
Health,
Labor
and
Welfare
is
the
government
agency
that
provides
regulatory
approval
for
pharmaceutical
products
in
Japan.
Partiesengaged
in
manufacture
or
sale
of
products
in
Japan
must
receive
the
approval
of
the
Minister
of
Health,
Labor
and
Welfare.
The
Pharmaceutical
Affairs
Law
ofJapan
requires
a
license
for
marketing
authorization
when
importing
to
Japan
and
selling
pharmaceutical
products
manufactured
in
other
countries.
It
also
requires
aforeign
manufacturer
to
get
each
of
its
manufacturing
sites
certified
as
a
manufacturing
site
of
pharmaceutical
products
to
be
marketed
in
Japan.
To
receive
alicense
for
marketing
authorization,
the
manufacturer
or
seller
must,
at
the
very
least,
employ
the
certain
manufacturing
marketing,
quality
and
safety
personnel.
Alicense
for
marketing
authorization
may
not
be
granted
if
the
quality
management
methods
and
post
marketing
safety
management
methods
applied
with
respect
tothe
pharmaceutical
product
fail
to
conform
to
the
standards
stipulated
in
the
ordinances
promulgated
by
the
Ministry
of
Health,
Labor
and
Welfare.













In
addition
to
the
licensing
requirements
for
entities
that
engage
in
manufacturing,
importing
and
sales
of
medical
products
as
mentioned
above,
the
lawalso
requires
that
the
medical
products
have
obtained
approval
before
they
are
marketed
and
sold
in
Japan.
The
process
for
the
approval
includes
such
elements
asevaluation
and
testing
of
trustworthiness
of
the
clinical
trial,
testing
of
quality,
efficacy,
absorption
and
egestion,
toxicity,
and
safety
of
the
products.
The
timerequired
for
the
approval
process
varies
depending
on
the
product,
but
it
can
be
years.
The
product
also
needs
approval
for
pricing
to
be
applied
for
redemption
ofhealth
insurance.
The
medical
products
which
once
are
approved
and
marketed
are
also
subject
to
regular
post-marketing
vigilance
of
safety
and
quality
under
thestandards
of
Good
Manufacturing
Practice.Australia













The
Therapeutic
Goods
Administration
("TGA")
is
the
regulatory
body,
under
the
Australian
Department
of
Health,
responsible
for
conducting
assessmentand
monitoring
activities
of
therapeutic
goods
in
Australia.
Products
under
the
jurisdiction
of
the
TGA
include
prescription
medicines,
medical
devices
(simple
andcomplex),
diagnostic
products,
vaccines,
and
biologics.
Activities
of
the
TGA
include
classifying
the
product
based
on
risk
to
the
person,
implementing
appropriateregulatory32Table
of
Contentscontrols
for
the
manufacturing
processes,
and
monitoring
approved
products
with
a
comprehensive
adverse
event
reporting
program.
The
TGA
requires
that
amarketing
authorization
be
submitted
and
reviewed
for
safety
and
efficacy,
and
approved
before
a
medication
can
be
marketed
and
provided
to
patientscommercially.
A
separate
regulatory
pathway
is
utilized
to
conduct
clinical
trials
in
Australia.
Australia
has
also
an
Orphan
drug
designation.Regulation
of
Medical
Devices
Outside
the
US
and
Europe













In
addition
to
regulations
in
the
US,
we
will
be
subject
to
a
variety
of
regulations
in
other
jurisdictions
governing
the
medical
device.
Whether
or
not
weobtain
FDA
approval
for
a
product
and
the
medical
device
that
will
be
used,
we
must
obtain
approval
of
a
product
and
the
medical
device
by
the
comparableregulatory
authorities
of
countries
outside
the
US
before
we
can
commence
marketing
of
the
product
in
those
countries.
The
requirements
for
approval
and
theapproval
process
vary
from
country
to
country,
and
the
time
may
be
longer
or
shorter
than
that
required
for
FDA
approval.













Under
certain
harmonized
medical
device
approval/clearance
regulations
outside
the
US,
reference
to
US
clearance
permits
fast-tracking
of
marketclearance.
Other
regions
are
harmonized
with
EU
standards,
and
therefore
recognize
the
CE
mark
(Conformité
Européene,
which
means
European
Conformity)
as
adeclaration
of
conformity
to
applicable
standards.Early
Access
ProgramsEuropean
Union













Under
European
law,
member
states
are
authorized
to
adopt
national
legal
regimes
for
the
supply
or
use
of
non-authorized
drugs
in
case
of
therapeuticneeds.
The
most
common
national
legal
regimes
are
compassionate
use
programs
and
named
patient
sales,
but
other
national
regimes
for
early
access
may
beavailable,
depending
on
the
member
state.
For
drugs
approved
through
the
centralized
procedure,
such
as
orphan
drugs,
compassionate
use
programs
are
alsoregulated
at
the
European
level.













Special
programs
can
be
set
up
to
make
available
to
patients
with
an
unmet
medical
need
a
promising
drug
which
has
not
yet
been
authorized
for
theircondition
("compassionate
use").
As
a
general
rule,
compassionate
use
programs
can
only
be
put
in
place
for
drugs
or
biologics
that
are
expected
to
help
patientswith
life-threatening,
long-lasting
or
seriously
disabling
illnesses
who
currently
cannot
be
treated
satisfactorily
with
authorized
medicines,
or
who
have
a
diseasefor
which
no
medicine
has
yet
been
authorized.
The
compassionate
use
route
may
be
a
way
for
patients
who
cannot
enroll
in
an
ongoing
clinical
trial
to
obtaintreatment
with
a
potentially
life-saving
medicine.
Compassionate
use
programs
are
coordinated
and
implemented
by
the
EU
member
states,
which
decideindependently
how
and
when
to
open
such
programs
according
to
national
rules
and
legislation.
Generally,
doctors
who
wish
to
obtain
a
promising
drug
for
theirseriously
ill
patients
will
need
to
contact
the
relevant
national
authority
in
their
respective
country
and
follow
the
procedure
that
has
been
set
up.
Typically,
thenational
authority
keeps
a
register
of
the
patients
treated
with
the
drug
within
the
compassionate
use
program,
and
a
system
is
in
place
to
record
any
side
effectsreported
by
the
patients
or
their
doctors.
Orphan
drugs
very
often
are
subject
to
compassionate
use
programs
due
to
their
very
nature
(rare
diseases
are
life-threatening,
long-lasting
or
seriously
disabling
diseases)
and
the
unusually
long
time
required
for
both
their
approval
and
effective
marketing.













Doctors
can
also
obtain
promising
drugs
for
their
patients
by
requesting
a
supply
of
a
drug
from
the
manufacturer
or
a
pharmacist
located
in
anothercountry,
to
be
used
for
an
individual
patient
under
their
direct
responsibility.
This
is
often
called
treatment
on
a
'named-patient
basis'
and
should
not
be
confusedwith
compassionate
use
programs.
In
this
case,
the
doctor
responsible
for
the33Table
of
Contentstreatment
will
either
contact
the
manufacturer
directly
or
make
a
prescription
for
a
pharmacist.
While
manufacturers
or
pharmacists
do
record
what
they
supply,there
is
no
central
register
of
the
patients
that
are
being
treated
in
this
way.Reimbursement
of
Pharmaceutical
Products













In
the
US,
many
independent
third-party
payers,
as
well
as
the
Medicare
and
state
Medicaid
programs,
reimburse
buyers
of
pharmaceutical
products.Medicare
is
the
federal
program
that
provides
health
care
benefits
to
senior
citizens
and
certain
disabled
and
chronically
ill
persons.
Medicaid
is
the
need-basedfederal
and
state
program
administered
by
the
states
to
provide
health
care
benefits
to
certain
persons.













As
one
of
the
conditions
for
obtaining
Medicaid
and
Medicare
Part
B
coverage
for
our
marketed
pharmaceutical
products,
we
will
need
to
agree
to
pay
arebate
to
state
Medicaid
agencies
that
provide
reimbursement
for
those
products.
We
will
also
have
to
agree
to
sell
our
commercial
products
under
contracts
withthe
Department
of
Veterans
Affairs,
Department
of
Defense,
Public
Health
Service,
and
numerous
other
federal
agencies
as
well
as
certain
hospitals
that
aredesignated
as
340B
covered
entities
(entities
designated
by
federal
statutes
to
receive
drugs
at
discounted
prices)
at
prices
that
are
significantly
below
the
price
wecharge
to
commercial
pharmaceutical
distributors.
These
programs
and
contracts
are
highly
regulated
and
will
impose
restrictions
on
our
business.
Failure
tocomply
with
these
regulations
and
restrictions
could
result
in
a
loss
of
our
ability
to
continue
receiving
reimbursement
for
our
drugs
once
approved.
Medicare
andMedicaid
programs
may
also
seek
penalties
for
improper
marketing,
including
off-label
marketing,
of
our
drugs.













Private
healthcare
payers
also
attempt
to
control
costs
and
influence
drug
pricing
through
a
variety
of
mechanisms,
including
through
negotiating
discountswith
the
manufacturers
and
through
the
use
of
tiered
formularies
and
other
mechanisms
that
provide
preferential
access
to
certain
drugs
over
others
within
atherapeutic
class.
Payers
also
set
other
criteria
to
govern
the
uses
of
a
drug
that
will
be
deemed
medically
appropriate
and
therefore
reimbursed
or
otherwisecovered.













Different
pricing
and
reimbursement
schemes
exist
in
other
countries.
In
the
European
Union,
governments
influence
the
price
of
drugs
through
theirpricing
and
reimbursement
rules
and
control
of
national
health
care
systems
that
fund
a
large
part
of
the
cost
of
those
products
to
patients.
Some
jurisdictionsoperate
positive
and
negative
list
systems
under
which
drugs
may
only
be
marketed
once
a
reimbursement
price
has
been
agreed.
To
obtain
reimbursement
orpricing
approval,
some
of
these
countries
may
require
the
completion
of
clinical
trials
that
compare
the
cost-effectiveness
of
a
particular
drug
candidate
to
currentlyavailable
therapies.
Other
member
states
allow
companies
to
fix
their
own
prices
for
drugs,
but
monitor
and
control
company
profits.
The
downward
pressure
onhealth
care
costs
in
general,
particularly
prescription
drugs,
has
become
very
intense.
As
a
result,
increasingly
high
barriers
are
being
erected
to
the
entry
of
newdrugs.
In
addition,
in
some
countries,
cross-border
imports
from
low-priced
markets
exert
a
commercial
pressure
on
pricing
within
a
country.
There
can
be
noassurance
that
any
country
that
has
price
controls
or
reimbursement
limitations
for
drugs
will
allow
favorable
reimbursement
and
pricing
arrangements
for
any
ofour
products.Regulation/Fraud
and
Abuse
Laws













Healthcare
providers,
physicians
and
third-party
payers
(government
or
private)
often
play
a
primary
role
in
the
recommendation
and
prescription
of
healthcare
products.
In
the
US
and
most
jurisdictions,
numerous
detailed
requirements
apply
to
government
and
private
health
care
programs,34Table
of
Contentsand
a
broad
range
of
fraud
and
abuse
and
transparency
laws
are
relevant
to
pharmaceutical
companies.
US
federal
and
state
healthcare
laws
and
regulations
in
theseareas
include
the
following:·The
federal
anti-kickback
statute;·The
federal
civil
False
Claims
Act;·The
federal
Health
Insurance
Portability
and
Accountability
Act
of
1996
(HIPAA),
as
amended
by
the
Health
Information
Technology
forEconomic
and
Clinical
Health
Act
(HITECH),
and
similar
state
privacy
laws;·The
federal
criminal
false
statements
statute;·The
price
reporting
requirements
under
the
Medicaid
Drug
Rebate
Program
and
the
Veterans
Health
Care
Act
of
1992;·The
federal
Physician
Payment
Sunshine
Act,
being
implemented
as
the
Open
Payments
Program;
and·Analogous
and
similar
state
laws
and
regulations.













Similar
restrictions
apply
in
the
member
states
of
the
European
Union,
which
have
been
set
out
by
laws
or
industry
codes
of
conducts.Employees













As
of
December
31,
2015,
we
had
a
total
of
125
employees,
including
64
in
research,
clinical,
regulatory,
medical
affairs
and
quality
assurance;
11
intechnical
operations,
manufacturing
and
quality
control;
36
in
general
and
administrative
functions;
and
14
in
pre-commercial
activities.
We
had
114
employees
inthe
US
and
11
employees
in
Europe.
We
anticipate
increasing
headcount
in
both
the
US
and
Europe
in
2016.













Our
success
depends
in
large
measure
on
our
ability
to
attract
and
retain
capable
executive
officers
and
highly
skilled
employees
who
are
in
great
demand.None
of
our
employees
are
represented
by
a
labor
union
and
we
believe
that
our
relations
with
our
employees
are
generally
good.
Generally,
our
employees
are
at-will
employees.
However,
we
have
entered
into
employment
agreements
with
certain
of
our
executive
officers.Available
Information













We
file
electronically
with
the
Securities
and
Exchange
Commission,
or
SEC,
our
annual
reports
on
Form
10-K,
quarterly
reports
on
Form
10-Q,
currentreports
on
Form
8-K,
and
amendments
to
those
reports
filed
or
furnished
pursuant
to
Section
13(a)
or
15(d)
of
the
Securities
Exchange
Act
of
1934,
which
we
referto
as
the
Exchange
Act.
We
make
available
on
our
website
at
http://www.insmed.com,
free
of
charge,
copies
of
these
reports
as
soon
as
reasonably
practicable
afterfiling
these
reports
with,
or
furnishing
them
to,
the
SEC.
The
public
can
also
obtain
materials
that
we
file
with
the
SEC
through
the
SEC's
website
athttp://www.sec.gov
or
at
the
SEC's
Public
Reference
Room
at
100
F
Street,
NE,
Washington,
DC
20549.
Information
on
the
operation
of
the
Public
ReferenceRoom
is
available
by
calling
the
SEC
at
800-SEC-0330.













Also
available
through
our
website's
"Investor
Relations
Corporate
Governance"
page
are
charters
for
the
Audit,
Compensation
and
Nominations
andGovernance
committees
of
our
board
of
directors,
our
Corporate
Governance
Guidelines,
and
our
Code
of
Business
Conduct
and
Ethics.













The
references
to
our
website
and
the
SEC's
website
are
intended
to
be
inactive
textual
references
only.
Neither
the
contents
of
our
website,
nor
thecontents
of
the
SEC's
website,
are
incorporated
by
reference
in
this
Annual
Report
on
Form
10-K.Financial
Information













The
financial
information
required
under
this
Item
1
is
incorporated
herein
by
reference
to
Item
8
of
this
Annual
Report
on
Form
10-K.35Table
of
ContentsITEM
1A.







RISK
FACTORS















Our business is subject to substantial risks and uncertainties. Any of the risks and uncertainties described below, either alone or taken together, couldmaterially and adversely affect our business, financial condition, results of operations, prospects for growth, or the value of an investment in our common stock. Inaddition, these risks and uncertainties could cause actual results to differ materially from those expressed or implied by forward-looking statements contained inthis Form 10-K (please read the "Cautionary Note Regarding Forward-Looking Statements" appearing at the beginning of this Form 10-K). The risks anduncertainties described below are not the only ones we face. Additional risks and uncertainties not currently known to us or that we currently deem to beimmaterial may also materially and adversely affect our business, financial condition, results of operations, prospects and the value of an investment in ourcommon stock and could cause actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements.Risks
Related
to
Development
and
Commercialization
of
our
Product
CandidatesOur near term prospects are highly dependent on the success of our most advanced product candidate, ARIKAYCE. If we are unable to successfully completethe development of, obtain regulatory approval for, and successfully commercialize ARIKAYCE, our business and the value of our common stock may bematerially adversely affected.













We
are
investing
substantially
all
of
our
efforts
and
financial
resources
in
the
development
of
ARIKAYCE,
our
most
advanced
product
candidate.
Ourability
to
generate
product
revenue
from
ARIKAYCE
will
depend
heavily
on
the
successful
completion
of
development
of,
receipt
of
regulatory
approval
for,
andcommercialization
of,
ARIKAYCE.













Positive
results
from
preclinical
studies
of
a
drug
candidate
may
not
be
predictive
of
similar
results
in
human
clinical
trials,
and
promising
results
fromearlier
clinical
trials
of
a
drug
candidate
may
not
be
replicated
in
later
clinical
trials.
Many
companies
in
the
pharmaceutical
and
biotechnology
industries
havesuffered
significant
setbacks
in
late-stage
clinical
trials
even
after
achieving
promising
results
in
earlier
stages
of
development.
Accordingly,
the
results
of
thecompleted
clinical
trials
for
ARIKAYCE
may
not
be
predictive
of
the
results
we
may
obtain
in
our
clinical
trials
currently
in
progress
or
other
trials.













We
are
conducting
a
global
phase
3
clinical
study
of
ARIKAYCE
(the
212
or
CONVERT
study)
in
adult
non-CF
patients
with
NTM
lung
infectionscaused
by
MAC
that
are
refractory
to
treatment.
The
CONVERT
study
is
designed
to
confirm
the
culture
conversion
results
seen
in
our
phase
2
clinical
trial
(the112
study).













In
the
fourth
quarter
of
2014,
we
filed
an
MAA
with
the
EMA
seeking
approval
of
ARIKAYCE
in
the
EU
for
the
treatment
of
NTM
lung
infections
basedon
the
data
from
the
112
study.
In
February
2015
the
EMA
validated
our
MAA
for
ARIKAYCE
for
NTM
lung
infections,
as
well
as
cystic
fibrosis
(CF)
patientswith
Pseudomonas lung
infections.
The
EMA
subsequently
requested
additional
information
with
respect
to
the
CF
indication
with
respect
to
the
similarity
ofARIKAYCE
to
another
product
that
has
an
orphan
designation
for
the
same
indication.
In
the
third
quarter
of
2015,
the
EMA
adopted
our
request
to
withdraw
thePseudomonas indication
from
our
MAA.
We
will
only
seek
approval
of
ARIKAYCE
for
the
treatment
of
patients
with
refractory
NTM
lung
infections
caused
byMAC.













In
December
2015,
we
submitted
our
responses
to
the
EMA's
120-day
questions
and
expect
to
receive
the
EMA's
180-day
list
of
outstanding
issues
(theLOI)
in
the
first
quarter
of
2016.
We36Table
of
Contentsanticipate
responding
to
the
LOI
and
participating
in
an
oral
hearing
with
the
CHMP
in
the
second
quarter
of
2016
to
address
the
LOI.
We
continue
to
expect
theCHMP
to
render
an
opinion
around
the
middle
of
2016.
There
can
be
no
assurance,
however,
that
results
from
the
112
study
will
be
sufficient
to
obtain
full
orconditional
marketing
approval
for
ARIKAYCE.
If
major
objections
raised
during
the
review
procedure
are
not
subsequently
resolved,
it
may
impact
our
ability
toobtain
an
approval
without
submission
of
additional
study
data.
Further,
even
if
we
obtain
conditional
approval,
it
may
be
withdrawn
under
certain
circumstancesand
confirmatory
clinical
studies
may
be
required
and
could
fail
to
demonstrate
sufficient
safety
and
efficacy
to
obtain
full
approval.













We
do
not
expect
ARIKAYCE
or
any
other
drug
candidates
we
may
develop
to
be
commercially
available
in
any
market
until
we
get
requisite
approvalfrom
the
EMA,
FDA
or
equivalent
regulatory
agency.We have not completed the research and development stage of ARIKAYCE or any other product candidates other than IPLEX, which we no longer market. Ifwe are unable to successfully commercialize ARIKAYCE or any other products, it may materially adversely affect our business, financial condition, results ofoperations and our prospects.













Our
long-term
viability
and
growth
depend
on
the
successful
commercialization
of
ARIKAYCE
and
potentially
other
product
candidates
that
lead
torevenue
and
profits.
Pharmaceutical
product
development
is
an
expensive,
high
risk,
lengthy,
complicated,
resource
intensive
process.
In
order
to
conduct
thedevelopment
programs
for
our
products,
we
must,
among
other
things,
be
able
to
successfully:·Identify
potential
drug
product
candidates;·Design
and
conduct
appropriate
laboratory,
preclinical
and
other
research;·Submit
for
and
receive
regulatory
approval
to
perform
clinical
studies;·Design
and
conduct
appropriate
preclinical
and
clinical
studies
according
to
good
laboratory
and
good
clinical
practices
and
disease-specificexpectations
of
FDA
and
other
regulatory
bodies;·Select
and
recruit
clinical
investigators;·Select
and
recruit
subjects
for
our
studies;·Collect,
analyze
and
correctly
interpret
the
data
from
our
studies;·Submit
for
and
receive
regulatory
approvals
for
marketing;·Submit
for
and
receive
reimbursement
approvals
for
market
access:
and·Manufacture
the
drug
product
candidates
and
device
components
according
to
cGMP.













The
development
program
with
respect
to
any
given
product
will
take
many
years
and
thus
delay
our
ability
to
generate
profits.
In
addition,
potentialproducts
that
appear
promising
at
early
stages
of
development
may
fail
for
a
number
of
reasons,
including
the
possibility
that
the
products
may
require
significantadditional
testing
or
turn
out
to
be
unsafe,
ineffective,
too
difficult
or
expensive
to
develop
or
manufacture,
too
difficult
to
administer
or
unstable.
If
we
do
notproceed
with
the
development
of
our
ARIKAYCE
program
in
the
NTM
or
CF
indications,
certain
organizations
that
provided
funding
to
us
for
such
developmentalefforts
may
elect
to
proceed
with
the
development
of
these
indications.
Even
if
we
are
successful
in
obtaining
regulatory
approval
for
our
product
candidates,including
ARIKAYCE,
we
may
not
obtain
labeling
that
permits
us
to
market
them
with
commercially
viable
claims
because
the
final
wording
of
the
approvedindication
may
be
restrictive,
or
the
available
clinical
data
may
not
provide
adequate
comparative
data
with
other
products.
Failure
to
successfully
commercializeour
products
will
adversely
affect
our
business,
financial
condition,
results
of
operations
and
prospects.37Table
of
ContentsIf regulatory agencies limit our proposed NTM treatment population for ARIKAYCE, our clinical studies do not produce positive results or our clinical trialsare delayed, or if serious side effects are identified during drug development, we may experience delays, incur additional costs and ultimately be unable tocommercialize our product candidates in the US, Europe or other countries.













Before
obtaining
regulatory
approval
for
the
sale
of
our
product
candidates,
we
must
conduct,
at
our
own
expense,
extensive
preclinical
tests
todemonstrate
the
safety
of
our
product
candidates
in
animals,
and
clinical
trials
to
demonstrate
the
safety
and
efficacy
of
our
product
candidates
in
humans.Significant
preclinical
or
clinical
trial
delays
also
could
shorten
the
patent
protection
period
during
which
we
may
have
the
exclusive
right
to
commercialize
ourproduct
candidates.
Such
delays
could
allow
our
competitors
to
bring
products
to
market
before
we
do
and
impair
our
ability
to
commercialize
our
products
orproduct
candidates.













Preclinical
and
clinical
testing
is
expensive,
difficult
to
design
and
implement
and
can
take
many
years
to
complete.
Special
challenges
can
arise
inconducting
trials
in
diseases
or
conditions
with
small
populations,
such
as
difficulties
enrolling
adequate
numbers
of
patients.
Our
product
development
costs
haveand
may
continue
to
increase
if
we
experience
further
delays
in
testing
or
approvals.
A
failure
of
one
or
more
of
our
preclinical
studies
or
clinical
trials
can
occur
atany
stage
of
testing.
We
may
experience
numerous
unforeseen
events
during,
or
as
a
result
of,
preclinical
testing
and
the
clinical
trial
process
that
could
delay
orprevent
our
ability
to
obtain
regulatory
approval
or
commercialize
our
product
candidates,
including:·Our
preclinical
tests
or
clinical
trials
may
produce
negative
or
inconclusive
results,
and
we
may
decide,
or
regulators
may
require
us,
to
conductadditional
preclinical
testing
or
clinical
trials
or
we
may
abandon
projects
that
we
expect
to
be
promising;·Regulators
or
institutional
review
boards
may
prevent
us
from
commencing
a
clinical
trial
or
conducting
a
clinical
trial
at
a
prospective
trial
site;·Enrollment
in
the
clinical
trials
may
take
longer
than
expected
or
the
clinical
trials
as
designed
may
not
allow
for
sufficient
patient
accrual
tocomplete
enrollment
of
the
trial;·We
may
decide
to
limit
or
abandon
our
commercial
development
programs;·Conditions
imposed
on
us
by
the
FDA
or
any
non-US
regulatory
authority
regarding
the
scope
or
design
of
our
clinical
trials
may
require
us
tocollect
and
submit
information
to
regulatory
authorities,
ethics
committees,
institutional
review
boards
or
others
for
review
and
approval;·The
number
of
patients
required
for
our
clinical
trials
may
be
larger
than
we
anticipate
or
participants
may
drop
out
of
our
clinical
trials
at
a
higherrate
than
we
anticipate;·Our
third
party
contractors,
contract
research
organizations,
which
we
refer
to
as
CROs,
clinical
investigators,
clinical
laboratories,
product
supplieror
inhalation
device
supplier
may
fail
to
comply
with
regulatory
requirements
or
fail
to
meet
their
contractual
obligations
to
us
in
a
timely
manner;·We
may
have
to
suspend
or
terminate
one
or
more
of
our
clinical
trials
if
we,
the
regulators
or
the
institutional
review
boards
determine
that
theparticipants
are
being
exposed
to
unacceptable
health
risks
or
for
other
reasons;·We
may
not
be
able
to
claim
that
a
product
candidate
provides
an
advantage
over
current
standard
of
care
or
future
competitive
therapies
indevelopment
because
our
clinical
studies
may
not
have
been
designed
to
support
such
claims;·Regulators
or
institutional
review
boards
may
require
that
we
hold,
suspend
or
terminate
clinical
research
for
various
reasons,
including
potentialsafety
concerns
or
noncompliance
with
regulatory
requirements;·The
cost
of
our
clinical
trials
may
be
greater
than
we
anticipate;38Table
of
Contents·The
supply
or
quality
of
product
used
in
clinical
trials
or
other
materials
necessary
to
conduct
our
clinical
trials
may
be
insufficient
or
inadequate
orwe
may
not
be
able
to
reach
agreements
on
acceptable
terms
with
prospective
contract
manufacturers
or
CROs;
and·The
effects
of
our
product
candidates
may
not
be
the
desired
effects
or
may
include
undesirable
side
effects
or
the
product
candidates
may
haveother
unexpected
characteristics.













For
example,
results
from
our
rodent
carcinogenicity
study
showed
that
when
rats
were
given
ARIKAYCE
daily
by
inhalation
for
two
years,
two
of
the120
rats
receiving
the
highest
dose
developed
lung
carcinomas.
These
rats
received
ARIKAYCE
doses
that
were
within
two-fold
of
those
in
clinical
studies(normalized
on
a
body
surface
area
basis
or
a
lung
weight
basis).
Based
on
these
results,
in
2011
the
FDA
placed
clinical
holds
on
our
phase
3
clinical
trials
forARIKAYCE,
which
holds
were
lifted
in
2012.
In
2013,
we
concluded
a
nine
month
dog
inhalation
toxicity
study.
The
final
report
from
the
study
stated
that
thelung
macrophage
response
in
dogs
was
similar
to
that
seen
in
our
previous
three
month
dosing
dog
study,
and
there
was
no
evidence
of
neoplasia,
squamousmetaplasia
or
proliferative
changes.
However,
approvability
or
labeling
of
ARIKAYCE
may
still
be
negatively
affected
by
the
prior
results
from
the
rat
carcinogenstudy.













If
we
are
required
to
conduct
additional
clinical
trials
or
other
testing
of
our
product
candidates
beyond
those
that
we
currently
contemplate,
if
we
areunable
to
successfully
complete
our
clinical
trials
or
other
testing,
if
the
results
of
these
trials
or
tests
are
not
positive
or
are
only
modestly
positive
or
if
there
aresafety
concerns,
we
may:·Be
delayed
in
obtaining,
or
may
not
be
able
to
obtain,
marketing
approval
for
one
or
more
of
our
product
candidates;·Obtain
approval
for
indications
that
are
not
as
broad
as
intended
or
entirely
different
than
those
indications
for
which
we
sought
approval;
or·Have
the
product
removed
from
the
market
after
obtaining
marketing
approval.We may not have, or may be unable to obtain, sufficient quantities of our product candidates to meet our required supply for clinical studies orcommercialization requirements.













We
do
not
have
any
in-house
manufacturing
capability
other
than
for
development
and
characterization
and
depend
completely
on
a
small
number
of
third-party
manufacturers
and
suppliers
for
the
manufacture
of
our
product
candidates
on
a
clinical
or
commercial
scale.
We
are
currently
dependent
on
Althea
for
theproduction
of
ARIKAYCE.
In
September
2015,
we
entered
into
a
Commercial
Fill/Finish
Services
Agreement
with
Althea
to
produce
ARIKAYCE
on
a
non-exclusive
basis.
Althea
currently
manufactures
ARIKAYCE
at
a
relatively
small
scale.
In
order
to
meet
potential
commercial
demand,
we
have
constructed
amanufacturing
operation
at
Therapure
in
Canada
as
an
alternate
site
of
manufacture
that
operates
at
a
larger
scale.
Our
supply
of
the
active
pharmaceuticalingredient
for
INS1009
is
dependent
on
a
single
supplier.
The
inability
of
a
supplier
to
fulfill
our
supply
requirements
could
materially
adversely
affect
our
abilityto
obtain
and
maintain
regulatory
approvals
and
future
operating
results.
A
change
in
the
relationship
with
any
supplier,
or
an
adverse
change
in
their
business,could
materially
adversely
affect
our
future
operating
results.













We
are
dependent
upon
Althea
and
Therapure
being
able
to
provide
an
adequate
supply
of
ARIKAYCE
both
for
our
clinical
trials
and
for
commercial
salein
the
event
ARIKAYCE
receives
marketing
approval.
We
intend
to
work
closely
with
Althea
and
Therapure
to
coordinate
efforts
regarding
regulatoryrequirements
and
our
supply
needs.













We
are
dependent
upon
PARI
being
able
to
provide
an
adequate
supply
of
nebulizers
both
for
our
clinical
trials
and
for
commercial
sale
in
the
eventARIKAYCE
receives
marketing
approval.
PARI39Table
of
Contentsis
the
sole
manufacturer
of
the
eFlow
nebulizer
system.
These
nebulizers
must
be
in
good
working
order
and
meet
specific
performance
characteristics.
We
intendto
work
closely
with
PARI
to
coordinate
efforts
regarding
regulatory
requirements.













We
do
not
have
long-term
commercial
agreements
with
all
of
our
suppliers
and
if
any
of
our
suppliers
are
unable
or
unwilling
to
perform
for
any
reason,we
may
not
be
able
to
locate
suppliers
or
enter
into
favorable
agreements
with
them.
Any
inability
to
acquire
sufficient
quantities
of
our
components
in
a
timelymanner
from
these
third
parties
could
delay
clinical
trials
or
commercialization
and
prevent
us
from
developing
and
distributing
our
products
in
a
cost-effectivemanner
or
on
a
timely
basis.













In
addition,
manufacturers
of
our
components
are
subject
to
cGMP
and
similar
standards
and
we
do
not
have
control
over
compliance
with
theseregulations
by
our
manufacturers.
If
one
of
our
contract
manufacturers
fails
to
maintain
compliance,
the
production
of
our
products
could
be
interrupted,
resultingin
delays
and
additional
costs.
In
addition,
if
the
facilities
of
such
manufacturers
do
not
pass
a
pre-approval
or
post-approval
plant
inspection,
the
FDA,
as
well
asother
regulatory
authorities
in
jurisdictions
outside
the
US,
will
not
grant
approval
and
may
institute
restrictions
on
the
marketing
or
sale
of
our
products.
We
arereliant
on
third-party
manufacturers
and
suppliers
to
meet
our
clinical
supply
demands
and
any
future
commercial
products.
Delays
in
receipt
of
materials,scheduling,
release,
custom's
control
and
regulatory
compliance
issues
may
adversely
impact
our
ability
to
initiate,
maintain
or
complete
clinical
trials
that
we
aresponsoring
or
may
adversely
impact
commercialization.
Issues
arising
from
scale-up,
facility
construction,
environmental
controls,
equipment
requirements,
localand
federal
permits
and
allowances
or
other
factors
may
have
an
adverse
impact
on
our
ability
to
manufacture
our
product
candidates.We have limited experience in conducting and managing the preclinical development activities and clinical trials necessary to obtain regulatory approvals,including approval by the FDA and EMA and other regulatory agencies.













We
have
limited
experience
in
conducting
and
managing
the
preclinical
development
activities
and
clinical
trials
necessary
to
obtain
regulatory
approvals,including
approval
by
the
FDA
and
EMA.
Since
our
merger
with
Transave,
we
have
not
completed
a
regulatory
filing
and
review
process
for,
obtained
regulatoryapproval
of
or
commercialized
any
of
our
product
candidates.
Our
limited
experience
might
prevent
us
from
successfully
designing,
implementing,
or
completing
aclinical
trial.
The
application
processes
for
FDA,
EMA
and
other
regulatory
agencies
are
complex
and
difficult
and
vary
by
regulatory
agency.
We
have
limitedexperience
in
conducting
and
managing
the
application
processes
necessary
to
obtain
regulatory
approvals
in
the
various
countries
and
we
might
not
be
able
todemonstrate
that
our
product
candidates
meet
the
appropriate
standards
for
regulatory
approval.
If
we
are
not
successful
in
conducting
and
managing
our
preclinicaldevelopment
activities
or
clinical
trials
or
obtaining
regulatory
approvals,
we
might
not
be
able
to
commercialize
ARIKAYCE,
or
might
be
significantly
delayed
indoing
so,
which
may
materially
harm
our
business.We may not be able to enroll enough patients to complete our clinical trials.













The
completion
rate
of
our
global
phase
3
clinical
study
of
ARIKAYCE
for
NTM
and
other
future
clinical
studies
of
our
products
is
dependent
on,
amongother
factors,
the
patient
enrollment
rate.
Patient
enrollment
is
a
function
of
many
factors,
including:·Investigator
identification
and
recruitment;·Regulatory
approvals
to
initiate
study
sites;·Patient
population
size;40Table
of
Contents·The
nature
of
the
protocol
to
be
used
in
the
trial;·Patient
proximity
to
clinical
sites;·Eligibility
criteria
for
the
study;·The
patients'
willingness
to
participate
in
the
study;·Competition
from
other
companies'
potential
clinical
studies
for
the
same
patient
population;
and·Ability
to
obtain
any
necessary
comparator
drug
or
medical
device.













While
we
believe
our
procedures
for
enrolling
patients
to
date
have
been
appropriate,
enrollment
at
certain
centers
is
slower
than
expected.
As
a
result,
weexpect
to
achieve
our
enrollment
objective
six
to
twelve
months
later
than
our
initial
expectation
and
now
expect
to
enroll
the
study
by
the
end
of
2016.
While
wehave
taken
a
number
of
steps
to
accelerate
enrollment,
there
is
no
guarantee
that
our
enrollment
will
be
completed
by
the
expected
time.
Delays
in
patientenrollment
for
future
clinical
trials
could
increase
costs
and
delay
ultimate
commercialization
and
sales,
if
any,
of
our
products.













If
any
of
our
products
meet
the
criteria
for
approval
pursuant
to
Subpart
H
(accelerated
approval),
such
approval
will
be
subject
to
our
carrying
out,
withdue
diligence,
adequate
and
well-controlled
post
market
studies
to
verify
and
describe
their
clinical
benefit.
If
we
fail
to
complete
such
studies
with
due
diligence,or
if
the
results
of
such
studies
fail
to
demonstrate
clinical
benefit,
FDA
may,
following
a
hearing,
withdraw
product
approval.The commercial success of ARIKAYCE or any other product candidates that we may develop will depend upon many factors, including the degree of marketacceptance by physicians, patients, third-party payers and others in the medical community.













Even
if
we
are
able
to
successfully
complete
development
of,
obtain
regulatory
approval
for,
and
bring
ARIKAYCE
to
market,
ARIKAYCE
may
not
gainmarket
acceptance
by
physicians,
patients,
third-party
payers
and
others
in
the
medical
community.
If
ARIKAYCE,
or
any
other
products
we
bring
to
market,
donot
achieve
an
adequate
level
of
acceptance,
we
may
not
generate
significant
product
revenue
and
we
may
not
become
profitable.
The
degree
of
market
acceptanceof
ARIKAYCE
and
any
other
product
candidates,
if
approved
for
commercial
sale,
will
depend
on
a
number
of
factors,
including:·The
prevalence
and
severity
of
any
side
effects,
including
any
limitations
or
warnings
contained
in
a
product's
approved
labeling;·The
efficacy
and
potential
advantages
over
alternative
treatments;·The
pricing
of
our
product
candidates;·Relative
convenience
and
ease
of
administration;·The
willingness
of
the
target
patient
population
to
try
new
therapies
and
of
physicians
to
prescribe
these
therapies;·The
strength
of
marketing
and
distribution
support
and
timing
of
market
introduction
of
competitive
products;·Publicity
concerning
our
products
or
competing
products
and
treatments,
including
competing
products
becoming
subject
to
generic
pricing;
and·Sufficient
third
party
insurance
coverage
and
reimbursement.













Even
if
a
potential
product
displays
a
favorable
efficacy
and
safety
profile
in
preclinical
and
clinical
trials,
market
acceptance
of
the
product
will
not
beknown
until
after
it
is
launched.
For
example,
if
a
clinical
trial
is
not
designed
to
demonstrate
advantages
over
alternative
treatments,
we
may
be
prohibited
frompromoting
our
product
candidates
on
any
such
advantages.
Our
efforts
to41Table
of
Contentseducate
the
medical
community
and
third-party
payers
on
the
benefits
of
our
product
candidates
may
require
significant
resources
and
may
never
be
successful.Such
efforts
to
educate
the
marketplace
may
require
more
resources
than
are
required
by
more
established
technologies
marketed
by
our
competitors.We currently have a very small marketing or sales organization, and we have limited experience as a company in marketing drug products. If we are unable toestablish our own marketing and sales capabilities, or are unable to enter into agreements with third parties, to market and sell our products after they areapproved, we may not be able to generate product revenues.













We
have
a
small
commercial
organization
for
the
marketing,
market
access,
sales
and
distribution
of
any
drug
products.
In
order
to
commercializeARIKAYCE
or
any
other
product
candidates,
we
must
develop
these
capabilities
on
our
own
or
make
arrangements
with
third
parties
for
the
marketing,
sales
anddistribution
of
our
products.
During
2015,
we
started
to
build
our
EU
commercial
infrastructure
to
support
the
launch
of
ARIKAYCE
in
certain
countries
inEurope,
if
approved.
The
establishment
and
development
of
our
own
sales
force
would
be
expensive
and
time
consuming
and
could
delay
any
product
launch,
andwe
cannot
be
certain
that
we
would
be
able
to
successfully
develop
this
capability.
As
a
result,
we
may
seek
one
or
more
partners
to
handle
some
or
all
of
the
salesand
marketing
of
ARIKAYCE
in
certain
markets.
However,
we
may
not
be
able
to
enter
into
arrangements
with
third
parties
to
sell
ARIKAYCE
on
favorableterms
or
at
all.
In
the
event
we
are
unable
to
develop
our
own
marketing,
market
access,
and
sales
force
or
collaborate
with
a
third-party
marketing,
market
access,and
sales
organization,
we
may
not
be
able
to
successfully
commercialize
ARIKAYCE
or
any
other
product
candidates
that
we
develop,
which
would
adverselyaffect
our
ability
to
generate
product
revenues.
Further,
whether
we
commercialize
products
on
our
own
or
rely
on
a
third
party
to
do
so,
our
ability
to
generaterevenue
will
be
dependent
on
the
effectiveness
of
the
sales
force.













Promotional
materials
for
our
approved
drug
products
must
be
submitted,
along
with
Form
2253,
to
FDA's
Office
of
Prescription
Drug
Products
(OPDP)
atthe
time
of
initial
dissemination
or
publication.
For
products
approved
pursuant
to
21
CFR
314
Subpart
H,
promotional
materials
intended
to
be
used
duringproduct
launch
must
be
submitted
during
the
pre-approval
review
period,
and
thereafter
must
be
submitted
at
least
30
days
prior
to
the
intended
time
of
initialdissemination
or
publication.
For
other
products,
OPDP
encourages
pre-launch
review,
and
will
provide
advisory
comments
in
response
to
such
submissions
uponrequest.
There
is
no
guarantee
that
OPDP
will
agree
that
the
proposed
promotional
materials
comply
with
applicable
FDA
requirements.
A
negative
response
inOPDP
Advisory
Comments
may
require
us
to
revise
planned
promotional
materials
and
may
limit
the
claims
we
can
use
in
such
materials.
If
OPDP
considerspromotional
materials
already
disseminated
or
published
to
violate
applicable
FDA
requirements,
OPDP
may
initiate
enforcement
action,
including
Untitled
Letters(previously
known
as
Notices
of
Violation),
Warning
Letters,
Injunction/Consent
decree,
Seizures,
Criminal
prosecution,
and/or
civil
and
monetary
penalties.We have limited experience operating internationally, are subject to a number of risks associated with our international activities and operations and may notbe successful in our efforts to expand internationally.













We
have
manufacturing,
collaboration,
clinical
trial
and
other
relationships
outside
the
US
but
we
currently
have
limited
operations
outside
of
the
US.Specifically,
as
of
December
31,
2015,
we
had
11
employees
located
in
Europe
and
we
expect
that
number
to
grow
in
2016
and
beyond
as
we
prepare
forcommercialization
in
Europe.
In
order
to
meet
our
long-term
goals,
we
will
need
to
grow
our
international
operations
over
the
next
several
years.
Consequently,
weare
and
will
continue
to
be
subject
to
additional
risks
related
to
operating
in
foreign
countries,
including:·we
have
limited
experience
operating
our
business
internationally;42Table
of
Contents·we
may
not
achieve
the
optimal
pricing
and
reimbursement
for
ARIKAYCE;·there
may
be
fewer
addressable
NTM
patients
than
were
originally
forecasted;·unexpected
adverse
events
related
to
ARIKAYCE
or
our
other
product
candidates
that
occur
in
foreign
markets
that
we
have
not
experienced
in
theUS;·local,
economic
and
political
conditions,
including
geopolitical
events,
such
as
war
and
terrorism,
foreign
currency
fluctuations,
which
could
resultin
increased
or
unpredictable
operating
expenses
and
reduced
revenues
and
other
obligations
incident
to
doing
business
in,
or
with
a
companylocated
in,
another
country;·unexpected
changes
in
reimbursement
and
pricing
requirements,
tariffs,
trade
barriers
and
regulatory
requirements;·economic
weakness,
including
foreign
currency
exchange
risks,
inflation
or
political
instability
in
particular
foreign
economies
and
markets;
and·compliance
with
foreign
or
US
laws,
rules
and
regulations,
including
data
privacy
requirements,
labor
relations
laws,
tax
laws,
anti-competitionregulations,
import,
export
and
trade
restrictions,
anti-
bribery/anti-corruption
laws,
regulations
or
rules,
which
could
lead
to
actions
by
us
or
ourlicensees,
distributors,
manufacturers,
other
third
parties
who
act
on
our
behalf
or
with
whom
we
do
business
in
foreign
countries
or
our
employeeswho
are
working
abroad
that
could
subject
us
to
investigation
or
prosecution
under
such
foreign
or
US
laws.













These
and
other
risks
associated
with
our
international
operations
may
materially
adversely
affect
our
business
and
results
of
operations.Risks
Related
to
Our
Reliance
on
Third
PartiesWe rely on third parties including clinical research organizations, or CROs, clinical laboratories, analytical laboratories and other providers for many services.If we are unable to form and sustain these relationships, or if any third-party arrangements that we may enter into are unsuccessful, our ability to develop andcommercialize our products may be materially adversely affected.













We
currently
rely,
and
expect
that
we
will
in
the
future
continue
to
rely,
on
third
parties
for
significant
research,
analytical
services,
preclinicaldevelopment
and
clinical
development.
For
example
almost
all
of
our
clinical
trial
work
is
done
by
CROs,
such
as
Synteract
who
is
our
CRO
for
both
the
212
and312
studies,
and
clinical
laboratories.
Reliance
on
these
third
parties
poses
a
number
of
risks,
including
the
following:·We
may
face
significant
competition
in
seeking
appropriate
partners;·These
arrangements
are
complex
and
time
consuming
to
negotiate,
document
and
implement;·We
may
not
be
successful
in
our
efforts
to
establish
and
implement
collaborations
or
other
alternative
arrangements
that
we
might
pursue
onfavorable
terms;·We
may
not
be
able
to
effectively
control
whether
the
CROs
or
other
third
parties
will
devote
sufficient
resources
to
our
programs
or
products;·We
are
not
able
to
control
the
regulatory
compliance
of
CROs,
third-party
suppliers,
contractors
and
collaborators,
including
their
processes
andprocedures,
systems
utilized
to
collect
and
analyze
data,
and
equipment
used
to
test
drug
product
and/or
clinical
supplies;·Disagreements
with
third
parties
and
CROs
may
be
difficult
to
resolve
and
could
result
in
a
dispute
over
and
loss
of
intellectual
property
rights,delay
or
termination
of
the
research,
development,
or
commercialization
of
product
candidates
or
result
in
litigation
or
arbitration;·Contracts
with
our
collaborators
may
fail
to
provide
sufficient
protection
of
our
intellectual
property;
and·We
may
have
difficulty
enforcing
the
contracts
if
one
of
these
collaborators
fails
to
perform.43Table
of
Contents













A
great
deal
of
uncertainty
exists
regarding
the
success
of
any
current
and
future
third-party
efforts
on
which
we
might
depend.
Failure
of
these
effortscould
delay,
impair,
or
prevent
the
development
and
commercialization
of
our
products
and
adversely
affect
our
business,
financial
condition,
results
of
operationsand
prospects.We rely on PARI, a third party manufacturer, to supply the nebulizer that is used for ARIKAYCE. Any disruption in supply of the nebulizer will have amaterial adverse effect on our business.













We
are
dependent
upon
PARI
being
able
to
provide
an
adequate
supply
of
nebulizers
both
for
our
clinical
trials
and
for
commercial
sale
in
the
eventARIKAYCE
receives
marketing
approval.
These
nebulizers
must
be
in
good
working
order,
meet
specific
performance
characteristics
and
be
approved
by
FDAand
other
regulatory
agencies
along
with
ARIKAYCE.
We
have
no
alternative
supplier
for
the
nebulizer
and
we
do
not
intend
to
seek
an
alternative
or
secondarysupplier
of
nebulizers.
Significant
effort
and
time
were
expended
in
the
optimization
of
the
nebulizer
for
use
with
ARIKAYCE.
In
the
event
PARI
cannot
providedevices,
replication
of
the
optimized
device
by
another
party
may
require
considerable
time
and
additional
regulatory
approval.
In
the
case
of
certain
defined
supplyfailures,
we
will
have
the
right
under
the
PARI
Agreement
to
make
the
Device
and
have
it
made
by
third
parties,
but
not
certain
third
parties
deemed
under
thePARI
Agreement
to
compete
with
PARI.
PARI
has
the
right
to
terminate
this
agreement
upon
written
notice
for
our
uncured
material
breach,
or
if
we
are
thesubject
of
specified
bankruptcy
or
liquidation
events.
In
the
event
PARI
terminates
the
supply
agreement
and
ceases
to
manufacture
the
nebulizer,
we
cannot
becertain
that
we
would
be
able
identify
another
willing
supplier
for
the
nebulizer
on
terms
we
require.
A
disruption
in
the
supply
of
nebulizers
could
delay,
impair,or
prevent
the
development
and
commercialization
of
our
products
and
adversely
affect
our
business,
financial
condition,
results
of
operations
and
prospects.We rely on Ajinomoto Althea, Inc. and Therapure, third party manufacturers, to supply ARIKAYCE. Any disruption in the supply of ARIKAYCE could have amaterial adverse effect on our business.













We
are
dependent
upon
Ajinomoto
Althea,
Inc.
("Althea")
to
provide
an
adequate
supply
of
ARIKAYCE
both
for
our
clinical
trials
and
for
commercialsale
in
the
event
ARIKAYCE
receives
marketing
approval.
In
September
2015,
we
entered
into
a
Commercial
Fill/Finish
Services
Agreement
with
Althea
toproduce
ARIKAYCE.
Althea
has
the
right
to
terminate
this
agreement
upon
written
notice
for
our
uncured
material
breach,
if
we
are
the
subject
of
specifiedbankruptcy
or
liquidation
events,
or
without
cause
with
24
months'
prior
written
notice.
In
the
event
Althea
terminates
the
supply
agreement
and
ceases
to
supplyARIKAYCE,
we
cannot
be
certain
that
we
would
be
able
to
identify
another
willing
supplier
for
ARIKAYCE
on
terms
we
require
or
that
are
favorable
to
us.
Adisruption
in
the
supply
of
ARIKAYCE
could
delay,
impair,
or
prevent
clinical
trials,
the
development
and
commercialization
of
ARIKAYCE
and
adversely
affectour
business,
financial
condition,
results
of
operations
and
prospects.













Althea
currently
manufactures
ARIKAYCE
at
a
relatively
small
scale.
In
order
to
meet
potential
commercial
demand,
if
ARIKAYCE
is
approved,
we
haveconstructed
a
manufacturing
operation
at
Therapure
in
Canada
as
an
alternate
site
of
manufacture
that
operates
at
a
larger
scale.
We
may
not
be
able
to
obtainregulatory
approvals
for
ARIKAYCE
produced
at
Therapure's
facility.
We
may
not
be
able
to
secure
an
alternative
source
of
ARIKAYCE
at
an
adequate
scale
ofproduction.
An
inadequate
supply
of
ARIKAYCE
could
delay,
impair,
or
prevent
clinical
trials,
the
development
and
commercialization
of
ARIKAYCE
andadversely
affect
our
business,
financial
condition,
results
of
operations
and
prospects.44Table
of
ContentsWe currently depend on third parties to conduct the operations of our clinical trials.













We
rely
on
third
parties,
such
as
CROs
like
Synteract,
medical
institutions,
clinical
investigators
and
contract
laboratories
to
oversee
some
of
theoperations
of
our
clinical
trials
and
to
perform
data
collection
and
analysis.
As
a
result,
we
may
face
additional
delays
outside
of
our
control
if
these
parties
do
notperform
their
obligations
in
a
timely
fashion
or
in
accordance
with
regulatory
requirements.
If
these
third
parties
do
not
successfully
carry
out
their
contractualduties
or
obligations
and
meet
expected
deadlines,
if
they
need
to
be
replaced,
or
if
the
quality
or
accuracy
of
the
clinical
data
they
obtain
is
compromised
due
tothe
failure
to
adhere
to
our
clinical
protocols
or
for
other
reasons,
our
financial
results
and
the
commercial
prospects
for
ARIKAYCE
or
our
other
potential
productcandidates
could
be
materially
harmed,
our
costs
could
increase
and
our
ability
to
obtain
regulatory
approval
and
commence
product
sales
could
be
delayed.













We
also
rely
on
third
parties
to
select
and
enter
into
agreements
with
clinical
investigators
to
conduct
clinical
trials
to
support
approval
of
our
products
andthe
failure
of
these
third
parties
to
carry
out
such
evaluation
and
selection
can
adversely
affect
the
quality
of
the
data
from
these
studies
and,
potentially,
theapproval
of
our
products.
In
particular,
as
part
of
our
new
drug
approval
submissions,
we
must
disclose
any
financial
interests
of
investigators
who
participated
inany
of
the
clinical
studies
being
submitted
in
support
of
approval,
or
must
certify
to
the
absence
of
such
financial
interests.
FDA
evaluates
the
informationcontained
in
such
disclosures
to
determine
whether
disclosed
interests
may
have
an
impact
on
the
reliability
of
a
study.
If
FDA
determines
that
financial
interests
ofany
clinical
investigator
raise
serious
questions
of
data
integrity,
FDA
can
institute
a
data
audit,
request
that
we
submit
further
data
analyses,
conduct
additionalindependent
studies
to
confirm
the
results
of
the
questioned
study,
or
refuse
to
use
the
data
from
the
questioned
study
as
a
basis
for
approval.
A
finding
by
FDAthat
a
financial
relationship
of
an
investigator
raises
serious
questions
of
data
integrity,
could
delay
or
otherwise
adversely
affect
approval
of
our
products.Risks
Related
to
Our
Financial
Condition
and
Capital
RequirementsWe have a history of operating losses. We expect to incur operating losses for the foreseeable future and may never achieve or maintain profitability.













We
are
a
global
biopharmaceutical
company
focused
on
the
unmet
needs
of
patients
with
rare
diseases.
We
have
incurred
losses
each
previous
year
of
ouroperation,
except
in
2009,
when
we
sold
our
manufacturing
facility
and
certain
other
assets
to
Merck.
We
expect
to
continue
incurring
operating
losses
for
theforeseeable
future.
The
process
of
developing
and
commercializing
our
products
requires
significant
pre-clinical
and
clinical
testing
as
well
as
regulatory
approvalsfor
commercialization
and
marketing
before
we
are
allowed
to
begin
product
sales.
In
addition,
commercialization
of
our
drug
candidates
likely
would
require
us
tosignificantly
expand
our
sales
and
marketing
organization
and
establish
contractual
relationships
to
enable
product
manufacturing
and
other
related
activities.
Weexpect
that
our
activities,
together
with
our
general
and
administrative
expenses,
will
continue
to
result
in
substantial
operating
losses
for
the
foreseeable
future.
Asof
December
31,
2015,
our
accumulated
deficit
was
$589.0
million.
For
the
year
ended
December
31,
2015,
our
consolidated
net
loss
was
$118.2
million.













To
achieve
and
maintain
profitability,
we
need
to
generate
significant
revenues
from
future
product
sales.
This
will
require
us
to
be
successful
in
a
range
ofchallenging
activities,
including:·Successfully
completing
development
of
and
obtaining
regulatory
approval
for
the
marketing
of
ARIKAYCE
and
possibly
other
product
candidateswhich
have
yet
to
be
developed
and
which
would
also
require
marketing
approval;45Table
of
Contents·Commercializing
ARIKAYCE
and
any
other
product
candidates
for
which
we
obtain
marketing
approval;
and·Achieving
market
acceptance
and
reimbursement
of
ARIKAYCE
and
any
other
product
candidates
for
which
we
obtain
marketing
approval
in
themedical
community
and
with
patients
and
third-party
payers.













ARIKAYCE
will
require
marketing
approval
and
significant
investment
in
commercial
capabilities,
including
manufacturing
and
sales
and
marketingefforts,
before
its
product
sales
can
generate
any
revenues
for
us.
Because
of
the
numerous
risks
and
uncertainties
associated
with
drug
development
andcommercialization,
we
are
unable
to
predict
the
extent
of
any
future
losses.
We
may
never
successfully
commercialize
ARIKAYCE
or
any
other
products,
generatesignificant
future
revenues
or
achieve
and
sustain
profitability.We expect that we will need additional funds in the future to continue our operations, but we face uncertainties with respect to our ability to access capital.













Our
operations
have
consumed
substantial
amounts
of
cash
since
our
inception.
We
expect
to
continue
to
incur
substantial
research
and
developmentexpenses,
and
we
expect
to
expend
substantial
financial
resources
to
complete
development
of,
seek
regulatory
approval
for,
and
prepare
for
commercialization
ofARIKAYCE.
We
may
need
to
seek
additional
funding
in
order
to
complete
any
clinical
trials
related
to
ARIKAYCE,
seek
regulatory
approvals
of
ARIKAYCE,and
commercially
launch
ARIKAYCE.
We
also
may
require
additional
future
capital
in
order
to
continue
our
other
research
and
development
activities
or
to
fundcorporate
development.
As
of
December
31,
2015,
we
had
$282.9
million
of
cash
and
cash
equivalents
on
hand.
If
adequate
funds
are
not
available
to
us
whenneeded,
we
may
be
required
to
reduce
or
eliminate
research
and
development
programs
or
commercial
efforts.













Our
future
capital
requirements
will
depend
on
many
factors,
including
factors
associated
with:·Phase
3
clinical
trials
and
commercialization
of
ARIKAYCE;·Early
access
programs;·Non-clinical
and
clinical
testing;·Process
development
and
scale
up
for
manufacturing;·Manufacturing
for
clinical
trials
and
commercial
demand;·Performance
of
our
third-party
suppliers
and
manufacturers;·Obtaining
marketing,
sales
and
distribution
capabilities;·Obtaining
regulatory
approvals;·Research
and
development,
including
formulation
development;·Retaining
employees
and
consultants;·Global
expansion
efforts;·Filing
and
prosecuting
patent
applications
and
enforcing
and
defending
patent
claims;·Establishing
strategic
alliances
and
collaborations
with
third-parties;
and·Potential
future
litigation.













We
also
may
need
to
spend
more
funds
than
currently
expected
because
we
may
further
change
or
alter
drug
development
plans,
acquire
additional
drugsor
drug
candidates
or
we
may
misjudge
our
costs.
As
of
December
31,
2015,
we
had
no
committed
sources
of
capital
and
do
not
know
whether
additional
financingwill
be
available
when
needed,
or,
if
available,
that
the
terms
will
be
favorable.
We
cannot
assure
that
our
cash
reserves
together
with
any
subsequent
funding
willbe
sufficient
for
our
capital
requirements.
The
failure
to
satisfy
our
capital
requirements
will
adversely
affect
our
business,
financial
condition,
results
of
operationsand
prospects.46Table
of
Contents













We
may
seek
additional
funding
through
strategic
alliances,
private
or
public
sales
of
our
securities,
debt
financing
or
licensing
all
or
a
portion
of
ourtechnology
or
through
other
means.
Such
funding
may
significantly
dilute
existing
shareholders,
subject
us
to
contractual
restrictions
such
as
operating
or
financialcovenants
or
limit
our
rights
to
our
technology.We currently have no meaningful source of revenue.













In
2015
and
2014,
we
generated
no
meaningful
revenue.
In
2013,
we
generated
other
revenue
from
the
modification
of
a
previously
granted
license
of
ourIPLEX
technology
to
Premacure.
Unless
we
can
execute
one
or
more
revenue
generating
transactions
or
successfully
obtain
regulatory
approval
for
andcommercialize
ARIKAYCE,
we
will
have
no
material
sources
of
operating
revenue.
We
expect
to
continue
to
incur
substantial
additional
operating
losses
for
atleast
the
next
several
years
as
we
continue
to
develop
and
seek
to
commercialize
ARIKAYCE.If we are not successful in our efforts to evaluate potential future IPLEX initiatives and to identify and engage in possible out-licensing opportunities forIPLEX, we may not derive any future revenues from IPLEX.













IPLEX
is
no
longer
a
development
priority
for
us.
We
no
longer
have
protein
development
capability
or
the
in-house
capability
to
manufacture
IPLEX.Accordingly,
we
continue
to
evaluate
possible
out-licensing
opportunities
for
IPLEX.
We
may
have
difficulty
identifying
possible
markets,
and
securingprospective
partners
for
out-licensing,
including
as
a
result
of
certain
opt-in
and
other
rights
retained
by
Ipsen
and
Genentech
related
to
future
development
ofIPLEX
pursuant
to
the
patent
infringement
settlement
agreement
among
us,
Ipsen
and
Genentech.
Even
if
we
are
able
to
enter
into
out-licensing
arrangements,
wemay
not
derive
any
revenue
from
those
arrangements.Our loan agreement with Hercules Technology Growth Capital, Inc. ("Hercules") contains covenants that impose restrictions on our operations that mayadversely affect our ability to optimally operate our business or to maximize shareholder value.













Our
loan
agreement
with
Hercules
contains
various
restrictive
covenants,
including
restrictions
on
our
ability
to
incur
additional
debt,
transfer
or
place
alien
or
security
interest
on
our
assets,
including
our
intellectual
property,
merge
with
or
acquire
other
companies,
redeem
or
repurchase
any
shares
of
our
capitalstock
or
pay
cash
dividends
to
our
stockholders.
The
loan
agreement
also
contains
certain
other
covenants
(including
limitations
on
other
indebtedness,
liens,acquisitions,
investments
and
dividends),
and
events
of
default
(including
payment
defaults,
breaches
of
covenants
following
any
applicable
cure
period,
a
materialimpairment
in
the
perfection
or
priority
of
the
lender's
security
interest
or
in
the
collateral,
and
events
relating
to
bankruptcy
or
insolvency).
Upon
the
occurrence
ofan
event
of
default,
a
default
interest
rate
of
an
additional
5%
may
be
applied
to
the
outstanding
loan
balances,
and
the
lender
may
terminate
its
lendingcommitment,
declare
all
outstanding
obligations
immediately
due
and
payable,
and
take
such
other
actions
as
set
forth
in
the
Loan
Agreement.
In
addition,
pursuantto
the
Loan
Agreement,
the
lender
has
the
right
to
participate,
in
an
amount
of
up
to
$1.0
million,
in
certain
future
private
equity
financing(s).













Under
our
loan
agreement
with
Hercules,
we
have
borrowed
$25.0
million
as
of
December
31,
2015,
bearing
interest
of
9.25%.
In
December
2015,
wecompleted
an
amendment
of
our
loan
agreement
by
exercising
an
option
to
extend
the
maturity
date
to
January
1,
2018
with
a
payment
to
Hercules
of
$250,000.The
amendment
extend
the
interest-only
period,
with
principal
repayments
beginning
in
October
2016.
Our
borrowings
under
the
Loan
Agreement
are
secured
by
alien
on
our
assets,
excluding
our
intellectual
property,
and
in
the
event
of
a
default
on
the
loan,
the
lender
may
have
the
right
to
seize
our
assets
securing
ourobligations
under
the
Loan
Agreement.
The
terms
and
restrictions
provided
for
in
the
Loan
Agreement
may
inhibit
our
ability
to
conduct
our
business
and
to47Table
of
Contentsprovide
distributions
to
our
stockholders.
Future
debt
securities
or
other
financing
arrangements
could
contain
negative
covenants
similar
to,
or
even
morerestrictive
than,
the
Hercules
loan.In process research and development (IPRD) currently comprises approximately 16% of our total assets. A reduction in the value of our IPRD could impactour results of operations and financial condition.













As
a
result
of
the
merger
with
Transave
in
2010
we
recorded
an
intangible
IPRD
asset
of
$77.9
million
and
goodwill
of
$6.3
million
on
our
balance
sheet.As
a
result
of
our
clinical
hold
announced
in
late
2011
we
recorded
a
charge
of
$26.0
million
in
the
fourth
quarter
of
2011
and
reduced
the
value
of
IPRD
to$58.2
million
and
reduced
goodwill
to
zero.
Other
potential
future
activities
or
results
could
result
in
additional
write-downs
of
IPRD,
which
would
adversely
affectour
results
of
operations
and
financial
condition.We may be unable to use our net operating losses.













We
have
substantial
tax
loss
carry
forwards
for
US
federal
income
tax
purposes
and
beginning
in
2015,
we
have
tax
losses
in
Ireland
as
well.
Our
ability
tofully
use
certain
US
tax
loss
carry
forwards
prior
to
December
2010
to
offset
future
income
or
tax
liability
was
limited
under
section
382
of
the
Internal
RevenueCode
of
1986,
as
amended.
Changes
in
the
ownership
of
our
stock,
including
those
resulting
from
the
issuance
of
shares
of
our
common
stock
upon
exercise
ofoutstanding
options,
may
limit
or
eliminate
our
ability
to
use
certain
net
operating
losses
in
the
future.Any acquisitions we make, or collaborative relationships we enter into, may require a significant amount of our available cash and may not be scientifically orcommercially successful.













As
part
of
our
business
strategy,
we
may
effect
acquisitions
to
obtain
additional
businesses,
products,
technologies,
capabilities
and
personnel.Nonetheless,
we
cannot
assure
you
that
we
will
identify
suitable
products
or
enter
into
such
acquisitions
on
acceptable
terms.
If
we
make
one
or
more
significantacquisitions
in
which
the
consideration
includes
cash,
we
may
be
required
to
use
a
substantial
portion
of
our
available
cash
and/or
need
to
raise
additional
capital.













Acquisitions
involve
a
number
of
operational
risks,
including:·failure
to
achieve
expected
synergies;·difficulty
and
expense
of
assimilating
the
operations,
technology
and
personnel
of
the
acquired
business;·our
inability
to
retain
the
management,
key
personnel
and
other
employees
of
the
acquired
business;·our
inability
to
maintain
the
acquired
company's
relationship
with
key
third
parties,
such
as
alliance
partners;·exposure
to
legal
claims
for
activities
of
the
acquired
business
prior
to
the
acquisition;·the
diversion
of
our
management's
attention
from
our
core
business;
and·the
potential
impairment
of
goodwill
and
write-off
of
in-process
research
and
development
costs,
adversely
affecting
our
reported
results
ofoperations
and
financial
condition.













We
also
may
enter
into
collaborative
relationships
that
would
involve
our
collaborators
conducting
proprietary
development
programs.
Any
conflict
withour
collaborators
could
limit
our
ability
to
obtain
future
collaboration
agreements
and
negatively
influence
our
relationship
with
existing
collaborators.Disagreements
with
collaborators
may
also
develop
over
the
rights
to
our
intellectual
property.48Table
of
ContentsRisks
Related
to
Regulatory
MattersWe may not be able to obtain regulatory approvals for ARIKAYCE or any other products we develop in the US, Europe or other countries. If we fail to obtainsuch approvals, we will not be able to commercialize our products.













We
are
required
to
obtain
various
regulatory
approvals
prior
to
studying
our
products
in
humans
and
then
again
before
we
market
and
distribute
ourproducts.
The
regulatory
review
and
approval
processes
in
both
the
US
and
Europe
require
evaluation
of
preclinical
studies
and
clinical
studies,
as
well
as
theevaluation
of
our
manufacturing
process.
These
processes
are
complex,
lengthy,
expensive,
resource
intensive
and
uncertain.
Securing
regulatory
approval
tomarket
our
products
requires
the
submission
of
much
more
extensive
preclinical
and
clinical
data,
manufacturing
information
regarding
the
process
and
facility,scientific
data
characterizing
our
product
and
other
supporting
data
to
the
regulatory
authorities
in
order
to
establish
its
safety
and
effectiveness.
This
process
also
iscomplex,
lengthy,
expensive,
resource
intensive
and
uncertain.
We
have
limited
experience
in
submitting
and
pursuing
applications
necessary
to
gain
theseregulatory
approvals.













Data
submitted
to
the
regulators
is
subject
to
varying
interpretations
that
could
delay,
limit
or
prevent
regulatory
agency
approval.
We
may
also
encounterdelays
or
rejections
based
on
changes
in
regulatory
agency
policies
during
the
period
in
which
we
develop
a
product
and
the
period
required
for
review
of
anyapplication
for
regulatory
agency
approval
of
a
particular
product.
For
example,
FDA
has
designated
ARIKAYCE
for
Fast
Track,
Breakthrough
Therapy
and
QIDPstatus,
all
programs
intended
to
expedite
or
streamline
the
development
and
regulatory
review
of
the
drug.
If
we
were
to
lose
the
current
designation
under
one
ormore
of
those
programs,
we
could
face
delays
in
the
FDA
review
and
approval
process.
Even
with
these
designations,
there
is
no
guarantee
we
will
receiveapproval
for
ARIKAYCE
on
a
timely
basis,
or
at
all.













The
Generating
Antibiotic
Incentives
Now
(GAIN)
Act
established
incentives
for
the
development
of
new
therapies
for
serious
and
life-threateninginfections
by
making
streamlined
priority
review
and
fast
track
processes
available
for
drugs
which
the
FDA
designates
as
QIDPs.
To
qualify
for
designation
as
aQIDP
according
to
the
criteria
established
in
the
GAIN
Act
a
product
must
be
an
antibacterial
or
anti-fungal
drug
for
human
use
intended
to
treat
serious
or
life-threatening
infections,
including:
those
caused
by
an
anti-fungal
resistant
pathogen,
including
novel
or
emerging
infectious
pathogens;
or
caused
by
qualifyingpathogens
listed
by
the
FDA
in
accordance
with
the
GAIN
Act.
Under
the
fast
track
program
generally,
the
sponsor
of
an
IND
may
request
FDA
to
designate
thedrug
candidate
as
a
fast
track
drug
if
it
is
intended
to
treat
a
serious
condition
and
fulfill
an
unmet
medical
need.
FDA
must
determine
if
the
drug
candidatequalifies
for
fast
track
designation
within
60
days
of
receipt
of
the
sponsor's
request.
Once
FDA
designates
a
drug
as
a
fast
track
candidate,
it
is
required
to
facilitatethe
development
and
expedite
the
review
of
that
drug
by
providing
more
frequent
communication
with
and
guidance
to
the
sponsor.













Delays
in
obtaining
regulatory
agency
approvals
could
adversely
affect
the
development
and
marketing
of
any
drugs
that
we
or
any
third
parties
develop.Resolving
such
delays
could
force
us
or
third
parties
to
incur
significant
costs,
could
limit
our
allowed
activities
or
the
allowed
activities
of
third
parties,
coulddiminish
any
competitive
advantages
that
we
or
our
third
parties
may
attain
or
could
adversely
affect
our
ability
to
receive
royalties,
any
of
which
could
materiallyadversely
affect
our
business,
financial
condition,
results
of
operations
or
prospects.













To
market
our
products
outside
of
the
US
and,
Europe,
we
and
any
potential
third
parties
must
comply
with
numerous
and
varying
regulatory
requirementsof
other
countries.
The
approval
procedures
vary
among
countries
and
can
involve
additional
product
testing
and
administrative
review49Table
of
Contentsperiods.
The
time
required
to
obtain
approval
in
these
other
territories
might
differ
from
that
required
to
obtain
FDA
or
EMA
approval.
The
regulatory
approvalprocess
in
these
other
territories
includes
at
least
all
of
the
risks
associated
with
obtaining
FDA
and
EMA
approval
detailed
above.













Specifically
related
to
INS1009,
we
believe
that
this
product
could
be
eligible
for
approval
under
Section
505(b)(2)
of
the
FDCA.
Like
a
traditional
NDAthat
is
submitted
under
Section
505(b)(1)
of
the
FDCA,
a
505(b)(2)
NDA
must
establish
that
the
drug
is
safe
and
effective,
but
unlike
a
traditional
NDA
theapplicant
may
rely
at
least
in
part
on
studies
not
conducted
by
or
for
the
applicant
and
for
which
the
applicant
does
not
have
a
right
of
reference.
The
ability
to
relyon
existing
data
to
support
safety
and/or
effectiveness
can
reduce
the
time
and
cost
associated
with
traditional
NDAs.
We
cannot
be
sure
that
we
will
obtainapproval
for
INS1009
under
the
505(b)(2)
pathway.













Approval
by
the
FDA
or
the
EMA
does
not
ensure
approval
by
the
regulatory
authorities
of
other
countries.
Marketing
approval
in
one
country
does
notensure
marketing
approval
in
another,
but
a
failure
or
delay
in
obtaining
marketing
approval
in
one
country
may
have
a
negative
effect
on
the
regulatory
process
inothers.
In
addition,
we
may
be
subject
to
fines,
suspension
or
withdrawal
of
marketing
approvals,
product
recalls,
seizure
of
products,
operating
restrictions
andcriminal
prosecution
if
we
fail
to
comply
with
applicable
US
and
foreign
regulatory
requirements.
If
we
fail
to
comply
with
regulatory
requirements
or
to
obtainand
maintain
required
approvals,
our
target
market
may
be
reduced
and
our
ability
to
realize
the
full
market
potential
of
our
product
candidates
may
be
harmed.The
failure
to
obtain
such
approvals
may
materially
adversely
affect
our
business,
financial
condition,
results
of
operations
and
our
prospects.There is little or no precedent for clinical development and regulatory expectations for agents to treat NTM; as a result we may encounter challengesdeveloping clinical endpoints that will ultimately be satisfactory to regulators, and may need to reevaluate our surrogate endpoints at various points in time.













FDA
may
base
accelerated
approval
for
drugs
for
serious
conditions
that
fill
an
unmet
medical
need
on
whether
the
drug
has
an
effect
on
a
surrogate
or
anintermediate
clinical
endpoint
(other
than
survival
or
irreversible
morbidity).
FDA
regulations
referred
to
as
"Subpart
H—Accelerated
Approval
of
New
Drugs
forSerious
or
Life-Threatening
Illnesses"
describe
the
potential
use
of
surrogate
endpoints.
A
surrogate
endpoint
used
for
accelerated
approval
is
a
marker—alaboratory
measurement,
radiographic
image,
physical
sign
or
other
measure
that
is
thought
to
predict
clinical
benefit,
but
is
not
itself
a
measure
of
clinical
benefit.Likewise,
an
intermediate
clinical
endpoint
is
a
measure
of
a
therapeutic
effect
that
is
considered
reasonably
likely
to
predict
the
clinical
benefit
of
a
drug,
such
asan
effect
on
irreversible
morbidity
and
mortality.
The
FDA
bases
its
decision
on
whether
to
accept
the
proposed
surrogate
or
intermediate
clinical
endpoint
on
thescientific
support
for
that
endpoint.
Studies
that
demonstrate
a
drug's
effect
on
a
surrogate
or
intermediate
clinical
endpoint
must
be
"adequate
and
well
controlled"as
required
by
the
FD&C
Act.













If
a
drug
is
approved
based
on
a
surrogate
endpoint
under
Subpart
H
the
approval
will
be
subject
to
the
requirement
that
the
applicant
study
the
drugfurther,
to
verify
and
describe
its
clinical
benefit,
where
there
is
uncertainty
as
to
the
relation
of
the
surrogate
endpoint
to
clinical
benefit,
or
of
the
observed
clinicalbenefit
to
the
ultimate
outcome.
Post
marketing
studies
would
usually
be
studies
already
underway.
When
required
to
be
conducted,
such
studies
must
also
beadequate
and
well-controlled.
The
applicant
shall
carry
out
any
such
studies
with
due
diligence.
Developing
clinical
endpoints
that
are
unsatisfactory
to
regulatorscould
delay
clinical
trials
and
the
FDA
approval
process
which
could
materially
adversely
affect
our
business,
financial
condition,
results
of
operations
and
ourprospects.50Table
of
Contents













In
addition,
even
if
we
are
successful
in
obtaining
accelerated
approval
in
the
US
or
under
comparable
pathways
in
other
jurisdictions,
we
may
facerequirements
and
limitations
that
will
adversely
affect
our
commercial
prospects.
For
example,
we
may
not
successfully
complete
required
post-approval
trials,
orsuch
trials
may
not
confirm
the
clinical
benefit
of
our
drug,
and
we
may
be
required
to
withdraw
approval
of
the
drug.For ARIKAYCE to be successfully developed and commercialized, in addition to regulatory approvals required for ARIKAYCE, the eFlow nebulizer systemmust satisfy certain regulatory requirements and its use as a delivery system for ARIKAYCE must be approved for use in any market in which we intend tocommercialize ARIKAYCE.













Although
the
optimized
eFlow
Nebulizer
System
is
CE
marked
by
PARI
in
Europe,
outside
Europe
it
is
labeled
as
investigational
for
use
in
our
clinicaltrials
in
the
US,
Canada,
Australia
and
Japan.
The
optimized
eFlow
Nebulizer
System
is
not
approved
for
commercial
use
in
the
US,
Canada
or
certain
othermarkets
in
which
we
may
choose
to
commercialize
ARIKAYCE
if
approved.
The
eFlow
Nebulizer
System
must
receive
regulatory
approval
before
we
can
marketARIKAYCE.
We
will
continue
to
work
closely
with
PARI
to
coordinate
efforts
regarding
regulatory
requirements,
including
our
proposed
filings
for
a
drug
anddevice.
However,
we
or
PARI
may
not
be
successful
in
meeting
the
regulatory
requirements
for
the
eFlow
Nebulizer
System,
which
could
prevent
or
hinder
ourability
to
bring
ARIKAYCE
to
market
or
market
it
successfully.Even if we obtain marketing approval for ARIKAYCE or any of our other product candidates, we will continue to face extensive regulatory requirements andour products may face future development and regulatory difficulties.













Even
if
marketing
approval
in
the
US
is
obtained,
the
FDA
may
still
impose
significant
restrictions
on
a
product's
indicated
uses
or
marketing,
includingrisk
evaluation
and
mitigation
strategies,
or
may
impose
ongoing
requirements
on
us,
including
with
respect
to:·Labeling,
such
as
black
box
or
other
warnings
or
contraindications;·Post-market
surveillance,
post-market
studies
or
post-market
clinical
trials;·Packaging,
storage,
distribution,
safety
surveillance,
advertising,
promotion,
recordkeeping
and
reporting
of
safety
and
other
post-marketinformation;·Monitoring
and
reporting
adverse
events
and
instances
of
the
failure
of
a
product
to
meet
the
specifications
in
the
NDA;·Changes
to
the
approved
product,
product
labeling
or
manufacturing
process;·Advertising
and
other
promotional
material;
and·Disclosure
of
clinical
trial
results
on
publicly
available
databases.













In
addition,
the
third-party
manufacturers
of
our
products
and
their
facilities
are
and
will
be
subject
to
continual
review
and
periodic
inspections
by
theFDA
and
other
regulatory
authorities.
The
distribution,
sale
and
marketing
of
our
products
are
subject
to
a
number
of
additional
requirements,
including:·State
wholesale
drug
distribution
laws
and
the
distribution
of
our
product
samples
to
physicians
must
comply
with
the
requirements
of
thePrescription
Drug
Marketing
Act;·Sales,
marketing
and
scientific
or
educational
grant
programs
must
comply
with
the
anti-kickback
and
fraud
and
abuse
provisions
of
the
SocialSecurity
Act,
the
transparency
provision
of
the
Patient
Protection
and
Affordable
Care
Act
and
an
associated
reconciliation
bill
that
became
law
inMarch
2010,
which
we
refer
to
collectively
as
the
Health
Care
Reform
Law,
federal
and
state
patient
privacy
laws,
the
False
Claims
Act
and
similarstate
laws;
and51Table
of
Contents·Pricing
and
rebate
programs
must
comply
with
the
Medicaid
rebate
requirements
of
the
Omnibus
Budget
Reconciliation
Act
of
1990
and
theVeteran's
Health
Care
Act
of
1992,
and
if
products
are
made
available
to
authorized
users
of
the
Federal
Supply
Schedule
of
the
General
ServicesAdministration,
additional
laws
and
requirements
apply.













All
of
these
activities
also
may
be
subject
to
federal
and
state
consumer
protection
and
unfair
competition
laws.













We
also
are
subject
to
changes
or
revisions
to
these
laws
and
regulations
that
may
make
gaining
regulatory
approval,
reimbursement
and
pricing
moredifficult
or
at
least
subject
to
different
criteria
and
standards.













If
we
or
any
third
party
involved
in
our
manufacturing
or
commercialization
efforts
fail
to
comply
with
applicable
regulatory
requirements,
a
regulatoryagency
may:·Issue
warning
letters
or
untitled
letters
asserting
that
we
are
in
violation
of
the
law;·Seek
an
injunction
or
impose
civil
or
criminal
penalties
or
monetary
fines;·Suspend
or
withdraw
marketing
approval;·Suspend
any
ongoing
clinical
trials;·Refuse
to
approve
pending
applications
or
supplements
to
applications
submitted
by
us;·Suspend
or
impose
restrictions
on
operations,
including
costly
new
manufacturing
requirements;·Seize
or
detain
products,
refuse
to
permit
the
import
or
export
of
products,
or
require
us
to
initiate
a
product
recall;·Refuse
to
allow
us
to
enter
into
supply
contracts,
including
government
contracts;·Impose
civil
monetary
penalties;
or·Pursue
civil
or
criminal
prosecutions
and
fines
against
our
company
or
responsible
officers.













Any
government
investigation
of
alleged
violations
of
law
could
require
us
to
expend
significant
time
and
resources
in
response,
and
could
generatenegative
publicity.
The
occurrence
of
any
event
or
penalty
described
above
may
inhibit
our
ability
to
commercialize
our
product
candidates
and
generate
revenues.Even if we obtain marketing approval for ARIKAYCE or any of our other product candidates, adverse effects discovered after approval could limit thecommercial profile of any approved product.













If
we
obtain
marketing
approval
for
ARIKAYCE
or
any
other
product
candidate
that
we
develop,
such
products
will
be
used
by
a
larger
number
of
patientsand
for
longer
periods
of
time
than
they
were
used
in
clinical
trials.
For
these
reasons
or
other
reasons,
we
or
others
may
later
discover
that
our
products
haveadverse
effect
profiles
that
limit
their
usefulness
or
require
their
withdrawal.
This
discovery
could
have
a
number
of
potentially
significant
negative
consequences,including:·Regulatory
authorities
may
withdraw
their
approval
of
the
product
and
may
require
recall
of
product
in
distribution;·Regulatory
authorities
may
require
the
addition
of
labeling
statements,
such
as
black
box
or
other
warnings
or
contraindications;·Regulatory
authorities
may
require
us
to
issue
specific
communications
to
healthcare
professionals,
such
as
"Dear
Doctor
Letters;"·Regulatory
authorities
may
impose
additional
restrictions
on
marketing
and
distribution
of
the
products,
or
other
risk
management
measures;52Table
of
Contents·Regulatory
authorities
may
issue
negative
publicity
regarding
the
product,
including
safety
communications;·We
may
be
required
to
change
the
way
the
product
is
administered,
conduct
additional
clinical
studies
or
restrict
the
distribution
of
the
product;·We
could
be
sued
and
held
liable
for
harm
caused
to
subjects;·We
could
be
subject
to
negative
publicity;
and·Our
reputation
may
suffer.













Any
of
these
events
could
prevent
us
from
maintaining
market
acceptance
of
the
affected
product,
could
cause
substantial
reduction
of
sales,
couldsubstantially
increase
the
costs
of
commercializing
our
product
candidates,
and
could
cause
significant
financial
losses.If we are unable to obtain adequate reimbursement from governments or third-party payers for ARIKAYCE or any other products that we may develop or if weare unable to obtain acceptable prices for those products, our prospects for generating revenue and achieving profitability may be materially adversely affected.













Our
prospects
for
generating
revenue
and
achieving
profitability
depend
heavily
upon
the
availability
of
adequate
reimbursement
for
the
use
of
ourapproved
product
candidates
from
governmental
and
other
third-party
payers,
both
in
the
US
and
in
other
markets.
Reimbursement
by
a
third
party
payer
maydepend
upon
a
number
of
factors,
including
the
third
party
payer's
determination
that
use
of
a
product
is:·A
covered
benefit
under
its
health
plan;·Safe,
effective
and
medically
necessary;·Appropriate
for
the
specific
patient;·Cost-effective;
and·Neither
experimental
nor
investigational.













Obtaining
reimbursement
approval
for
a
product
from
each
government
or
other
third-party
payer
is
a
time
consuming
and
costly
process
that
couldrequire
us
to
provide
supporting
scientific,
clinical
and
cost
effectiveness
data
for
the
use
of
our
products
to
each
payer.
We
may
not
be
able
to
provide
datasufficient
to
gain
acceptance
with
respect
to
reimbursement
or
we
might
need
to
conduct
post-marketing
studies
in
order
to
demonstrate
the
cost-effectiveness
ofany
future
products
to
such
payers'
satisfaction.
Such
studies
might
require
us
to
commit
a
significant
amount
of
management
time
and
financial
and
otherresources.
Even
when
a
payer
determines
that
a
product
is
eligible
for
reimbursement,
the
payer
may
impose
coverage
limitations
that
preclude
payment
for
someuses
that
are
approved
by
the
FDA
or
non-US
regulatory
authorities.
In
addition,
there
is
a
risk
that
full
reimbursement
may
not
be
available
for
high
pricedproducts.
Moreover,
eligibility
for
coverage
does
not
imply
that
any
product
will
be
reimbursed
in
all
cases
or
at
a
rate
that
allows
us
to
make
a
profit
or
even
coverour
costs.
Interim
payments
for
new
products,
if
applicable,
also
may
not
be
sufficient
to
cover
our
costs
and
may
not
be
made
permanent.
Subsequent
approvals
ofcompetitive
products
could
result
in
a
detrimental
change
to
the
reimbursement
of
our
products.













There
is
a
significant
focus
in
the
US
healthcare
industry
and
elsewhere
on
cost
containment
and
value.
We
expect
changes
in
the
Medicare
program
andstate
Medicaid
programs,
as
well
as
managed
care
organizations
and
other
third-party
payers
to
continue
to
put
pressure
on
pharmaceutical
product
pricing
in
returnfor
near-term
cost
effectiveness
or
budget
impact.
In
the
United
States,
the
Medicare
Prescription
Drug,
Improvement,
and
Modernization
Act
of
2003,
or
theMMA,
changed
the
way
Medicare
covers
and
pays
for
pharmaceutical
products.
The
legislation
expanded
Medicare
outpatient
prescription
drug
coverage
for
theelderly
through
Part
D
prescription
drug
plans
sponsored
by
private
entities.
The
legislation
authorized
such
plans
to
use
formularies
where
they
can
limit
the53Table
of
Contentsnumber
of
drugs
that
will
be
covered
in
any
therapeutic
class.
The
plans
generally
negotiate
significant
price
concessions
as
a
condition
of
formulary
placement.The
MMA
also
introduced
a
new
reimbursement
methodology
based
on
average
sales
prices
for
physician-administered
drugs,
which
is
generally
believed
to
haveresulted
in
lower
Medicare
reimbursement
for
physician-administered
drugs.
These
cost
reduction
initiatives
and
other
provisions
of
this
legislation
provideadditional
pressure
to
contain
and
reduce
drug
prices
and
could
decrease
the
coverage
and
price
that
we
receive
for
any
approved
products
and
could
seriously
harmour
business.
Although
the
MMA
applies
only
to
drug
benefits
for
Medicare
beneficiaries,
private
payers
often
follow
Medicare
coverage
policy
and
paymentlimitations
when
setting
their
own
reimbursement
rates,
and
any
reimbursement
reduction
resulting
from
the
MMA
may
result
in
a
similar
reduction
in
paymentsfrom
private
payers.













In
March
2010,
the
Patient
Protection
and
Affordable
Care
Act,
or
PPACA,
which
was
intended
to
broaden
access
to
health
insurance,
constrain
andreduce
the
growth
of
healthcare
spending,
enhance
remedies
against
fraud
and
abuse,
add
new
transparency
requirements
for
healthcare
and
health
insuranceindustries,
impose
new
taxes
and
fees
on
the
health
industry
and
impose
additional
health
policy
reforms,
was
passed
into
law.
Effective
in
October
2010,
thePPACA
revised
the
definition
of
"average
manufacturer
price"
for
reporting
purposes,
which
could
increase
the
amount
of
Medicaid
drug
rebates
to
states.
Further,beginning
in
2011,
the
law
imposed
a
significant
annual
fee
on
companies
that
manufacture
or
import
branded
prescription
drug
products.
We
do
not
know
the
fulleffects
that
the
PPACA
will
have
on
our
commercialization
efforts
but
we
believe
it
is
likely
that
the
law
will
continue
the
pressure
on
pharmaceutical
pricing,especially
under
the
Medicare
program,
and
also
may
increase
our
regulatory
burdens
and
operating
costs.
If
one
or
more
of
our
product
candidates
reachescommercialization,
such
changes
may
have
a
significant
impact
on
our
ability
to
set
a
price
we
believe
is
fair
for
our
products
and
may
adversely
affect
our
abilityto
generate
revenue
and
achieve
or
maintain
profitability.
We
expect
further
federal
and
state
proposals
and
health
care
reforms
to
continue
to
be
proposed
bylegislators,
which
could
limit
the
prices
that
can
be
charged
for
the
products
we
develop
and
may
limit
our
commercial
opportunity.













Moreover,
in
markets
outside
the
US,
including
Japan,
Canada
and
the
countries
in
the
EU,
pricing
of
pharmaceutical
products
is
subject
to
governmentalcontrol.
Evaluation
criteria
used
by
many
EU
government
agencies
for
the
purposes
of
pricing
and
reimbursement
typically
focus
on
a
product's
degree
ofinnovation
and
its
ability
to
meet
a
clinical
need
unfulfilled
by
currently
available
therapies.
The
PPACA
created
a
similar
entity,
the
Patient-
Centered
OutcomesResearch
Institute
(PCORI)
designed
to
review
the
effectiveness
of
treatments
and
medications
in
federally-funded
health
care
programs.
The
PCORI
began
its
firstresearch
initiatives
recently,
and
an
adverse
result
may
result
in
a
treatment
or
product
being
removed
from
Medicare
or
Medicare
coverage.
The
decisions
of
suchgovernmental
agencies
could
affect
our
ability
to
sell
our
products
profitably.Government health care reform could increase our costs, and could adversely affect our revenue and results of operations.













Our
industry
is
highly
regulated
and
changes
in
law
may
adversely
impact
our
business,
operations
or
financial
results.
Substantial
new
requirementsaffecting
compliance
were
enacted
as
part
of
the
PPACA,
which
may
require
us
to
modify
our
business
practices
with
health
care
practitioners.
For
example,
drugmanufacturers
are
required
to
report
information
on
payments
or
transfers
of
value
to
US
physicians
and
teaching
hospitals
as
well
as
investment
interests
held
byphysicians
and
their
immediate
family
members.
Failure
to
submit
required
information
may
result
in
civil
monetary
penalties.
The
reported
data
is
posted
insearchable
form
on
a
public
website.
Some
state
laws
also
prohibit
certain
gifts
to
health
care
providers,
require
pharmaceutical
companies
to
report
payments
tohealth
care
professionals,
and/or
require
companies
to
adopt
compliance
programs
or
codes
of
conduct.
In
addition,
other
countries,
including
France,
require
thedisclosure
of
certain
payments
to
health
care
professionals.54Table
of
Contents













The
reforms
imposed
by
the
PPACA
significantly
impact
the
pharmaceutical
industry;
however,
the
full
effects
cannot
be
known
until
these
provisions
arefully
implemented
and
CMS
and
other
federal
and
state
agencies
all
issue
applicable
regulations
or
guidance.
Moreover,
in
the
coming
years,
additional
changescould
be
made
to
governmental
healthcare
programs
that
could
significantly
impact
the
success
of
our
products
or
product
candidates.
We
will
continue
to
evaluatethe
PPACA,
as
amended,
the
implementation
of
regulations
or
guidance
related
to
various
provisions
of
the
PPACA
by
federal
agencies,
as
well
as
trends
andchanges
that
may
be
encouraged
by
the
legislation
and
that
may
potentially
have
an
impact
on
our
business
over
time.
The
cost
of
implementing
more
detailedrecord
keeping
systems
and
otherwise
complying
with
these
requirements
could
substantially
increase
our
costs.We will need approval from the FDA and other regulatory authorities in jurisdictions outside the US for our proposed trade names. Any failure or delayassociated with such approvals may delay the commercialization of our products.













Any
trade
name
we
intend
to
use
for
our
product
candidates
will
require
approval
from
the
FDA
regardless
of
whether
we
have
secured
a
formal
trademarkregistration
from
the
US
Patent
and
Trademark
Office,
or
PTO.
The
FDA
typically
conducts
a
rigorous
review
of
proposed
trade
names,
including
an
evaluation
ofpotential
for
confusion
with
other
trade
names
and
medication
error.
The
FDA
also
may
object
to
a
trade
name
if
it
believes
the
name
is
inappropriatelypromotional.
The
FDA
preliminarily
approved
our
use
of
the
name
ARIKAYCE
as
our
proposed
trade
name
for
our
liposomal
amikacin
for
inhalation
productcandidate.
Even
after
the
FDA
approves
a
trade
name,
the
FDA
may
request
that
we
adopt
an
alternative
name
for
the
product
if
adverse
event
reports
indicate
apotential
for
confusion
with
other
trade
names
and
medication
error.
If
we
are
required
to
adopt
an
alternative
name,
the
commercialization
of
ARIKAYCE
couldbe
delayed
or
interrupted,
which
would
limit
our
ability
to
commercialize
ARIKAYCE
and
generate
revenues.
In
December
2012,
we
learned
that
the
EMA
had
noobjection
to
our
request
to
use
the
name
ARIKAYCE.If we are found in violation of federal or state "fraud and abuse" laws, we may be required to pay a penalty or may be suspended from participation in federalor state health care programs, which may adversely affect our business, financial condition and results of operations.













In
the
US,
we
are
subject
to
various
federal
and
state
health
care
"fraud
and
abuse"
laws,
including
anti-kickback
laws,
false
claims
laws
and
other
lawsintended
to
reduce
fraud
and
abuse
in
federal
and
state
health
care
programs.
The
federal
Anti-Kickback
Statute
makes
it
illegal
for
any
person,
including
aprescription
drug
manufacturer
or
a
party
acting
on
its
behalf,
to
knowingly
and
willfully
solicit,
receive,
offer
or
pay
any
remuneration
that
is
intended
to
inducethe
referral
of
business,
including
the
purchase,
order
or
prescription
of
a
particular
drug
for
which
payment
may
be
made
under
a
federal
health
care
program,
suchas
Medicare
or
Medicaid.
Under
federal
government
regulations,
some
arrangements,
known
as
safe
harbors,
are
deemed
not
to
violate
the
federal
Anti-KickbackStatute.
Although
we
seek
to
structure
our
business
arrangements
in
compliance
with
all
applicable
requirements,
these
laws
are
broadly
written,
and
it
is
oftendifficult
to
determine
precisely
how
the
law
will
be
applied
in
specific
circumstances.
Accordingly,
it
is
possible
that
our
practices
may
be
challenged
under
thefederal
Anti-Kickback
Statute.
False
claims
laws
prohibit
anyone
from
knowingly
and
willfully
presenting
or
causing
to
be
presented
for
payment
to
third-partypayers,
including
government
payers,
claims
for
reimbursed
drugs
or
services
that
are
false
or
fraudulent,
claims
for
items
or
services
that
were
not
provided
asclaimed,
or
claims
for
medically
unnecessary
items
or
services.
Cases
have
been
brought
under
false
claims
laws
alleging
that
off-label
promotion
ofpharmaceutical
products
or
the
provision
of
kickbacks
has
caused
health
care
providers
to
submit
false
claims
to
governmental
health
care
programs
when
theyprescribe
drugs
or
fill
prescriptions
for
off-label
purposes.
Under
the
Health
Insurance
Portability
and
Accountability
Act
of
1996,
we
are
prohibited
fromknowingly
and
willfully
executing
a
scheme
to
defraud
any
health
care
benefit
program,55Table
of
Contentsincluding
private
payers,
or
knowingly
and
willfully
falsifying,
concealing
or
covering
up
a
material
fact
or
making
any
materially
false,
fictitious
or
fraudulentstatement
in
connection
with
the
delivery
of
or
payment
for
health
care
benefits,
items
or
services.
Violations
of
fraud
and
abuse
laws
may
be
punishable
bycriminal
and/or
civil
sanctions,
including
fines
or
exclusion
or
suspension
from
federal
and
state
health
care
programs
such
as
Medicare
and
Medicaid
anddebarment
from
contracting
with
the
US
government.
In
addition,
private
individuals
have
the
ability
to
bring
actions
on
behalf
of
the
government
under
the
federalFalse
Claims
Act
as
well
as
under
the
false
claims
laws
of
several
states.













Many
states
have
adopted
laws
similar
to
the
federal
anti-kickback
statute,
some
of
which
apply
to
the
referral
of
patients
for
health
care
servicesreimbursed
by
any
source,
not
just
governmental
payers.
In
addition,
California
and
a
few
other
states
have
passed
laws
that
require
pharmaceutical
companies
tocomply
with
the
April
2003
Office
of
Inspector
General
Compliance
Program
Guidance
for
Pharmaceutical
Manufacturers
and/or
the
Pharmaceutical
Research
andManufacturers
of
America,
or
PhRMA,
Code
on
Interactions
with
Healthcare
Professionals.
Several
states
also
impose
other
marketing
restrictions
or
requirepharmaceutical
companies
to
make
marketing
or
price
disclosures
to
the
state.
Health
record
privacy
laws
may
limit
access
to
information
identifying
thoseindividuals
who
may
be
prospective
users
or
prohibit
contact
with
any
persons
enrolled
in
Medicare
or
Medicaid.
There
are
ambiguities
as
to
what
is
required
tocomply
with
these
state
requirements,
and
we
could
be
subject
to
penalties
if
a
state
determines
that
we
have
failed
to
comply
with
an
applicable
state
lawrequirement.













Neither
the
government
nor
the
courts
have
provided
definitive
guidance
on
the
application
of
fraud
and
abuse
laws
to
our
business.
Law
enforcementauthorities
are
increasingly
focused
on
enforcing
these
laws,
and
it
is
possible
that
some
of
our
practices
may
be
challenged
under
these
laws.
While
we
believe
wehave
structured
our
business
arrangements
to
comply
with
these
laws,
it
is
possible
that
the
government
could
allege
violations
of,
or
convict
us
of
violating,
theselaws.
If
we
are
found
in
violation
of
one
of
these
laws,
we
could
be
required
to
pay
a
penalty
and
could
be
suspended
or
excluded
from
participation
in
federal
orstate
health
care
programs,
and
our
business,
financial
condition
and
results
of
operations
may
be
adversely
affected.Risks
Related
to
Our
Intellectual
PropertyIf we are unable to protect our intellectual property rights adequately, the value of our product candidates could be diminished.













Our
success
will
depend
in
part
on
our
ability
to
protect
proprietary
technology
and
to
obtain
patent
protection
for
our
products,
prevent
third
parties
frominfringing
on
our
patents
and
refrain
from
infringing
on
the
patents
of
others,
both
domestically
and
internationally.













In
addition,
the
patent
situation
in
the
field
of
biotechnology
and
pharmaceuticals
generally
is
highly
uncertain
and
involves
complex
legal,
technical,scientific
and
factual
questions.
We
intend
to
actively
pursue
patent
protection
for
products
resulting
from
our
research
and
development
activities
that
havesignificant
potential
commercial
value.
We
may
not
be
able
to
obtain
additional
issued
patents
relating
to
our
technology
or
products.













Even
if
issued,
patents
issued
to
us
or
our
licensors
may
be
challenged,
narrowed,
invalidated,
held
to
be
unenforceable
or
circumvented,
which
could
limitour
ability
to
stop
competitors
from
marketing
similar
products
or
reduce
the
term
of
patent
protection
we
may
have
for
our
products.
We
cannot
assure
you
thatany
patents
obtained
will
afford
us
adequate
protection
or
provide
us
with
any
meaningful
competitive
advantages
against
these
competitors.56Table
of
Contents













US
patents
and
patent
applications
may
also
be
subject
to
interference
or
derivation
proceedings,
and
US
patents
may
be
subject
to
re-examinationproceedings,
reissue,
post-grant
review
and/or
inter
partes
review
in
the
USPTO.
Foreign
patents
may
be
subject
to
opposition
or
comparable
proceedings
in
thecorresponding
foreign
patent
office,
which
could
result
in
either
loss
of
the
patent
or
denial
of
the
patent
application
or
loss
or
reduction
in
the
scope
of
one
or
moreof
the
claims
of
the
patent
or
patent
application.
In
addition,
such
interference,
derivation,
re-examination,
post-grant
review,
inter
partes
review
and
oppositionproceedings
may
be
costly.













Changes
in
either
patent
laws
or
in
interpretations
of
patent
laws
in
the
United
States
and
other
countries
may
diminish
the
value
of
our
intellectualproperty
or
narrow
the
scope
of
our
patent
protection.
For
example,
the
America
Invents
Act
was
signed
into
law
in
the
United
States
in
September
2011,
withphased
implementation
through
March
2013,
and
includes
a
number
of
changes
to
established
practices.
These
include
the
transition
to
a
first-inventor-to-filesystem,
establishment
of
new
procedures
for
challenging
patents
and
implementation
of
different
methods
for
invalidating
patents.
We
cannot
predict
the
impactthat
new
laws,
government
rule-making,
implementing
regulations
and
applicable
case
law
may
have
on
the
strength
of
our
patents.
Certain
reforms
may
make
iteasier
for
competitors
to
challenge
our
patents
and
could
have
a
material
adverse
effect
on
our
business
and
prospects.
In
addition,
any
patents
we
procure
mayrequire
cooperation
with
companies
holding
related
patents
and
we
may
have
difficulty
forming
a
successful
relationship
with
such
other
companies.If we are not able to adequately prevent disclosure of trade secrets and other proprietary information, the value of our product candidates could be significantlydiminished.













We
rely
on
trade
secrets
to
protect
our
proprietary
technologies,
especially
where
we
do
not
believe
patent
protection
is
appropriate
or
obtainable.However,
trade
secrets
are
difficult
to
protect.
We
rely
in
part
on
confidentiality
agreements
with
our
employees,
consultants,
advisors,
collaborators,
and
otherthird
parties
and
partners
to
protect
our
trade
secrets
and
other
proprietary
information.
These
agreements
may
not
effectively
prevent
disclosure
of
confidentialinformation
or
may
not
provide
an
adequate
remedy
in
the
event
of
unauthorized
disclosure
of
confidential
information.
In
addition,
third
parties
mayindependently
develop
or
discover
our
trade
secrets
and
proprietary
information.
For
example,
the
FDA,
as
part
of
its
Transparency
Initiative
is
consideringwhether
to
make
additional
information
publicly
available
on
a
routine
basis,
including
information
that
we
may
consider
to
be
trade
secrets
or
other
proprietaryinformation,
and
it
is
not
clear
at
the
present
time
whether
and
how
the
FDA's
disclosure
policies
may
change
in
the
future.
Costly
and
time-consuming
litigationcould
be
necessary
to
enforce
and
determine
the
scope
of
our
proprietary
rights,
and
any
failure
to
obtain
or
maintain
trade
secret
protection
could
adversely
affectour
competitive
business
position.We may not be able to enforce our intellectual property rights throughout the world.













The
laws
of
some
foreign
countries
do
not
protect
intellectual
property
rights
to
the
same
extent
as
the
laws
of
the
United
States.
Many
companies
haveencountered
significant
problems
in
protecting
and
defending
intellectual
property
rights
in
certain
foreign
jurisdictions.
The
legal
systems
of
some
countries,particularly
developing
countries,
do
not
favor
the
enforcement
of
patents
and
other
intellectual
property
protection,
especially
those
relating
to
life
sciences.
Thiscould
make
it
difficult
for
us
to
stop
the
infringement
of
our
patents
or
in-licensed
patents
or
the
misappropriation
of
our
other
intellectual
property
rights.
Forexample,
many
foreign
countries
have
compulsory
licensing
laws
under
which
a
patent
owner
may
be
required
to
grant
licenses
to
third
parties.
In
addition,
manycountries
limit
the
enforceability
of
patents
against
third
parties,
including
government
agencies
or
government
contractors.
In
these
countries,
patents
may
providelimited
or
no
benefit.57Table
of
Contents













Proceedings
to
enforce
our
patent
rights
in
foreign
jurisdictions
could
result
in
substantial
costs
and
divert
our
efforts
and
attention
from
other
aspects
ofour
business.
Our
efforts
to
protect
our
intellectual
property
rights
in
such
countries
may
be
inadequate.
In
addition,
changes
in
the
law
and
legal
decisions
bycourts
in
the
United
States
and
foreign
countries
may
affect
our
ability
to
obtain
adequate
protection
for
our
technology
and
to
enforce
intellectual
property
rights.Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information.













In
order
to
protect
our
proprietary
technology
and
processes,
we
rely
in
part
on
confidentiality
agreements
with
our
corporate
partners,
employees,consultants,
outside
scientific
collaborators
and
sponsored
researchers
and
other
advisors.
These
agreements
may
not
effectively
prevent
disclosure
of
confidentialinformation
and
may
not
provide
an
adequate
remedy
in
the
event
of
unauthorized
disclosure
of
confidential
information.
In
addition,
others
may
independentlydiscover
trade
secrets
and
proprietary
information.
Costly
and
time-
consuming
litigation
could
be
necessary
to
enforce
and
determine
the
scope
of
our
proprietaryrights,
and
failure
to
obtain
or
maintain
trade
secret
protection
could
adversely
affect
our
ability
to
successfully
compete
in
the
industry.We may infringe the intellectual property rights of others, which may prevent or delay our product development efforts, prevent us from commercializing ourproducts or increase the costs of commercializing our products.













Third
parties
may
claim
that
we
have
infringed
upon
or
misappropriated
their
proprietary
rights.
Third
parties
may
attempt
to
obtain
patent
protectionrelating
to
the
production
and
use
of
our
product
candidates.
We
cannot
assure
you
that
any
existing
third-party
patents,
or
patents
that
may
later
issue
to
thirdparties,
would
not
negatively
affect
our
commercialization
of
ARIKAYCE,
INS1009
or
any
other
product.
We
cannot
assure
you
that
such
patents
can
be
avoidedor
invalidated
or
would
be
licensed
to
us
at
commercially
reasonable
rates
or
at
all.
We
cannot
assure
you
that
we
will
be
successful
in
any
intellectual
propertylitigation
that
may
arise
or
that
such
litigation
would
not
have
an
adverse
effect
on
our
business,
financial
condition,
results
of
operation
or
prospects.
In
the
eventof
a
successful
claim
against
us
for
infringement
or
misappropriation
of
a
third
party's
proprietary
rights,
we
may
be
required
to
take
actions
including
but
notlimited
to
the
following:·Pay
damages,
including
up
to
treble
damages,
and
the
other
party's
attorneys'
fees,
which
may
be
substantial;·Cease
the
development,
manufacture,
marketing
and
sale
of
products
or
use
of
processes
that
infringe
the
proprietary
rights
of
others;·Expend
significant
resources
to
redesign
our
products
or
our
processes
so
that
they
do
not
infringe
the
proprietary
rights
of
others,
which
may
not
bepossible;·Redesign
our
products
or
processes
to
avoid
third-party
proprietary
rights,
which
means
we
may
suffer
significant
regulatory
delays
associated
withconducting
additional
clinical
trials
or
other
steps
to
obtain
regulatory
approval;
and/or·Obtain
one
or
more
licenses
arising
out
of
a
settlement
of
litigation
or
otherwise
from
third
parties
which
license(s)
may
not
be
available
to
us
onacceptable
terms
or
at
all.













Furthermore,
litigation
with
any
third
party,
even
if
the
allegations
are
without
merit,
would
likely
be
expensive
and
time-consuming
and
divertmanagement's
attention.













In
particular,
PAH
is
a
competitive
indication
with
established
products,
including
other
formulations
of
treprostinil.
Our
supply
of
the
activepharmaceutical
ingredient
for
INS1009
is
dependent
upon
a
single
supplier.
The
supplier
owns
patents
on
its
manufacturing
process
and
we
have
filed
patentapplications
for
INS1009.
A
competitor
in
the
PAH
indication
may
claim
that
we
or
our58Table
of
Contentssupplier
have
infringed
upon
or
misappropriated
their
proprietary
rights.
We
cannot
be
sure
that
we
or
our
supplier
will
be
successful
in
any
intellectual
propertylitigation
that
may
arise
or
that
such
litigation
would
not
have
an
adverse
effect
on
our
business,
financial
condition,
results
of
operation
or
prospects.Any lawsuits relating to infringement of intellectual property rights necessary to defend ourselves or enforce our rights may be costly and time consuming.













Any
conclusions
we
may
have
reached
regarding
non-infringement,
inapplicability
or
invalidity
of
a
third
party's
intellectual
property
are
based
insignificant
part
on
a
review
of
publicly
available
databases
and
other
information.
There
may
be
information
not
available
to
us
or
otherwise
not
reviewed
by
usthat
could
change
our
conclusions.
Moreover,
the
scope
and
validity
of
patent
claims
depend
significantly
on
facts
and
circumstances,
and
a
court's
conclusions
asto
these
matters
may
differ
from
the
conclusions
that
we
have
reached.













We
may
have
to
undertake
costly
litigation
to
enforce
any
patents
issued
or
licensed
to
us
or
to
confirm
the
scope
and
validity
of
another
party'sproprietary
rights.
We
cannot
assure
you
that
a
court
would
not
invalidate
our
issued
or
licensed
intellectual
property.
An
adverse
outcome
in
litigation
orinterference
or
other
proceeding
in
any
court
or
patent
office
could
materially
adversely
affect
our
ability
to
develop
and
commercialize
our
product
candidates.If we fail to comply with our obligations in our license agreements for our product candidates, we could lose license rights that are important to our business.













We
currently
have
a
licensing
agreement
with
PARI
for
use
of
the
optimized
eFlow
Nebulizer
System
for
delivery
of
ARIKAYCE
in
treating
patients
withNTM
infections.
We
have
rights
to
several
US
and
foreign
issued
patents,
and
patent
applications
involving
improvements
to
the
optimized
eFlow
NebulizerSystem.
Under
the
licensing
agreement,
PARI
is
entitled
to
receive
payments
either
in
cash,
qualified
stock
or
a
combination
of
both,
at
PARI's
discretion,
based
onachievement
of
certain
milestone
events
including
phase
3
trial
initiation,
first
acceptance
of
MAA
submission
(or
equivalent)
in
the
US
of
ARIKAYCE
and
thedevice,
first
receipt
of
marketing
approval
in
the
US
for
ARIKAYCE
and
the
device,
and
first
receipt
of
marketing
approval
in
a
major
EU
country
for
ARIKAYCEand
the
device.
There
can
be
no
assurance
that
the
foregoing
milestone
events
will
be
achieved
and
therefore
there
can
be
no
assurance
that
we
will
make
any
futurepayments.
We
have
certain
obligations
under
this
licensing
agreement
in
relation
to
specified
licensed
indications.
With
respect
to
CF,
we
are
obligated
to
usecommercially
reasonable
efforts
to
develop,
obtain
regulatory
and
reimbursement
approval,
market
and
sell
ARIKAYCE
in
two
or
more
major
European
countries.With
respect
to
NTM,
CF
and
bronchiectasis,
we
have
specific
obligations
to
use
commercially
reasonable
efforts
to
achieve
certain
developmental
and
regulatorymilestones
by
set
deadlines.
Additionally,
for
NTM,
we
are
obligated
to
use
commercially
reasonable
efforts
to
achieve
certain
commercial
milestones
in
the
US,Europe
and
Canada.
The
consequences
of
our
failing
to
use
commercially
reasonable
efforts
to
achieve
certain
commercial
milestones
are
context-specific,
butinclude
ending
PARI's
non-compete
obligation,
making
the
license
non-exclusive
and
terminating
the
license,
in
each
case
with
respect
to
the
applicable
indication.Termination
of
the
licensing
agreement
or
loss
of
exclusive
rights
may
occur
if
we
fail
to
meet
our
obligations,
including
payment
of
royalties
to
PARI,
or
if
we
donot
meet
certain
milestones
contained
in
the
licensing
agreement
such
as
obtaining
marketing
approval
or
achieving
the
first
commercial
sale
of
ARIKAYCE.59Table
of
ContentsRisks
Related
to
Our
IndustryWe operate in a highly competitive and changing environment, and if we are unable to adapt to our environment, we may be unable to compete successfully.













Biotechnology
and
related
pharmaceutical
technology
have
undergone
and
are
likely
to
continue
to
experience
rapid
and
significant
change.
We
expectthat
the
technologies
associated
with
biotechnology
research
and
development
will
continue
to
develop
rapidly.
Our
future
success
will
depend
in
large
part
on
ourability
to
maintain
a
competitive
position
with
respect
to
these
technologies
and
to
obtain
and
maintain
protection
for
our
intellectual
property.
Any
compounds,products
or
processes
that
we
develop
may
become
obsolete
before
we
recover
any
expenses
incurred
in
connection
with
their
development.
Rapid
technologicalchange
could
make
our
products
obsolete,
and
materially
adversely
affect
our
business,
financial
condition,
results
of
operations
or
prospects.













We
expect
that
successful
competition
will
depend,
among
other
things,
on
product
efficacy,
safety,
reliability,
availability,
timing
and
scope
of
regulatoryapproval
and
price.
Specifically,
we
expect
crucial
factors
will
include
the
relative
speed
with
which
we
can
develop
products,
complete
the
clinical
testing
andregulatory
approval
processes
and
supply
commercial
quantities
of
the
product
to
the
market.
We
expect
competition
to
increase
as
technological
advances
aremade
and
commercial
applications
broaden.













In
each
of
our
potential
product
areas,
we
face
substantial
competition
from
pharmaceutical,
biotechnology
and
other
companies,
universities
and
researchinstitutions.
Relative
to
us,
most
of
these
entities
have
substantially
greater
capital
resources,
research
and
development
staffs,
facilities
and
experience
inconducting
clinical
studies
and
obtaining
regulatory
approvals,
as
well
as
in
manufacturing
and
marketing
pharmaceutical
products.
Many
of
our
competitors
mayachieve
product
commercialization
or
patent
protection
earlier
than
us.
Furthermore,
we
believe
that
our
competitors
have
used,
and
may
continue
to
use,
litigationto
gain
a
competitive
advantage.
Finally,
our
competitors
may
use
different
technologies
or
approaches
to
the
development
of
products
similar
to
the
products
weare
seeking
to
develop.
We
cannot
assure
you
that
if
ARIKAYCE
is
approved
for
NTM
that
it
will
be
able
to
compete
successfully
in
the
marketplace.Competitors could develop and obtain FDA or other regulatory approval of products containing amikacin, which could adversely affect our competitiveposition in all ARIKAYCE-related indications.













In
the
event
there
are
other
amikacin
products
approved
by
the
FDA
or
other
regulatory
agencies
for
any
use,
physicians
may
elect
to
prescribe
thoseproducts
rather
than
ARIKAYCE
to
treat
the
indications
for
which
ARIKAYCE
may
receive
approval,
which
is
commonly
referred
to
as
off-label
use.
Althoughregulations
prohibit
a
drug
company
from
promoting
off-label
use
of
its
product,
the
FDA
and
other
regulatory
agencies
do
not
regulate
the
practice
of
medicineand
as
a
result
cannot
direct
physicians
as
to
what
product
to
prescribe
to
their
patients.
As
a
result,
we
would
have
limited
ability
to
prevent
any
off-label
use
of
acompetitor's
product
to
treat
diseases
for
which
we
have
received
FDA
or
other
regulatory
agency
approval,
even
if
such
use
violates
our
patents
or
orphan
drugexclusivity
for
the
use
of
amikacin
to
treat
such
diseases.
This
could
negatively
affect
our
results
of
operations
or
business.60Table
of
ContentsCompetitors could develop and obtain FDA or other regulatory approval of antibiotic products that are more effective, safer, tolerable or more convenient orless expensive than our products in development or existing products, which could adversely affect our competitive position in all ARIKAYCE-relatedindications.













There
are
potential
competitive
products,
both
approved
and
in
development,
which
include
oral,
systemic,
or
inhaled
antibiotic
products
to
treat
chronicrespiratory
infections.
If
any
of
our
competitors
develops
a
product
that
is
more
effective,
safer,
tolerable
or,
convenient
or
less
expensive
than
ARIKAYCE,
itwould
adversely
affect
our
ability
to
generate
revenues.
We
also
may
face
lower
priced
generic
competitors
if
third-party
payers
encourage
use
of
generic
or
lower-priced
versions
of
our
product
or
if
competing
products
are
imported
into
the
US
or
other
countries
where
we
may
sell
ARIKAYCE.If another party obtains orphan drug exclusivity for a product that is essentially the same as a product we are developing for a particular indication, we may beprecluded or delayed from commercializing the product in that indication.













Under
the
Orphan
Drug
Act,
the
FDA
may
grant
orphan
drug
designation
to
drugs
intended
to
treat
a
rare
disease
or
condition.
See
"Business—Government
Regulation—Orphan
Drugs—United
States."
The
company
that
obtains
the
first
marketing
approval
from
the
FDA
for
a
designated
orphan
drug
for
arare
disease
receives
marketing
exclusivity
for
use
of
that
drug
for
the
designated
condition
for
a
period
of
seven
years.
Similar
laws
exist
in
EU
with
a
term
of
tenyears.
See
"Business—Government
Regulation—Orphan
Drugs—Europe."
If
a
competitor
obtains
approval
of
the
same
drug
for
the
same
indication
or
diseasebefore
us,
we
would
be
prohibited
from
obtaining
approval
for
our
product
for
seven
or
more
years,
unless
our
product
can
be
shown
to
be
clinically
superior.
Inaddition,
more
than
one
drug
may
be
approved
by
the
FDA
for
the
same
orphan
indication
or
disease
as
long
as
the
drugs
are
different
drugs.
As
a
result,
even
ifone
of
our
products
is
approved
and
receives
orphan
drug
exclusivity,
the
FDA
may
approve
different
drugs
for
use
in
treating
the
same
indication
or
diseasecovered
by
our
product,
which
could
adversely
affect
our
competitive
position.If we obtain orphan exclusivity for a product, the FDA may approve another product during our orphan exclusivity period for the same indication undercertain circumstances.













The
Orphan
Drug
Act
was
created
to
encourage
companies
to
develop
therapies
for
rare
diseases
by
providing
incentives
for
drug
development
andcommercialization.
One
of
the
incentives
provided
by
the
act
is
seven
years
of
market
exclusivity
in
the
United
States
for
the
first
product
in
a
class
licensed
for
thetreatment
of
a
rare
disease.
Orphan
exclusivity
will
not,
however,
bar
approval
of
another
product
under
certain
circumstances.
One
such
circumstance
is
if
aproduct
with
the
same
active
ingredient
is
proven
safe
and
effective
for
a
different
indication.
Another
circumstance
is
if
a
subsequent
product
with
the
same
activeingredient
for
the
same
indication
is
shown
to
be
clinically
superior
to
the
approved
product
on
the
basis
of
greater
efficacy
or
safety,
or
providing
a
majorcontribution
to
patient
care.
FDA
may
also
approve
another
product
with
the
same
active
ingredient
and
the
same
indication
if
the
company
with
orphan
drugexclusivity
is
not
able
to
meet
market
demand.
Further,
FDA
may
approve
more
than
one
product
for
the
same
orphan
indication
or
disease
as
long
as
the
productscontain
different
active
ingredients.
As
a
result,
even
if
one
of
our
product
candidates
receives
orphan
exclusivity,
the
FDA
can
still
approve
other
drugs
that
have
adifferent
active
ingredient
for
use
in
treating
the
same
indication
or
disease.
All
of
the
above
circumstances
could
create
a
more
competitive
market
for
us.61Table
of
ContentsOur research, development and manufacturing activities used in the production of ARIKAYCE involve the use of hazardous materials, which could expose usto damages and materially adversely affect our results of operations and financial condition.













We
are
subject
to
numerous
environmental,
health
and
safety
laws
and
regulations,
including
those
governing
laboratory
procedures
and
the
handling,
use,storage,
treatment
and
disposal
of
hazardous
materials
and
wastes.
Our
research
and
development
program
and
manufacturing
activities
for
ARIKAYCE
involvethe
controlled
use
of
hazardous
materials
and
chemicals.
We
generally
contract
with
third
parties
for
the
disposal
of
these
materials
and
wastes.
Although
webelieve
we
are
in
compliance
with
all
pertinent
regulations,
we
cannot
eliminate
the
risk
of
environmental
contamination,
damage
to
facilities
or
injury
to
personnelfrom
the
accidental
or
improper
use
or
control
of
these
materials.
In
addition
to
any
liability
we
could
have
for
any
misuse
by
us
of
hazardous
materials
andchemicals,
we
could
also
potentially
be
liable
for
activities
of
our
contract
manufacturers
or
other
third
parties.
Any
such
liability,
or
even
claims
of
such
liability,could
materially
adversely
affect
our
results
of
operations
and
financial
condition.
We
also
could
incur
significant
costs
associated
with
civil
or
criminal
fines
andpenalties.













In
addition,
we
may
incur
substantial
costs
in
order
to
comply
with
current
or
future
environmental,
health
and
safety
laws
and
regulations.
These
currentor
future
laws
and
regulations
may
impair
our
research,
development
or
production
efforts.
Failure
to
comply
with
these
laws
and
regulations
also
may
result
insubstantial
fines,
penalties
or
other
sanctions.We may be subject to product liability claims, and we have only limited product liability insurance.













The
manufacture
and
sale
of
human
therapeutic
products
involve
an
inherent
risk
of
product
liability
claims
and
associated
adverse
publicity.
We
currentlyhave
only
limited
product
liability
insurance
for
our
products.
We
do
not
know
if
we
will
be
able
to
maintain
existing
or
obtain
additional
product
liabilityinsurance
on
acceptable
terms
or
with
adequate
coverage
against
potential
liabilities.
This
type
of
insurance
is
expensive
and
may
not
be
available
on
acceptableterms.
If
we
are
unable
to
obtain
or
maintain
sufficient
insurance
coverage
on
reasonable
terms
or
to
otherwise
protect
against
potential
product
liability
claims,
wemay
be
unable
to
commercialize
our
products.
A
successful
product
liability
claim
brought
against
us
in
excess
of
our
insurance
coverage,
if
any,
may
require
us
topay
substantial
amounts
and
may
materially
adversely
affect
our
business,
financial
condition,
results
of
operations
or
prospects.Risks
Related
to
Employee
Matters
and
Managing
GrowthWe are dependent upon retaining and attracting key personnel, the loss of whose services could materially adversely affect our business, financial condition,results of operations and prospects.













We
depend
highly
on
the
principal
members
of
our
scientific
and
management
personnel,
the
loss
of
whose
services
might
significantly
delay
or
preventthe
achievement
of
our
research,
development
or
business
objectives.
Our
success
depends,
in
large
part,
on
our
ability
to
attract
and
retain
qualified
management,scientific
and
medical
personnel,
and
on
our
ability
to
develop
and
maintain
important
relationships
with
commercial
partners,
leading
research
institutions
and
keydistributors.
We
will
need
to
hire
additional
personnel
in
anticipation
of
seeking
regulatory
approval
for
and
commercial
launch
of
ARIKAYCE.













Competition
for
skilled
personnel
in
our
industry
and
market
is
very
intense
because
of
the
numerous
pharmaceutical
and
biotechnology
companies
thatseek
similar
personnel.
These
companies
may
have
greater
financial
and
other
resources,
offer
a
greater
opportunity
for
career
advancement
and62Table
of
Contentshave
a
longer
history
in
the
industry
than
we
do.
We
also
experience
competition
for
the
hiring
of
our
scientific
and
clinical
personnel
from
universities,
researchinstitutions,
and
other
third
parties.
We
cannot
assure
that
we
will
attract
and
retain
such
persons
or
maintain
such
relationships.













Our
inability
to
retain
and
attract
qualified
employees
would
harm
our
business.We expect to expand our development, manufacturing, regulatory and future sales and marketing capabilities, and as a result, we may encounter difficulties inmanaging our growth, which could disrupt our operations.













We
expect
that
our
potential
expansion
into
areas
and
activities
requiring
additional
expertise,
such
as
further
clinical
trials,
governmental
approvals,manufacturing,
sales,
marketing
and
distribution
will
place
additional
requirements
on
our
management,
operational
and
financial
resources.
Future
growth
wouldimpose
significant
added
responsibilities
on
members
of
management,
including
the
need
to
identify,
recruit,
maintain,
motivate
and
integrate
additionalemployees.
Also,
our
management
may
need
to
divert
a
disproportionate
amount
of
its
attention
away
from
our
day-to-day
activities
and
devote
a
substantialamount
of
time
to
managing
these
growth
activities.
We
may
not
be
able
to
effectively
manage
the
expansion
of
our
operations,
which
may
result
in
weaknesses
inour
infrastructure,
give
rise
to
operational
mistakes,
loss
of
business
opportunities,
loss
of
employees
and
reduced
productivity
among
remaining
employees.













The
anticipated
commercialization
of
ARIKAYCE
and
the
development
of
additional
product
candidates
will
require
significant
expenditures
by
us
andplace
a
strain
on
our
resources.
If
our
management
is
unable
to
effectively
manage
our
activities
in
anticipation
of
commercialization,
as
well
as
our
developmentefforts,
we
may
incur
higher
than
expected
expenditures
or
other
expenses
and
our
business
may
otherwise
be
adversely
affected.Risks
Related
to
our
Common
Stock
and
Listing
on
the
Nasdaq
Global
Select
MarketThe market price of our stock has been and may continue to be highly volatile.













Our
common
stock
is
listed
on
the
Nasdaq
Global
Select
Market
under
the
ticker
symbol
INSM.
The
market
price
of
our
stock
has
been
and
may
continueto
be
highly
volatile,
and
could
be
subject
to
wide
fluctuations
in
price
in
response
to
various
factors,
many
of
which
are
beyond
our
control.
These
factors
mayinclude:·Our
listing
status
on
the
Nasdaq
Global
Select
Market;·Results
of
our
clinical
studies
and
preclinical
studies,
or
those
of
our
corporate
partners
or
our
competitors;·Delays
in
timing
of
pre-clinical,
clinical
development
and
regulatory
filings
and
delays
regarding
our
inability
to
obtain
potential
approvals;·Strategic
business
decisions;·Developments
in
our
relationships
with
corporate
partners;·Developments
affecting
our
corporate
partners;·Negative
regulatory
action
or
regulatory
approval
with
respect
to
our
announcement
or
our
competitors'
announcements
of
new
products;·Government
regulation,
reimbursement
changes
and
governmental
investigation
or
audits
related
to
us
or
to
our
products;·Developments
related
to
our
patents
or
other
proprietary
rights
or
those
of
our
competitors;·Other
competitive
developments;·Reports
issued
by
and
changes
in
the
position
of
securities
analysts
with
respect
to
our
stock
or
changes
in
stock
ownership
by
investors;63Table
of
Contents·Operating
results
below
the
expectations
of
securities
analysts
and
investors;
and·The
need
or
perceived
need
to
raise
additional
capital.













In
addition,
the
stock
market
has
from
time
to
time
experienced
extreme
price
and
volume
fluctuations,
which
have
particularly
affected
the
market
pricesfor
emerging
biotechnology
and
pharmaceutical
companies
like
us,
and
which
have
often
been
unrelated
to
their
operating
performance.
These
broad
marketfluctuations
may
adversely
affect
the
market
price
of
our
common
stock.













Historically,
when
the
market
price
of
a
stock
has
been
volatile,
shareholders
are
more
likely
to
institute
securities
and
derivative
class
action
litigationagainst
the
issuer
of
such
stock.
If
any
of
our
shareholders
were
to
institute
a
lawsuit
against
us,
we
could
incur
substantial
costs
defending
the
lawsuit.
Any
lawsuitcould
divert
the
time
and
attention
of
our
management.Future sales of substantial amounts of common stock in the public market, or the possibility of such sales occurring, could also adversely affect prevailingmarket prices for our common stock or our future ability to raise capital through an offering of equity securities.













The
sale
of
a
significant
number
of
shares
of
our
common
stock
in
the
public
market
could
harm
the
market
price
of
our
common
stock.
The
market
pricefor
our
common
stock
could
also
decline,
perhaps
significantly,
as
a
result
of
issuances
of
a
large
number
of
shares
of
our
common
stock
in
the
public
market
oreven
the
perception
that
such
issuances
could
occur.If we fail to meet the continued listing requirements of the Nasdaq Global Select Market, our common stock may be delisted from the Nasdaq Global SelectMarket, which may cause the value of an investment in our common stock to decrease.













If
a
delisting
from
the
Nasdaq
Global
Select
Market
were
to
occur,
our
common
stock
may
be
eligible,
upon
the
application
of
a
market
maker,
to
trade
onthe
OTC
Bulletin
Board
or
in
the
"pink
sheets."
These
alternative
markets
are
generally
considered
to
be
less
efficient
than,
and
not
as
broad
as,
the
Nasdaq
GlobalSelect
Market.
Therefore,
delisting
of
our
common
stock
from
the
Nasdaq
Global
Select
Market
could
adversely
affect
the
trading
price
of
our
common
stock
andcould
limit
the
liquidity
of
our
common
stock
and
therefore
could
cause
the
value
of
an
investment
in
our
common
stock
to
decrease.The ownership interest of existing shareholders will be diluted by the exercise of options issued by us or to the extent that we issue additional common stock inconnection with any offerings of securities, strategic transactions, or otherwise.













As
of
December
31,
2015,
5.3
million
shares
of
our
common
stock
are
potentially
issuable
under
outstanding
restricted
stock
units
and
stock
options
to
ouremployees,
officers,
directors
and
consultants.













The
conversion
or
exercise
of
some
or
all
of
our
restricted
stock
units
and
options
will
dilute
the
ownership
interests
of
existing
shareholders.
Any
sales
inthe
public
market
of
the
common
stock
issuable
upon
such
conversion
or
exercise
could
adversely
affect
prevailing
market
prices
of
our
common
stock.













Additionally,
our
Articles
of
Incorporation
currently
authorize
us
to
issue
up
to
500
million
common
shares.
As
of
December
31,
2015
we
had
61.8
millionshares
of
common
stock
outstanding.
To
the
extent
that
we
issue
additional
common
stock
in
connection
with
any
offerings
of
securities,64Table
of
Contentsstrategic
transactions,
or
otherwise,
the
ownership
interest
of
existing
shareholders
will
be
further
diluted.Historically we have not paid dividends on our common stock, and we have no plans to pay dividends in the foreseeable future.













We
have
never
declared
or
paid
any
cash
dividend
on
our
common
stock
and
do
not
currently
intend
to
do
so
for
the
foreseeable
future.
We
currentlyanticipate
that
we
will
retain
any
future
earnings
for
the
development,
operation
and
expansion
of
our
business
and
do
not
anticipate
declaring
or
paying
any
cashdividends
for
the
foreseeable
future.
Therefore,
the
success
of
an
investment
in
shares
of
our
common
stock
will
depend
upon
any
future
appreciation
in
their
value.There
is
no
guarantee
that
shares
of
our
common
stock
will
appreciate
in
value
or
even
maintain
the
price
at
which
our
stockholders
have
purchased
their
shares.Certain provisions of Virginia law and our articles of incorporation and amended and restated bylaws could hamper a third party's acquisition of, ordiscourage a third party from attempting to acquire control of us.













Certain
provisions
of
Virginia
law
and
our
articles
of
incorporation
and
amended
and
restated
bylaws
could
hamper
a
third
party's
acquisition
of,
ordiscourage
a
third
party
from
attempting
to
acquire
control
of
us
or
limit
the
price
that
investors
might
be
willing
to
pay
for
shares
of
our
common
stock.
Theseprovisions
include:·A
provision
allowing
us
to
issue
preferred
stock
with
rights
senior
to
those
of
the
common
stock
without
any
further
vote
or
action
by
the
holders
ofthe
common
stock.
The
issuance
of
preferred
stock
could
decrease
the
amount
of
earnings
and
assets
available
for
distribution
to
the
holders
ofcommon
stock
or
could
adversely
affect
the
rights
and
powers,
including
voting
rights,
of
the
holders
of
the
common
stock.
In
certaincircumstances,
such
issuance
could
have
the
effect
of
decreasing
the
market
price
of
the
common
stock;·The
existence
of
a
staggered
board
of
directors
in
which
there
are
three
classes
of
directors
serving
staggered
three-year
terms,
thus
expanding
thetime
required
to
change
the
composition
of
a
majority
of
directors
and
perhaps
discouraging
someone
from
making
an
acquisition
proposal
for
us;·Our
amended
and
restated
bylaws'
requirement
that
shareholders
provide
advance
notice
when
nominating
director
candidates
to
serve
on
our
Boardof
Directors;·The
inability
of
shareholders
to
convene
a
shareholders'
meeting
without
the
chairman
of
the
board,
the
president
or
a
majority
of
the
board
ofdirectors
first
calling
the
meeting;
and·The
application
of
Virginia
law
prohibiting
us
from
entering
into
a
business
combination
with
the
beneficial
owner
of
10%
or
more
of
ouroutstanding
voting
stock
for
a
period
of
three
years
after
the
10%
or
greater
owner
first
reached
that
level
of
stock
ownership,
unless
we
meet
certaincriteria.













In
addition,
we
previously
had
a
"poison
pill"
shareholder
rights
plan,
which
expired
in
May
2011.
Under
Virginia
law,
our
Board
of
Directors
mayimplement
a
new
shareholders
rights
plan
without
shareholder
approval.
Our
Board
of
Directors
intends
to
regularly
consider
this
matter,
even
in
the
absence
ofspecific
circumstances
or
takeover
proposals,
to
facilitate
its
future
ability
to
quickly
and
effectively
protect
shareholder
value.65Table
of
ContentsOther
Risks
Related
to
our
BusinessCorporate governance and public disclosure requirements add uncertainty to our compliance policies and increase our costs of compliance.













Changing
laws,
regulations
and
standards
relating
to
accounting,
corporate
governance
and
public
disclosure,
including
the
Sarbanes-Oxley
Act
of
2002,other
SEC
regulations,
and
the
Nasdaq
Global
Select
Market
rules,
are
creating
uncertainty
for
companies
like
ours.
These
laws,
regulations
and
standards
may
lackspecificity
and
are
subject
to
varying
interpretations.
Their
application
in
practice
may
evolve
over
time,
as
new
guidance
is
provided
by
regulatory
and
governingbodies.
This
could
result
in
continuing
uncertainty
regarding
compliance
matters
and
higher
costs
of
compliance
as
a
result
of
ongoing
revisions
to
such
corporategovernance
standards.













In
particular,
our
efforts
to
comply
with
Section
404
of
the
Sarbanes-Oxley
Act
of
2002,
to
furnish
a
report
by
management
on,
among
other
things,
theeffectiveness
and
the
related
regulations
regarding
our
required
assessment
of
our
internal
controls
over
financial
reporting
and
our
external
auditors'
audit
of
ourinternal
control
over
financial
reporting
requires
the
commitment
of
significant
financial
and
managerial
resources.
We
consistently
assess
the
adequacy
of
ourinternal
controls
over
financial
reporting,
remediate
any
control
deficiencies
that
may
be
identified,
and
validate
through
testing
that
our
controls
are
functioning
asdocumented.
While
we
do
not
anticipate
any
material
weaknesses,
the
inability
of
management
and
our
independent
auditor
to
provide
us
with
an
unqualified
reportas
to
the
effectiveness
of
our
internal
controls
over
financial
reporting
for
future
year
ends
could
result
in
adverse
consequences
to
us,
including,
but
not
limited
to,a
loss
of
investor
confidence
in
the
reliability
of
our
financial
statements,
which
could
cause
the
market
price
of
our
stock
to
decline.
For
example,
in
connectionwith
our
review
of
internal
control
over
financial
reporting
as
of
December
31,
2012,
we
determined
that
we
did
not
adequately
implement
certain
controls
over
theadministration,
accounting
and
oversight
of
our
2000
Stock
Incentive
Plan,
and
we
concluded
that
a
material
weakness
in
our
internal
control
over
financialreporting
existed
as
of
December
31,
2012.
The
existence
of
this
or
one
or
more
other
material
weaknesses
or
significant
deficiencies
in
our
internal
control
overfinancial
reporting
could
result
in
errors
in
our
financial
statements,
and
substantial
costs
and
resources
may
be
required
to
rectify
any
internal
control
deficiencies.Any
material
weaknesses
may
materially
adversely
affect
our
ability
to
report
accurately
our
financial
condition
and
results
of
operations
in
a
timely
and
reliablemanner.
In
addition,
although
we
continually
review
and
evaluate
internal
control
systems
to
allow
management
to
report
on
the
sufficiency
of
our
internalcontrols,
we
cannot
assure
you
that
we
will
not
discover
weaknesses
in
our
internal
control
over
financial
reporting.
Any
such
weakness
or
failure
to
remediate
amaterial
weakness
could
materially
adversely
affect
our
ability
to
comply
with
applicable
financial
reporting
requirements
and
the
requirements
of
our
variousagreements.













We
are
committed
to
maintaining
high
standards
of
corporate
governance
and
public
disclosure,
and
our
efforts
to
comply
with
evolving
laws,
regulationsand
standards
in
this
regard
have
resulted
in,
and
are
likely
to
continue
to
result
in,
increased
general
and
administrative
expenses
and
a
diversion
of
managementtime
and
attention
from
revenue-generating
activities
to
compliance
activities.
In
addition,
the
laws,
regulations
and
standards
regarding
corporate
governance
maymake
it
more
difficult
for
us
to
obtain
director
and
officer
liability
insurance.
Further,
our
board
members,
chief
executive
officer
and
chief
financial
officer
couldface
an
increased
risk
of
personal
liability
in
connection
with
their
performance
of
duties.
As
a
result,
we
may
face
difficulties
attracting
and
retaining
qualifiedboard
members
and
executive
officers,
which
could
harm
our
business.
If
we
fail
to
comply
with
new
or
changed
laws,
regulations
or
standards
of
corporategovernance,
our
business
and
reputation
may
be
harmed.66Table
of
ContentsOur internal computer systems, or those of our CROs or other contractors or consultants, may fail or suffer security breaches, which could result in a materialdisruption of our business operations, including our drug development programs.













Despite
the
implementation
of
security
measures,
our
internal
computer
systems
and
those
of
our
CROs
and
other
contractors
and
consultants
arevulnerable
to
damage
from
computer
viruses,
unauthorized
access,
natural
disasters,
terrorism,
war
and
telecommunication
and
electrical
failures.
If
such
an
eventwere
to
occur
and
cause
interruptions
in
our
operations,
it
could
result
in
a
material
adverse
effect
on
our
business
operations,
including
a
material
disruption
of
ourdrug
development
programs.
Unauthorized
disclosure
of
sensitive
or
confidential
client
or
employee
data,
whether
through
breach
of
computer
systems,
systemsfailure,
employee
negligence,
fraud
or
misappropriation,
or
otherwise,
could
damage
our
reputation.
Similarly,
unauthorized
access
to
or
through
our
informationsystems
and
networks,
whether
by
our
employees
or
third
parties,
could
result
in
negative
publicity,
legal
liability
and
damage
to
our
reputation.
For
example,
theloss
of
clinical
trial
data
from
completed
or
ongoing
clinical
trials
for
any
of
our
drug
candidates
could
result
in
delays
in
our
regulatory
approval
efforts
andsignificantly
increase
our
costs
to
recover
or
reproduce
the
data.
To
the
extent
that
any
disruption
or
security
breach
was
to
result
in
a
loss
of
or
damage
to
our
dataor
applications,
or
inappropriate
disclosure
of
confidential
or
proprietary
information,
we
could
incur
liability
and
the
further
development
of
our
drug
candidatescould
be
delayed.













Although
we
have
general
liability
insurance
coverage,
including
coverage
for
errors
or
omissions,
there
can
be
no
assurance
that
our
coverage
will
coverall
claims,
continue
to
be
available
on
reasonable
terms
or
will
be
sufficient
in
amount
to
cover
one
or
more
large
claims,
or
that
the
insurer
will
not
disclaimcoverage
as
to
any
future
claim.
The
successful
assertion
of
one
or
more
large
claims
against
us
that
exceed
or
are
not
covered
by
our
insurance
coverage
orchanges
in
our
insurance
policies,
including
premium
increases
or
the
imposition
of
large
deductible
or
co-insurance
requirements,
could
have
a
material
adverseeffect
on
our
business,
results
of
operations
and
financial
condition.We are subject to the U.S. Foreign Corrupt Practices Act and other anti-corruption laws or trade control laws, as well as other laws governing our operations.If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures, and legal expenses, which could adverselyaffect our business, financial condition and results of operations.













Our
operations
are
subject
to
anti-corruption
laws,
including
the
U.S.
Foreign
Corrupt
Practices
Act
(the
"FCPA")
and
other
anti-corruption
laws
that
applyin
countries
where
we
do
business.
The
FCPA,
UK
Bribery
Act
and
these
other
laws
generally
prohibit
us,
our
employees
and
our
intermediaries
making
prohibitedpayments
to
government
officials
or
other
persons
to
obtain
or
retain
business
or
gain
some
other
business
advantage.
We
operate
in
jurisdictions
that
pose
a
risk
ofpotential
FCPA
violations,
and
we
participate
in
joint
ventures
and
relationships
with
third
parties
whose
actions
could
potentially
subject
us
to
liability
under
theFCPA
or
local
anti-corruption
laws.
In
addition,
we
cannot
predict
the
nature,
scope
or
effect
of
future
regulatory
requirements
to
which
our
internationaloperations
might
be
subject
or
the
manner
in
which
existing
laws
might
be
administered
or
interpreted.













We
are
also
subject
to
other
laws
and
regulations
governing
our
international
operations,
including
regulations
administered
by
the
U.S.
Department
ofCommerce's
Bureau
of
Industry
and
Security,
the
U.S.
Department
of
Treasury's
Office
of
Foreign
Asset
Control,
and
various
non-U.S.
government
entities,including
applicable
export
control
regulations,
economic
sanctions
on
countries
and
persons,
customs
requirements,
currency
exchange
regulations
and
transferpricing
regulations
(collectively,
the
"Trade
Control
laws").67Table
of
Contents













There
is
no
assurance
that
we
will
be
completely
effective
in
ensuring
our
compliance
with
all
applicable
anticorruption
laws,
including
the
FCPA
or
otherlegal
requirements,
including
Trade
Control
laws.
If
we
are
not
in
compliance
with
the
FCPA
and
other
anti-corruption
laws
or
Trade
Control
laws,
we
may
besubject
to
criminal
and
civil
penalties,
disgorgement
and
other
sanctions
and
remedial
measures,
and
legal
expenses,
which
could
have
an
adverse
impact
on
ourbusiness,
financial
condition,
results
of
operations
and
liquidity.
Likewise,
any
investigation
of
any
potential
violations
of
the
FCPA
other
anti-
corruption
laws
orTrade
Control
laws
by
U.S.
or
foreign
authorities
could
also
have
an
adverse
impact
on
our
reputation,
business,
financial
condition
and
results
of
operations.ITEM
1B.



UNRESOLVED
STAFF
COMMENTS














None.ITEM
2.



PROPERTIES














We
currently
lease
56,617
square
feet
of
laboratory
and
office
space
in
Bridgewater,
New
Jersey.
The
initial
term
of
the
lease
will
expire
in
November2019,
and
we
have
the
option
to
extend
the
lease
for
two
additional
five
year
periods
beyond
the
initial
term.
In
2016,
we
leased
office
space
in
Ireland
and
theNetherlands.













We
also
lease
approximately
19,000
square
feet
of
office
space
in
Richmond,
Virginia.
The
lease
expires
in
October
2016.
Our
corporate
headquarterswere
formerly
located
in
Richmond
but
we
closed
this
facility.
In
November
2014,
we
entered
into
an
agreement
to
sublet
this
space
for
the
remainder
of
the
leaseterm.ITEM
3.



LEGAL
PROCEEDINGS














From
time
to
time,
we
are
a
party
to
various
lawsuits,
claims
and
other
legal
proceedings
that
arise
in
the
ordinary
course
of
our
business.
While
theoutcomes
of
these
matters
are
uncertain,
management
does
not
expect
that
the
ultimate
costs
to
resolve
these
matters
will
have
a
material
adverse
effect
on
ourconsolidated
financial
position,
results
of
operations
or
cash
flows.
See
Note
11
to
the
Notes
to
the
Consolidated
Financial
Statements
included
in
this
report
for
adescription
of
our
current
legal
proceedings.ITEM
4.



MINE
SAFETY
DISCLOSURES














Not
applicable.68Table
of
ContentsPART
II
ITEM
5.



MARKET
FOR
REGISTRANT'S
COMMON
EQUITY,
RELATED
STOCKHOLDER
MATTERS
AND
ISSUER
PURCHASES
OF
EQUITYSECURITIES














Our
trading
symbol
is
"INSM."
Our
common
stock
currently
trades
on
the
Nasdaq
Global
Select
Market.
Until
February
3,
2014,
our
common
stock
tradedon
the
Nasdaq
Capital
Market.
The
following
table
lists
the
high
and
low
sale
prices
per
share
for
our
common
stock
on
a
quarterly
basis
for
both
2015
and
2014.















On
February
1,
2016,
the
last
reported
sale
price
for
our
common
stock
on
the
Nasdaq
Global
Select
Market
was
$13.54
per
share.
As
of
February
1,
2016,there
were
141
holders
of
record
of
our
common
stock.













On
December
15,
2014,
we
entered
into
a
Stock
Purchase
Agreement
with
Hercules
pursuant
to
which
we
issued
70,771
shares
of
our
common
stock,
parvalue
$0.01
per
share
(which
represented
less
than
1%
of
the
outstanding
Common
Stock
as
of
the
date
thereof),
at
a
price
of
$14.13
per
share
(the
closing
price
onDecember
12,
2014),
for
an
aggregate
purchase
price
of
approximately
$1.0
million.
The
securities
sold
in
the
private
placement
were
not
registered
under
theSecurities
Act
of
1933,
as
amended
(the
"Act")
and
may
not
be
offered
or
sold
in
the
United
States
in
the
absence
of
an
effective
registration
statement
orexemption
from
the
registration
requirements
under
the
Act.
We
believe
that
the
issuance
of
the
securities
in
this
transaction
was
exempt
from
registration
underSection
4(2)
of
the
Act.













We
have
never
declared
or
paid
cash
dividends
on
our
common
stock.
We
anticipate
that
we
will
retain
all
earnings,
if
any,
to
support
operations
and
tofinance
the
growth
and
development
of
our
business
for
the
foreseeable
future.
Under
the
terms
of
our
loan
agreement
with
Hercules,
we
are
prohibited
fromdeclaring
or
paying
any
cash
dividend
or
making
a
cash
distribution
on
any
class
of
our
stock
or
on
other
equity
interest,
except
that
our
subsidiaries
(defined
in
theLoan
Agreement
as
a
corporate
entity
in
which
we
control
more
than
50%
of
the
voting
securities)
may
pay
dividends
or
make
distributions
to
their
equity
owners.Any
future
determination
as
to
the
payment
of
dividends
will
be
dependent
upon
these
and
any
contractual
or
other
restrictions
to
which
we
may
be
subject
and,
tothe
extent
permissible
thereunder,
will
be
at
the
sole
discretion
of
our
board
of
directors
and
will
depend
on
our
financial
condition,
results
of
operations,
capitalrequirements
and
other
factors
our
board
of
directors
deems
relevant.69Fiscal
Year
2015
High
Low
Fourth
Quarter
$21.14
$15.31
Third
Quarter
$28.66
$17.07
Second
Quarter
$25.39
$19.87
First
Quarter
$22.59
$13.93
Fiscal
Year
2014
High
Low
Fourth
Quarter
$16.42
$12.57
Third
Quarter
$20.11
$11.65
Second
Quarter
$19.98
$12.10
First
Quarter
$21.54
$15.91
Table
of
ContentsCOMPARISON
OF
5
YEAR
CUMULATIVE
TOTAL
RETURN*
Among
Insmed
Incorporated,
the
NASDAQ
Composite
Index,
the
S&P
500
Index,
the
NASDAQ
Pharmaceutical
Index,
and
the
NASDAQ
Biotechnology
Index
*$100
invested
on
12/31/10
in
stock
or
index,
including
reinvestment
of
dividends.
Fiscal
year
ending
December
31.
Copyright©
2016
S&P,
a
division
of
McGraw
Hill
Financial.
All
rights
reserved.ITEM
6.



SELECTED
FINANCIAL
DATA














The
following
selected
financial
data
reflects
our
consolidated
statements
of
operations
and
consolidated
balance
sheets
as
of
and
for
the
years
endedDecember
31,
2015,
2014,
2013,
2012
and
2011.
The
data
below
should
be
read
in
conjunction
with,
and
is
qualified
by
reference
to,
"Management's
Discussionand
Analysis
of
Financial
Condition
and
Results
of
Operations"
and
our70Table
of
Contentsconsolidated
financial
statements
and
notes
thereto
contained
elsewhere
in
this
Annual
Report
on
Form
10-K.71


Year
Ended
December
31,



2015
2014
2013
2012
2011
(1)



(in
thousands,
except
per
share
data)

Historical
Statement
of
OperationsData:















Revenues
$-


$-


$11,500
$-


$4,417
Operating
expenses:















Research
and
development

74,277

56,292

44,279

29,781

28,623
General
and
administrative

43,216

31,073

22,236

12,657

11,523
Impairment
loss

-



-



-



-



25,990
Total
operating
expenses

117,493

87,365

66,515

42,438

66,136
Operating
loss

(117,493)
(87,365)
(55,015)
(42,438)
(61,719)Investment
income

261

58

166

1,822

2,064
Interest
expense

(2,889)
(2,415)
(2,412)
(763)
(10)Other,
net

(33)
141

(33)
5

1
Loss
before
income
taxes

(120,154)
(89,581)
(57,294)
(41,374)
(59,664)Income
tax
benefit

(1,971)
(10,422)
(1,221)
-



-


Net
loss

(118,183)
(79,159)
(56,073)
(41,374)
(59,664)Accretion
of
beneficial
conversionfeature

-



-



-



-



(9,175)Net
loss
attributable
to
commonstockholders
$(118,183)$(79,159)$(56,073)$(41,374)$(68,839)Basic
and
diluted
net
loss
attributable
tocommon
stockholders
per
share
$(2.02)$(1.84)$(1.60)$(1.56)$(2.95)Weighted
average
basic
and
dilutedcommon
shares
outstanding

58,633

43,095

34,980

26,545

23,348
Historical
Balance
Sheet
Data:















Cash,
cash
equivalents
and
short-terminvestments
$282,876
$159,226
$113,894
$90,782
$76,272
Certificate
of
deposit
$-


$-


$-


$2,153
$2,085
Total
assets
$356,556
$230,864
$176,498
$153,561
$139,833
Current
portion
of
long-term
debt
$3,113
$-


$3,283
$3,007
$-


Long-term
debt,
net
of
current
portion
$22,027
$24,856
$16,338
$16,221
$-


Stockholders'
equity
$311,698
$186,237
$143,324
$120,882
$134,267
(1)During
the
first
quarter
of
2011,
our
board
of
directors
authorized
a
one-for-ten
reverse
stock
split.
All
share
and
per
share
amountsincluded
in
the
above
selected
financial
data
give
retroactive
effect
to
the
one-for-ten
stock
split
for
all
periods
presented.Table
of
ContentsITEM
7.







MANAGEMENT'S
DISCUSSION
AND
ANALYSIS
OF
FINANCIAL
CONDITION
AND
RESULTS
OF
OPERATIONS















The following discussion also should be read in conjunction with our consolidated financial statements and the notes thereto.OVERVIEW













Insmed
is
a
global
biopharmaceutical
company
focused
on
the
unmet
needs
of
patients
with
rare
diseases.
Our
lead
product
candidate
is
ARIKAYCE™,
orliposomal
amikacin
for
inhalation
(LAI),
which
is
in
late-stage
development
for
patients
with
nontuberculous
mycobacteria
(NTM)
lung
disease,
a
rare
and
oftenchronic
infection
that
is
capable
of
causing
irreversible
lung
damage
and
can
be
fatal.
Our
earlier
stage
pipeline
includes
INS1009,
a
nebulized
prodrug
formulationof
treprostinil,
a
vasodilator
of
pulmonary
arterial
vascular
beds.
We
believe
INS1009
may
offer
a
differentiated
product
profile
with
therapeutic
potential
inpulmonary
arterial
hypertension
(PAH),
idiopathic
pulmonary
fibrosis
(IPF),
sarcoidosis,
and
severe
refractory
asthma.













We
are
conducting
a
global
phase
3
clinical
study
of
ARIKAYCE
(the
212
or
CONVERT
study)
in
adult
patients
with
NTM
lung
disease
caused
byMycobacterium avium complex
(MAC),
the
predominant
infective
species
in
NTM
lung
disease
in
the
United
States
(US),
Europe,
and
Japan.
The
EuropeanMedicines
Agency
(EMA)
Committee
for
Medicinal
Products
for
Human
Use
(CHMP)
is
reviewing
our
marketing
authorization
application
(MAA)
seekingapproval
of
ARIKAYCE
for
the
treatment
of
MAC
lung
disease
in
adult
patients
who
have
persistent
positive
sputum
cultures
despite
the
use
of
medicallyappropriate
first-line
therapy.
We
are
also
advancing
a
phase
1
study
of
INS1009
in
healthy
subjects.
In
addition
to
INS1009,
our
earlier-stage
pipeline
includes
anumber
of
preclinical
compounds
that
we
are
evaluating
in
multiple
rare
diseases
of
unmet
medical
need,
including
methicillin-resistant
staph
aureus
(MRSA),NTM,
PAH,
and
sarcoidosis.
We
are
also
evaluating
additional
formulations
and
delivery
options
for
treprostinil,
including
delivery
via
a
metered
dose
inhaler.
Tocomplement
our
internal
research,
we
actively
seek
in-licensing
and
acquisition
opportunities
for
a
broad
range
of
rare
diseases.













We
were
incorporated
in
the
Commonwealth
of
Virginia
on
November
29,
1999.
On
December
1,
2010,
we
completed
a
business
combination
withTransave,
Inc.,
a
privately
held,
New
Jersey-based
pharmaceutical
company
focused
on
the
development
of
differentiated
and
innovative
inhaled
pharmaceuticalsfor
the
site-specific
treatment
of
serious
lung
infections.
Our
continuing
operations
are
based
on
the
technology
and
products
historically
developed
by
Transave.During
2015
we
formed
subsidiaries
in
a
number
of
countries
in
Europe
in
preparation
for
the
commercialization
of
ARIKAYCE,
upon
approval
in
the
EuropeanUnion,
and
to
support
our
global
tax
structure.
The
Company
has
operations
in
the
US,
Ireland,
Germany,
France,
the
United
Kingdom
(UK)
and
the
Netherlands.Our
principal
executive
offices
are
located
at
10
Finderne
Avenue,
Building
10,
Bridgewater,
New
Jersey
08807
and
our
phone
number
is
(908)
977-9900.
OurCompany
website
is
www.insmed.com.
The
information
presented
in
our
website
is
not
a
part
of
this
Annual
Report
and
the
reference
to
our
website
is
intended
tobe
an
inactive
textual
reference
only.KEY
COMPONENTS
OF
OUR
STATEMENT
OF
OPERATIONSRevenues













In
2015,
the
French
National
Agency
for
Medicines
and
Health
Products
Safety
(ANSM)
granted
LAI
a
Temporary
Authorization
for
Use
(AutorisationTemporaire
d'Utilisation
or
ATU).
Pursuant
to
this
program,
we
shipped
ARIKAYCE
to
pharmacies
after
receiving
requests
from
physicians
for
patients
in
France.For
the
year
ended
December
31,
2015,
the
revenue
recorded
from72Table
of
Contentsthe
ATU
program
was
immaterial
to
disclose
and
is
included
in
"other
income."
We
are
initiating
expanded
access
programs
(EAPs)
in
other
select
territories
inEurope,
some
of
which
may
be
fully
reimbursed.
EAPs
are
intended
to
make
products
available
before
they
are
commercially
available
in
accordance
with
localregulations.
We
did
not
recognize
any
revenue
in
2014.
In
2013,
our
other
revenue
solely
consisted
of
an
$11.5
million
payment
received
from
Premacure
HoldingsAB
and
Premacure
AB
of
Sweden
(now
Shire
plc)
in
exchange
for
the
Company's
right
to
receive
royalties
under
its
license
agreement
with
Premacure.
Werecorded
this
as
other
revenue
after
all
four
revenue
recognition
criteria
were
present
and
we
had
no
continuing
performance
obligations
related
to
the
paymentreceived.
Besides
the
ATU
revenue
in
France,
we
currently
do
not
recognize
any
revenue
from
product
sales
or
other
sources.Research
and
Development
Expenses













Research
and
development
expenses
consist
primarily
of
salaries,
benefits
and
other
related
costs,
including
stock-based
compensation,
for
personnelserving
in
our
research
and
development
functions.
Expenses
also
include
other
internal
operating
expenses,
the
cost
of
manufacturing
our
drug
candidate
forclinical
study,
the
cost
of
conducting
clinical
studies,
and
the
cost
of
conducting
preclinical
and
research
activities.
Our
expenses
related
to
manufacturing
our
drugcandidate
for
clinical
study
are
primarily
related
to
activities
at
contract
manufacturing
organizations
that
manufacture
ARIKAYCE
for
our
use.
Our
expensesrelated
to
clinical
trials
are
primarily
related
to
activities
at
contract
research
organizations
that
conduct
and
manage
clinical
trials
on
our
behalf.
These
contracts
setforth
the
scope
of
work
to
be
completed
at
a
fixed
fee
or
amount
per
patient
enrolled.
Payments
under
these
contracts
primarily
depend
on
performance
criteria
suchas
the
successful
enrollment
of
patients
or
the
completion
of
clinical
trial
milestones
as
well
as
time-based
fees.
Expenses
are
accrued
based
on
contracted
amountsapplied
to
the
level
of
patient
enrollment
and
to
activity
according
to
the
clinical
trial
protocol.
Nonrefundable
advance
payments
for
goods
or
services
that
will
beused
or
rendered
for
future
research
and
development
activities
are
deferred
and
capitalized.
Such
amounts
are
then
recognized
as
an
expense
as
the
related
goodsare
delivered
or
the
services
are
performed,
or
when
the
goods
or
services
are
no
longer
expected
to
be
provided.













Since
2011,
we
have
focused
our
development
activities
principally
on
our
proprietary,
advanced
liposomal
technology
designed
specifically
for
inhalationlung
delivery.
In
2013,
we
completed
a
phase
3
trial
in
Europe
and
Canada
in
which
we
evaluated
ARIKAYCE
in
CF
patients
with
Pseudomonas lung
infections.In
2014,
we
completed
a
phase
2
clinical
trial
in
the
US
and
Canada
of
ARIKAYCE
in
patients
with
NTM
lung
infections.
In
2015,
we
commenced
a
globalphase
3
trial
for
ARIKAYCE
for
patients
with
NTM
lung
infections.
Since
our
business
combination
with
Transave,
the
majority
of
our
research
and
developmentexpenses
have
been
for
our
ARIKAYCE
program.
Our
development
efforts
in
2015
principally
relate
to
the
development
of
ARIKAYCE
in
the
NTM
indicationand,
to
a
lesser
extent,
for
INS1009.













Our
clinical
trials
are
subject
to
numerous
risks
and
uncertainties
that
are
outside
of
our
control,
including
the
possibility
that
necessary
regulatoryapprovals
may
not
be
obtained.
In
addition,
the
duration
and
the
cost
of
clinical
trials
may
vary
significantly
from
trial
to
trial
over
the
life
of
a
project
as
a
result
ofdifferences
in
the
study
protocol
for
each
trial
as
well
as
differences
arising
during
the
clinical
trial,
including,
among
others,
the
following:·The
number
of
patients
that
ultimately
participate
in
the
trial;·The
duration
of
patient
follow-up
that
is
determined
to
be
appropriate
in
view
of
results;·The
number
of
clinical
sites
included
in
the
trials;·The
length
of
time
required
to
enroll
suitable
patient
subjects;
and·The
efficacy
and
safety
profile
of
the
product
candidate.73Table
of
Contents













Our
clinical
trials
may
be
subject
to
delays,
particularly
if
we
are
unable
to
produce
clinical
trial
material
in
sufficient
quantities
and
of
sufficient
quality
tomeet
the
schedule
for
our
clinical
trials.
Moreover,
all
of
our
product
candidates
must
overcome
significant
regulatory,
technological,
manufacturing
and
marketingchallenges
before
they
can
be
successfully
commercialized.
Any
significant
delays
that
occur
or
additional
expenses
that
we
incur
may
have
a
material
adverseeffect
on
our
financial
position
and
may
require
us
to
raise
additional
capital
sooner
or
in
larger
amounts
than
is
presently
expected.
In
addition,
as
a
result
of
therisks
and
uncertainties
related
to
the
development
and
approval
of
our
product
candidates
and
the
additional
uncertainties
related
to
our
ability
to
market
and
sellthese
products
once
approved
for
commercial
sale,
we
are
unable
to
provide
a
meaningful
prediction
regarding
when,
if
at
all,
we
will
generate
positive
cash
inflowfrom
these
projects.General
and
Administrative
Expenses













General
and
administrative
expenses
consist
primarily
of
salaries,
benefits
and
other
related
costs,
including
stock-based
compensation,
for
personnelserving
in
our
executive,
finance
and
accounting,
legal,
pre-commercial,
corporate
development,
information
technology,
program
management
and
humanresource
functions.
General
and
administrative
expenses
also
include
professional
fees
for
legal,
including
patent-related
expenses,
consulting,
insurance,
board
ofdirector
fees,
tax
and
accounting
services.
We
expect
that
our
general
and
administrative
expenses
will
increase
in
order
to
support
increased
levels
of
developmentactivities
and
commencement
of
commercialization
activities
for
our
product
candidates,
specifically
in
Europe.Debt
Issuance
Costs













Debt
issuance
costs
are
amortized
to
interest
expense
using
the
effective
interest
rate
method
over
the
term
of
the
debt.
Our
balance
sheet
reflects
debt
netof
debt
issuance
costs
paid
to
the
lender
and
reflects
debt
issuance
costs
paid
to
other
third
parties
as
other
assets.
Amortization
of
debt
issuance
costs
are
includedas
a
component
of
interest
expense.Investment
Income
and
Interest
Expense













Investment
income
consists
of
interest
and
dividend
income
earned
on
our
cash,
cash
equivalents
and
short-term
investments,
along
with
realized
gains(losses)
on
the
sale
of
investments.
Interest
expense
consists
primarily
of
interest
costs
and
amortization
of
debt
issuance
costs
related
to
our
debt
obligations.RESULTS
OF
OPERATIONSComparison
of
the
Years
Ended
December
31,
2015
and
2014Net
Loss













Net
loss
for
the
year
ended
December
31,
2015
was
$118.2
million,
or
($2.02)
per
common
share—basic
and
diluted,
compared
with
a
net
loss
of$79.2
million,
or
($1.84)
per
common
share—basic
and
diluted,
for
the
year
ended
December
31,
2014.
The
$39.0
million
increase
in
our
net
loss
for
the
yearended
December
31,
2015
as
compared
to
the
same
period
in
2014
was
primarily
due
to:·Increased
research
and
development
expenses
of
$18.0
million
primarily
resulting
from
an
increase
in
clinical
trial
expenses
related
to
theARIKAYCE
phase
3
CONVERT
study
and
expenses
related
to
research
activities
for
INS1009,
and
an
increase
in
manufacturing
expenses
due
toproduction
related
to
our
clinical
and
research
programs;
and74Table
of
Contents·Increased
general
and
administrative
expenses
of
$12.1
million
resulting
from
an
increase
in
compensation
expenses,
including
an
increase
innoncash
stock-based
compensation
related
to
the
vesting
of
certain
performance-based
stock
options,
an
increase
in
pre-commercial
expenses
inEurope
and
fees
and
expenses
related
to
the
build-out
of
our
European
operations
and
global
tax
infrastructure.













In
addition,
there
was
an
$8.4
million
decrease
in
the
benefit
from
income
taxes
resulting
from
the
sale
of
a
portion
of
our
New
Jersey
State
net
operatinglosses
(NOLs)
under
the
State
of
New
Jersey's
Technology
Business
Tax
Certificate
Transfer
Program
for
cash
of
$2.0
million
and
$10.4
million
in
2015
and
2014,respectively,
net
of
commissions.
The
$10.4
million
benefit
in
2014
represents
two
years
of
sales
of
NOLs,
one
in
January
2014
and
one
in
December
2014.
As
ofDecember
31,
2015,
we
have
reached
the
lifetime
maximum
allowable
amount
of
NJ
NOL
sales.Research
and
Development
Expenses













Research
and
development
expenses
for
the
years
ended
December
31,
2015
and
2014
were
comprised
of
the
following:













Research
and
development
expenses
increased
to
$74.3
million
during
the
year
ended
December
31,
2015
from
$56.3
million
in
the
same
period
in
2014.The
$18.0
million
increase
was
primarily
due
to
a
$13.0
million
increase
in
external
clinical
development
and
research
expenses
related
to
the
ARIKAYCE
phase
3CONVERT
study
and
expenses
related
to
research
activities
for
INS1009.
In
addition,
manufacturing
expenses
increased
$5.0
million
primarily
due
to
an
increasein
production
related
to
our
clinical
and
research
programs.
We
expect
research
and
development
expenses
to
increase
in
2016
as
compared
to
2015
due
primarilyto
the
clinical
trial
activity
related
to
the
ARIKAYCE
phase
3
CONVERT
study.75


Years
Ended
December
31,
Increase
(decrease)



2015
2014
$
%
External
Expenses












Clinical
development
&
research
$25,274
$12,327
$12,947

105.0%Manufacturing

21,279

16,320

4,959

30.4%Regulatory
and
quality
assurance

3,051

4,888

(1,837)
(37.6)%Subtotal—external
expenses
$49,604
$33,535
$16,069

47.9%Internal
Expenses












Compensation
and
relatedexpenses
$18,666
$17,543
$1,123

6.4%Other
internal
operating
expenses

6,007

5,214

793

15.2%Subtotal—internal
expenses
$24,673
$22,757
$1,916

8.4%Total
$74,277
$56,292
$17,985

31.9%Table
of
ContentsGeneral
and
Administrative
Expenses













General
and
administrative
expenses
for
the
year
ended
December
31,
2015
and
2014
were
comprised
of
the
following:













General
and
administrative
expenses
increased
to
$43.2
million
during
the
year
ended
December
31,
2015
from
$31.1
million
in
the
same
period
in
2014.The
$12.1
million
increase
was
primarily
due
to
higher
compensation
related
expenses
due
to
an
increase
in
headcount,
an
increase
in
pre-commercial
expenses
inEurope,
a
$1.5
million
increase
in
noncash
stock-based
compensation
expense
related
to
certain
performance
based
stock
options
as
the
recognition
criteria
was
metupon
the
MAA
for
ARIKAYCE
being
accepted
for
filing
by
the
EMA
in
February
2015,
and
fees
and
expenses
related
to
the
build-out
of
our
European
operationsand
global
tax
infrastructure.
We
expect
general
and
administrative
expenses
to
increase
in
2016
as
compared
to
2015
due,
in
part,
to
an
increase
in
expendituresrelated
to
pre-commercial
activities
in
certain
European
markets.Interest
Expense













Interest
expense
was
$2.9
million
during
the
year
ended
December
31,
2015
as
compared
to
$2.4
million
in
the
same
period
in
2014.
The
$0.5
millionincrease
in
interest
expense
in
2015
relates
to
an
increase
in
our
borrowings
from
Hercules.
In
December
2014,
we
entered
into
a
third
amendment
to
the
Loan
andSecurity
Agreement
with
Hercules
which
increased
our
borrowings
by
an
additional
$5.0
million
to
an
aggregate
total
of
$25.0
million.Benefit
from
Income
Taxes













The
benefit
for
income
taxes
was
$2.0
million
and
$10.4
million
for
the
years
ended
December
31,
2015
and
2014,
respectively.
The
benefit
for
incometaxes
recorded
for
the
year
ended
December
31,
2014
primarily
reflects
the
reversal
of
a
valuation
allowance
previously
recorded
against
our
New
Jersey
State
netoperating
losses
(NOLs)
that
resulted
from
the
sale
of
a
portion
of
our
New
Jersey
State
NOLs
under
the
State
of
New
Jersey's
Technology
Business
TaxCertificate
Transfer
Program
(the
"Program")
for
cash
of
$10.4
million,
net
of
commissions.
The
Program
allows
qualified
technology
and
biotechnologybusinesses
in
New
Jersey
to
sell
unused
amounts
of
NOLs
and
defined
research
and
development
tax
credits
for
cash.
The
reason
for
the
decrease
in
tax
benefit
in2015
was
due
to
timing,
as
we
recognized
the
full
tax
benefits
of
the
2014
sales
of
NOLs
in
calendar
year
2014,
while
the
2013
sales
of
NOLs
were
recognized
inthe
first
quarter
of
2014.
In
addition
in
2015,
we
reached
the
lifetime
maximum
cap
of
NOLs
that
can
be
sold
to
the
State
of
New
Jersey.
Therefore
we
will
nolonger
receive
cash
proceeds
from
this
program
in
the
future.76


Year
Ended
December
31,
Increase
(decrease)



2015
2014
$
%
General
&
administrative
$30,614
$23,032
$7,582

32.9%Pre-commercial
expenses

12,602

8,041

4,561

56.7%Total
general
&
administrativeexpenses
$43,216
$31,073
$12,143

39.1%Table
of
ContentsComparison
of
the
Years
Ended
December
31,
2014
and
2013Net
Loss













Net
loss
for
the
year
ended
December
31,
2014
was
$79.2
million,
or
($1.84)
per
common
share—basic
and
diluted,
compared
with
a
net
loss
of$56.1
million,
or
($1.60)
per
common
share—basic
and
diluted
for
the
year
ended
December
31,
2013.
The
$23.1
million
increase
in
our
net
loss
in
the
year
endedDecember
31,
2014
as
compared
to
2013
was
primarily
due
to
$11.5
million
in
Other
revenue
received
in
2013
related
to
a
one-time
payment
for
the
sale
of
theCompany's
right
to
receive
future
royalties
under
its
license
agreement
with
Premacure
(now
Shire
plc).
An
increase
in
2014
expenses
also
contributed
to
theincrease
in
net
loss
for
the
period
and
included
a:·$12.0
million
increase
in
our
research
and
development
expenses
that
primarily
resulted
from
an
increase
in
manufacturing
expenses
as
a
result
ofthe
build-out
of
a
production
area
at
Therapure's
facility,
the
completion
of
certain
process
improvement
projects
at
our
third
party
manufacturingpartner
and
the
manufacture
of
ARIKAYCE
for
clinical
supply.
In
addition,
there
was
an
increase
in
internal
expenses,
specifically
compensationand
personnel
related
expenses,
including
non-cash
stock
compensation
expense.
These
increases
were
offset,
in
part,
by
a
decrease
in
externalclinical
expenses
which
was
primarily
related
to
the
fact
that
our
phase
3
pivotal
study
in
CF
patients
was
completed
in
2013;
and·$8.9
million
increase
in
our
general
and
administrative
expenses
that
resulted
from
an
increase
in
pre-commercial
expenses
and
an
increase
incertain
administrative
expenses
including
an
increase
in
headcount
and
related
compensation
expenses
and
an
increase
in
expenses
related
to
ournew
headquarters
and
laboratory
facilities
in
Bridgewater,
New
Jersey.













Partially
offsetting
these
expenses
was
a
$9.2
million
increase
in
the
benefit
from
income
taxes
resulting
from
the
sale
of
a
portion
of
our
New
Jersey
StateNOLs
under
the
State
of
New
Jersey's
Technology
Business
Tax
Certificate
Transfer
Program
for
cash
of
$10.4
million
and
$1.2
million
in
2014
and
2013,respectively,
net
of
commissions.
The
$10.4
million
benefit
from
income
taxes
represents
two
years
of
sales
of
NOLs,
one
in
January
2014
and
one
in
December2014.Other
Revenue













Other
revenue
in
2013
solely
consisted
of
a
one-time
$11.5
million
payment
we
received
from
Premacure
(now
Shire
plc)
in
exchange
for
the
Company'sright
to
receive
future
royalties
under
its
license
agreement
with
Premacure
(see
Note
10
to
the
consolidated
financial
statements
on
Form
10-K
for
the
year
endedDecember
31,
2014
for
additional
information
regarding
our
agreement
with
Premacure).
We
recorded
this
as
Other
revenue
in
2013,
since
all
revenue
recognitioncriteria
were
met
and
we
had
no
continuing
performance
obligations
related
to
the
payment
received.77Table
of
ContentsResearch
and
Development
Expenses













Research
and
development
expenses
for
the
year
ended
December
31,
2014
and
2013
comprised
the
following:













Research
and
development
expenses
increased
to
$56.3
million
during
the
year
ended
December
31,
2014
from
$44.3
million
in
the
same
period
in
2013.The
$12.0
million
increase
was
primarily
due
to
an
$8.4
million
increase
in
manufacturing
expenses
as
a
result
of
the
build-out
of
a
production
area
at
Therapure'sfacility,
the
completion
of
certain
process
improvement
projects
at
our
third
party
manufacturing
partner,
and
the
manufacture
of
ARIKAYCE
for
clinical
supply.In
addition,
there
was
an
$8.1
million
increase
in
internal
expenses,
specifically
a
$7.2
million
increase
in
compensation
and
related
expenses,
which
included
anincrease
of
$2.2
million
in
stock
compensation
expenses
and
additional
expenses
related
to
the
transition
and
consulting
agreement
with
our
former
chief
medicalofficer.
These
increases
were
offset,
in
part,
by
a
decrease
of
$7.4
million
in
external
clinical
expenses
which
was
primarily
related
to
the
fact
that
our
phase
3pivotal
study
in
CF
patients
was
completed
in
2013.General
and
Administrative
Expenses













General
and
administrative
expenses
for
the
years
ended
December
31,
2014
and
2013
comprised
the
following:78


Years
Ended
December
31,
Increase
(Decrease)



2014
2013
$
%
External
Expenses












Clinical
development
&
research
$12,327
$19,728
$(7,401)
-37.5%Manufacturing

16,320

7,906

8,414

106.4%Regulatory
and
quality
assurance

4,888

2,010

2,878

143.2%Subtotal—external
expenses
$33,535
$29,644
$3,891

13.1%Internal
Expenses












Compensation
and
relatedexpenses
$17,543
$10,327
$7,216

69.9%Other
internal
operating
expenses

5,214

4,308

906

21.0%Subtotal—internal
expenses
$22,757
$14,635
$8,122

55.5%Total
$56,292
$44,279
$12,013

27.1%


December
31,
Increase
(Decrease)



2014
2013
$
%
General
&
administrative
$23,032
$18,627
$4,405

23.6%Pre-commercial
expenses

8,041

3,609

4,432

122.8%Total
general
&
administrativeexpenses
$31,073
$22,236
$8,837

39.7%Table
of
Contents













General
and
administrative
expenses
increased
to
$31.1
million
during
the
year
ended
December
31,
2014
from
$22.2
million
in
the
same
period
in
2013.The
$8.9
million
increase
was
primarily
due
to
a
$4.5
million
increase
in
pre-commercial
expenses
and
an
increase
in
certain
administrative
expenses
including
a$1.8
million
increase
in
headcount
and
related
compensation
expense
and
a
$1.5
million
increase
in
expenses
related
to
our
new
headquarters
and
laboratoryfacilities
in
Bridgewater,
New
Jersey.Investment
Income
and
Interest
Expense













Investment
income
was
$0.1
million
and
$0.2
million
during
the
years
ended
December
31,
2014
and
2013,
respectively.
Interest
expense
was
$2.4
millionduring
the
years
ended
December
31,
2014
and
2013
and
represents
interest
expense
under
our
Loan
Agreement.Benefit
from
Income
Taxes













The
benefit
for
income
taxes
was
$10.4
million
and
$1.2
million
for
the
years
ended
December
31,
2014
and
2013,
respectively.
The
benefit
for
incometaxes
recorded
for
the
years
ended
December
31,
2014
and
2013
solely
reflect
the
reversal
of
a
valuation
allowance
previously
recorded
against
our
New
JerseyState
NOLs
that
resulted
from
the
sale
of
a
portion
of
our
New
Jersey
State
NOLs
under
the
State
of
New
Jersey's
Technology
Business
Tax
Certificate
TransferProgram
(the
"Program")
for
cash
of
$10.4
million
and
$1.2
million,
respectively
and
net
of
commissions.
The
Program
allows
qualified
technology
andbiotechnology
businesses
in
New
Jersey
to
sell
unused
amounts
of
NOLs
and
defined
research
and
development
tax
credits
for
cash.
The
$10.4
million
benefit
fromincome
taxes
represents
two
years
of
sales
of
NOLs,
one
in
January
2014
and
one
in
December
2014.LIQUIDITY
AND
CAPITAL
RESOURCESOverview













There
is
considerable
time
and
cost
associated
with
developing
a
potential
drug
or
pharmaceutical
product
to
the
point
of
regulatory
approval
andcommercialization.
Historically,
we
have
funded
our
operations
through
public
and
private
placements
of
equity
securities,
through
debt
financing,
from
theproceeds
from
the
sale
of
our
follow-on
biologics
platform
to
Merck
in
2009
and
from
revenues
related
to
sales
of
product
and
our
IPLEX
expanded
accessprogram,
which
was
discontinued
in
2011.
We
expect
to
continue
to
incur
losses
because
we
plan
to
fund
research
and
development
activities
and
commerciallaunch
activities,
and
we
do
not
expect
material
revenues
for
at
least
the
next
two
years.













We
believe
we
currently
have
sufficient
funds
to
meet
our
financial
needs
for
at
least
the
next
twelve
months.
We
may
opportunistically
raise
additionalcapital
and
may
do
so
through
equity
or
debt
financing(s),
strategic
transactions
or
otherwise.
Such
additional
funding
will
be
necessary
to
continue
to
develop
ourpotential
product
candidates,
to
pursue
the
license
or
purchase
of
other
technologies,
to
commercialize
our
product
candidates
or
to
purchase
other
products.
Wecannot
assure
you
that
adequate
capital
will
be
available
on
favorable
terms,
or
at
all,
when
needed.
If
we
are
unable
to
obtain
sufficient
additional
funds
whenrequired,
we
may
be
forced
to
delay,
restrict
or
eliminate
all
or
a
portion
of
our
research
or
development
programs,
dispose
of
assets
or
technology
or
ceaseoperations.
During
the
remainder
of
2016,
we
plan
to
continue
to
fund
further
clinical
development
of
ARIKAYCE
and
INS1009,
support
efforts
to
obtainregulatory
approvals
and
prepare
for
commercialization
in
certain
European
countries.
Our
cash
requirements
in
2016
will
be
impacted
by
a
number
of
factors,79Table
of
Contentsthe
most
significant
of
which,
being
the
enrollment
rates
and
other
expenses
related
to
the
CONVERT
study.













On
April
6,
2015,
we
completed
an
underwritten
public
offering
of
11.5
million
shares
of
our
common
stock,
which
included
the
underwriter's
exercise
infull
of
its
over-allotment
option
of
1.5
million
shares,
at
a
price
to
the
public
of
$20.65
per
share.
Our
net
proceeds
from
the
sale
of
the
shares,
after
deducting
theunderwriter's
discount
and
offering
expenses
of
$14.5
million,
were
$222.9
million.Cash
Flows













As
of
December
31,
2015,
we
had
total
cash
and
cash
equivalents
of
$282.9
million,
as
compared
with
$159.2
million
as
of
December
31,
2014.
The$123.7
million
increase
was
due
primarily
to
net
proceeds
received
from
the
issuance
of
11.5
million
shares
of
our
common
stock
in
April
2015
offset
by
the
use
ofcash
in
operating
activities.
Our
working
capital
was
$265.9
million
as
of
December
31,
2015.













Net
cash
used
in
operating
activities
was
$100.7
million
and
$64.4
million
for
the
years
ended
December
31,
2015
and
2014,
respectively.
The
net
cashused
in
operating
activities
during
2015
and
2014
was
primarily
for
the
clinical,
regulatory
and
pre-commercial
activities
related
to
ARIKAYCE.













Net
cash
used
in
investing
activities
was
$3.5
million
and
$5.3
million
for
the
years
ended
December
31,
2015
and
2014,
respectively.
The
net
cash
used
ininvesting
activities
during
2015
was
primarily
related
to
payments
for
the
build
out
of
our
headquarters
and
lab
facility
in
Bridgewater,
New
Jersey,
as
well
asinvestments
in
an
enterprise
resource
planning
software
system.













Net
cash
provided
by
financing
activities
was
$227.8
million
and
$115.1
million
for
the
years
ended
December
31,
2015
and
2014,
respectively.
Net
cashprovided
by
financing
activities
in
2015
included
net
proceeds
of
$222.9
million
received
from
the
issuance
of
11.5
million
common
shares
in
April
2015
andproceeds
of
$5.1
million
received
from
stock
option
exercises.
Net
cash
provided
by
financing
activities
in
2014
included
$109.0
million
from
the
issuance
ofcommon
stock.Contractual
Obligations













On
June
29,
2012,
we
and
our
domestic
subsidiaries,
as
co-borrowers,
entered
into
a
Loan
and
Security
Agreement
with
Hercules
that
allowed
us
toborrow
up
to
$20.0
million
("Loan
Agreement")
at
an
interest
rate
of
9.25%.
On
December
15,
2014,
we
entered
into
a
third
amendment
(the
"Third
Amendment")to
the
Loan
Agreement
with
Hercules.
In
connection
with
the
Third
Amendment,
we
paid
a
commitment
fee
of
$25,000,
and
at
the
closing,
paid
a
facility
fee
of$125,000.
Under
the
Third
Amendment,
the
amount
of
borrowings
was
increased
by
an
additional
$5.0
million
to
an
aggregate
total
of
$25.0
million
and
theinterest-only
period
was
extended
through
December
31,
2015.
In
December
2015,
we
entered
into
a
fifth
amendment
to
the
Loan
Agreement
to
exercise
an
optionto
extend
the
maturity
date
of
the
loan
to
January
1,
2018
with
a
payment
to
Hercules
of
$250,000.
The
amendment
extends
the
interest-only
period,
with
principalrepayments
beginning
in
October
2016.













We
have
an
operating
lease
for
office
and
laboratory
space
located
in
Bridgewater,
NJ,
our
corporate
headquarters,
for
which
the
initial
lease
term
expiresin
November
2019.
Future
minimum
rental
payments
under
this
lease
total
approximately
$3.8
million.
We
hold
a
lease
that
expires
in
October
2016
for
officespace
in
Richmond,
VA,
the
site
of
our
former
corporate
headquarters.
Future
minimum
rental
payments
under
this
lease
total
approximately
$0.4
million.
During2011,
we
recorded
a
net
present
value
charge
of
$1.2
million
in
general
and
administrative
expenses
associated
with80Table
of
Contentsvacating
the
Richmond
facility.
In
November
2014,
we
entered
into
an
agreement
to
sublet
this
space
for
the
remainder
of
the
lease
term.
We
expect
to
collectproceeds
from
the
sublease
in
the
amount
of
$0.2
million
over
the
remaining
term
of
the
lease.













In
September
2015,
we
entered
into
a
Commercial
Fill/Finish
Services
Agreement
(the
"Fill/Finish
Agreement")
with
Ajinomoto
Althea,
Inc.,
a
Delawarecorporation
("Althea"),
for
Althea
to
produce,
on
a
non-exclusive
basis,
ARIKAYCE
in
finished
dosage
form.
Under
the
Fill/Finish
Agreement,
we
are
obligated
topay
a
minimum
of
$2.7
million
for
the
batches
of
ARIKAYCE
produced
each
calendar
year
during
the
term
of
the
Fill/Finish
Agreement.
The
Fill/FinishAgreement
is
effective
as
of
January
1,
2015,
has
an
initial
term
that
ends
on
December
31,
2017
and
may
be
extended
for
additional
two
year
periods
upon
mutualwritten
agreement
of
the
Company
and
Althea
at
least
one
year
prior
to
the
expiration
of
its
then-current
term.













As
of
December
31,
2015,
future
payments
under
our
long-term
debt
agreements,
capital
leases,
minimum
future
payments
under
non-cancellableoperating
leases
(net
of
sublease)
and
minimum
future
payment
obligations
are
as
follows:













This
table
does
not
include:
(a)
any
milestone
payments
which
may
become
payable
to
third
parties
under
our
license
and
collaboration
agreements
as
thetiming
and
likelihood
of
such
payments
are
not
known;
(b)
any
royalty
payments
to
third
parties
as
the
amounts
of
such
payments,
timing
and/or
the
likelihood
ofsuch
payments
are
not
known;
(c)
contracts
that
are
entered
into
in
the
ordinary
course
of
business
which
are
not
material
in
the
aggregate
in
any
period
presentedabove;
or
(d)
any
payments
related
to
the
agreements
mentioned
below.













We
currently
have
a
licensing
agreement
with
PARI
for
the
use
of
the
optimized
eFlow
Nebulizer
System
for
delivery
of
ARIKAYCE
in
treating
patientswith
NTM
infections,
CF
and
bronchiectasis.
We
have
rights
to
several
US
and
foreign
issued
patents,
and
patent
applications
involving
improvements
to
theoptimized
eFlow
Nebulizer
System.
Under
the
licensing
agreement,
PARI
is
entitled
to
receive
payments
either
in
cash,
qualified
stock
or
a
combination
of
both,
atPARI's
discretion,
based
on
achievement
of
certain
milestone
events
including
phase
3
trial
initiation
(which
occurred
in
2012),
first
acceptance
of
MAAsubmission
(or
equivalent)
in
the
US
of
ARIKAYCE
and
the
device,
first
receipt
of
marketing
approval
in
the
US
for
ARIKAYCE
and
the
device,
and
first
receiptof
marketing
approval
in
a
major
EU
country
for
ARIKAYCE
and
the
device.
In
addition,
PARI
is
entitled
to
receive
royalty
payments
in
the
mid-single
digits
oncommercial
net
sales
of
ARIKAYCE
pursuant
to
the
licensing
agreement,
subject
to
certain
specified
annual
minimum
royalties.
In
July
2014,
we
entered
into
aCommercialization
Agreement
(the
"PARI
Agreement")
with
PARI
for
the
manufacture
and
supply
of
eFlow
nebulizer
systems
and
related
accessories
(the"Device")
as
optimized
for
use
with
our
proprietary
liposomal
amikacin
for
inhalation.
The
PARI
Agreement
has
an
initial
term
of
fifteen
years
from
the
firstcommercial
sale
of
ARIKAYCE
pursuant
to
the
licensing81





As
of
December
31,
2015
Payments
Due
By
Period



Total
Less
than1
year
1
-
3
Years
4
-
5
Years
After
5
Years



(In
thousands)

Debt
obligations















Debt
maturities
$25,000
$2,873
$22,127
$-


$-


Contractual
interest

4,358

2,719

1,639

-



-


Operating
leases

4,256

1,271

2,021

964

-


Purchase
obligations

5,400

2,700

2,700

-



-


Total
contractual
obligations
$39,014
$9,563
$28,487
$964
$-


Table
of
Contentsagreement
(the
"Initial
Term").
The
term
of
the
PARI
Agreement
may
be
extended
by
us
for
an
additional
five
years
by
providing
written
notice
to
PARI
at
leastone
year
prior
to
the
expiration
of
the
Initial
Term.













In
2004
and
2009,
we
entered
into
research
funding
agreements
with
Cystic
Fibrosis
Foundation
Therapeutics,
Inc.
(CFFT)
whereby
we
received$1.7
million
and
$2.2
million
for
each
respective
agreement
in
research
funding
for
the
development
of
ARIKAYCE.
If
ARIKAYCE
becomes
an
approved
productfor
CF
patients
in
the
US,
we
will
owe
a
payment
to
CFFT
of
up
to
$13.4
million
that
is
payable
over
a
three-year
period
after
approval
as
a
commercialized
drug
inthe
US.
Furthermore,
if
certain
global
sales
milestones
are
met
within
5
years
of
the
drug
commercialization,
we
would
owe
an
additional
$3.9
million
in
additionalpayments.
Since
there
is
significant
development
risk
associated
with
ARIKAYCE,
we
have
not
accrued
these
obligations.













In
February
2014,
we
entered
into
a
contract
manufacturing
agreement
with
Therapure
for
the
manufacture
of
ARIKAYCE
at
the
larger
scales
necessary
tosupport
commercialization.
Pursuant
to
the
agreement,
we
collaborated
with
Therapure
to
construct
a
production
area
for
the
manufacture
of
ARIKAYCE
inTherapure's
existing
manufacturing
facility
in
Mississauga,
Ontario,
Canada.
We
paid
Therapure
approximately
$12
million
for
the
build
out
of
the
constructionarea
and
related
manufacturing
costs.
Therapure
will
manufacture
ARIKAYCE
for
us
on
a
non-exclusive
basis.
The
agreement
has
an
initial
term
of
five
years
fromthe
first
date
on
which
Therapure
delivers
ARIKAYCE
to
us
after
we
obtain
permits
related
to
the
manufacture
of
ARIKAYCE.
Under
the
agreement,
we
areobligated
to
pay
certain
minimum
amounts
for
the
batches
of
ARIKAYCE
produced
each
calendar
year.













In
December
2014,
we
entered
into
Work
Order
1
(the
"Work
Order"),
pursuant
to
a
Master
Agreement
for
Services
with
SynteractHCR,
Inc.
("Synteract")dated
as
of
August
27,
2014,
as
amended
on
December
23,
2014,
pursuant
to
which
we
retained
Synteract
to
perform
implementation
and
management
services
inconnection
with
certain
clinical
trials
pursuant
to
a
specific
protocol
of
pharmaceutical
products
under
development
by
us
or
under
our
control.
Synteract
isproviding
comprehensive
services
for
protocol
INS-212,
a
randomized,
open-label,
multicenter
study
of
liposomal
amikacin
for
inhalation
in
adult
patients
withNTM
lung
infections
caused
by
MAC
complex
that
are
refractory
to
treatment.
Prior
to
the
execution
of
the
Work
Order,
Synteract
was
providing
such
servicespursuant
to
a
Letter
of
Intent,
dated
August
25,
2014.
We
anticipate
that
aggregate
costs
relating
to
all
work
orders
for
the
212
study
will
be
approximately$40
million
over
the
period
of
the
study.
In
April
2015,
we
entered
into
a
work
order
with
Synteract
to
perform
implementation
and
management
services
forprotocol
INS-312,
a
study
in
which
all
non-converters
from
the
INS-212
study
will
be
eligible
to
enter
a
separate
open-label
study.
We
anticipate
that
aggregatecosts
relating
to
all
work
orders
for
the
312
study
will
be
approximately
$20
million
over
the
period
of
the
study.Future
Funding
Requirements













We
will
need
to
raise
additional
capital
to
fund
our
operations,
to
develop
and
commercialize
ARIKAYCE,
to
develop
INS1009,
and
to
develop,
acquire,in-license
or
co-promote
other
products
that
address
orphan
or
rare
diseases.
Our
future
capital
requirements
may
be
substantial
and
will
depend
on
many
factors,including:·the
timing
and
cost
of
our
anticipated
clinical
trials
of
ARIKAYCE
for
the
treatment
of
patients
with
NTM
lung
infections;82Table
of
Contents·the
decisions
of
the
FDA
and
EMA
with
respect
to
our
applications
for
marketing
approval
of
ARIKAYCE
in
the
US
and
Europe;
the
costs
ofactivities
related
to
the
regulatory
approval
process;
and
the
timing
of
approvals,
if
received;·the
cost
of
putting
in
place
the
sales
and
marketing
capabilities
necessary
to
be
prepared
for
a
potential
commercial
launch
of
ARIKAYCE,
ifapproved;·the
cost
of
filing,
prosecuting
and
enforcing
patent
claims;·the
costs
of
our
manufacturing-related
activities;·the
costs
associated
with
commercializing
ARIKAYCE
if
we
receive
marketing
approval;
and·subject
to
receipt
of
marketing
approval,
the
levels,
timing
and
collection
of
revenue
received
from
sales
of
approved
products,
if
any,
in
the
future.













In
April
2015,
we
generated
net
proceeds
of
$222.9
million
from
the
issuance
of
11.5
million
shares
of
common
stock.
We
believe
we
currently
havesufficient
funds
to
meet
our
financial
needs
for
the
next
twelve
months.
However,
our
business
strategy
may
require
us
to,
or
we
may
otherwise
determine
to,
raiseadditional
capital
at
any
time
through
equity
or
debt
financing(s),
strategic
transactions
or
otherwise.
Such
additional
funding
may
be
necessary
to
continue
todevelop
our
potential
product
candidates,
to
pursue
the
license
or
purchase
of
complementary
technologies,
to
commercialize
our
product
candidates
or
to
purchaseother
products.
If
we
are
unable
to
obtain
additional
financing,
we
may
be
required
to
reduce
the
scope
of
our
planned
product
development
and
commercializationor
our
plans
to
establish
a
sales
and
marketing
force,
any
of
which
could
harm
our
business,
financial
condition
and
results
of
operations.
The
source,
timing
andavailability
of
any
future
financing
will
depend
principally
upon
equity
and
debt
market
conditions,
interest
rates
and,
more
specifically,
our
continued
progress
inour
regulatory,
development
and
commercial
activities.
We
cannot
assure
you
that
such
capital
funding
will
be
available
on
favorable
terms
or
at
all.
If
we
areunable
to
obtain
sufficient
additional
funds
when
required,
we
may
be
forced
to
delay,
restrict
or
eliminate
all
or
a
portion
of
our
research
or
developmentprograms,
dispose
of
assets
or
technology
or
cease
operations.













To
date,
we
have
not
generated
any
meaningful
revenue
from
ARIKAYCE.
We
do
not
know
when
or
if
we
will
generate
any
revenue.
We
do
not
expect
togenerate
significant
revenue
unless
or
until
we
obtain
marketing
approval
of,
and
commercialize,
ARIKAYCE.Off-Balance
Sheet
Arrangements













We
do
not
have
any
off-balance
sheet
arrangements,
other
than
operating
leases,
that
have
or
are
reasonably
likely
to
have
a
current
or
future
materialeffect
on
our
financial
condition,
revenues
or
expenses,
results
of
operations,
liquidity,
capital
expenditures
or
capital
resources.
We
do
not
have
any
interest
inspecial
purpose
entities,
structured
finance
entities
or
other
variable
interest
entities.CRITICAL
ACCOUNTING
POLICIES













Preparation
of
financial
statements
in
accordance
with
generally
accepted
accounting
principles
in
the
US
requires
us
to
make
estimates
and
assumptionsaffecting
the
reported
amounts
of
assets,
liabilities,
revenues
and
expenses
and
the
disclosures
of
contingent
assets
and
liabilities.
We
use
our
historical
experienceand
other
relevant
factors
when
developing
our
estimates
and
assumptions.
We
continually
evaluate
these
estimates
and
assumptions.
The
amounts
of
assets
andliabilities
reported
in
our
consolidated
balance
sheets
and
the
amounts
of
revenue
reported
in
our
consolidated
statements
of
comprehensive
loss
are
effected
byestimates
and
assumptions,
which
are
used
for,
but
not
limited
to,
the
accounting
for
research
and
development,
revenue
recognition,
stock-based
compensation,identifiable
intangible
assets
and
goodwill,
and
accrued
expenses.
The
accounting
policies
discussed
below
are
considered
critical
to
an
understanding
of
ourconsolidated
financial
statements
because
their83Table
of
Contentsapplication
places
the
most
significant
demands
on
our
judgment.
Actual
results
could
differ
from
our
estimates.
For
additional
accounting
policies,
see
Note
2
toour
Consolidated
Financial
Statements—"Summary
of
Significant
Accounting
Policies."Research
and
Development













Research
and
development
expenses
consist
primarily
of
salaries,
benefits
and
other
related
costs,
including
stock-based
compensation,
for
personnelserving
our
research
and
development
functions,
and
other
internal
operating
expenses,
the
cost
of
manufacturing
our
drug
candidate
for
clinical
study,
the
cost
ofconducting
clinical
studies,
and
the
cost
of
conducting
preclinical
and
research
activities.
Our
expenses
related
to
manufacturing
our
drug
candidate
for
clinicalstudy
are
primarily
related
to
activities
at
contract
manufacturing
organizations
that
manufacture
ARIKAYCE
and
INS1009
for
our
use.
Our
expenses
related
toclinical
trials
are
primarily
related
to
activities
at
contract
research
organizations
that
conduct
and
manage
clinical
trials
on
our
behalf.
These
contracts
set
forth
thescope
of
work
to
be
completed
at
a
fixed
fee
or
amount
per
patient
enrolled.
Payments
under
these
contracts
depend
on
performance
criteria
such
as
the
successfulenrollment
of
patients
or
the
completion
of
clinical
trial
milestones
as
well
as
time-based
fees.
Expenses
are
accrued
based
on
contracted
amounts
applied
to
thelevel
of
patient
enrollment
and
to
activity
according
to
the
clinical
trial
protocol.













Nonrefundable
advance
payments
for
goods
or
services
that
will
be
used
or
rendered
for
future
research
and
development
activities
are
deferred
andcapitalized.
Such
amounts
are
then
recognized
as
an
expense
as
the
related
goods
are
delivered
or
the
services
are
performed,
or
when
the
goods
or
services
are
nolonger
expected
to
be
provided.Revenue
Recognition













In
the
periods
when
we
record
revenue,
we
recognize
revenues
when
all
of
the
following
four
criteria
are
present:
persuasive
evidence
of
an
arrangementexists;
delivery
has
occurred
or
services
have
been
rendered;
the
fee
is
fixed
or
determinable;
and
collectability
is
reasonably
assured.
We
did
not
record
anymaterial
revenue
for
the
years
ended
December
31,
2015
and
2014.













Where
we
have
continuing
performance
obligations
under
the
terms
of
a
collaborative
arrangement,
non-refundable
upfront
license
payments
receivedupon
contract
signing
are
recorded
as
deferred
revenue
and
recognized
as
revenue
as
the
related
activities
are
performed.
The
period
over
which
these
activities
areto
be
performed
is
based
upon
management's
estimate
of
the
development
period.
Changes
in
management's
estimate
could
change
the
period
over
which
revenueis
recognized.
Research
and/or
development
payments
are
recognized
as
revenues
as
the
related
research
and/or
development
activities
are
performed
and
when
wehave
no
continuing
performance
obligations
related
to
the
research
and
development
payment
received.













Where
we
have
no
continuing
involvement
under
a
collaborative
arrangement,
we
record
nonrefundable
license
fee
revenues
when
we
have
the
contractualright
to
receive
the
payment,
in
accordance
with
the
terms
of
the
collaboration
agreement,
and
record
milestones
upon
appropriate
notification
to
us
of
achievementof
the
milestones
by
the
collaborative
partner.













We
recognize
revenue
from
milestone
payments
when
earned,
provided
that
(i)
the
milestone
event
is
substantive
and
its
achievability
was
not
reasonablyassured
at
the
inception
of
the
agreement
and
(ii)
we
do
not
have
ongoing
performance
obligations
related
to
the
achievement
of
the
milestone
earned.
Milestonepayments
are
considered
substantive
if
all
of
the
following
conditions
are
met:
the
milestone
payment
(a)
is
commensurate
with
either
the
vendor's
performance
toachieve
the
milestone
or
the
enhancement
of
the
value
of
the
delivered
item
or
items
as
a
result
of
a
specific
outcome84Table
of
Contentsresulting
from
the
vendor's
performance
to
achieve
the
milestone,
(b)
relates
solely
to
past
performance,
and
(c)
is
reasonable
relative
to
all
of
the
deliverables
andpayment
terms
(including
other
potential
milestone
consideration)
within
the
arrangement.
Any
amounts
received
under
the
agreement
in
advance
of
performance,if
deemed
substantive,
are
recorded
as
deferred
revenue
and
recognized
as
revenue
as
we
complete
our
performance
obligations.













With
regard
to
recognizing
revenue
for
multiple
deliverable
revenue
arrangements,
each
deliverable
within
a
multiple-deliverable
revenue
arrangement
isaccounted
for
as
a
separate
unit
of
accounting
if
both
of
the
following
criteria
are
met:
(1)
the
delivered
item
or
items
have
value
to
the
customer
on
a
standalonebasis
and
(2)
for
an
arrangement
that
includes
a
general
right
of
return
relative
to
the
delivered
item(s),
delivery
or
performance
of
the
undelivered
item(s)
isconsidered
probable
and
substantially
in
our
control.













In
addition,
multiple
deliverable
revenue
arrangement
consideration
is
allocated
at
the
inception
of
an
arrangement
to
all
deliverables
using
the
relativeselling
price
method.
We
also
apply
a
selling
price
hierarchy
for
determining
the
selling
price
of
a
deliverable,
which
includes
(1)
vendor-
specific
objectiveevidence,
if
available,
(2)
third-party
evidence,
if
vendor-specific
objective
evidence
is
not
available,
and
(3)
estimated
selling
price
if
neither
vendor-specific
northird-party
evidence
is
available.













Deferred
revenue
associated
with
a
non-refundable
payment
received
under
a
collaborative
agreement
that
is
terminated
prior
to
its
completion
results
inan
immediate
recognition
of
the
deferred
revenue.Stock-Based
Compensation













We
recognize
stock-based
compensation
expense
for
awards
of
equity
instruments
to
employees
and
directors
based
on
the
grant-date
fair
value
of
thoseawards.
The
grant-date
fair
value
of
the
award
is
recognized
as
compensation
expense
ratably
over
the
requisite
service
period,
which
generally
equals
the
vestingperiod
of
the
award,
and
if
applicable,
is
adjusted
for
expected
forfeitures.
We
also
grant
performance-based
stock
options
to
employees.
The
grant-date
fair
valueof
the
performance-based
stock
options
is
recognized
as
compensation
expense
over
the
implicit
service
period
using
the
accelerated
attribution
method
once
it
isprobable
that
the
performance
condition
will
be
achieved.
Stock-based
compensation
expense
is
included
in
both
research
and
development
expenses
and
generaland
administrative
expenses
in
the
Consolidated
Statements
of
Comprehensive
Loss.
For
awards
that
were
deemed
to
be
granted
outside
of
the
Company's
2000Stock
Incentive
Plan,
we
used
liability
accounting.
These
awards
were
classified
as
a
liability
and
were
remeasured
at
fair
value
at
the
end
of
each
reporting
period.Changes
in
fair
value
are
included
in
compensation
expense
in
the
Consolidated
Statements
of
Comprehensive
Loss
(see
additional
disclosures
related
to
awardsgranted
outside
of
the
2000
Stock
Incentive
Plan
in
Footnote
8
"Stock-Based
Compensation"
of
our
consolidated
financial
statements
located
in
Part
IV,
Item
15
ofthis
Annual
Report
on
Form
10-K).













The
following
table
summarizes
the
assumptions
used
in
determining
the
fair
value
of
stock
options
granted
during
the
years
ended
December
31,
2015,2014
and
2013:85


2015
2014
2013Volatility
78%
-
82%
83%
-
86%
86%
-
96%Risk-free
interest
rate
1.31%
-
1.75%
1.46%
-
1.83%
0.65%
-
1.65%Dividend
yield
0.0%
0.0%
0.0%Expected
option
term
(in
years)
6.25
6.25
6.25Table
of
Contents













For
the
years
ended
December
31,
2015,
2014
and
2013,
the
volatility
factor
was
based
on
our
historical
volatility
since
the
closing
of
our
merger
withTransave,
Inc.
on
December
1,
2010.
The
expected
life
was
determined
using
the
simplified
method
as
described
in
ASC
Topic
718,
"Accounting
for
StockCompensation",
which
is
the
midpoint
between
the
vesting
date
and
the
end
of
the
contractual
term.
The
risk-free
interest
rate
is
based
on
the
US
Treasury
yield
ineffect
at
the
date
of
grant.
Forfeitures
are
based
on
actual
percentage
of
option
forfeitures
since
the
closing
of
the
merger
on
December
1,
2010
and
are
the
basis
forfuture
forfeiture
expectations.Identifiable
Intangible
Assets













Identifiable
intangible
assets
are
measured
at
their
respective
fair
values
and
are
not
amortized
until
commercialization.
Once
commercialization
occurs,these
intangible
assets
will
be
amortized
over
their
estimated
useful
lives.
The
fair
values
assigned
to
our
intangible
assets
are
based
on
reasonable
estimates
andassumptions
given
available
facts
and
circumstances.
Unanticipated
events
or
circumstances
may
occur
that
may
require
us
to
review
the
assets
for
impairment.Events
or
circumstances
that
may
require
an
impairment
assessment
include
negative
clinical
trial
results,
the
non-approval
of
a
new
drug
application
by
aregulatory
agency,
material
delays
in
our
development
program
or
a
sustained
decline
in
market
capitalization.













Indefinite-lived
intangible
assets
are
not
subject
to
periodic
amortization.
Rather,
indefinite-lived
intangibles
are
reviewed
for
impairment
by
applying
afair
value
based
test
on
an
annual
basis
or
more
frequently
if
events
or
circumstances
indicate
impairment
may
have
occurred.
Events
or
circumstances
that
mayrequire
an
interim
impairment
assessment
are
consistent
with
those
described
above.
We
perform
our
annual
impairment
test
as
of
October
1
of
each
year.













We
use
the
income
approach
to
derive
the
fair
value
of
in-process
research
and
development
assets.
This
approach
calculates
fair
value
by
estimatingfuture
cash
flows
attributable
to
the
assets
and
then
discounting
these
cash
flows
to
a
present
value
using
a
risk-adjusted
discount
rate.
A
market
based
valuationapproach
was
not
considered
given
a
lack
of
revenues
and
profits
by
us.
This
approach
requires
significant
management
judgment
with
respect
to
unobservableinputs
such
as
future
volume,
revenue
and
expense
growth
rates,
changes
in
working
capital
use,
appropriate
discount
rates
and
other
assumptions
and
estimates.The
estimates
and
assumptions
used
are
consistent
with
our
business
plans.Accrued
Expenses













We
are
required
to
estimate
accrued
expenses
as
part
of
our
process
of
preparing
financial
statements.
This
process
involves
estimating
the
level
of
serviceperformed
on
our
behalf
and
the
associated
cost
incurred
in
instances
where
we
have
not
been
invoiced
or
otherwise
notified
of
actual
costs.
Examples
of
areas
inwhich
subjective
judgments
may
be
required
include
costs
associated
with
services
provided
by
contract
organizations
for
preclinical
development,
clinical
trialsand
manufacturing
of
clinical
materials.
We
accrue
for
expenses
associated
with
these
external
services
by
determining
the
total
cost
of
a
given
study
based
on
theterms
of
the
related
contract.
We
accrue
for
costs
incurred
as
the
services
are
being
provided
by
monitoring
the
status
of
the
trials
and
the
invoices
received
fromour
external
service
providers.
In
the
case
of
clinical
trials,
the
estimated
cost
normally
relates
to
the
projected
costs
of
having
subjects
enrolled
in
our
trials,
whichwe
recognize
over
the
estimated
term
of
the
trial
according
to
the
number
of
subjects
enrolled
in
the
trial
on
an
ongoing
basis,
beginning
with
subject
enrollment.As
actual
costs
become
known
to
us,
we
adjust
our
accruals.
To
date,
the
number
of
clinical
trials
and
related
research
service
agreements
has
been
relativelylimited
and
our
estimates
have
not
differed
significantly
from
the
actual
costs
incurred.86Table
of
ContentsNew
Accounting
Pronouncements













In
April
2015,
the
Financial
Accounting
Standards
Board
(FASB)
issued
Accounting
Standards
Update
(ASU)
No.
2015-03,
Simplifying
the
Presentationof
Debt
Issuance
Costs.
The
new
standard
requires
that
debt
issuance
costs
be
presented
in
the
balance
sheet
as
a
direct
reduction
from
the
carrying
value
of
theassociated
debt
liability,
consistent
with
the
presentation
of
a
debt
discount.
The
standard
is
effective
for
public
entities
for
annual
and
interim
periods
beginningafter
December
15,
2015.
Early
adoption
is
permitted
for
financial
statements
that
have
not
been
previously
issued.
The
new
guidance
will
be
applied
on
aretrospective
basis.
We
have
determined
the
impact
of
this
standard
will
be
not
be
material
on
our
consolidated
results
of
operations
and
financial
position.













In
November
2015,
the
FASB
issued
ASU
2015-17,
Income
Taxes
(Topic
740):
Balance
Sheet
Classification
of
Deferred
Taxes,
which
updated
andsimplified
the
presentation
of
deferred
income
taxes.
Current
generally
accepted
accounting
principles
require
an
entity
to
separate
deferred
income
tax
liabilitiesand
assets
into
current
and
noncurrent
amounts
in
a
classified
statement
of
financial
position.
To
simplify
the
presentation
of
deferred
income
taxes,
theamendments
in
this
update
require
that
deferred
tax
liabilities
and
assets
be
classified
as
noncurrent
in
a
classified
statement
of
financial
position.
The
currentrequirement
that
deferred
tax
assets
and
liabilities
of
a
tax-paying
component
of
an
entity
be
offset
and
presented
as
a
single
amount
is
not
affected
by
theamendments
in
this
update.
The
amendments
in
this
update
are
effective
for
financial
statements
issued
for
annual
periods
beginning
after
December
15,
2016
andinterim
periods
within
those
annual
periods.
Earlier
application
is
permitted
as
of
the
beginning
of
an
interim
or
annual
reporting
period.
We
have
early
adopted
theupdate
effective
with
its
annual
reporting
period
ended
December
31,
2015.
The
adoption
of
this
update
did
not
have
a
significant
impact
on
our
consolidatedfinancial
statements.ITEM
7A.



QUANTITATIVE
AND
QUALITATIVE
DISCLOSURES
ABOUT
MARKET
RISK














As
of
December
31,
2015,
our
cash
and
cash
equivalents
were
in
cash
accounts
or
were
invested
in
money
funds.
Such
accounts
or
investments
are
notinsured
by
the
federal
government.













As
of
December
31,
2015,
we
had
$25.0
million
of
fixed
rate
borrowings
bearing
interest
at
9.25%
outstanding
under
a
Loan
and
Security
Agreement
weentered
into
in
June
2012
and
amended
most
recently
in
December
2015.
If
a
10%
change
in
interest
rates
was
to
have
occurred
on
December
31,
2015,
this
changewould
not
have
had
a
material
effect
on
the
fair
value
of
our
debt
as
of
that
date,
nor
would
it
have
had
a
material
effect
on
our
future
earnings
or
cash
flows.













The
majority
of
our
business
is
conducted
in
US
dollars.
However,
we
do
conduct
certain
transactions
in
other
currencies,
including
Euros,
British
Poundsand
Japanese
Yen.
Fluctuations
in
foreign
currency
exchange
rates
do
not
materially
affect
our
results
of
operations.
During
2015,
2014
and
2013,
our
results
ofoperations
were
not
materially
affected
by
fluctuations
in
foreign
currency
exchange
rates.ITEM
8.



FINANCIAL
STATEMENTS
AND
SUPPLEMENTARY
DATA














The
information
required
by
Item
8
is
included
in
our
Financial
Statements
and
Supplementary
Data
listed
in
Item
15
of
Part
IV
of
this
Annual
Report
onForm
10-K.ITEM
9.



CHANGES
IN
AND
DISAGREEMENTS
WITH
ACCOUNTANTS
ON
ACCOUNTING
AND
FINANCIAL
DISCLOSURE














None.87Table
of
ContentsITEM
9A.



CONTROLS
AND
PROCEDURES
Evaluation
of
Disclosure
Controls
and
Procedures













Our
management,
with
the
participation
of
our
principal
executive
officer
and
principal
financial
officer,
evaluated
the
effectiveness
of
our
disclosurecontrols
and
procedures
as
of
December
31,
2015.
The
term
"disclosure
controls
and
procedures,"
as
defined
in
Rules
13a-15(e)
and
15d-
15(e)
under
the
ExchangeAct,
means
controls
and
other
procedures
that
are
designed
to
provide
reasonable
assurance
that
information
required
to
be
disclosed
by
us
in
the
periodic
reportsthat
we
file
or
submit
with
the
SEC
is
recorded,
processed,
summarized
and
reported,
within
the
time
periods
specified
in
the
SEC's
rules
and
forms,
and
to
ensurethat
such
information
is
accumulated
and
communicated
to
our
management,
including
our
Chief
Executive
Officer
and
Chief
Financial
Officer,
as
appropriate,
toallow
timely
decisions
regarding
required
disclosure.
Based
on
that
evaluation,
as
of
December
31,
2015,
our
Chief
Executive
Officer
and
Chief
Financial
Officerhave
concluded
that
our
disclosure
controls
and
procedures
are
effective
at
the
reasonable
assurance
level.Management's
Report
on
Internal
Control
Over
Financial
Reporting













Our
management
is
responsible
for
establishing
and
maintaining
adequate
internal
control
over
financial
reporting.
Internal
control
over
financial
reportingis
defined
in
Rule
13a-15(f)
and
15d-15(f)
under
the
Securities
Exchange
Act
of
1934,
as
amended,
as
a
process
designed
by,
or
under
the
supervision
of,
ourprincipal
executive
and
principal
financial
and
accounting
officers
and
effected
by
our
board
of
directors
and
management
to
provide
reasonable
assuranceregarding
the
reliability
of
financial
reporting
and
the
preparation
of
financial
statements
for
external
purposes
in
accordance
with
generally
accepted
accountingprinciples
and
includes
those
policies
and
procedures
that:·Pertain
to
the
maintenance
of
records
that
in
reasonable
detail
accurately
and
fairly
reflect
the
transactions
and
dispositions
of
our
assets;·Provide
reasonable
assurance
that
transactions
are
recorded
as
necessary
to
permit
preparation
of
financial
statements
in
accordance
with
USgenerally
accepted
accounting
principles,
and
that
receipts
and
expenditures
of
our
company
are
being
made
only
in
accordance
with
authorizationsof
our
management
and
board
of
directors;
and·Provide
reasonable
assurance
regarding
prevention
or
timely
detection
of
unauthorized
acquisition,
use
or
disposition
of
our
assets
that
could
have
amaterial
effect
on
the
financial
statements.













Because
of
its
inherent
limitations,
internal
control
over
financial
reporting
may
not
prevent
or
detect
misstatements.
Projections
of
any
evaluation
ofeffectiveness
to
future
periods
are
subject
to
the
risks
that
controls
may
become
inadequate
because
of
changes
in
conditions,
or
that
the
degree
of
compliance
withthe
policies
or
procedures
may
deteriorate.
Our
management
assessed
the
effectiveness
of
our
internal
control
over
financial
reporting
as
of
December
31,
2015,based
on
the
criteria
set
forth
by
the
Committee
of
Sponsoring
Organizations
of
the
Treadway
Commission
(COSO)
in
Internal
Control—Integrated
Framework(2013
framework).
A
material
weakness
is
a
deficiency,
or
a
combination
of
deficiencies,
in
internal
control
over
financial
reporting,
such
that
there
is
a
reasonablepossibility
that
a
material
misstatement
of
a
company's
annual
or
interim
financial
statements
will
not
be
prevented
or
detected
on
a
timely
basis.
Based
onmanagement's
assessment,
management
concluded
that
the
Company's
internal
control
over
financial
reporting
was
effective
as
of
December
31,
2015.88Table
of
Contents













Ernst
&
Young
LLP,
our
independent
registered
public
accounting
firm,
issued
an
attestation
report
on
our
internal
control
over
financial
reporting.
Thereport
of
Ernst
&
Young
LLP
is
contained
in
Item
15
of
Part
IV
of
this
Annual
Report
on
Form
10-K.ITEM
9B.



OTHER
INFORMATION














NonePART
III
ITEM
10.



DIRECTORS,
EXECUTIVE
OFFICERS
AND
CORPORATE
GOVERNANCE














Pursuant
to
General
Instruction
G(3)
of
Form
10-K,
the
information
required
by
Item
10
of
Form
10-K
is
hereby
incorporated
by
reference
from
thediscussion
responsive
thereto
under
the
captions
"Election
of
Directors,"
"Corporate
Governance"
and
"Section
16(a)
Beneficial
Ownership
Reporting
Compliance"in
our
definitive
proxy
statement
for
our
2016
annual
meeting
of
shareholders
to
be
filed
with
the
SEC
no
later
than
120
days
after
the
close
of
the
fiscal
yearcovered
by
this
Annual
Report.ITEM
11.



EXECUTIVE
COMPENSATION














Pursuant
to
General
Instruction
G(3)
of
Form
10-K,
the
information
required
by
Item
11
of
Form
10-K
is
hereby
incorporated
by
reference
from
thediscussion
responsive
thereto
under
the
captions
"Compensation
Discussion
and
Analysis,"
"Compensation
Committee
Report,"
"Compensation
CommitteeInterlocks
and
Insider
Participation"
and
"Directors
Compensation"
in
our
definitive
proxy
statement
for
our
2016
annual
meeting
of
shareholders
to
be
filed
withthe
SEC
no
later
than
120
days
after
the
close
of
the
fiscal
year
covered
by
this
Annual
Report.ITEM
12.



SECURITY
OWNERSHIP
OF
CERTAIN
BENEFICIAL
OWNERS
AND
MANAGEMENT
AND
RELATED
STOCKHOLDER
MATTERS














Pursuant
to
General
Instruction
G(3)
of
Form
10-K,
the
information
required
by
Item
12
of
Form
10-K
is
hereby
incorporated
by
reference
from
thediscussion
responsive
thereto
under
the
captions
"Compensation
Discussion
and
Analysis,"
"Security
Ownership
of
Certain
Beneficial
Owners"
and
"SecurityOwnership
of
Directors
and
Management"
in
our
definitive
proxy
statement
for
our
2016
annual
meeting
of
shareholders
to
be
filed
with
the
SEC
no
later
than120
days
after
the
close
of
the
fiscal
year
covered
by
this
Annual
Report.ITEM
13.



CERTAIN
RELATIONSHIPS
AND
RELATED
TRANSACTIONS
AND
DIRECTOR
INDEPENDENCE














Pursuant
to
General
Instruction
G(3)
of
Form
10-K,
the
information
required
by
Item
13
of
Form
10-K
is
hereby
incorporated
by
reference
from
thediscussion
responsive
thereto
under
the
captions
"Election
of
Directors"
and
"Certain
Relationships
and
Related
Transactions"
in
our
definitive
proxy
statement
forour
2016
annual
meeting
of
shareholders
to
be
filed
with
the
SEC
no
later
than
120
days
after
the
close
of
the
fiscal
year
covered
by
this
Annual
Report.ITEM
14.



PRINCIPAL
ACCOUNTING
FEES
AND
SERVICES














Pursuant
to
General
Instruction
G(3)
of
Form
10-K,
the
information
required
by
Item
14
of
Form
10-K
is
hereby
incorporated
by
reference
from
thediscussion
responsive
thereto
under
the
caption
"Corporate
Governance"
and
"Ratification
of
Independent
Public
Accountants"
in
our
definitive
proxy
statement
forour
2016
annual
meeting
of
shareholders
to
be
filed
with
the
SEC
no
later
than
120
days
after
the
close
of
the
fiscal
year
covered
by
this
Annual
Report.89Table
of
ContentsPART
IV
ITEM
15.







EXHIBITS
AND
FINANCIAL
STATEMENT
SCHEDULES
(a)Documents
filed
as
part
of
this
report.
1.FINANCIAL
STATEMENTS
.
The
following
consolidated
financial
statements
of
the
Company
are
set
forth
herein,
beginning
onpage
93:
(i)Reports
of
Independent
Registered
Public
Accounting
Firm
(ii)Consolidated
Balance
Sheets
as
of
December
31,
2015
and
2014
(iii)Consolidated
Statements
of
Comprehensive
Loss
for
the
Years
Ended
December
31,
2015,
2014
and
2013
(iv)Consolidated
Statements
of
Stockholders'
Equity
for
the
Years
Ended
December
31,
2015,
2014
and
2013
(v)Consolidated
Statements
of
Cash
Flows
for
the
Years
Ended
December
31,
2015,
2014
and
2013
(vi)Notes
to
Consolidated
Financial
Statements
2.FINANCIAL
STATEMENT
SCHEDULES.
None
required.3.EXHIBITS.
The
exhibits
that
are
required
to
be
filed
or
incorporated
by
reference
herein
are
listed
in
the
Exhibit
Index.90Table
of
ContentsSIGNATURES













Pursuant
to
the
requirements
of
Section
13
or
15(d)
of
the
Securities
Exchange
Act
of
1934,
the
Registrant
has
duly
caused
this
report
to
be
signed
on
itsbehalf
by
the
undersigned,
thereunto
duly
authorized
on
February
25,
2016.













Pursuant
to
the
requirements
of
the
Securities
Exchange
Act
of
1934,
this
report
has
been
signed
below
by
the
following
persons
on
behalf
of
theRegistrant
and
in
the
capacities
indicated
on
February
25,
2016.91

INSMED
INCORPORATED
a
Virginia
corporation
(Registrant)

By:
/s/
WILLIAM
H.
LEWIS
William
H.
Lewis
President and Chief Executive Officer (Principal ExecutiveOfficer) and DirectorSignature
Title


/s/
WILLIAM
H.
LEWIS
William
H.
Lewis
President
and
Chief
Executive
Officer
(Principal
ExecutiveOfficer)
and
Director/s/
ANDREW
T.
DRECHSLER
Andrew
T.
Drechsler
Chief
Financial
Officer
(Principal
Financial
Officer
andPrincipal
Accounting
Officer)/s/
DONALD
HAYDEN,
JR.
Donald
Hayden,
Jr.
Chairman
of
the
Board
of
Directors/s/
ALFRED
F.
ALTOMARI
Alfred
F.
Altomari
Director/s/
DAVID
R.
BRENNAN
David
R.
Brennan
Director/s/
STEINAR
J.
ENGELSEN,
M.D.
Steinar
J.
Engelsen,
M.D.
Director/s/
DAVID
W.J.
MCGIRR
David
W.J.
McGirr
Director/s/
MYRTLE
POTTER
Myrtle
Potter
Director/s/
MELVIN
SHAROKY,
M.D.
Melvin
Sharoky,
M.D.
DirectorTable
of
ContentsReport
of
Independent
Registered
Public
Accounting
FirmThe
Board
of
Directors
and
Stockholders
of
Insmed
Incorporated













We
have
audited
the
accompanying
consolidated
balance
sheets
of
Insmed
Incorporated
as
of
December
31,
2015
and
2014,
and
the
related
consolidatedstatements
of
comprehensive
loss,
stockholders'
equity
and
cash
flows
for
each
of
the
three
years
in
the
period
ended
December
31,
2015.
These
financialstatements
are
the
responsibility
of
the
Company's
management.
Our
responsibility
is
to
express
an
opinion
on
these
financial
statements
based
on
our
audits.













We
conducted
our
audits
in
accordance
with
the
standards
of
the
Public
Company
Accounting
Oversight
Board
(United
States).
Those
standards
requirethat
we
plan
and
perform
the
audit
to
obtain
reasonable
assurance
about
whether
the
financial
statements
are
free
of
material
misstatement.
An
audit
includesexamining,
on
a
test
basis,
evidence
supporting
the
amounts
and
disclosures
in
the
financial
statements.
An
audit
also
includes
assessing
the
accounting
principlesused
and
significant
estimates
made
by
management,
as
well
as
evaluating
the
overall
financial
statement
presentation.
We
believe
that
our
audits
provide
areasonable
basis
for
our
opinion.













In
our
opinion,
the
financial
statements
referred
to
above
present
fairly,
in
all
material
respects,
the
consolidated
financial
position
of
Insmed
Incorporatedat
December
31,
2015
and
2014,
and
the
consolidated
results
of
its
operations
and
its
cash
flows
for
each
of
the
three
years
in
the
period
ended
December
31,
2015,in
conformity
with
U.S.
generally
accepted
accounting
principles.













We
also
have
audited,
in
accordance
with
the
standards
of
the
Public
Company
Accounting
Oversight
Board
(United
States),
Insmed
Incorporated'sinternal
control
over
financial
reporting
as
of
December
31,
2015,
based
on
criteria
established
in
Internal
Control—Integrated
Framework
issued
by
the
Committeeof
Sponsoring
Organizations
of
the
Treadway
Commission
(2013
framework)
and
our
report
dated
February
25,
2016
expressed
an
unqualified
opinion
thereon.Iselin,
New
Jersey
February
25,
201692

/s/
Ernst
&
Young
LLPTable
of
ContentsReport
of
Independent
Registered
Public
Accounting
Firm
The
Board
of
Directors
and
Stockholders
of
Insmed
Incorporated













We
have
audited
Insmed
Incorporated's
internal
control
over
financial
reporting
as
of
December
31,
2015,
based
on
criteria
established
in
Internal
Control—Integrated
Framework
issued
by
the
Committee
of
Sponsoring
Organizations
of
the
Treadway
Commission
(2013
framework)
(the
COSO
criteria).
InsmedIncorporated's
management
is
responsible
for
maintaining
effective
internal
control
over
financial
reporting,
and
for
its
assessment
of
the
effectiveness
of
internalcontrol
over
financial
reporting
included
in
the
accompanying
Management's
Report
on
Internal
Control
Over
Financial
Reporting.
Our
responsibility
is
to
expressan
opinion
on
the
company's
internal
control
over
financial
reporting
based
on
our
audit.













We
conducted
our
audit
in
accordance
with
the
standards
of
the
Public
Company
Accounting
Oversight
Board
(United
States).
Those
standards
requirethat
we
plan
and
perform
the
audit
to
obtain
reasonable
assurance
about
whether
effective
internal
control
over
financial
reporting
was
maintained
in
all
materialrespects.
Our
audit
included
obtaining
an
understanding
of
internal
control
over
financial
reporting,
assessing
the
risk
that
a
material
weakness
exists,
testing
andevaluating
the
design
and
operating
effectiveness
of
internal
control
based
on
the
assessed
risk,
and
performing
such
other
procedures
as
we
considered
necessaryin
the
circumstances.
We
believe
that
our
audit
provides
a
reasonable
basis
for
our
opinion.













A
company's
internal
control
over
financial
reporting
is
a
process
designed
to
provide
reasonable
assurance
regarding
the
reliability
of
financial
reportingand
the
preparation
of
financial
statements
for
external
purposes
in
accordance
with
generally
accepted
accounting
principles.
A
company's
internal
control
overfinancial
reporting
includes
those
policies
and
procedures
that
(1)
pertain
to
the
maintenance
of
records
that,
in
reasonable
detail,
accurately
and
fairly
reflect
thetransactions
and
dispositions
of
the
assets
of
the
company;
(2)
provide
reasonable
assurance
that
transactions
are
recorded
as
necessary
to
permit
preparation
offinancial
statements
in
accordance
with
generally
accepted
accounting
principles,
and
that
receipts
and
expenditures
of
the
company
are
being
made
only
inaccordance
with
authorizations
of
management
and
directors
of
the
company;
and
(3)
provide
reasonable
assurance
regarding
prevention
or
timely
detection
ofunauthorized
acquisition,
use,
or
disposition
of
the
company's
assets
that
could
have
a
material
effect
on
the
financial
statements.













Because
of
its
inherent
limitations,
internal
control
over
financial
reporting
may
not
prevent
or
detect
misstatements.
Also,
projections
of
any
evaluation
ofeffectiveness
to
future
periods
are
subject
to
the
risk
that
controls
may
become
inadequate
because
of
changes
in
conditions,
or
that
the
degree
of
compliance
withthe
policies
or
procedures
may
deteriorate.













In
our
opinion,
Insmed
Incorporated
maintained,
in
all
material
respects,
effective
internal
control
over
financial
reporting
as
of
December
31,
2015,
basedon
the
COSO
criteria.













We
also
have
audited,
in
accordance
with
the
standards
of
the
Public
Company
Accounting
Oversight
Board
(United
States),
the
consolidated
balancesheets
of
Insmed
Incorporated
as
of
December
31,
2015
and
2014,
and
the
related
consolidated
statements
of
comprehensive
loss,
stockholders'
equity
and
cashflows
for
each
of
the
three
years
in
the
period
ended
December
31,
2015
and
our
report
dated
February
25,
2016
expressed
an
unqualified
opinion
thereon.Iselin,
New
Jersey
February
25,
201693

/s/
Ernst
&
Young
LLPTable
of
ContentsINSMED
INCORPORATED
Consolidated
Balance
Sheets
(in
thousands,
except
par
value
and
share
data)



See accompanying notes to consolidated financial statements94


As
of
December
31,



2015
2014
Assets






Current
assets:






Cash
and
cash
equivalents
$282,876
$159,226
Prepaid
expenses
and
other
current
assets

5,242

5,488
Total
current
assets

288,118

164,714
In-process
research
and
development

58,200

58,200
Fixed
assets,
net

8,092

7,534
Other
assets

2,146

416
Total
assets
$356,556
$230,864
Liabilities
and
shareholders'
equity






Current
liabilities:






Accounts
payable
$7,468
$9,249
Accrued
expenses

10,995

9,638
Other
current
liabilities

683

743
Current
portion
of
long-term
debt

3,113

-


Total
current
liabilities

22,259

19,630
Long-term
liabilities:






Accrued
lease
expense,
long-term

-



118
Other
long-term
liabilities

572

23
Debt,
long-term

22,027

24,856
Total
liabilities

44,858

44,627
Common
stock,
$0.01
par
value;
500,000,000
authorized
shares,
61,813,995
and49,806,131
issued
and
outstanding
shares
at
December
31,
2015
and
December
31,2014,
respectively

618

498
Additional
paid-in
capital

900,043

656,519
Accumulated
deficit

(588,963)
(470,780)Total
shareholders'
equity

311,698

186,237
Total
liabilities
and
shareholders'
equity
$356,556
$230,864
Table
of
ContentsINSMED
INCORPORATED
Consolidated
Statements
of
Comprehensive
Loss
(in
thousands,
except
per
share
data)



See accompanying notes to audited consolidated financial statements95


Years
ended
December
31,



2015
2014
2013
Other
revenue
$-


$-


$11,500
Total
revenues

-



-



11,500
Operating
expenses:









Research
and
development

74,277

56,292

44,279
General
and
administrative

43,216

31,073

22,236
Total
operating
expenses

117,493

87,365

66,515
Operating
loss

(117,493)
(87,365)
(55,015)Investment
income

261

58

166
Interest
expense

(2,889)
(2,415)
(2,412)Other
income/(expense),
net

(33)
141

(33)Loss
before
income
taxes

(120,154)
(89,581)
(57,294)Benefit
from
income
taxes

(1,971)
(10,422)
(1,221)Net
loss
and
comprehensive
loss
$(118,183)$(79,159)$(56,073)Basic
and
diluted
net
loss
per
share
$(2.02)$(1.84)$(1.60)Weighted
average
basic
and
diluted
common
shares
outstanding

58,633

43,095

34,980
Table
of
ContentsINSMED
INCORPORATED
Consolidated
Statements
of
Stockholders'
Equity
(in
thousands)



See accompanying notes to audited consolidated financial statements96


Common
Stock
Warrant












Additional
Paid-in
Capital
Accumulated
Deficit






Shares
Amount
Shares
Amount
Total
Balance
at
January
1,
2013

31,488
$315

330
$790
$455,325
$(335,548)$120,882
Comprehensive
loss:





















Net
loss
















(56,073)
(56,073)Exercise
of
stock
options

372

4







1,622




1,626
Net
proceeds
from
issuance
of
commonstock

6,900

69







66,948




67,017
Issuance
of
common
stock
for
vesting
ofRSUs

154

1







(1)



-


Exercise
of
warrants

223

2

(330)
(790)
788




-


Reclass
of
stock
compensation
expensefor
liability
awards
to
equity













3,371




3,371
Stock
compensation
expense













6,501




6,501
Balance
at
December
31,
2013

39,137
$391

-


$-


$534,554
$(391,621)$143,324
Comprehensive
loss:





















Net
loss
















(79,159)
(79,159)Exercise
of
stock
options

283

3







1,728




1,731
Net
proceeds
from
issuance
of
commonstock

10,306

103







108,910




109,013
Issuance
of
common
stock
for
vesting
ofRSUs

80

1







(1)



-


Stock
compensation
expense













11,328




11,328
Balance
at
December
31,
2014

49,806
$498

-


$-


$656,519
$(470,780)$186,237
Comprehensive
loss:





















Net
loss
















(118,183)
(118,183)Exercise
of
stock
options

481

5







5,107




5,112
Net
proceeds
from
issuance
of
commonstock

11,500

115







222,827




222,942
Issuance
of
common
stock
for
vesting
ofRSUs

27
















-


Stock
compensation
expense













15,590




15,590
Balance
at
December
31,
2015

61,814
$618

-


$-


$900,043
$(588,963)$311,698
Table
of
ContentsINSMED
INCORPORATED
Consolidated
Statements
of
Cash
Flows
(in
thousands)



See accompanying notes to audited consolidated financial statements97


Years
ended
December
31,



2015
2014
2013
Operating
activities









Net
loss
$(118,183)$(79,159)$(56,073)Adjustments
to
reconcile
net
loss
to
net
cash
used
in
operatingactivities:









Depreciation
and
amortization

1,982

1,073

680
Stock
based
compensation
expense

15,590

11,328

8,668
Loss
/
(gain)
on
sale
of
assets,
net

-



9

(2)Amortization
of
debt
discount
and
debt
issuance
costs

458

390

333
Accrual
of
the
end
of
term
charge
on
the
debt

76

110

160
Changes
in
operating
assets
and
liabilities:









Prepaid
expenses
and
other
assets

(1,484)
(2,972)
(1,832)Accounts
payable

(1,781)
3,312

(1,131)Accrued
expenses
and
other

2,642

1,493

2,533
Net
cash
used
in
operating
activities

(100,700)
(64,416)
(46,664)Investing
activities









Purchase
of
fixed
assets

(3,454)
(5,351)
(826)Proceeds
from
sale
of
asset

-



10

2
Maturity
of
a
certificate
of
deposit

-



-



2,153
Net
cash
(used
in)
/
provided
by
investing
activities

(3,454)
(5,341)
1,329
Financing
activities









Payments
on
capital
lease
obligations

-



(64)
(96)Proceeds
from
issuance
of
debt

-



5,000

-


Proceeds
from
issuance
of
common
stock

222,942

109,013

67,017
Proceeds
from
exercise
of
stock
options

5,112

1,390

1,626
Payment
of
debt
issuance
costs

(250)
(250)
(100)Net
cash
provided
by
financing
activities

227,804

115,089

68,447
Increase
in
cash
and
cash
equivalents

123,650

45,332

23,112
Cash
and
cash
equivalents
at
beginning
of
period

159,226

113,894

90,782
Cash
and
cash
equivalents
at
end
of
period
$282,876
$159,226
$113,894
Supplemental
disclosures
of
cash
flow
information:









Cash
paid
for
interest
$2,948
$1,803
$1,809
Cash
received
for
taxes,
net
$3,008
$9,429
$1,221
Supplemental
disclosures
of
non-cash
investing
and
financingactivities:









Value
of
warrant
exercised
by
converting
the
warrant
into
shares
ofcommon
stock
("net
issuance
method")
$-


$-


$790
Table
of
ContentsINSMED
INCORPORATED
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
1.        Description of Business and Basis of Presentation              Description of Business —Insmed
is
a
global
biopharmaceutical
company
focused
on
the
unmet
needs
of
patients
with
rare
diseases.
The
Company's
leadproduct
candidate
is
ARIKAYCE,
or
liposomal
amikacin
for
inhalation
(LAI),
which
is
in
late-stage
development
for
patients
with
nontuberculous
mycobacteria(NTM)
lung
disease,
a
rare
and
often
chronic
infection
that
is
capable
of
causing
irreversible
lung
damage
and
which
can
be
fatal.
The
Company's
earlier
stagepipeline
includes
INS1009,
a
nebulized
prodrug
formulation
of
treprostinil.













The
Company
was
incorporated
in
the
Commonwealth
of
Virginia
on
November
29,
1999
and
its
principal
executive
offices
are
located
in
Bridgewater,New
Jersey.
During
2015
the
Company
formed
subsidiaries
in
a
number
of
countries
in
Europe
in
preparation
for
the
commercialization
of
ARIKAYCE,
uponapproval
in
the
European
Union,
and
to
support
its
global
tax
structure.
The
Company
has
operations
in
the
United
States
(US),
Ireland,
Germany,
France,
theUnited
Kingdom
and
the
Netherlands.              Basis of Presentation —The
consolidated
financial
statements
include
the
accounts
of
the
Company
and
its
wholly-owned
subsidiaries,
Transave,
LLC,Insmed
Pharmaceuticals,
Inc.,
Insmed
Limited,
Celtrix
Pharmaceuticals,
Inc.,
Insmed
Holdings
Limited,
Insmed
Ireland
Limited,
Insmed
France
SAS,
InsmedGermany
GmbH
and
Insmed
Netherlands
B.V.
All
intercompany
transactions
and
balances
have
been
eliminated
in
consolidation.2.        Summary of Significant Accounting Policies              Use of Estimates —The
preparation
of
the
consolidated
financial
statements
in
conformity
with
accounting
principles
generally
accepted
in
the
UnitedStates
(GAAP)
requires
management
to
make
estimates
and
assumptions
that
affect
the
amounts
reported
in
the
consolidated
financial
statements
andaccompanying
notes.
The
Company
bases
its
estimates
and
judgments
on
historical
experience
and
on
various
other
assumptions.
The
amounts
of
assets
andliabilities
reported
in
the
Company's
balance
sheets
and
the
amounts
of
expenses
reported
for
each
period
presented
are
effected
by
estimates
and
assumptions,which
are
used
for,
but
not
limited
to,
the
accounting
for
stock-based
compensation,
income
taxes,
loss
contingencies,
and
accounting
for
research
and
developmentcosts.
Actual
results
could
differ
from
those
estimates.              Investment Income and Interest Expense —Investment
income
consists
of
interest
and
dividend
income
earned
on
the
Company's
cash,
cash
equivalentsand
short-term
investments,
along
with
realized
gains
(losses)
on
the
sale
of
investments.
Interest
expense
consists
primarily
of
interest
costs
related
to
theCompany's
debt.              Cash and Cash Equivalents —The
Company
considers
cash
equivalents
to
be
highly
liquid
investments
with
maturities
of
three
months
or
less
from
thedate
of
purchase.              Fixed Assets, Net —Fixed
assets
are
recorded
at
cost
and
are
depreciated
on
a
straight-line
basis
over
the
estimated
useful
lives
of
the
assets.
Estimateduseful
lives
of
three
to
five
years
are
used
for
computer
equipment.
Estimated
useful
lives
of
seven
years
are
used
for
laboratory
equipment,
office
equipment
andfurniture
and
fixtures.
Leasehold
improvements
are
amortized
over
the
shorter
of
the
lease
term
or
the
estimated
useful
life
of
the
asset.
Long-lived
assets
arereviewed
for
impairment
whenever
events
or
changes
in
circumstances
indicate
that
the
carrying
amount
of
an
asset
may
not
be98Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)2.        Summary of Significant Accounting Policies (Continued)recoverable.
Recoverability
of
assets
to
be
held
and
used
is
measured
by
a
comparison
of
the
carrying
amount
of
an
asset
to
estimated
undiscounted
future
cashflows
expected
to
be
generated
by
the
asset.
If
the
carrying
amount
of
an
asset
exceeds
its
estimated
future
cash
flows,
then
an
impairment
charge
is
recognized
forthe
amount
by
which
the
carrying
value
of
the
asset
exceeds
the
fair
value
of
the
asset.              Identifiable Intangible Assets —Identifiable
intangible
assets
are
measured
at
their
respective
fair
values
and
are
not
amortized
until
commercialization.Once
commercialization
occurs,
these
intangible
assets
will
be
amortized
over
their
estimated
useful
lives.
The
fair
values
assigned
to
the
Company's
intangibleassets
are
based
on
reasonable
estimates
and
assumptions
given
available
facts
and
circumstances.
Unanticipated
events
or
circumstances
may
occur
that
mayrequire
the
Company
to
review
the
assets
for
impairment.
Events
or
circumstances
that
may
require
an
impairment
assessment
include
negative
clinical
trial
results,the
non-approval
of
a
new
drug
application
by
a
regulatory
agency,
material
delays
in
the
Company's
development
program
or
a
sustained
decline
in
marketcapitalization.













Indefinite-lived
intangible
assets
are
not
subject
to
periodic
amortization.
Rather,
indefinite-lived
intangibles
are
reviewed
for
impairment
by
applying
afair
value
based
test
on
an
annual
basis
or
more
frequently
if
events
or
circumstances
indicate
impairment
may
have
occurred.
Events
or
circumstances
that
mayrequire
an
interim
impairment
assessment
are
consistent
with
those
described
above.
The
Company
performs
its
annual
impairment
test
as
of
October
1
of
eachyear.













The
Company
uses
the
income
approach
to
derive
the
fair
value
of
in-
process
research
and
development
assets.
This
approach
calculates
fair
value
byestimating
future
cash
flows
attributable
to
the
assets
and
then
discounting
these
cash
flows
to
a
present
value
using
a
risk-adjusted
discount
rate.
A
market
basedvaluation
approach
was
not
considered
given
a
lack
of
revenues
and
profits
for
the
Company.
This
approach
requires
significant
management
judgment
withrespect
to
unobservable
inputs
such
as
future
volume,
revenue
and
expense
growth
rates,
changes
in
working
capital
use,
appropriate
discount
rates
and
otherassumptions
and
estimates.
The
estimates
and
assumptions
used
are
consistent
with
the
Company's
business
plans.              Debt Issuance Costs —Debt
issuance
costs
are
amortized
using
the
effective
interest
rate
method
and
amortized
to
interest
expense
over
the
term
of
thedebt.
Debt
issuance
costs
paid
to
the
lender
are
reflected
as
a
discount
to
the
debt,
and
debt
issuance
costs
paid
to
other
third
parties
are
reflected
as
other
assets
inthe
consolidated
balance
sheets.              Fair Value Measurements —The
Company
categorizes
its
financial
assets
and
liabilities
measured
and
reported
at
fair
value
in
the
financial
statements
ona
recurring
basis
based
upon
the
level
of
judgments
associated
with
the
inputs
used
to
measure
their
fair
value.
Hierarchical
levels,
which
are
directly
related
to
theamount
of
subjectivity
associated
with
the
inputs
used
to
determine
the
fair
value
of
financial
assets
and
liabilities,
are
as
follows:·Level
1—Inputs
are
unadjusted,
quoted
prices
in
active
markets
for
identical
assets
or
liabilities
at
the
measurement
date.99Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)2.        Summary of Significant Accounting Policies (Continued)·Level
2—Inputs
(other
than
quoted
prices
included
in
Level
1)
are
either
directly
or
indirectly
observable
for
the
assets
or
liability
throughcorrelation
with
market
data
at
the
measurement
date
and
for
the
duration
of
the
instrument's
anticipated
life.·Level
3—Inputs
reflect
management's
best
estimate
of
what
market
participants
would
use
in
pricing
the
asset
or
liability
at
the
measurement
date.Consideration
is
given
to
the
risk
inherent
in
the
valuation
technique
and
the
risk
inherent
in
the
inputs
to
the
model.













Each
major
category
of
financial
assets
and
liabilities
measured
at
fair
value
on
a
recurring
basis
are
categorized
based
upon
the
lowest
level
of
significantinput
to
the
valuations.
The
fair
value
hierarchy
also
requires
an
entity
to
maximize
the
use
of
observable
inputs
and
minimize
the
use
of
unobservable
inputs
whenmeasuring
fair
value.
Financial
instruments
in
Level
1
generally
include
US
treasuries
and
mutual
funds
listed
in
active
markets.













The
Company's
only
assets
and
liabilities
which
were
measured
at
fair
value
as
of
December
31,
2015
and
December
31,
2014
were
its
cash
and
cashequivalents
of
$282.9
million
and
$159.2
million,
respectively.
These
amounts
were
measured
at
Level
1
using
quoted
prices
in
active
markets
for
identical
assetsat
the
measurement
date.
The
Company's
cash
and
cash
equivalents
permit
daily
redemption
and
the
fair
values
of
these
investments
are
based
upon
the
quotedprices
in
active
markets
provided
by
the
holding
financial
institutions.
Cash
equivalents
consist
of
liquid
investments
with
a
maturity
of
three
months
or
less
fromthe
date
of
purchase
and
the
short-term
investments
consist
of
instruments
with
maturities
greater
than
three
months.













The
Company
recognizes
transfers
between
levels
within
the
fair
value
hierarchy,
if
any,
at
the
end
of
each
quarter.
There
were
no
transfers
in
or
out
ofLevel
1,
Level
2
or
Level
3
during
2015
and
2014.













As
of
December
31,
2015
and
2014,
the
Company
held
no
securities
that
were
in
an
unrealized
loss
or
gain
position.













The
Company
reviews
the
status
of
each
security
quarterly
to
determine
whether
an
other-than-temporary
impairment
has
occurred.
In
making
itsdetermination,
the
Company
considers
a
number
of
factors,
including:
(1)
the
significance
of
the
decline,
(2)
whether
the
securities
were
rated
below
investmentgrade,
(3)
how
long
the
securities
have
been
in
an
unrealized
loss
position,
and
(4)
the
Company's
ability
and
intent
to
retain
the
investment
for
a
sufficient
periodof
time
for
it
to
recover.              Foreign currency —The
Company
has
operations
in
the
United
States,
Ireland,
Germany,
France,
the
United
Kingdom
and
the
Netherlands.
The
results
ofits
non-US
dollar
based
functional
currency
operations
are
translated
to
US
dollars
at
the
average
exchange
rates
during
the
period.
Assets
and
liabilities
aretranslated
at
the
exchange
rate
prevailing
at
the
balance
sheet
date.
Equity
is
translated
at
the
prevailing
exchange
rate
at
the
date
of
the
equity
transaction.Translation
adjustments,
when
material,
will
be
reflected
in
shareholders'
equity
and
included
as
a
component
of
other
comprehensive
loss.100Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)2.        Summary of Significant Accounting Policies (Continued)













The
Company
realizes
foreign
currency
transaction
gains/(losses)
in
the
normal
course
of
business
based
on
movements
in
the
applicable
exchange
rates.These
gains/(losses)
are
included
as
a
component
of
other
(expense)
/
income,
net.              Concentration of Credit Risk —Financial
instruments
that
potentially
subject
the
Company
to
concentrations
of
credit
risk
consist
primarily
of
cash
andcash
equivalents.
The
Company
places
its
cash
equivalents
with
high
credit-quality
financial
institutions
and
may
invest
its
short-
term
investments
in
US
treasurysecurities,
mutual
funds
and
government
agency
bonds.
The
Company
has
established
guidelines
relative
to
credit
ratings
and
maturities
that
seek
to
maintainsafety
and
liquidity.













The
Company
sources
its
raw
materials
from
single
suppliers.
In
addition,
the
production
of
the
Company's
lead
product
candidate,
ARIKAYCE,
iscurrently
performed
by
a
sole
manufacturer.
The
Company
entered
into
a
contract
manufacturing
agreement
with
a
second
manufacturer
to
construct
a
productionarea
for
ARIKAYCE
which
was
substantially
completed
in
2015.
This
second
site
will
eventually
supply
ARIKAYCE
at
the
larger
scales
necessary
to
supportcommercialization.
The
inability
of
the
suppliers
or
manufacturers
to
fulfill
supply
requirements
of
the
Company
could
materially
impact
future
operating
results.
Achange
in
the
relationship
with
the
suppliers
or
manufacturer,
or
an
adverse
change
in
their
business,
could
materially
impact
future
operating
results.              Revenue Recognition —In
2015,
the
French
National
Agency
for
Medicines
and
Health
Products
Safety
(ANSM)
granted
LAI
a
Temporary
Authorizationfor
Use
(Autorisation
Temporaire
d'Utilisation
or
ATU).
Pursuant
to
this
program,
the
Company
shipped
product
to
pharmacies
after
receiving
requests
fromphysicians
for
patients
in
France.
For
the
year
ended
December
31,
2015,
the
revenue
recorded
was
immaterial
and
is
included
as
a
component
of
"other
income."The
Company
is
initiating
expanded
access
programs
(EAPs)
in
other
select
territories
in
Europe,
some
of
which
may
be
fully
reimbursed.
EAPs
are
intended
tomake
products
available
on
a
named
patient
basis
before
they
are
commercially
available
in
accordance
with
local
regulations.
The
Company
did
not
recognize
anyrevenue
in
2014.
In
2013,
the
Company's
other
revenue
solely
consists
of
an
$11.5
million
payment
received
from
Premacure
(now
Shire
plc)
in
exchange
for
theCompany's
right
to
receive
royalties
under
its
license
agreement
with
Premacure.
The
Company
recorded
this
as
other
revenue
after
all
four
revenue
recognitioncriteria
were
present
and
the
Company
had
no
continuing
performance
obligations
related
to
the
payment
received.













The
Company
recognizes
revenues
when
all
of
the
following
four
criteria
are
present:
persuasive
evidence
of
an
arrangement
exists;
delivery
has
occurredor
services
have
been
rendered;
the
fee
is
fixed
or
determinable;
and
collectability
is
reasonably
assured.













Where
the
Company
has
continuing
performance
obligations
under
the
terms
of
a
collaborative
arrangement,
non-refundable
upfront
license
paymentsreceived
upon
contract
signing
are
recorded
as
deferred
revenue
and
recognized
as
revenue
as
the
related
activities
are
performed.
The
period
over
which
theseactivities
are
to
be
performed
is
based
upon
management's
estimate
of
the
development
period.
Changes
in
management's
estimate
could
change
the
period
overwhich
revenue
is
recognized.
Research
and/or
development
payments
are
recognized
as
revenues
as
the
related
research
and/or
development
activities
areperformed
and
when
the
Company
has
no
continuing
performance
obligations
related
to
the
research
and
development
payment
received.101Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)2.        Summary of Significant Accounting Policies (Continued)













Where
the
Company
has
no
continuing
involvement
under
a
collaborative
arrangement,
the
Company
records
nonrefundable
license
fee
revenues
when
theCompany
has
the
contractual
right
to
receive
the
payment,
in
accordance
with
the
terms
of
the
collaboration
agreement,
and
records
milestones
upon
appropriatenotification
to
the
Company
of
achievement
of
the
milestones
by
the
collaborative
partner.













The
Company
recognizes
revenue
from
milestone
payments
when
earned,
provided
that
(i)
the
milestone
event
is
substantive
and
its
achievability
was
notreasonably
assured
at
the
inception
of
the
agreement
and
(ii)
the
Company
does
not
have
ongoing
performance
obligations
related
to
the
achievement
of
themilestone
earned.
Milestone
payments
are
considered
substantive
if
all
of
the
following
conditions
are
met:
the
milestone
payment
(a)
is
commensurate
with
eitherthe
vendor's
performance
to
achieve
the
milestone
or
the
enhancement
of
the
value
of
the
delivered
item
or
items
as
a
result
of
a
specific
outcome
resulting
from
thevendor's
performance
to
achieve
the
milestone,
(b)
relates
solely
to
past
performance,
and
(c)
is
reasonable
relative
to
all
of
the
deliverables
and
payment
terms(including
other
potential
milestone
consideration)
within
the
arrangement.
Any
amounts
received
under
the
agreement
in
advance
of
performance,
if
deemedsubstantive,
are
recorded
as
deferred
revenue
and
recognized
as
revenue
as
the
Company
completes
its
performance
obligations.













With
regard
to
recognizing
revenue
for
multiple
deliverable
revenue
arrangements,
each
deliverable
within
a
multiple-deliverable
revenue
arrangement
isaccounted
for
as
a
separate
unit
of
accounting
if
both
of
the
following
criteria
are
met:
(1)
the
delivered
item
or
items
have
value
to
the
customer
on
a
standalonebasis
and
(2)
for
an
arrangement
that
includes
a
general
right
of
return
relative
to
the
delivered
item(s),
delivery
or
performance
of
the
undelivered
item(s)
isconsidered
probable
and
substantially
in
the
Company's
control.













In
addition,
multiple
deliverable
revenue
arrangement
consideration
is
allocated
at
the
inception
of
an
arrangement
to
all
deliverables
using
the
relativeselling
price
method.
The
Company
also
applies
a
selling
price
hierarchy
for
determining
the
selling
price
of
a
deliverable,
which
includes
(1)
vendor-specificobjective
evidence,
if
available,
(2)
third-party
evidence,
if
vendor-specific
objective
evidence
is
not
available,
and
(3)
estimated
selling
price
if
neither
vendor-specific
nor
third-party
evidence
is
available.













Deferred
revenue
associated
with
a
non-refundable
payment
received
under
a
collaborative
agreement
that
is
terminated
prior
to
its
completion
results
inan
immediate
recognition
of
the
deferred
revenue.              Research and Development —Research
and
development
expenses
consist
primarily
of
salaries,
benefits
and
other
related
costs,
including
stock
basedcompensation,
for
personnel
serving
in
the
Company's
research
and
development
functions,
and
other
internal
operating
expenses,
the
cost
of
manufacturing
a
drugcandidate,
including
the
medical
devices
for
drug
delivery,
for
clinical
study,
the
cost
of
conducting
clinical
studies,
and
the
cost
of
conducting
preclinical
andresearch
activities.
The
Company's
expenses
related
to
manufacturing
its
drug
candidate
and
medical
devices
for
clinical
study
are
primarily
related
to
activities
atcontract
manufacturing
organizations
that
manufacture
ARIKAYCE,
INS1009
and
the
medical
devices
for
the
Company's
use.
The
Company's
expenses
related
toclinical
trials
are
primarily
related
to
activities
at
contract
research
organizations
that
conduct
and102Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)2.        Summary of Significant Accounting Policies (Continued)manage
clinical
trials
on
the
Company's
behalf.
These
contracts
set
forth
the
scope
of
work
to
be
completed
at
a
fixed
fee
or
amount
per
patient
enrolled.
Paymentsunder
these
contracts
primarily
depend
on
performance
criteria
such
as
the
successful
enrollment
of
patients
or
the
completion
of
clinical
trial
milestones
as
well
astime-based
fees.
Expenses
are
accrued
based
on
contracted
amounts
applied
to
the
level
of
patient
enrollment
and
to
activity
according
to
the
clinical
trial
protocol.Nonrefundable
advance
payments
for
goods
or
services
that
will
be
used
or
rendered
for
future
research
and
development
activities
are
deferred
and
capitalized.Such
amounts
are
then
recognized
as
an
expense
as
the
related
goods
are
delivered
or
the
services
are
performed,
or
when
the
goods
or
services
are
no
longerexpected
to
be
provided.              Stock-Based Compensation —The
Company
recognizes
stock-based
compensation
expense
for
awards
of
equity
instruments
to
employees
and
directorsbased
on
the
grant-date
fair
value
of
those
awards.
The
grant-date
fair
value
of
the
award
is
recognized
as
compensation
expense
ratably
over
the
requisite
serviceperiod,
which
generally
equals
the
vesting
period
of
the
award,
and
if
applicable,
is
adjusted
for
expected
forfeitures.
The
Company
also
grants
performance-basedstock
options
to
employees.
The
grant-date
fair
value
of
the
performance-based
stock
options
is
recognized
as
compensation
expense
over
the
implicit
serviceperiod
using
the
accelerated
attribution
method
once
it
is
probable
that
the
performance
condition
will
be
achieved.
Stock-based
compensation
expense
is
includedin
both
research
and
development
expenses
and
general
and
administrative
expenses
in
the
Consolidated
Statements
of
Comprehensive
Loss.













Certain
awards
deemed
to
be
granted
outside
of
the
Company's
equity
incentive
plans
require
the
Company
to
use
liability
accounting.
These
awards
areclassified
as
a
liability
and
are
remeasured
at
fair
value
at
the
end
of
each
reporting
period
until
such
time
they
are
deemed
to
be
granted
under
the
Company'sequity
incentive
plans.
Changes
in
fair
value
are
included
in
compensation
expense
in
the
Consolidated
Statements
of
Comprehensive
Loss
(see
additionaldisclosures
related
to
awards
granted
outside
of
the
2000
Stock
Incentive
Plan
in
Note
8,
Stock-Based
Compensation).              Income Taxes —The
Company
accounts
for
income
taxes
under
the
asset
and
liability
method.
Deferred
tax
assets
and
liabilities
are
recognized
for
thefuture
tax
consequences
attributable
to
differences
between
the
financial
statement
carrying
amounts
of
existing
assets
and
liabilities
and
their
respective
tax
basesand
operating
loss
carry
forwards.
Deferred
tax
assets
and
liabilities
are
measured
using
enacted
tax
rates
expected
to
apply
to
taxable
income
in
the
years
in
whichthose
temporary
differences
are
expected
to
be
recovered
or
settled.
The
effect
on
deferred
tax
assets
and
liabilities
of
a
change
in
tax
rates
is
recognized
in
incomein
the
period
that
includes
the
enactment
date.













A
valuation
allowance
is
recorded
to
reduce
the
deferred
tax
assets
to
the
amount
that
is
expected
to
be
realized.
In
evaluating
the
need
for
a
valuationallowance,
the
Company
takes
into
account
various
factors,
including
the
expected
level
of
future
taxable
income
and
available
tax
planning
strategies.
If
actualresults
differ
from
the
assumptions
made
in
the
evaluation
of
a
valuation
allowance,
the
Company
records
a
change
in
valuation
allowance
through
income
taxexpense
in
the
period
such
determination
is
made.













The
Company
uses
a
comprehensive
model
for
how
it
measures,
presents
and
discloses
an
uncertain
tax
position
taken
or
expected
to
be
taken
in
a
taxreturn.
The
Company
may
recognize
the103Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)2.        Summary of Significant Accounting Policies (Continued)tax
benefit
from
an
uncertain
tax
position
only
if
it
is
more
likely
than
not
that
the
tax
position
will
be
sustained
on
examination
by
taxing
authorities,
based
solelyon
the
technical
merits
of
the
position.
The
tax
benefits
recognized
in
the
financial
statements
from
such
a
position
should
be
measured
based
on
the
largest
benefitthat
has
a
greater
than
50%
likelihood
to
be
sustained
upon
ultimate
settlement.
The
Company
has
no
uncertain
tax
positions
as
of
December
31,
2015
that
qualifyfor
either
recognition
or
disclosure
in
the
consolidated
financial
statements.













The
Company's
policy
for
interest
and
penalties
related
to
income
tax
exposures
is
to
recognize
interest
and
penalties
as
a
component
of
the
income
taxeson
continuing
operations
in
the
Consolidated
Statements
of
Comprehensive
Loss.              Net Loss Per Common Share —Basic
net
loss
per
common
share
is
computed
by
dividing
net
loss
attributable
to
common
stockholders
by
the
weightedaverage
number
of
common
shares
outstanding
during
the
period.
Diluted
net
loss
per
common
share
is
computed
by
dividing
net
loss
by
the
weighted
averagenumber
of
common
shares
and
other
dilutive
securities
outstanding
during
the
period.
Potentially
dilutive
securities
from
stock
options,
restricted
stock
units
andwarrants
to
purchase
common
stock
would
be
antidilutive
as
the
Company
incurred
a
net
loss
in
all
periods
presented.
Potentially
dilutive
common
shares
resultingfrom
the
assumed
exercise
of
outstanding
stock
options
and
warrants
are
determined
based
on
the
treasury
stock
method.













The
following
table
sets
forth
the
reconciliation
of
the
weighted
average
number
of
shares
used
to
compute
basic
and
diluted
net
loss
per
share
for
theyears
ended
December
31,
2015,
2014
and
2013.104


Years
Ended
December
31,



2015
2014
2013



(In
thousands,
except
per
share
amounts)

Numerator:









Net
loss:
$(118,183)$(79,159)$(56,073)Denominator:









Weighted
average
common
shares
used
in
calculation
of
basic
net
lossper
share:

58,633

43,095

34,980
Effect
of
dilutive
securities:









Common
stock
options

-



-



-


Restricted
stock
and
restricted
stock
units

-



-



-


Common
stock
warrant

-



-



-


Weighted
average
common
shares
outstanding
used
in
calculation
ofdiluted
net
loss
per
share

58,633

43,095

34,980
Net
loss
per
share:









Basic
and
Diluted
$(2.02)$(1.84)$(1.60)Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)2.        Summary of Significant Accounting Policies (Continued)













The
following
potentially
dilutive
securities
have
been
excluded
from
the
computations
of
diluted
weighted-average
common
shares
outstanding
as
ofDecember
31,
2015,
2014
and
2013
as
their
effect
would
have
been
anti-dilutive
(in
thousands).              Segment Information —The
Company
currently
operates
in
one
business
segment,
which
is
the
development
and
commercialization
of
inhaled
therapiesfor
patients
with
serious
lung
diseases.
A
single
management
team
that
reports
to
the
Chief
Executive
Officer
comprehensively
manages
the
entire
business.
TheCompany
does
not
operate
separate
lines
of
business
with
respect
to
its
products
or
product
candidates.
Accordingly,
the
Company
does
not
have
separatereportable
segments.              New Accounting Pronouncements —In
April
2015,
the
Financial
Accounting
Standards
Board
(FASB)
issued
Accounting
Standards
Update(ASU)
No.
2015-03,
Simplifying
the
Presentation
of
Debt
Issuance
Costs.
The
new
standard
requires
that
debt
issuance
costs
be
presented
in
the
balance
sheet
as
adirect
reduction
from
the
carrying
value
of
the
associated
debt
liability,
consistent
with
the
presentation
of
a
debt
discount.
The
standard
is
effective
for
publicentities
for
annual
and
interim
periods
beginning
after
December
15,
2015.
Early
adoption
is
permitted
for
financial
statements
that
have
not
been
previouslyissued.
The
new
guidance
will
be
applied
on
a
retrospective
basis.
The
Company
has
determined
the
impact
of
this
standard
will
be
not
be
material
on
itsconsolidated
results
of
operations
and
financial
position.













In
November
2015,
the
FASB
issued
ASU
2015-17,
Income
Taxes
(Topic
740):
Balance
Sheet
Classification
of
Deferred
Taxes,
which
updated
andsimplified
the
presentation
of
deferred
income
taxes.
Current
generally
accepted
accounting
principles
require
an
entity
to
separate
deferred
income
tax
liabilitiesand
assets
into
current
and
noncurrent
amounts
in
a
classified
statement
of
financial
position.
To
simplify
the
presentation
of
deferred
income
taxes,
theamendments
in
this
update
require
that
deferred
tax
liabilities
and
assets
be
classified
as
noncurrent
in
a
classified
statement
of
financial
position.
The
currentrequirement
that
deferred
tax
assets
and
liabilities
of
a
tax-paying
component
of
an
entity
be
offset
and
presented
as
a
single
amount
is
not
affected
by
theamendments
in
this
update.
The
amendments
in
this
update
are
effective
for
financial
statements
issued
for
annual
periods
beginning
after
December
15,
2016
andinterim
periods
within
those
annual
periods.
Earlier
application
is
permitted
as
of
the
beginning
of
an
interim
or
annual
reporting
period.
The
Company
has
earlyadopted
the
update
effective
with
its
annual
reporting
period
ended
December
31,
2015.
The
adoption
of
this
update
did
not
have
a
significant
impact
on
theCompany's
consolidated
financial
statements.105


2015
2014
2013
Stock
options
to
purchase
common
stock

5,274

4,400

3,633
Restricted
stock
and
restricted
stock
units

44

21

93
Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)3.        Accrued Expenses













Accrued
expenses
consist
of
the
following:4.        Identifiable Intangible Assets













The
Company's
only
identifiable
intangible
asset
was
in-process
research
and
development
("IPRD")
related
to
ARIKAYCE
as
of
December
31,
2015
and2014.
The
total
intangible
IPRD
asset
was
$58.2
million
as
of
December
31,
2015
and
2014,
which
resulted
from
the
initial
amount
recorded
at
the
time
of
theCompany's
merger
with
Transave
in
2010
and
subsequent
adjustments
in
the
value.
Historically,
the
Company
uses
the
income
approach
to
derive
the
fair
value
ofin-process
research
and
development
assets.
This
approach
calculates
fair
value
by
estimating
future
cash
flows
attributable
to
the
assets
and
then
discounting
thesecash
flows
to
a
present
value
using
a
risk-adjusted
discount
rate.
Identifiable
intangible
assets
are
measured
at
their
respective
fair
values
and
are
not
amortizeduntil
commercialization.
Once
commercialization
occurs,
intangible
assets
will
be
amortized
over
their
estimated
useful
lives.
The
Company
did
not
identify
anyindicators
of
impairment
of
its
in-process
research
and
development
intangible
assets
as
of
December
31,
2015.106


As
of
December
31,



2015
2014



(in
thousands)

Accrued
clinical
trial
expenses
$4,331
$2,113
Accrued
compensation

4,302

4,317
Accrued
professional
fees

1,202

542
Accrued
technical
operation
expenses

702

762
Accrued
interest
payable

199

258
Accrued
construction
costs

57

1,500
Other
accrued
expenses

202

146

$10,995
$9,638
Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)5.        Fixed Assets, net













Fixed
assets
are
stated
at
cost
and
depreciated
or
amortized
using
the
straight-line
method,
based
on
useful
lives
as
follows:













Depreciation
expense
was
$2.0
million,
$1.1
million
and
$0.7
million
for
the
years
ended
December
31,
2015,
2014
and
2013,
respectively.
Depreciationexpense
includes
depreciation
for
equipment
under
capital
lease
obligations.6.        Debt













On
June
29,
2012,
the
Company
and
its
domestic
subsidiaries,
as
co-borrowers,
entered
into
a
Loan
and
Security
Agreement
with
Hercules
TechnologyGrowth
Capital,
Inc.
("Hercules")
that
allowed
the
Company
to
borrow
up
to
$20.0
million
("Loan
Agreement")
at
an
interest
rate
of
9.25%.
On
December
15,2014,
Company
and
Hercules
entered
into
a
third
amendment
(the
"Third
Amendment")
to
the
Loan
Agreement.
In
connection
with
the
Third
Amendment,
theCompany
paid
a
commitment
fee
of
$25,000,
and
at
the
closing,
paid
a
facility
fee
of
$125,000.
Under
the
Third
Amendment,
the
amount
of
borrowings
wasincreased
by
$5.0
million
to
an
aggregate
total
of
$25.0
million
and
the
interest-only
period
was
extended
through
December
31,
2015.
In
December
2015,
theCompany
entered
into
a
fifth
amendment
to
the
Loan
Agreement,
to
exercise
an
option
to
extend
the
maturity
date
to
January
1,
2018
with
a
payment
to
Hercules
of$250,000.
The
amendment
extends
the
interest-only
period,
with
principal
repayments
beginning
in
October
2016.













In
connection
with
the
Loan
Agreement,
the
Company
granted
the
lender
a
first
position
lien
on
all
of
the
Company's
assets,
excluding
intellectualproperty.
Prepayment
of
the
loans
made
pursuant
to
the
Loan
Agreement
is
subject
to
penalty
and
the
Company
is
required
to
pay
an
"end
of
term"
charge
of$390,000,
which
is
being
charged
to
interest
expense
(and
accreted
to
the
debt)
using
the
effective
interest
method
over
the
life
of
the
Loan
Agreement.
The
end
ofterm
fee
was
paid
in
full
as
required
in
January
2016.
Debt
issuance
fees
paid
to
the
lender
were
recorded
as
a
discount
on
the107





As
of
December
31,



Estimated
Useful
Life
(years)
Asset
Description
2015
2014






(in
thousands)

Lab
equipment
7
$3,957
$3,449
Furniture
and
fixtures
7

1,127

1,127
Computer
hardware
and
software
3
-
5

1,969

921
Office
equipment
7

65

65
Manufacturing
Equipment
7

980

669
Leasehold
improvements
lease
term

5,300

4,627




13,398

10,858
Less
accumulated
depreciation



(5,306)
(3,324)Fixed
assets,
net


$8,092
$7,534
Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)6.        Debt (Continued)debt
and
are
being
amortized
to
interest
expense
using
the
effective
interest
method
over
the
life
of
the
Loan
Agreement.
Debt
issuance
fees
paid
to
third
partieswere
capitalized
and
are
being
amortized
to
interest
expense
using
the
effective
interest
method
over
the
life
of
the
Loan
Agreement.













The
Loan
Agreement
also
contains
representations
and
warranties
by
us
and
the
lender
and
indemnification
provisions
in
favor
of
the
lender
and
customarycovenants
(including
limitations
on
other
indebtedness,
liens,
acquisitions,
investments
and
dividends,
but
no
financial
covenants),
and
events
of
default
(includingpayment
defaults,
breaches
of
covenants
following
any
applicable
cure
period,
a
material
impairment
in
the
perfection
or
priority
of
the
lender's
security
interest
orin
the
collateral,
and
events
relating
to
bankruptcy
or
insolvency).
Upon
the
occurrence
of
an
event
of
default,
a
default
interest
rate
of
an
additional
5%
may
beapplied
to
the
outstanding
loan
balances,
and
the
lender
may
terminate
its
lending
commitment,
declare
all
outstanding
obligations
immediately
due
and
payable,and
take
such
other
actions
as
set
forth
in
the
Loan
Agreement.
In
addition,
pursuant
to
the
Loan
Agreement,
the
lender
has
the
right
to
participate,
in
an
amount
ofup
to
$1.0
million,
in
certain
future
private
equity
financing(s)
by
the
Company.













In
conjunction
with
entering
into
the
original
Loan
Agreement
in
2012,
the
Company
granted
a
warrant
to
the
lender
to
purchase
shares
of
the
Company'scommon
stock.
Since
the
warrant
was
granted
in
conjunction
with
entering
into
the
Loan
Agreement,
the
relative
fair
value
of
the
warrant
was
recorded
as
equityand
debt
discount.
On
April
30,
2013,
the
lender
exercised
the
warrant
in
full.
The
debt
discount
is
being
amortized
to
interest
expense
over
the
term
of
the
relateddebt
using
the
effective
interest
method.













The
following
table
presents
the
components
of
the
Company's
debt
balance
as
of
December
31,
2015:108


December
31,
2015



(in
thousands)

Debt:



Notes
payable
$25,000
Accretion
of
end
of
term
charge

390
Issuance
fees
paid
to
lender

(250)Current
portion
of
long-term
debt

(3,113)Long-term
debt
$22,027
Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)6.        Debt (Continued)













Future
principal
repayments
of
the
Company's
long-term
debt
are
as
follows
(in
thousands):













The
estimated
fair
value
of
the
debt
(categorized
as
a
Level
2
liability
for
fair
value
measurement
purposes)
is
determined
using
current
market
factors
andthe
ability
of
the
Company
to
obtain
debt
at
comparable
terms
to
those
that
are
currently
in
place.
As
of
December
31,
2015
and
2014,
the
fair
value
of
theCompany's
debt
approximates
the
carrying
amount.7.        Stockholders' Equity              Common Stock —As
of
December
31,
2015,
the
Company
had
500,000,000
shares
of
common
stock
authorized
with
a
par
value
of
$0.01
and
61,813,995shares
of
common
stock
issued
and
outstanding.
In
addition,
as
of
December
31,
2015,
the
Company
had
reserved
5,273,722
shares
of
common
stock
for
issuanceupon
the
exercise
of
outstanding
common
stock
options
and
43,554
shares
of
common
stock
for
issuance
upon
the
vesting
of
restricted
stock
units.













On
December
15,
2014,
in
connection
with
the
Third
Amendment
to
the
Loan
Agreement,
the
Company
entered
into
a
stock
purchase
agreement
withHercules
pursuant
to
which
the
Company
issued
70,771
shares
of
its
common
stock,
at
a
price
of
$14.13
per
share
(the
closing
price
of
the
Company's
commonstock
as
reported
by
the
NASDAQ
Stock
Market
on
December
12,
2014),
for
an
aggregate
purchase
price
of
approximately
$1.0
million.
The
securities
sold
in
thisprivate
placement
have
not
been
registered
under
the
Securities
Act
of
1933,
as
amended
(the
"Act")
and
may
not
be
offered
or
sold
in
the
United
States
in
theabsence
of
an
effective
registration
statement
or
exemption
from
the
registration
requirements
under
the
Act.
The
issuance
of
the
securities
in
this
transaction
wereexempt
from
registration
under
Section
4(2)
of
the
Securities
Act
of
1933.













On
April
6,
2015,
the
Company
completed
an
underwritten
public
offering
of
11,500,000
shares
of
the
Company's
common
stock,
which
included
theunderwriter's
exercise
in
full
of
its
over-allotment
option
of
1,500,000
shares,
at
a
price
to
the
public
of
$20.65
per
share.
The
Company's
net
proceeds
from
the
saleof
the
shares,
after
deducting
the
underwriter's
discount
and
offering
expenses
of
$14.5
million,
were
$222.9
million.













On
August
18,
2014,
the
Company
completed
an
underwritten
public
offering
of
10,235,000
shares
of
the
Company's
common
stock,
which
included
theunderwriter's
exercise
in
full
of
its
over-allotment
option
of
1,335,000
shares,
at
a
price
to
the
public
of
$11.25
per
share.
The
Company's
net
proceeds
from
the
saleof
the
shares,
after
deducting
the
underwriter's
discount
and
offering
expenses
of
$7.1
million,
were
$108.0
million.













On
July
22,
2013,
the
Company
completed
an
underwritten
public
offering
of
6,900,000
shares
of
the
Company's
common
stock,
which
included
theunderwriter's
exercise
in
full
of
its
over-allotment109





Year
Ending
in
December
31:



2016
$2,873
2017

12,180
2018
(due
on
January
1,
2018)

9,947

$25,000
Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)7.        Stockholders' Equity (Continued)option
of
900,000
shares,
at
a
price
to
the
public
of
$10.40
per
share.
The
Company's
net
proceeds
from
the
sale
of
the
shares,
after
deducting
the
underwriter'sdiscount
and
offering
expenses
of
$4.7
million,
were
$67.0
million.              Preferred Stock —As
of
December
31,
2015
and
2014,
the
Company
had
200,000,000
shares
of
preferred
stock
authorized
with
a
par
value
of
$0.01
andno
shares
of
preferred
stock
were
issued
and
outstanding.              Warrant —In
conjunction
with
entering
into
the
Loan
Agreement
in
2012
(See
Note
6—Debt),
the
Company
granted
a
warrant
to
the
lender
to
purchase329,932
shares
of
the
Company's
common
stock
at
an
exercise
price
of
$2.94
per
share.
The
fair
value
of
the
warrant
of
$0.8
million
was
calculated
using
theBlack-Scholes
warrant-pricing
methodology
at
the
date
of
issuance
and
was
recorded
as
equity
and
as
a
discount
to
the
debt
and
was
amortized
to
interest
expenseover
the
term
of
the
related
debt
using
the
effective
interest
method.
On
April
30,
2013,
the
lender
exercised
the
warrant
in
full
via
the
"net
issuance"
methodspecified
in
the
warrant
agreement.
In
accordance
with
such
provisions,
the
Company
issued
and
delivered
223,431
shares
of
common
shares
to
the
lender
onMay
1,
2013.
As
a
result
of
the
exercise,
the
warrant
is
no
longer
outstanding
and
there
are
no
additional
shares
issuable
under
this
instrument.8.        Stock-Based Compensation













The
Company's
current
equity
compensation
plan,
the
2015
Incentive
Plan,
was
approved
by
shareholders
at
the
Company's
Annual
Meeting
ofShareholders
on
May
21,
2015.
The
2015
Incentive
Plan
is
administered
by
the
Compensation
Committee
and
the
Board
of
Directors
of
the
Company.
Under
theterms
of
the
2015
Incentive
Plan,
the
Company
is
authorized
to
grant
a
variety
of
incentive
awards
based
on
its
common
stock,
including
stock
options
(bothincentive
stock
options
and
non-qualified
stock
options),
performance
options/shares
and
other
stock
awards,
as
well
as
the
payment
of
incentive
bonuses
to
allemployees
and
non-employee
directors.
On
May
21,
2015,
5,000,000
shares
of
the
Company's
common
stock
were
authorized
and
as
of
December
31,
2015,
therewere
4,295,221
shares
remaining
for
future
grants
(or
issuances)
of
stock
options,
stock
appreciation
rights,
restricted
stock,
restricted
stock
units
and
incentivebonuses
under
the
2015
Incentive
Plan.
The
2015
Incentive
Plan
will
terminate
on
April
9,
2025
unless
it
is
extended
or
terminated
earlier
pursuant
to
its
terms.
Inaddition,
from
time
to
time,
the
Company
makes
inducement
grants
of
stock
options.
These
awards
are
made
pursuant
to
the
NASDAQ
inducement
grant
exceptionas
a
component
of
new
hires'
employment
compensation
in
connection
with
the
Company's
equity
grant
program.
During
the
year
ended
December
31,
2015,
theCompany
granted
227,000
inducement
stock
options
to
new
employees.













During
2013,
the
Company
had
three
equity
compensation
plans:
the
2013
Incentive
Plan,
the
Amended
and
Restated
2000
Stock
Incentive
Plan,
asamended
(the
"2000
Stock
Incentive
Plan")
and
the
Amended
and
Restated
2000
Employee
Stock
Purchase
Plan
(the
"Stock
Purchase
Plan").
Both
the
2000
StockIncentive
Plan
and
the
Stock
Purchase
Plan
were
adopted
by
the
Company's
Board
of
Directors
in
2000.
Upon
the
approval
of
the
2013
Incentive
Plan,
noadditional
awards
were
issued
under
the
2000
Stock
Incentive
Plan
and
the
shares
remaining
for
future
grant
under
the
2000
Stock
Incentive
Plan
were
transferredto
the
2013
Incentive
Plan.110Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)8.        Stock-Based Compensation (Continued)













During
the
first
quarter
of
2013,
the
Company
completed
a
review
of
equity
compensation
awards
granted
under
its
2000
Stock
Incentive
Plan
anddetermined
that
it
had
inadvertently
exceeded
the
annual
per-person
sub-limits
involving
certain
awards
previously
made
to
certain
of
its
current
and
past
officersand
directors
(the
"excess
awards").
The
aggregate
amount
of
common
stock
represented
by
these
excess
awards,
which
consisted
of
RSUs
and
stock
options,
wasapproximately
1.4
million
shares.
These
awards
were
deemed
to
be
granted
outside
of
the
2000
Stock
Incentive
Plan
and
as
such
the
Company
applied
liabilityaccounting
to
these
awards.
On
May
23,
2013
(the
date
of
the
Company's
2013
Annual
Meeting
of
Stockholders),
shareholders
approved
the
grants
associated
withthe
excess
awards,
which
as
of
this
date,
allowed
the
excess
awards
to
be
deemed
granted
under
the
2000
Stock
Incentive
Plan.
As
a
result,
the
excess
awards
werere-measured
at
fair
value
on
May
23,
2013
and
the
liability
was
reclassified
to
additional
paid-in
capital.
The
unrecognized
fair
value
calculated
for
the
excessawards
as
of
May
23,
2013
is
being
recognized
as
compensation
expense
ratably
over
the
remaining
requisite
service
period
for
each
award.              Stock Options —The
Company
calculates
the
fair
value
of
stock
options
granted
using
the
Black-Scholes
valuation
model.
The
Company
calculated
thefair
value
of
stock
options
granted
outside
of
the
2000
Stock
Incentive
Plan
using
liability
accounting.
These
awards
were
classified
as
a
liability
and
were
re-measured
at
fair
value
at
the
end
of
each
reporting
period
using
the
Black-Scholes
valuation
model
and
changes
in
fair
value
were
included
in
compensationexpense
in
the
Consolidated
Statements
of
Comprehensive
Loss
(see
additional
disclosures
related
to
stock
options
granted
outside
the
2000
Stock
Incentive
Plan
atthe
end
of
this
footnote).













The
following
table
summarizes
the
grant
date
fair
value
and
assumptions
used
in
determining
the
fair
value
of
all
stock
options
granted,
including
grantsof
inducement
shares,
during
the
years
ended
December
31,
2015,
2014
and
2013.













For
the
years
ended
December
31,
2015,
2014
and
2013,
the
volatility
factor
was
based
on
the
Company's
historical
volatility
since
the
closing
of
theMerger
on
December
1,
2010.
The
expected
life
was
determined
using
the
simplified
method
as
described
in
ASC
Topic
718,
"Accounting
for
StockCompensation",
which
is
the
midpoint
between
the
vesting
date
and
the
end
of
the
contractual
term.
The
risk-free
interest
rate
was
based
on
the
US
Treasury
yieldin
effect
at
the
date
of
grant.
Forfeitures
are
based
on
actual
percentage
of
option
forfeitures
since
the
closing
of
the
Merger
on
December
1,
2010,
and
this
is
thebasis
for
future
forfeiture
expectations.111


2015
2014
2013Volatility
78%
-
82%
83%
-
86%
86%
-
96%Risk-free
interest
rate
1.31%
-
1.75%
1.46%
-
1.83%
0.65%
-
1.65%Dividend
yield
0.0%
0.0%
0.0%Expected
option
term
(in
years)
6.25
6.25
6.25Weighted-average
fair
value
of
stock
optionsgranted
$14.20
$11.74
$8.16Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)8.        Stock-Based Compensation (Continued)













From
time
to
time,
the
Company
grants
performance-condition
options
to
certain
employees.
Vesting
of
these
options
is
subject
to
the
Company
achievingcertain
performance
criteria
established
at
the
date
of
grant
and
the
individuals
fulfilling
a
service
condition
(continued
employment).
As
of
December
31,
2015,
theCompany
had
performance
options
totaling
158,334
shares
outstanding.
As
a
result
of
the
Marketing
Authorization
Application
("MAA")
acceptance
forARIKAYCE,
which
was
received
from
the
European
Medicines
Agency
("EMA")
in
February
2015,
performance
options
totaling
$1.5
million
were
recorded
asnon-cash
compensation
expense
in
the
first
quarter
of
2015.













The
following
table
summarizes
stock
option
activity
for
stock
options
granted
under
the
2013
Incentive
Plan
and
the
2000
Stock
Incentive
Plan,
as
well
asgrants
of
inducement
shares,
for
the
years
ended
December
31,
2015,
2014
and
2013
as
follows:112


Number
of
Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life
in
Years
Aggregate
Intrinsic
Value
(in
'000)
Options
outstanding
at
January
1,
2013

1,817,839
$4.10






Granted

2,323,500

10.53






Exercised

(371,743)
4.37






Forfeited
and
expired

(136,600)
10.49






Options
outstanding
at
December
31,
2013

3,632,996

7.94






Vested
and
expected
to
vest
at
December
31,
2013

3,402,306

7.88






Exercisable
at
December
31,
2013

484,213

4.25






Options
outstanding
at
December
31,
2013

3,632,996
$7.94






Granted

1,600,452

16.10






Exercised

(283,057)
6.11






Forfeited
and
expired

(550,285)
11.42






Options
outstanding
at
December
31,
2014

4,400,106

10.59






Vested
and
expected
to
vest
at
December
31,
2014

3,891,511

10.32






Exercisable
at
December
31,
2014

1,235,710

6.90






Options
outstanding
at
December
31,
2014

4,400,106
$10.59






Granted

1,902,850

20.45






Exercised

(481,140)
10.62






Forfeited
and
expired

(548,094)
15.43






Options
outstanding
at
December
31,
2015

5,273,722

13.64

8.00
$29,699
Vested
and
expected
to
vest
at
December
31,
2015

5,059,645

13.46

7.96
$29,240
Exercisable
at
December
31,
2015

1,991,141

8.70

7.11
$19,128
Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)8.        Stock-Based Compensation (Continued)













The
total
intrinsic
value
of
stock
options
exercised
during
the
years
ended
December
31,
2015,
2014
and
2013
was
$4.7
million,
$2.5
million
and$2.7
million,
respectively.













As
of
December
31,
2015,
there
was
$26.9
million
of
unrecognized
compensation
expense
related
to
unvested
stock
options,
which
is
expected
to
berecognized
over
a
weighted
average
period
of
2.5
years.
Included
above
in
unrecognized
compensation
expense
was
$1.2
million
related
to
outstandingperformance-based
options.
The
following
table
summarizes
the
range
of
exercise
prices
and
the
number
of
stock
options
outstanding
and
exercisable
as
ofDecember
31,
2015:              Restricted Stock and Restricted Stock Units —The
Company
may
grant
Restricted
Stock
("RS")
and
Restricted
Stock
Units
("RSUs")
to
employees
andnon-employee
directors.
Each
RS
and
RSU
represents
a
right
to
receive
one
share
of
the
Company's
common
stock
upon
the
completion
of
a
specific
period
ofcontinued
service
or
achievement
of
a
certain
milestone.
RS
and
RSU
awards
granted
are
valued
at
the
market
price
of
the
Company's
common
stock
on
the
date
ofgrant.
The
Company
recognizes
noncash
compensation
expense
for
the
fair
values
of
these
RS
and
RSUs
on
a
straight-line
basis
over
the
requisite
service
period
ofthese
awards.113Outstanding
as
of
December
31,
2015
Exercisable
as
of
December
31,
2015
Range
of
Exercise
Prices
Number
of
Options
Weighted
Average
Remaining
Contractual
Term
(in
years)
Weighted
Average
Exercise
Price
Number
of
Options
Weighted
Average
Exercise
Price
$3.03
$3.29

153,878

5.62
$3.05

152,017
$3.05
$3.40
$3.40

708,314

6.69
$3.40

531,236
$3.40
$3.60
$6.90

583,542

6.90
$6.01

389,433
$5.90
$6.96
$12.44

693,090

7.37
$11.36

378,156
$11.35
$12.58
$14.20

527,974

8.36
$12.78

189,989
$12.76
$14.24
$16.07

768,900

8.48
$15.36

161,331
$14.46
$16.09
$20.49

782,624

8.46
$19.28

183,354
$19.52
$20.92
$22.14

106,300

9.14
$21.54

5,625
$21.54
$22.76
$22.76

793,000

9.38
$22.76

-



-


$22.84
$27.38

156,100

9.41
$23.76

-



-


Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)8.        Stock-Based Compensation (Continued)













The
following
table
summarizes
RSU
awards
granted
during
the
years
ended
December
31,
2015,
2014
and
2013:              Awards Granted Outside of the 2000 Stock Incentive Plan —As
described
above,
during
the
first
quarter
of
2013,
the
Company
completed
a
review
ofequity
compensation
awards
granted
under
its
2000
Stock
Incentive
Plan
and
determined
that
it
had
inadvertently
exceeded
the
annual
per-person
sub-limitsinvolving
certain
awards
previously
made
to
certain
of
its
current
and
past
officers
and
directors
(the
"excess
awards").
The
aggregate
amount
of
common
stockrepresented
by
these
excess
awards,
which
consisted
of
RSUs
and
stock
options,
was
approximately
1.4
million
shares.
These
awards
were
deemed
to
be
grantedoutside
of
the
2000
Stock
Incentive
Plan
and
as
such
the
Company
applied
liability
accounting
to
these
awards.
On
May
23,
2013
(the
date
of
the
Company's
2013Annual
Meeting
of
Stockholders),
shareholders
approved
the
grants
associated
with
the
excess
awards,
which
as
of
this
date,
allowed
the
excess
awards
to
bedeemed
granted
under
the
2000
Stock
Incentive
Plan.
As
a
result,
the
excess
awards
were
re-measured
at
fair
value
on
May
23,
2013
and
the
liability
wasreclassified
to
additional
paid-in
capital.
The
unrecognized
fair
value
calculated
for
the
excess
awards
as
of
May
23,
2013
is
being
recognized
as
compensationexpense
ratably
over
the
remaining
requisite
service
period
for
each
award.114


Number
of
RSU's
Weighted
Average
Grant
Price
Outstanding
at
January
1,
2013

215,525
$6.26
Granted

55,317

6.77
Released

(177,316)
6.42
Forfeited

(885)
5.00
Outstanding
at
December
31,
2013

92,641
$6.27
Granted

20,502

19.47
Released

(92,641)
6.27
Forfeited

-



-


Outstanding
at
December
31,
2014

20,502
$19.47
Granted

49,776

16.07
Released

(26,724)
18.68
Forfeited

-



-


Outstanding
at
December
31,
2015

43,554
$16.07
Expected
to
Vest

43,554
$16.07
Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)8.        Stock-Based Compensation (Continued)













The
following
table
summarizes
the
stock-based
compensation
recorded
in
the
Consolidated
Statements
of
Comprehensive
Loss
related
to
stock
optionsand
RSUs
during
the
years
ended
December
31,
2015,
2014
and
2013:9.        Income Taxes













The
benefit
for
income
taxes
was
$2.0
million,
$10.4
million
and
$1.2
million
and
the
effective
rates
were
approximately
2%,
12%
and
2%
for
the
yearsended
December
31,
2015,
2014
and
2013,
respectively.
The
benefit
for
income
taxes
recorded
and
the
effective
tax
rates
for
the
year
ended
December
31,
2015,2014
and
2013
primarily
reflect
the
reversal
of
valuation
allowances
previously
recorded
against
the
Company's
New
Jersey
State
net
operating
losses
("NOL")
thatresulted
from
the
Company's
sale
of
$24.3
million,
$110.5
million
and
$27.0
million
of
its
New
Jersey
State
NOLs
under
the
State
of
New
Jersey's
TechnologyBusiness
Tax
Certificate
Transfer
Program
(the
"Program")
for
cash
of
$2.0
million,
$10.4
million
and
$1.2
million,
respectively,
net
of
commissions.
The
Programallows
qualified
technology
and
biotechnology
businesses
in
New
Jersey
to
sell
unused
amounts
of
NOLs
and
defined
research
and
development
tax
credits
forcash.
In
2015,
the
Company
reached
the
lifetime
maximum
cap
of
NOLs
that
can
be
sold
to
the
State
of
New
Jersey.
Therefore
the
Company
will
no
longer
receivecash
proceeds
from
this
program
in
the
future.













The
Company
is
subject
to
US
federal
and
state
income
taxes
and
the
statute
of
limitations
for
tax
audit
is
open
for
the
federal
tax
returns
for
the
yearsended
2012
and
later,
and
is
generally
open
for
certain
states
for
the
years
2011
and
later.
The
Company's
US
federal
tax
return
for
the
year
ended
December
31,2013
is
currently
under
audit
by
the
Internal
Revenue
Service.
The
Company
has
incurred
net
operating
losses
since
inception,
except
for
the
year
endedDecember
31,
2009.
Such
loss
carryforwards
would
be
subject
to
audit
in
any
tax
year
in
which
those
losses
are
utilized,
notwithstanding
the
year
of
origin.













The
Company's
policy
is
to
recognize
interest
accrued
related
to
unrecognized
tax
benefits
and
penalties
in
income
tax
expense.
The
Company
hasrecorded
no
such
expense.
As
of
December
31,
2015
and
2014,
the
Company
has
recorded
no
reserves
for
unrecognized
income
tax
benefits,
nor
has
it
recordedany
accrued
interest
or
penalties
related
to
uncertain
tax
positions.
The
Company
does
not115





2015
2014
2013






(in
millions)

Research
and
development
expenses


$4.0
$4.5
$2.4
General
and
administrative
expenses



11.6

6.8

6.3

Total(1)
$15.6
$11.3
$8.7
(1)Includes
$2.3
million,
$2.4
million
and
$4.1
million
for
the
years
ended
December
31,
2015,
2014
and
2013,
respectively,
forthe
remeasurement
of
certain
stock
options
and
RSUs
that
occurred
during
May
2013.Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)9.        Income Taxes (Continued)anticipate
any
material
changes
in
the
amount
of
unrecognized
tax
positions
over
the
next
twelve
months.













For
the
year
ended
December
31,
2015,
the
Company
was
also
subject
to
foreign
income
taxes
as
a
result
of
new
legal
entities
established
for
activities
inEurope.
The
Company's
loss
before
income
taxes
was
generated
in
the
US
and
globally
as
follows
(in
thousands):













The
Company's
income
tax
provision
/
(benefit)
consisted
of
the
following
(in
thousands):116


Years
ended
December
31,



2015
2014
2013
US
$(100,278)$(89,581)$(57,294)Foreign

(19,876)
-

-
Total
$(120,154)$(89,581)$(57,294)


Years
ended
December
31,



2015
2014
2013
Current:









Federal
$-
$-
$-
State

(2,015)
(10,422)
(1,221)Foreign

44

-

-


(1,971)
(10,422)
(1,221)Deferred:









Federal

-

-

-
State

-

-

-
Foreign

-

-

-


-

-

-
Total
$(1,971)$(10,422)$(1,221)Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)9.        Income Taxes (Continued)













The
reconciliation
between
the
federal
statutory
tax
rate
of
34%
and
the
Company's
effective
tax
rate
is
as
follows:













Deferred
tax
assets
and
liabilities
are
determined
based
on
the
difference
between
financial
statement
and
tax
bases
using
enacted
tax
rates
in
effect
for
theyear
in
which
the
differences
are
expected
to
reverse.
The
components
of
the
deferred
tax
assets
and
liabilities
consist
of
the
following:













The
net
deferred
tax
assets
(prior
to
applying
the
valuation
allowance)
of
$216.2
million
and
$163.9
million
at
December
31,
2015
and
2014,
respectively,primarily
consist
of
net
operating
loss
carryforwards
for
income
tax
purposes.
Due
to
the
Company's
history
of
operating
losses,
the
Company
recorded
a
fullvaluation
allowance
on
its
net
deferred
tax
assets
by
increasing
the
valuation
allowance
by
$52.3
million
and
$15.8
million
in
2015
and
2014,
respectively,
as
it
ismore
likely
than
not
that
such
tax
benefits
will
not
be
realized.117


Years
EndedDecember
31,



2015
2014
2013
Statutory
federal
tax
rate

34%
34%
34%Permanent
items

(4)%
(3)%
0%State
income
taxes,
net
of
federal
benefit

4%
(7)%
7%R&D
and
other
tax
credits

12%
5%
7%Foreign
income
taxes

(1)%
0%
0%Change
in
state
tax
rate

0%
0%
2%Change
in
valuation
allowance

(43)%
(17)%
(49)%Other

0%
0%
1%Effective
tax
rate

2%
12%
2%


As
of
December
31,



2015
2014



(in
thousands)

Deferred
tax
assets:






Net
operating
loss
carryforwards
$195,052
$160,758
General
business
credits

33,360

18,150
Alternative
minimum
tax
(AMT)
credit

418

418
Other

10,569

7,863
Gross
deferred
tax
assets
$239,399
$187,189
Deferred
tax
liabilities:






In-process
research
and
development
$(23,245)$(23,245)Deferred
tax
liabilities
$(23,245)$(23,245)Net
deferred
tax
assets
$216,154
$163,944
Valuation
allowance

(216,154)
(163,944)Net
deferred
tax
assets
$-
$-
Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)9.        Income Taxes (Continued)













At
December
31,
2015,
the
Company
had
federal
net
operating
loss
carryforwards
for
income
tax
purposes
of
approximately
$538.7
million.
Due
to
thelimitation
on
NOLs
as
more
fully
discussed
below,
$360.4
million
of
the
NOLs
are
available
to
offset
future
taxable
income,
if
any.
The
NOL
carryovers
andgeneral
business
tax
credits
expire
in
various
years
beginning
in
2018.
For
state
tax
purposes,
the
Company
has
approximately
$115.9
million
of
New
Jersey
NOLsavailable
to
offset
against
future
taxable
income
or
to
be
sold
as
part
of
the
New
Jersey
Transfer
Program.
The
Company
also
has
California
and
Virginia
NOLsthat
are
entirely
limited
due
to
Section
382
(as
discussed
below),
in
addition
to
changing
state
apportionment
allocations,
as
the
Company
is
now
100%
resident
inNew
Jersey.













During
2014,
the
Company
completed
an
Internal
Revenue
Code
Section
382
("Section
382")
analysis
in
order
to
determine
the
amount
of
losses
that
arecurrently
available
for
potential
offset
against
future
taxable
income,
if
any.
It
was
determined
that
the
utilization
of
the
Company's
NOL
and
general
business
taxcredit
carryforwards
generated
in
tax
periods
up
to
and
including
December
2010
(the
"December
2010
and
prior
NOLs")
were
subject
to
substantial
limitationsunder
Section
382
due
to
ownership
changes
that
occurred
at
various
points
from
the
Company's
original
organization
through
December
2010.
In
general,
anownership
change,
as
defined
by
Section
382,
results
from
transactions
increasing
the
ownership
of
certain
shareholders
or
public
groups
in
the
stock
of
acorporation
by
more
than
50
percentage
points
over
a
three-year
period.
Since
the
Company's
formation,
it
has
raised
capital
through
the
issuance
of
common
stockon
several
occasions
which,
combined
with
the
purchasing
shareholders'
subsequent
disposition
of
those
shares,
resulted
in
multiple
changes
in
ownership,
asdefined
by
Section
382
since
the
Company's
formation
in
1999.
These
ownership
changes
resulted
in
substantial
limitations
on
the
use
of
the
Company's
NOLs
andgeneral
business
tax
credit
carryforwards
up
to
and
including
December
2010.
The
Company
continues
to
track
all
of
its
NOLs
and
tax
credit
carryforwards
but
hasprovided
a
full
valuation
allowance
to
offset
those
amounts.10.        License and Collaboration AgreementsIn-License Agreements              PARI Pharma GmbH —In
April
2008,
the
Company
entered
into
a
licensing
agreement
with
PARI
Pharma
GmbH
("PARI")
for
use
of
the
optimizedeFlow
Nebulizer
System
for
delivery
of
ARIKAYCE
in
treating
patients
with
NTM
infections,
CF
and
bronchiectasis.
The
Company
has
rights
to
several
US
andforeign
issued
patents
and
patent
applications
involving
improvements
to
the
optimized
eFlow
Nebulizer
System.
Under
the
licensing
agreement,
PARI
is
entitledto
receive
payments
either
in
cash,
qualified
stock
or
a
combination
of
both,
at
PARI's
discretion,
based
on
achievement
of
certain
future
milestone
events
includingfirst
acceptance
of
MAA
submission
(or
equivalent)
in
the
US
of
ARIKAYCE
and
the
device,
first
receipt
of
marketing
approval
in
the
US
for
ARIKAYCE
and
thedevice,
and
first
receipt
of
marketing
approval
in
a
major
EU
country
for
ARIKAYCE
and
the
device.
In
addition,
PARI
is
entitled
to
receive
royalty
payments
inthe
mid-single
digits
on
commercial
net
sales
of
ARIKAYCE,
subject
to
certain
specified
annual
minimum
royalties.
See
below
for
information
related
to
thecommercialization
agreement
with
PARI.118Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)10.        License and Collaboration Agreements (Continued)              Respironics —In
November
2015,
the
Company
entered
into
an
agreement
with
Respironics
Inc.,
a
division
of
Philips
(Respironics),
for
the
clinical
supplyof
devices
to
be
used
in
the
development
of
INS1009
for
PAH.
The
agreement
calls
for
payments
to
Respironics
upon
the
achievement
of
certain
clinicalmilestones
relating
to
the
development
of
INS1009
aggregating
$7.6
million.
In
addition,
the
Company
will
be
required
to
pay
a
royalty
on
net
sales
of
the
product,if
any.Out-License Agreements              Eleison —In
February
2011,
the
Company
entered
into
an
agreement
with
Eleison
Pharmaceuticals
whereby
it
granted
Eleison
an
exclusive
license
forCISPLATIN
Lipid
Complex.
The
license
gives
Eleison
the
right
to
develop,
manufacture
and
commercialize
CISPLATIN
Lipid
Complex.
Payments
totaling$1.0
million
were
received
in
2011
and
were
recorded
as
license
fee
revenue.              Premacure (now Shire plc) —In
May
2012,
the
Company
entered
into
an
agreement
with
Premacure
(now
Shire
plc)
pursuant
to
which
the
Companygranted
to
Premacure
an
exclusive,
worldwide
license
to
develop,
manufacture
and
commercialize
IGF-1,
with
its
natural
binding
protein,
IGFBP-3,
for
theprevention
and
treatment
of
complications
of
preterm
birth
in
exchange
for
royalty
payments
on
commercial
sales
of
IGF-1
(the
"Premacure
License
Agreement").In
March
2013,
the
Company
amended
the
Premacure
License
Agreement
to
provide
Premacure
with
the
option,
exercisable
by
Premacure
any
time
prior
toApril
30,
2013,
to
pay
the
Company
$11.5
million
(the
"Buyout
Amount")
and
assume
any
of
the
Company's
royalty
obligations
to
other
parties
in
exchange
for
afully
paid
license.
On
April
29,
2013,
Premacure
exercised
this
option
and
paid
the
Company
$11.5
million
in
exchange
for
a
fully
paid
license.
The
Companyrecorded
this
payment
as
other
revenue
in
the
three
months
ended
June
30,
2013.
The
Company
is
not
entitled
to
any
additional
future
royalties
from
Premacure,and
Premacure
has
assumed
the
Company's
royalty
obligations
to
other
parties
under
the
Premacure
License
Agreement.Collaboration Agreements              Cystic Fibrosis Foundation Therapeutics, Inc. —In
2004
and
2009,
the
Company
entered
into
research
funding
agreements
with
Cystic
FibrosisFoundation
Therapeutics,
Inc.
(CFFT)
whereby
it
received
$1.7
million
and
$2.2
million
for
each
respective
agreement
in
research
funding
for
the
development
ofits
ARIKAYCE
product.
If
ARIKAYCE
becomes
an
approved
product
for
CF
in
the
US,
the
Company
will
owe
payments
totaling
up
to
$13.4
million
to
CFFT
thatwould
be
payable
over
a
three-year
period
after
approval
as
a
commercialized
drug
in
the
US.
Furthermore,
if
certain
global
sales
milestones
are
met
within
5
yearsof
the
drug
commercialization,
the
Company
would
owe
an
additional
payment
of
$3.9
million.
Since
there
is
significant
development
risk
associated
withARIKAYCE,
the
Company
has
not
accrued
these
obligations.              Therapure Biopharma Inc. —In
February
2014,
the
Company
entered
into
a
Contract
Manufacturing
Agreement
with
Therapure
Biopharma
Inc.("Therapure")
for
the
manufacture
of
the
Company's
product
ARIKAYCE.
Pursuant
to
the
agreement,
the
Company
and
Therapure
collaborated
to
construct
aproduction
area
for
the
manufacture
of
ARIKAYCE
in
Therapure's
existing
manufacturing
facility
in
Mississauga,
Ontario,
Canada.
Therapure
manufacturesARIKAYCE
for
the119Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)10.        License and Collaboration Agreements (Continued)Company
on
a
non-exclusive
basis.
The
agreement
has
an
initial
term
of
five
years
from
the
first
date
on
which
Therapure
delivers
ARIKAYCE
to
Insmed
afterInsmed
obtains
permits
related
to
the
manufacture
of
ARIKAYCE,
and
will
renew
automatically
for
successive
periods
of
two
years
each,
unless
terminated
byeither
party
by
providing
the
required
two
years'
prior
written
notice
to
the
other
party.
Notwithstanding
the
foregoing,
the
parties
have
rights
and
obligations
underthe
agreement
prior
to
the
commencement
of
the
initial
term.
Under
the
agreement,
the
Company
is
obligated
to
pay
certain
minimum
amounts
for
the
batches
ofARIKAYCE
produced
each
calendar
year.
The
agreement
allows
for
termination
by
either
party
upon
the
occurrence
of
certain
events,
including
(i)
the
materialbreach
by
the
other
party
of
any
provision
of
the
agreement
or
the
quality
agreement
expected
to
be
entered
into
between
the
parties,
or
(ii)
the
default
orbankruptcy
of
the
other
party.
In
addition,
the
Company
may
terminate
the
agreement
for
any
reason
upon
no
fewer
than
one
hundred
eighty
days'
advance
notice.Costs
incurred
under
this
agreement
will
be
recorded
as
a
component
of
research
and
development
expense
until
such
time
as
the
Company
receives
regulatoryapprovals
for
ARIKAYCE.              PARI Pharma GmbH —In
July
2014,
the
Company
entered
into
a
Commercialization
Agreement
with
PARI
for
the
manufacture
and
supply
of
eFlownebulizer
device
as
optimized
for
use
with
the
Company's
proprietary
liposomal
amikacin
for
inhalation.
The
agreement
has
an
initial
term
of
fifteen
years
from
thefirst
commercial
sale
of
ARIKAYCE
pursuant
to
the
licensing
agreement
(the
"Initial
Term").
The
term
of
the
agreement
may
be
extended
by
the
Company
for
anadditional
five
years
by
providing
written
notice
to
PARI
at
the
least
one
year
prior
to
the
expiration
of
the
Initial
Term.
Notwithstanding
the
foregoing,
the
partieshave
certain
rights
and
obligations
under
the
agreement
prior
to
the
commencement
of
the
Initial
Term.
The
agreement
allows
for
termination
by
either
party
uponthe
occurrence
of
certain
events,
including
(i)
the
material
breach
by
the
other
party
of
any
provision
of
the
agreement,
(ii)
the
default
or
bankruptcy
of
the
otherparty,
or
(iii)
in
limited
circumstances,
upon
termination
by
the
Company
of
the
License
Agreement
between
the
parties.              SynteractHCR, Inc. —In
December
2014,
the
Company,
entered
into
Work
Order
1,
pursuant
to
a
Master
Agreement
for
services
with
SynteractHCR,
Inc.,("Synteract")
dated
as
of
August
27,
2014,
as
amended
on
December
23,
2014,
pursuant
to
which
the
Company
retained
Synteract
to
perform
implementation
andmanagement
services
in
connection
with
certain
clinical
trials
pursuant
to
a
specific
protocol
of
pharmaceutical
products
under
development
by
or
under
the
controlof
the
Company.
Synteract
is
providing
comprehensive
services
for
the
212
study.
In
April
2015,
the
Company
entered
into
a
work
order
with
Synteract
to
performimplementation
and
management
services
for
protocol
INS-312,
a
study
in
which
all
non-converters
from
the
212
study
will
be
eligible
to
enter
a
separate
open-label
study.              Ajinomoto Althea, Inc. —In
September
2015,
the
Company
entered
into
a
Commercial
Fill/Finish
Services
Agreement
(the
"Fill/Finish
Agreement")
withAjinomoto
Althea,
Inc.,
a
Delaware
corporation
("Althea"),
for
Althea
to
produce,
on
a
non-exclusive
basis,
ARIKAYCE
in
finished
dosage
form.
Under
theFill/Finish
Agreement,
the
Company
is
obligated
to
pay
a
minimum
of
$2.7
million
for
the
batches
of
ARIKAYCE
produced
each
calendar
year
during
the
term
ofthe
Fill/Finish
Agreement.
The
Fill/Finish
Agreement
is
effective
as
of
January
1,
2015,
has
an
initial
term
that
ends
on
December
31,
2017
and
may
be
extendedfor
additional
two
year
periods
upon
mutual
written
agreement
of
the
Company
and
Althea
at
least
one
year
prior
to
the
expiration
of
its
then-current
term.120Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)11.        Commitments and ContingenciesCommitments













The
Company
has
an
operating
lease
for
office
and
laboratory
space
located
in
Bridgewater,
NJ
for
which
the
initial
lease
term
expires
in
November
2019.Future
minimum
rental
payments
under
this
lease
are
$3.8
million.
The
Company
also
leases
office
space
in
Richmond,
VA,
where
the
Company's
corporateheadquarters
were
previously
located,
through
October
2016.
Future
minimum
rental
payments
under
this
lease
total
approximately
$0.4
million.
During
2011,
theCompany
recorded
a
net
present
value
charge
of
$1.2
million
in
general
and
administrative
expenses
associated
with
vacating
the
Richmond
facility.
In
December2014,
the
Company
entered
into
an
agreement
to
sublet
this
space
for
the
remainder
of
the
lease
term.













Rent
expense
charged
to
operations,
net
of
rental
income
recorded,
was
$0.8
million,
$1.3
million,
and
$1.0
million
for
the
years
ended
December
31,2015,
2014
and
2013,
respectively.
Rent
expense
is
recorded
on
a
straight-line
basis
over
the
term
of
the
applicable
leases.
Future
minimum
rental
cash
paymentsrequired
under
the
Company's
operating
leases
as
of
December
31,
2015
are
as
follows
(in
thousands):Legal
Proceedings













From
time
to
time,
the
Company
is
a
party
to
various
other
lawsuits,
claims
and
other
legal
proceedings
that
arise
in
the
ordinary
course
of
business.
Whilethe
outcomes
of
these
matters
are
uncertain,
management
does
not
expect
that
the
ultimate
costs
to
resolve
these
matters
will
have
a
material
adverse
effect
on
theCompany's
consolidated
financial
position,
results
of
operations
or
cash
flows.121Year
Ending
in
December
31:



2016
$1,271
2017

996
2018

1,025
2019

964
2020

-

$4,256
Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)12.        Quarterly Financial Data (Unaudited)













The
following
table
summarizes
unaudited
quarterly
financial
data
for
the
years
ended
December
31,
2015
and
2014
(in
thousands,
except
per
share
data).















Basic
and
diluted
net
loss
per
share
amounts
included
in
the
above
table
were
computed
independently
for
each
of
the
quarters
presented.
Accordingly,
thesum
of
the
quarterly
basic
and
diluted
net
loss
per
share
amounts
may
not
agree
to
the
total
for
the
year.13.        Retirement Plan













The
Company
has
a
401(k)
defined
contribution
plan
for
the
benefit
for
all
US
employees
and
permits
voluntary
contributions
by
employees
subject
toIRS-imposed
limitations.
Beginning
in
April
2015,
the
Company
matches
100%
of
eligible
employee
contributions
on
the
first
3%
of
employee
salary
(up
to
theIRS
maximum).
Employer
contributions
for
the
year
ended
December
31,
2015
were
$0.4
million.
There
were
no
employer
contributions
in
2014
and
2013.122


2015



First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Revenues
$-
$-
$-
$-
$-
Operating
loss
$(26,706)$(27,952)$(30,245)$(32,590)$(117,493)Net
loss
$(27,369)$(28,607)$(30,962)$(31,245)$(118,183)Basic
and
diluted
net
loss
per
share
$(0.55)$(0.47)$(0.50)$(0.51)$(2.02)


2014



First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Revenues
$-
$-
$-
$-
$-
Operating
loss
$(18,079)$(22,816)$(23,404)$(23,066)$(87,365)Net
loss
$(14,298)$(23,224)$(23,990)$(17,647)$(79,159)Basic
and
diluted
net
loss
per
share
$(0.36)$(0.59)$(0.54)$(0.36)$(1.84)Table
of
ContentsEXHIBIT
INDEX
123
2.1
Agreement
and
Plan
of
Merger,
dated
December
1,
2010,
among
Insmed
Incorporated,
River
Acquisition
Co.,Transave,
LLC
Transave,
Inc.
and
TVM
V
Life
Science
Ventures
GmbH
&
Co.
KG
(incorporated
by
reference
fromExhibit
2.1
to
Insmed
Incorporated's
Current
Report
on
Form
8-K
filed
on
December
2,
2010
(SEC
file
no.
000-30739)).
3.1
Articles
of
Incorporation
of
Insmed
Incorporated,
as
amended
through
June
14,
2012
(incorporated
by
reference
fromExhibit
3.1
to
Insmed
Incorporated's
Annual
Report
on
Form
10-K
filed
on
March
18,
2013).
3.2
Amended
and
Restated
Bylaws
of
Insmed
Incorporated
(incorporated
by
reference
from
Exhibit
3.1
to
InsmedIncorporated's
Quarterly
Report
on
Form
10-Q
filed
on
August
6,
2015).
4.1
Specimen
stock
certificate
representing
common
stock,
$0.01
par
value
per
share,
of
the
Registrant
(incorporated
byreference
from
Exhibit
4.2
to
Insmed
Incorporated's
Registration
Statement
on
Form
S-4/A
(Registration
No.
333-30098)
filed
on
March
24,
2000).
10.1**
Insmed
Incorporated
Amended
and
Restated
2000
Stock
Incentive
Plan
(incorporated
by
reference
from
Exhibit
10.3to
Insmed
Incorporated's
Form
10-Q
filed
on
May
7,
2013).
10.2**
Insmed
Incorporated
2013
Incentive
Plan
(incorporated
by
reference
from
Exhibit
99.1
to
Insmed
Incorporated'sRegistration
Statement
on
Form
S-8
filed
on
May
24,
2013).
10.3**
Insmed
Incorporated
2015
Incentive
Plan
(incorporated
by
reference
from
Exhibit
99.1
to
Insmed
Incorporated'sRegistration
Statement
on
Form
S-8
filed
on
May
28,
2015).
10.4**
Form
of
Award
Agreement
for
Restricted
Stock
Units
issued
to
employees
pursuant
to
the
Insmed
Incorporated
2013Incentive
Plan
(incorporated
by
reference
from
Exhibit
10.3
to
Insmed
Incorporated's
Form
10-K
filed
on
March
6,2014).
10.5**
Form
of
Award
Agreement
for
Restricted
Stock
Units
issued
to
directors
pursuant
to
the
Insmed
Incorporated
2013Incentive
Plan
(incorporated
by
reference
from
Exhibit
10.4
to
Insmed
Incorporated's
Form
10-K
filed
on
March
6,2014).
10.6**
Form
of
Award
Agreement
for
an
Incentive
Stock
Option
pursuant
to
the
Insmed
Incorporated
2013
Incentive
Plan(incorporated
by
reference
from
Exhibit
10.5
to
Insmed
Incorporated's
Form
10-K
filed
on
March
6,
2014).
10.7**
Form
of
Award
Agreement
for
a
Non-Qualified
Stock
Option
pursuant
to
the
Insmed
Incorporated
2013
IncentivePlan
(incorporated
by
reference
from
Exhibit
10.6
to
Insmed
Incorporated's
Form
10-K
filed
on
March
6,
2014).
10.8**
Employment
Agreement,
dated
December
2,
2010,
between
Insmed
Incorporated
and
Dr.
Renu
Gupta
(incorporatedby
reference
from
Exhibit
10.4
to
Insmed
Incorporated's
Current
Report
on
Form
8-K
filed
on
February
1,
2011).Table
of
Contents124
10.9**
Transition
and
Separation
Agreement,
dated
March
26,
2014
and
effective
as
of
April
16,
2014,
between
InsmedIncorporated
and
Renu
Gupta,
M.D.
(incorporated
by
reference
from
Exhibit
10.3
to
Insmed
Incorporated's
Form
10-Q
filed
on
May
8,
2014).
10.10**
Employment
Agreement,
effective
as
of
September
10,
2012,
between
Insmed
Incorporated
and
William
Lewis(incorporated
by
reference
from
Exhibit
10.1
to
Insmed
Incorporated's
Current
Report
on
Form
8-K
filed
onSeptember
11,
2012).
10.11**
Employment
Agreement,
effective
as
of
November
7,
2012,
between
Insmed
Incorporated
and
Andrew
Drechsler(incorporated
by
reference
from
Exhibit
10.1
to
Insmed
Incorporated's
Current
Report
on
Form
8-K
filed
onNovember
7,
2012).
10.12
Loan
and
Security
Agreement,
dated
as
of
June
29,
2012,
by
and
between
Insmed
Incorporated
and
its
domesticsubsidiaries
and
Hercules
Technology
Growth
Capital,
Inc.
(incorporated
by
reference
from
Exhibit
10.1
to
InsmedIncorporated's
Current
Report
on
Form
8-K
filed
on
July
2,
2012).
10.12.1
Amendment
No.
1
to
Loan
and
Security
Agreement,
dated
as
of
July
24,
2012,
by
and
between
Insmed
Incorporatedand
its
domestic
subsidiaries
and
Hercules
Technology
Growth
Capital,
Inc.
(filed
herewith).
10.12.2
Amendment
No.
2
to
Loan
and
Security
Agreement,
dated
as
of
November
25,
2013,
by
and
between
InsmedIncorporated
and
its
domestic
subsidiaries
and
Hercules
Technology
Growth
Capital,
Inc.
(filed
herewith).
10.12.3
Amendment
No.
3
to
Loan
and
Security,
dated
as
of
December
15,
2014,
by
and
among
Insmed
Incorporated
and
itsdomestic
subsidiaries
and
Hercules
Technology
Growth
Capital,
Inc.,
Hercules
Capital
Funding
Trust
2012-1
andHercules
Capital
Funding
Trust
2014-1
(incorporated
by
reference
from
Exhibit
10.27
to
Insmed
Incorporated'sAnnual
Report
on
Form
10-K
filed
February
27,
2015).
10.12.4
Amendment
No.
4
to
Loan
and
Security
Agreement,
dated
as
of
June
9,
2015,
by
and
among
Insmed
Incorporatedand
its
domestic
subsidiaries
and
Hercules
Technology
Growth
Capital,
Inc.,
Hercules
Capital
Funding
Trust
2012-1and
Hercules
Capital
Funding
Trust
2014-1
(filed
herewith).
10.12.5
Amendment
No.
5
to
Loan
and
Security
Agreement,
dated
as
of
December
22,
2015,
by
and
among
InsmedIncorporated
and
its
domestic
subsidiaries
and
Hercules
Technology
Growth
Capital,
Inc.,
Hercules
Capital
FundingTrust
2012-1
and
Hercules
Capital
Funding
Trust
2014-1
(filed
herewith).
10.13+
Settlement,
license
and
development
agreement,
dated
March
5,
2007,
between
Insmed
Incorporated,
InsmedTherapeutic
Proteins,
Inc.,
Celtrix
Pharmaceuticals,
Tercica
Inc.,
and
Genentech,
Inc.
(incorporated
by
referencefrom
Exhibit
10.1
to
Insmed
Incorporated's
Quarterly
Report
on
10-Q
filed
on
May
10,
2007
(SEC
file
no.
000-30739)).
10.14+
License
agreement,
dated
April
25,
2008,
between
Transave,
Inc.
and
PARI
Pharma
GmbH,
and
Amendments
No.
1-4
thereto
(incorporated
by
reference
from
Exhibit
10.22
to
Insmed
Incorporated's
Annual
Report
on
Form
10-K
filedon
March
18,
2013).Table
of
Contents125
10.14.1*
Amendment
No.
5
to
License
Agreement
between
Transave,
Inc.
and
PARI
Pharma
GmbH,
effective
as
ofOctober
5,
2015
(filed
herewith).
10.14.2*
Amendment
No.
6
to
License
Agreement
between
Transave,
Inc.
and
PARI
Pharma
GmbH,
effective
as
ofOctober
9,
2015
(filed
herewith).
10.15**
Employment
Agreement,
effective
as
of
July
29,
2013,
between
Insmed
Incorporated
and
Christine
Pellizzari(incorporated
by
reference
from
Exhibit
10.1
to
Insmed
Incorporated's
Form
10-Q
filed
on
November
5,
2013).
10.16**
Insmed
Incorporated
Senior
Executive
Bonus
Plan
(incorporated
by
reference
from
Exhibit
10.2
to
InsmedIncorporated's
Form
10-Q
filed
on
November
5,
2013).
10.17
Lease,
dated
December
31,
2013,
between
Denver
Road,
LLC
and
Insmed
Incorporated
(incorporated
by
referencefrom
Exhibit
10.1
to
Insmed
Incorporated's
Current
Report
on
Form
8-K
filed
on
January
3,
2014).
10.17.1
First
Amendment
to
Lease,
dated
April
29,
2014,
between
Denver
Road,
LLC
and
Insmed
Incorporated
(filedherewith).
10.17.2
Second
Amendment
to
Lease,
dated
November
20,
2015,
between
Denver
Road,
LLC
and
Insmed
Incorporated(filed
herewith).
10.18
Form
of
Indemnification
Agreement
entered
into
with
each
of
the
Company's
directors
and
officers
(incorporated
byreference
from
Exhibit
10.1
to
Insmed
Incorporated's
Current
Report
on
Form
8-K
filed
on
January
16,
2014).
10.19+
Contract
Manufacturing
Agreement,
dated
February
7,
2014,
between
Insmed
Incorporated
and
TherapureBiopharma
Inc.
(incorporated
by
reference
from
Exhibit
10.1
to
Insmed
Incorporated's
Form
10-Q
filed
on
May
8,2014).
10.20+
Amending
Agreement,
dated
March
13,
2014,
between
Insmed
Incorporated
and
Therapure
Biopharma
Inc.(incorporated
by
reference
from
Exhibit
10.2
to
Insmed
Incorporated's
Form
10-Q
filed
on
May
8,
2014).
10.21+
Commercialization
Agreement
dated
July
8,
2014
between
Insmed
Incorporated
and
PARI
Pharma
GmbH(incorporated
by
reference
from
Exhibit
10.1
to
Insmed
Incorporated's
Form
10-Q
filed
on
November
6,
2014).
10.22
Stock
Purchase
Agreement,
dated
as
of
December
15,
2014,
by
and
between
Insmed
Incorporated
and
HerculesTechnology
Growth
Capital,
Inc.
(incorporated
by
reference
from
Exhibit
10.28
to
Insmed
Incorporated's
Form
10-Kfiled
on
February
27,
2015).
10.23+
Master
Agreement
for
Services,
dated
as
of
August
27,
2014,
by
and
between
Insmed
Incorporated
andSynteractHCR,
Inc.
(incorporated
by
reference
from
Exhibit
10.29
to
Insmed
Incorporated's
Form
10-K
filed
onFebruary
27,
2015).
10.24+
Work
Order
1,
dated
as
of
December
30,
2014,
by
and
between
Insmed
Incorporated
and
SynteractHCR,
Inc.(incorporated
by
reference
from
Exhibit
10.30
to
Insmed
Incorporated's
Form
10-K
filed
on
February
27,
2015).Table
of
Contents+The
Securities
and
Exchange
Commission
has
granted
confidential
treatment
with
respect
to
certain
information
in
these
exhibits.
The
confidential
portionsof
these
exhibits
have
been
omitted
and
filed
separately
with
the
Securities
and
Exchange
Commission.126
10.25**
Employment
Agreement,
effective
as
of
February
18,
2014,
between
Insmed
Incorporated
and
Peggy
Berry(incorporated
by
reference
from
Exhibit
10.1
to
Insmed
Incorporated's
Form
10-Q
filed
on
May
7,
2015).
10.26**
Employment
Agreement,
effective
as
of
January
2,
2013,
between
Insmed
Incorporated
and
S.
Nicole
Schaeffer(incorporated
by
reference
from
Exhibit
10.2
to
Insmed
Incorporated's
Form
10-Q
filed
on
May
7,
2015).
10.27+
Commercial
Fill/Finish
Services
Agreement
between
Insmed
Incorporated
and
Ajinomoto
Althea,
Inc.,
dated
as
ofSeptember
15,
2015
(incorporated
by
reference
from
Exhibit
10.1
to
Insmed
Incorporated's
Form
10-Q
filedNovember
6,
2015).
21.1
Subsidiaries
of
Insmed
Incorporated
(filed
herewith).
23.1
Consent
of
Ernst
&
Young
LLP
(filed
herewith).
31.1
Certification
of
William
H.
Lewis,
Chief
Executive
Officer
of
Insmed
Incorporated,
pursuant
to
Rules
13a-
14(a)
and15d-14(a)
promulgated
under
the
Securities
Exchange
Act
of
1934,
as
adopted
pursuant
to
Section
302
of
theSarbanes
Oxley
Act
of
2003
(filed
herewith).
31.2
Certification
of
William
H.
Lewis,
Chief
Executive
Officer
of
Insmed
Incorporated,
pursuant
to
18
USCSection
1350,
as
adopted
pursuant
to
Section
906
of
the
Sarbanes
Oxley
Act
of
2003
(filed
herewith).
32.1
Certification
of
Andrew
T.
Drechsler,
Chief
Financial
Officer
(Principal
Financial
and
Accounting
Officer)
ofInsmed
Incorporated,
pursuant
to
Rules
13a-14(a)
and
15d-14(a)
promulgated
under
the
Securities
Exchange
Act
of1934,
as
adopted
pursuant
to
Section
302
of
the
Sarbanes
Oxley
Act
of
2003
(filed
herewith).
32.2
Certification
of
Andrew
T.
Drechsler,
Chief
Financial
Officer
(Principal
Financial
and
Accounting
Officer)
ofInsmed
Incorporated,
pursuant
to
18
USC
Section
1350,
as
adopted
pursuant
to
Section
906
of
the
Sarbanes
OxleyAct
of
2003
(filed
herewith).
101.INS
XBRL
Instance
Document
101.SCH
XBRL
Taxonomy
Extension
Schema
Document
101.CAL
XBRL
Taxonomy
Extension
Calculation
Linkbase
Document
101.DEF
XBRL
Taxonomy
Extension
Definition
Linkbase
Document
101.LAB
XBRL
Taxonomy
Extension
Label
Linkbase
Document
101.PRE
XBRL
Taxonomy
Extension
Presentation
Linkbase
DocumentTable
of
Contents*Confidential
treatment
has
been
requested
for
certain
portions
of
this
exhibit.
The
confidential
portions
of
this
exhibit
have
been
omitted
and
filedseparately
with
the
Securities
and
Exchange
Commission.
**Management
contract
or
compensatory
plan
or
arrangement
of
the
Company
required
to
be
filed
as
an
exhibit.127Exhibit 10.12.1
Execution Version
AMENDMENT NO. 1TOLOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT (this
“
Amendment ”)
is
entered
into
this
24th
day
of
July,
2012
by
andbetween
INSMED INCORPORATED ,
a
Virginia
corporation
(“
Parent ”),
 INSMED PHARMACEUTICALS, INC., a
Virginia
corporation
(“
InsmedPharma ”),
CELTRIX PHARMACEUTICALS, INC. a
Delaware
corporation
(“
Celtrix ”),
TRANSAVE, LLC ,
a
Delaware
limited
liability
company
(“Transave ”,
together
with
Parent,
Insmed
Pharma,
and
Celtrix
are
hereinafter
collectively
referred
to
as
the
“
Borrowers ”,
and
each
individually
as
a
“
Borrower”),
and
HERCULES TECHNOLOGY GROWTH CAPITAL, INC., a
Maryland
corporation
(the
“
Lender ”).
Capitalized
terms
used
herein
without
definitionshall
have
the
same
meanings
given
them
in
the
Loan
Agreement
(as
defined
below).
RECITALS
A .











Each
Borrower
and
the
Lender
have
entered
into
that
certain
Loan
and
Security
Agreement
dated
as
of
June
29,
2012
(as
amended,
restated,supplemented
or
otherwise
modified
from
time
to
time,
the
“
Loan Agreement ”),
pursuant
to
which
the
Lender
has
agreed
to
extend
and
make
available
to
theBorrowers
certain
extensions
of
credit.
B. 











Each
Borrower
and
the
Lender
have
agreed
to
amend
the
Loan
Agreement
upon
the
terms
and
conditions
more
fully
set
forth
herein.
AGREEMENT
NOW,
THEREFORE,
in
consideration
of
the
foregoing
Recitals
and
intending
to
be
legally
bound,
the
parties
hereto
agree
as
follows:
1 .












AMENDMENTS.
1.1 









Section 7.13 (Deposit Accounts). Section
7.13
of
the
Loan
Agreement
is
hereby,
retroactively
to
July
11,
2012,
amended
and
restatedin
its
entirety
as
follows:
“7.13





Deposit
Accounts.
No
Borrower
nor
any
Subsidiary
shall
maintain
any
Deposit
Accounts,
or
accounts
holding
InvestmentProperty,
except
with
respect
to
(a)
which
the
Lender
has
an
Account
Control
Agreement
and
(b)
Wells
Fargo
Bank,
National
Association,account
no.
070491230905172
(the
“
Wells Fargo CD Account ”);
provided,
that
(i)
funds
in
the
Wells
Fargo
CD
Account
shall
not
exceed$2,111,248
plus
regularly
accrued
interest
and
(ii)
all
amounts
in
the
Wells
Fargo
CD
Account
shall
be
transferred
to
an
account
with
respect
towhich
the
Lender
has
an
Account
Control
Agreement
promptly
upon
the
existing
maturity
date
of
the
certificate
of
deposit
on
July
26,
2013.”
2. 












BORROWERS’ REPRESENTATIONS AND WARRANTIES .
Each
Borrower
represents
and
warrants
that:

(a) 










immediately
upon
giving
effect
to
this
Amendment
(i)
the
representations
and
warranties
contained
in
the
Loan
Documents
are
true,accurate
and
complete
in
all
material
respects
as
of
the
date
hereof
(except
to
the
extent
such
representations
and
warranties
relate
to
an
earlier
date,
in
which
casethey
are
true
and
correct
as
of
such
date),
and
(ii)
no
Event
of
Default
has
occurred
and
is
continuing;
(b) 










such
Borrower
has
the
corporate
power
and
authority
to
execute
and
deliver
this
Amendment
and
to
perform
its
obligations
under
theLoan
Agreement,
as
amended
by
this
Amendment;
(c) 










the
certificate
or
articles
of
incorporation,
bylaws
and
other
organizational
documents
of
such
Borrower
delivered
to
the
Lender
on
theClosing
Date
remain
true,
accurate
and
complete
and
have
not
been
amended,
restated,
supplemented
or
otherwise
modified
and
continue
to
be
in
full
force
andeffect;
(d) 










the
execution
and
delivery
by
such
Borrower
of
this
Amendment
and
the
performance
by
such
Borrower
of
its
obligations
under
theLoan
Agreement,
as
amended
by
this
Amendment,
have
been
duly
authorized
by
all
necessary
corporate
action
or
limited
liability
company,
as
applicable,
on
thepart
of
such
Borrower;
(e) 










this
Amendment
has
been
duly
executed
and
delivered
by
such
Borrower
and
is
the
binding
obligation
of
such
Borrower,
enforceableagainst
it
in
accordance
with
its
terms,
except
as
such
enforceability
may
be
limited
by
bankruptcy,
insolvency,
reorganization,
liquidation,
moratorium
or
othersimilar
laws
of
general
application
and
equitable
principles
relating
to
or
affecting
creditors’
rights
generally;
and
(f) 











as
of
the
date
hereof,
such
Borrower
has
no
defenses
against
the
obligations
to
pay
any
amounts
under
the
Obligations.
Each
Borrower
understands
and
acknowledges
that
the
Lender
is
entering
into
this
Amendment
in
reliance
upon,
and
in
partial
consideration
for,the
above
representations
and
warranties,
and
agrees
that
such
reliance
is
reasonable
and
appropriate.
3. 












LIMITATION. The
amendments
set
forth
in
this
Amendment
shall
be
limited
precisely
as
written
and
shall
not
be
deemed
(a)
to
be
a
waiveror
modification
of
any
other
term
or
condition
of
the
Loan
Agreement
or
of
any
other
instrument
or
agreement
referred
to
therein
or
to
prejudice
any
right
orremedy
which
the
Lender
may
now
have
or
may
have
in
the
future
under
or
in
connection
with
the
Loan
Agreement
or
any
instrument
or
agreement
referred
totherein;
or
(b)
to
be
a
consent
to
any
future
amendment
or
modification
or
waiver
to
any
instrument
or
agreement
the
execution
and
delivery
of
which
is
consentedto
hereby,
or
to
any
waiver
of
any
of
the
provisions
thereof.
Except
as
expressly
amended
hereby,
the
Loan
Agreement
shall
continue
in
full
force
and
effect.
4. 












EFFECTIVENESS. This
Amendment
shall
become
effective
upon
the
satisfaction
of
all
of
the
following
conditions
precedent
in
form
andsubstance
satisfactory
to
the
Lender
(the
“
Effective Date ”):
2
4.1 









Amendment. The
Lender
shall
have
received
duly
executed
counterparts
of
this
Amendment
signed
by
the
parties
hereto.
5. 












EXPENSES. Each
Borrower
agrees
to
pay
the
Lender’s
costs
and
expenses
(including
the
reasonable
fees
and
expenses
of
the
Lender’scounsel,
advisors
and
consultants)
accrued
and
incurred
in
connection
with
the
transactions
contemplated
by
this
Amendment,
and
all
other
Lender
expenses(including
the
reasonable
fees
and
expenses
of
the
Lender’s
counsel,
advisors
and
consultants)
payable
in
accordance
with
Section
11.11
of
the
Loan
Agreement.
6. 












COUNTERPARTS. This
Amendment
may
be
signed
originally
or
by
facsimile
or
other
means
of
electronic
transmission
in
any
number
ofcounterparts,
and
by
different
parties
hereto
in
separate
counterparts,
with
the
same
effect
as
if
the
signatures
to
each
such
counterpart
were
upon
a
singleinstrument.
All
counterparts
shall
be
deemed
an
original
of
this
Amendment.
7. 












INTEGRATION. This
Amendment
and
any
documents
executed
in
connection
herewith
or
pursuant
hereto
contain
the
entire
agreementbetween
the
parties
with
respect
to
the
subject
matter
hereof
and
supersede
all
prior
agreements,
understandings,
offers
and
negotiations,
oral
or
written,
withrespect
thereto
and
no
extrinsic
evidence
whatsoever
may
be
introduced
in
any
judicial
or
arbitration
proceeding,
if
any,
involving
this
Amendment;
except
that
anyfinancing
statements
or
other
agreements
or
instruments
filed
by
the
Lender
with
respect
to
the
Borrowers
shall
remain
in
full
force
and
effect.
8. 












GOVERNING LAW; VENUE. THIS
AMENDMENT
SHALL
BE
GOVERNED
BY
AND
SHALL
BE
CONSTRUED
AND
ENFORCED
INACCORDANCE
WITH
THE
LAWS
OF
THE
STATE
OF
CALIFORNIA.
Each
Borrower
and
the
Lender
each
submit
to
the
exclusive
jurisdiction
of
the
State
andFederal
courts
in
Santa
Clara
County,
California.
[Remainder
of
page
intentionally
left
blank;
signature
page
follows]
3
IN WITNESS WHEREOF, the
parties
have
duly
authorized
and
caused
this
Amendment
to
be
executed
as
of
the
date
first
written
above.
BORROWERS:
INSMED INCORPORATED



By:/s/
Kevin
P.
Tully
Name:Kevin
P.
Tully
Title:Chief
Financial
Officer



INSMED PHARMACEUTICALS, INC.



By:/s/
Kevin
P.
Tully
Name:Kevin
P.
Tully
Title:Chief
Financial
Officer



TRANSAVE, LLC



By:/s/
Kevin
P.
Tully
Name:Kevin
P.
Tully
Title:Chief
Financial
Officer



CELTRIX PHARMACEUTICALS, INC.



By:/s/
Kevin
P.
Tully
Name:Kevin
P.
Tully
Title:Chief
Financial
Officer



LENDER:



HERCULES TECHNOLOGY GROWTH
CAPITAL, INC.,






By:/s/
K.
Nicholas
Martitsch
Name:K.
Nicholas
Martitsch
Its:Associate
General
Counsel

[Signature
Page
to
Amendment
No.
1
to
Loan
and
Security
Agreement]
Exhibit 10.12.2
AMENDMENT NO. 2TOLOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT (this
“
Amendment
”)
is
dated
as
of
November
25,
2013
and
is
entered
intoby
and
among
INSMED
INCORPORATED,
a
Virginia
corporation
(“
Parent
”),
INSMED
PHARMACEUTICALS,
INC.,
a
Virginia
corporation
(“
InsmedPharma
”),
CELTRIX
PHARMACEUTICALS,
INC.,
a
Delaware
corporation
(“
Celtrix
”),
TRANSAVE,
LLC,
a
Delaware
limited
liability
company
(“
Transave”,
together
with
Parent,
Insmed
Pharma,
and
Celtrix
are
hereinafter
collectively
referred
to
as
the
“
Borrowers
”
and
each
individually
as
a
“
Borrower
’’),
andHERCULES
TECHNOLOGY
GROWTH
CAPITAL,
INC.,
a
Maryland
corporation
(“
Lender
”).
Capitalized
terms
used
herein
without
definition
shall
have
thesame
meanings
given
them
in
the
Loan
Agreement
(as
defined
below).
RECITALS
A. 



































Borrowers
and
Lender
have
entered
into
that
certain
Loan
and
Security
Agreement
dated
as
of
June
29,
2012
(as
may
be
amended,
restated,supplemented
or
otherwise
modified
from
time
to
time,
the
“
Loan
Agreement
’’),
pursuant
to
which
Lender
has
extended
and
make
available
to
Borrowers
certainextensions
of
credit.
B. 



































Borrowers
and
Lender
have
agreed
to
amend
the
Loan
Agreement
upon
the
terms
and
conditions
more
fully
set
forth
herein.
AGREEMENT
NOW,
THEREFORE,
in
consideration
of
the
foregoing
Recitals
and
intending
to
be
legally
bound,
the
parties
hereto
agree
as
follows:
1. 





































AMENDMENTS.
1.1 






























The
definition
of
“Amortization
Date”
in
Section
1.1
is
amended
and
restated
with
the
following:
“Amortization
Date”
means
July
1,
2014;
provided
that
if
Borrowers
(i)
achieve
positive
data
from
their
TARGET-112
Phase
II
NTM
Trial
and(ii)
pays
Lender
an
additional
$100,000
fee
on
or
prior
to
July
1,
2014,
then
the
Amortization
Date
shall
be
extended
to
January
1,
2015.
1.2 






























The
reference
to
“$200,000”
in
clause
(vii)
of
the
definition
of
“Permitted
Indebtedness”
in
Section
1.1
is
hereby
amended
andrestated
with
“$250,000”.
1.3 






























The
second
sentence
in
Section
2.2(d)
is
amended
and
restated
with
the
following:
The
Borrowers
shall
repay
the
aggregate
Term
Loan
principal
balance
that
is
outstanding
on
the
Amortization
Date
in
equal
monthly
installmentsof
principal
and
interest
(based
upon
a
30
month
amortization
schedule)
commencing
on
the
applicable
Amortization
Date
and
continuing
on
the
first
business
dayof
each
month
thereafter
with
any
yet
to
accrue
amortization
payments
(balloon)
due
on
the
Term
Loan
Maturity
Date.

2. 





































BORROWERS’ REPRESENTATIONS AND WARRANTIES. Each
Borrower
represents
and
warrants
that:
(a) 
































immediately
upon
giving
effect
to
this
Amendment
(i)
the
representations
and
warranties
contained
in
the
LoanDocuments
are
true,
accurate
and
complete
in
all
material
respects
as
of
the
date
hereof
(except
to
the
extent
such
representations
and
warranties
relate
toan
earlier
date,
in
which
case
they
are
true
and
correct
in
all
material
respects
as
of
such
earlier
date),
and
(ii)
no
Event
of
Default
has
occurred
and
iscontinuing;
(b) 
































such
Borrower
has
the
corporate
power
and
authority
to
execute
and
deliver
this
Amendment
and
to
perform
itsobligations
under
the
Loan
Agreement,
as
amended
by
this
Amendment;
(c) 

































the
certificate
of
incorporation,
bylaws
and
other
organizational
documents
of
such
Borrower
delivered
to
Lender
onthe
Closing
Date
remain
true,
accurate
and
complete
and
have
not
been
amended,
supplemented
or
restated
and
are
and
continue
to
be
in
full
force
andeffect;
(d) 
































the
execution
and
delivery
by
such
Borrower
of
this
Amendment
and
the
performance
by
such
Borrower
of
itsobligations
under
the
Loan
Agreement,
as
amended
by
this
Amendment,
have
been
duly
authorized
by
all
necessary
corporate
action
on
the
part
of
suchBorrower;
(e) 

































this
Amendment
has
been
duly
executed
and
delivered
by
such
Borrower
and
is
the
binding
obligation
of
suchBorrower,
enforceable
against
it
in
accordance
with
its
terms,
except
as
such
enforceability
may
be
limited
by
bankruptcy,
insolvency,
reorganization,liquidation,
moratorium
or
other
similar
laws
of
general
application
and
equitable
principles
relating
to
or
affecting
creditors’
rights;
and
(f) 


































as
of
the
date
hereof,
such
Borrower
has
no
defenses
against
the
obligations
to
pay
any
amounts
under
theObligations.
Each
Borrower
understands
and
acknowledges
that
Lender
is
entering
into
this
Amendment
in
reliance
upon,
and
in
partial
consideration
for,
the
aboverepresentations
and
warranties,
and
agrees
that
such
reliance
is
reasonable
and
appropriate.
3. 





































LIMITATION. The
amendments
set
forth
in
this
Amendment
shall
be
limited
precisely
as
written
and
shall
not
be
deemed
(a)
to
be
a
waiver
ormodification
of
any
other
term
or
condition
of
the
Loan
Agreement
or
of
any
other
instrument
or
agreement
referred
to
therein
or
to
prejudice
any
right
or
remedywhich
Lender
may
now
have
or
may
have
in
the
future
under
or
in
connection
with
the
Loan
Agreement
or
any
instrument
or
agreement
referred
to
therein;
or(b)
to
be
a
consent
to
any
future
amendment
or
modification
or
waiver
to
any
instrument
or
agreement
the
execution
and
delivery
of
which
is
consented
to
hereby,or
to
any
waiver
of
any
of
the
provisions
thereof.
Except
as
expressly
amended
hereby,
the
Loan
Agreement
shall
continue
in
full
force
and
effect.
4. 





































EFFECTIVENESS. This
Amendment
shall
become
effective
upon
the
satisfaction
of
all
the
following
conditions
precedent:
4.1 






























Fee. The
Borrowers
shall
pay
Lender
a
non-renewable
facility
fee
equal
to
$100,000.
2
4.2 






























Amendment. The
Lender
shall
have
duly
executed
counterparts
of
this
Amendment
signed
by
the
parties
hereto.
4.3 






























Insurance Certificate. The
Lender
shall
have
received
insurance
certificates
reasonably
satisfactory
to
Lender
adding[DESCRIBE
NEW
ADDRESS]
to
such
policies.
5. 





































COUNTERPARTS. This
Amendment
may
be
signed
in
any
number
of
counterparts,
and
by
different
parties
hereto
in
separate
counterparts,with
the
same
effect
as
if
the
signatures
to
each
such
counterpart
were
upon
a
single
instrument.
All
counterparts
shall
be
deemed
an
original
of
thisAmendment.
6. 





































INCORPORATION BY REFERENCE. The
provisions
of
Section
11
of
the
Agreement
shall
be
deemed
incorporated
herein
by
reference,mutatis mutandis.
[signature
page
follows]
3
IN WITNESS WHEREOF, the
parties
have
duly
authorized
and
caused
this
Amendment
to
be
executed
as
of
the
date
first
written
above.
BORROWERS :
INSMED INCORPORATED


By:/s/
Andrew
T.
Drechsler
Name:Andrew
T.
Drechsler
Title:Chief
Financial
Officer


INSMED PHARMACEUTICALS, INC.


By:/s/
Andrew
T.
Drechsler
Name:Andrew
T.
Drechsler
Title:Chief
Financial
Officer


TRANSAVE, LLC


BY: INSMED INCORPORATED, ITS MANAGING
MEMBER


By:/s/
Christine
Pellizzari
Name:Christine
Pellizzari
Title:General
Counsel
&
Corporate
Secretary


CELTRIX PHARMACEUTICALS, INC.


By:/s/
Andrew
T.
Drechsler
Name:Andrew
T.
Drechsler
Title:Chief
Financial
Officer


LENDER :

HERCULES TECHNOLOGY GROWTH CAPITAL, INC.


By:/s/
Ben
Bang
Name:Ben
Bang
Its:Senior
Counsel

Exhibit 10.12.4
CONSENT AND AMENDMENT NO. 4TO LOAN AND SECURITY AGREEMENT
This
CONSENT AND AMENDMENT NO. 4 TO LOAN AND SECURITY AGREEMENT (this
“
Amendment
”)
is
dated
as
of
June
9,
2015
and
isentered
into
by
and
among
(a)
 INSMED INCORPORATED ,
a
Virginia
corporation
(“Parent”),
 INSMED PHARMACEUTICALS, INC. ,
a
Virginiacorporation
(“
Insmed
Pharma
”),
CELTRIX PHARMACEUTICALS, INC. ,
a
Delaware
corporation
(“
Celtrix
”),
TRANSAVE, LLC ,
a
Delaware
limitedliability
company
(“
Transave
”,
together
with
Parent,
Insmed
Pharma,
and
Celtrix
are
hereinafter
collectively
referred
to
as
the
“
Borrowers
”
and
eachindividually
as
a
“
Borrower
”),
and
(b)

HERCULES TECHNOLOGY GROWTH CAPITAL, INC. ,
a
Maryland
corporation
(“
Hercules
Growth
”),HERCULES CAPITAL FUNDING TRUST 2012-1 ,
a
statutory
trust
created
and
existing
under
the
laws
of
the
State
of
Delaware
(“
Hercules
2012
”),
andHERCULES CAPITAL FUNDING TRUST 2014-1 ,
a
statutory
trust
created
and
existing
under
the
laws
of
the
State
of
Delaware
(“
Hercules
2014
”,
togetherwith
Hercules
Growth
and
Hercules
2012
collectively
referred
to
as
the
“
Lender
”).
Capitalized
terms
used
herein
without
definition
shall
have
the
same
meaningsgiven
them
in
the
Loan
Agreement
(as
defined
below).
RECITALS
A.




































Borrowers
and
Lender
have
entered
into
that
certain
Loan
and
Security
Agreement
dated
as
of
June
29,
2012,
as
amended
by
that
certainAmendment
No.
1
to
Loan
and
Security
Agreement
dated
as
of
July
24,
2012,
as
amended
by
that
certain
Amendment
No.
2
to
Loan
and
Security
Agreement
datedas
of
November
25,
2013,
and
as
further
amended
by
that
certain
Amendment
No.
3
to
Loan
and
Security
Agreement
dated
as
of
December
15,
2014
(as
may
befurther
amended,
restated,
supplemented
or
otherwise
modified
from
time
to
time,
the
“
Loan
Agreement
”),
pursuant
to
which
Lender
has
extended
and
makeavailable
to
Borrowers
certain
extensions
of
credit.
B.




































Borrowers
notified
Lender
that
Parent
(a)
has
created
a
wholly-owned
Subsidiary,
Insmed
Holdings
Limited,
a
company
organized
under
thelaws
of
Ireland
(“
Holdings
”),
(b)
has
permitted
Holdings
to
create
a
wholly-owned
Subsidiary,
Insmed
Ireland
Limited,
a
company
organized
under
the
laws
ofIreland
(“
Irish
Subsidiary
”),
(c)
has
permitted
Irish
Subsidiary
to
create
four
(4)
wholly-owned
Subsidiaries:
(i)
Insmed
Germany
GmbH,
a
company
organizedunder
the
laws
of
Germany,
(ii)
Insmed
Netherlands
BV,
a
company
organized
under
the
laws
of
the
Netherlands,
(iii)
Insmed
France
SAS,
a
company
organizedunder
the
laws
of
France,
and
(iv)
Insmed
Limited,
a
company
organized
under
the
laws
of
England
and
Wales,
(d)
intends
to
permit
Irish
Subsidiary
to
create
awholly-owned
Subsidiary
organized
under
the
laws
of
Italy
((a)-(d),
collectively,
the
“
Subsidiary
Formation
”),
and
(e)
has
licensed
the
Intellectual
Property
setforth
on
Schedule
1
hereto
to
Irish
Subsidiary
(the
“License”)
pursuant
to
the
terms
and
conditions
of
(i)
that
certain
Cost
Sharing
Agreement
effective
as
ofApril
1,
2015
by
and
among
Parent
and
Irish
Subsidiary
attached
as
Schedule
2
hereto,
and
(ii)
that
certain
Platform
Contribution
Transaction
Intangible
PropertyLicense
Agreement
effective
as
of
April
1,
2015
by
and
among
Parent
and
Irish
Subsidiary
attached
as
Schedule
3
hereto.
Borrowers
have
requested
that
Lenderconsent
to
and
ratify
the
Subsidiary
Formation
and
the
License.

C.




































Lender
has
agreed
to
so
consent
to
and
ratify
the
Subsidiary
Formation
and
the
License,
but
only
to
the
extent,
in
accordance
with
the
terms,subject
to
the
conditions
and
in
reliance
upon
the
representations
and
warranties
set
forth
below.
D.




































Borrowers
and
Lender
have
agreed
to
amend
the
Loan
Agreement
upon
the
terms
and
conditions
more
fully
set
forth
herein.
E.





































Lender
has
agreed
to
so
amend
certain
provisions
of
the
Loan
Agreement,
but
only
to
the
extent,
in
accordance
with
the
terms,
subject
to
theconditions
and
in
reliance
upon
the
representations
and
warranties
set
forth
below.
AGREEMENT
NOW,
THEREFORE,
in
consideration
of
the
foregoing
Recitals
and
intending
to
be
legally
bound,
the
parties
hereto
agree
as
follows:
1. 





































AMENDMENT.
1.1 






























Section 1.1 (Definitions and Rules of Construction). Clause
(xi)
appearing
in
the
definition
of
“Permitted
Investments”
set
forth
inSection
1.1
of
the
Loan
Agreement
shall
be
amended
in
its
entirety
and
replaced
with
the
following:
(xi)
Investments
in
Subsidiaries
organized
outside
of
the
United
States
for
current,
ordinary,
and
necessary
operating
expenses,
not
to
exceedFifteen
Million
Dollars
($15,000,000.00)
in
the
aggregate
in
any
calendar
year,
provided
that
no
Event
of
Default
has
occurred
and
is
continuingor
would
exist
after
giving
effect
to
such
Investment;
2. 





































CONSENT AND RATIFICATION .
Subject
to
the
terms
of
Section
5
below,
Lender
(a)
consents
to
and
ratifies
the
Subsidiary
Formation
andagrees
that
the
Subsidiary
Formation
shall
not,
in
and
of
itself,
constitute
an
“Event
of
Default”
under
Section
7.10
of
the
Loan
Agreement
(relative
to
mergers
andacquisitions),
and
(b)
consents
to
and
ratifies
the
License
and
agrees
that
the
License
shall
be
considered
a
Permitted
Transfer
and
shall
not,
in
and
of
itself,constitute
an
“Event
of
Default”
under
Section
7.9
of
the
Loan
Agreement
(relative
to
transfers).
3. 





































BORROWERS’ REPRESENTATIONS AND WARRANTIES .
Each
Borrower
represents
and
warrants
that:
(a)

































immediately
upon
giving
effect
to
this
Amendment
(i)
the
representations
and
warranties
contained
in
the
Loan
Documentsare
true,
accurate
and
complete
in
all
material
respects
as
of
the
date
hereof
(except
to
the
extent
such
representations
and
warranties
relate
to
an
earlier
date,
inwhich
case
they
are
true
and
correct
as
of
such
date),
and
(ii)
no
Event
of
Default
has
occurred
and
is
continuing;
(b)

































such
Borrower
has
the
corporate
or
limited
liability
company,
as
applicable,
power
and
authority
to
execute
and
deliver
thisAmendment
and
to
perform
its
obligations
under
the
Loan
Agreement,
as
amended
by
this
Amendment;
2
(c)


































the
certificate
of
incorporation,
bylaws
and
other
organizational
documents
of
such
Borrower
delivered
to
Lender
on
theClosing
Date
remain
true,
accurate
and
complete
and
have
not
been
amended,
supplemented
or
restated
and
are
and
continue
to
be
in
full
force
and
effect;
(d)

































the
execution
and
delivery
by
such
Borrower
of
this
Amendment
and
the
performance
by
such
Borrower
of
its
obligationsunder
the
Loan
Agreement,
as
amended
by
this
Amendment,
have
been
duly
authorized
by
all
necessary
corporate
or
limited
liability
company,
as
applicable,action
on
the
part
of
such
Borrower;
(e)


































this
Amendment
has
been
duly
executed
and
delivered
by
such
Borrower
and
is
the
binding
obligation
of
such
Borrower,enforceable
against
it
in
accordance
with
its
terms,
except
as
such
enforceability
may
be
limited
by
bankruptcy,
insolvency,
reorganization,
liquidation,
moratoriumor
other
similar
laws
of
general
application
and
equitable
principles
relating
to
or
affecting
creditors’
rights;
and
(f)



































as
of
the
date
hereof,
such
Borrower
has
no
defenses
against
the
obligations
to
pay
any
amounts
under
the
SecuredObligations.
Each
Borrower
understands
and
acknowledges
that
Lender·
is
entering
into
this
Amendment
in
reliance
upon,
and
in
partial
consideration
for,
the
aboverepresentations
and
warranties,
and
agrees
that
such
reliance
is
reasonable
and
appropriate.
4. 





































LIMITATION .
The
terms
set
forth
in
this
Amendment
shall
be
limited
precisely
as
written
and
shall
not
be
deemed
(a)
to
be
a
waiver
ormodification
of
any
other
term
or
condition
of
the
Loan
Agreement
or
of
any
other
instrument
or
agreement
referred
to
therein
or
to
prejudice
any
right
or
remedywhich
Lender
may
now
have
or
may
have
in
the
future
under
or
in
connection
with
the
Loan
Agreement
or
any
instrument
or
agreement
referred
to
therein;
or(b)
to
be
a
consent
to
any
future
amendment
or
modification
or
waiver
to
any
instrument
or
agreement
the
execution
and
delivery
of
which
is
consented
to
hereby,or
to
any
waiver
of
any
of
the
provisions
thereof.
Except
as
expressly
amended
hereby,
the
Loan
Agreement
shall
continue
in
full
force
and
effect.
5. 





































EFFECTIVENESS .
This
Amendment
shall
become
effective
upon
the
satisfaction
of
all
the
following
conditions
precedent:
5.1 






























Borrowers
shall
not
license
any
of
Borrowers’
property
or
assets
in
connection
with
the
License
other
than
assets
set
forth
on
Schedule1
hereto.
5.2 






























The
Subsidiary
Formation
and
the
License
do
not
otherwise
result
in
an
Event
of
Default
after
giving
effect
to
such
SubsidiaryFormation
and
License.
5.3 






























Borrowers
shall
have
paid
all
of
Lender’s
reasonable,
documented
costs
and
out-of-pocket
expenses
in
connection
with
thisAmendment.
5.4 






























Lender
shall
have
received
duly
executed
counterparts
of
this
Amendment
signed
by
the
parties
hereto.
3
6. 





































COUNTERPARTS .

This
Amendment
may
be
signed
in
any
number
of
counterparts,
and
by
different
parties
hereto
in
separate
counterparts,with
the
same
effect
as
if
the
signatures
to
each
such
counterpart
were
upon
a
single
instrument.
All
counterparts
shall
be
deemed
an
original
of
this
Amendment.
7. 





































INCORPORATION BY REFERENCE .
The
provisions
of
Section
11
of
the
Loan
Agreement
shall
be
deemed
incorporated
herein
byreference,
mutatis mutandis .
[signature
page
follows]
4
IN WITNESS WHEREOF ,
the
parties
have
duly
authorized
and
caused
this
Amendment
to
be
executed
as
of
the
date
first
written
above.
BORROWERS :
INSMED INCORPORATED
 
By:/s/
Andrew
T.
Drechsler
Name:Andrew
T.
Drechsler
Title:CFO



INSMED PHARMACEUTICALS, INC.
  
By:/s/
Andrew
T.
Drechsler
Name:Andrew
T.
Drechsler
Title:CFO



TRANSAVE, LLC
  
By:/s/
Andrew
T.
Drechsler
Name:Andrew
T.
Drechsler
Title:CFO



CELTRIX PHARMACEUTICALS, INC.
  
By:/s/
Andrew
T.
Drechsler
Name:Andrew
T.
Drechsler
Title:CFO
 [Signature page to Consent and Amendment No. 4 to Loan and Security Agreement]  LENDER :
HERCULES CAPITAL FUNDING TRUST 2012-1
  
By: Hercules Technology Growth Capital, Inc., its servicer
 
By:/s/
Bob
Bang
Name:Bob
Bang
Title:Associate
General
Counsel



HERCULES CAPITAL FUNDING TRUST 2014-1
 
By: Hercules Technology Growth Capital, Inc., its servicer
 
By:/s/
Bob
Bang
Name:Bob
Bang
Title:Associate
General
Counsel



HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
 
By: Hercules Technology Growth Capital, Inc., its servicer
 
By:/s/
Bob
Bang
Name:Bob
Bang
Title:Associate
General
Counsel
 [Signature page to Consent and Amendment No. 4 to Loan and Security Agreement]

Schedule
1

Schedule 1
Detail of Products Related to the Intangible Property Rights
Insmed
Incorporated
(“Insmed”)
has
granted
a
license
with
respect
to
the
Intangible
Property
Rights,
as
defined
in
the
Platform
Contribution
Transaction(“PCT”)
Intangible
Property
License
Agreement,
effective
as
of
April
l,
2015,
by
and
between
Insmed
Ireland
limited
and
Insmed
(the
“Agreement”),related
to
thepatents
and
products
associated
with:
1.






































ARIKAYCE2.






































INS-10093.






































Any
other
products
or
development
currently
owned
by
Insmed
prior
to
the
execution
of
the
Agreement.

Schedule
2

COST SHARING AGREEMENT
INSMED INCORPORATED - INSMED IRELAND LIMITED
This
COST
SHARING
AGREEMENT
(the
“
Agreement ”)
is
effective
as
of
April
1,
2015
(the
“Effective
Date”).
by
and
between
Insmed
IrelandLimited
(“Insmed
Ireland”),
a
limited
liability
company
organized
under
the
laws
of
Ireland,
with
registered
office
at
25-28
North
Wall
Quay,
Dublin
1,
Ireland,registered
with
the
Registrar
of
Companies
under
number
550604
and
Insmed
Incorporated
(“Insmed
U.S.”),
a
corporation
organized
under
the
laws
of
Virginiawith
principal
place
of
business
at
10
Finderne
Avenue,
Building
10,
Bridgewater,
New
Jersey
(collectively,
the
“
Parties ”
and
individually,
“
Party ”).
RECITALS
WHEREAS ,
the
Parties
are
engaged
in
the
business
of
researching,
developing,
marketing
and
distributing
pharmaceuticals
products
(collectively“Insmed
Group
Property”);
WHEREAS ,
the
Parties
have
concurrently
entered
into
a
Platform
Contribution
Transaction
(“PCT”)
Intangible
Property
License
Agreement,
dated
as
ofthe
date
herewith,
pursuant
to
which
Insmed
Ireland
acquired
an
exclusive
license
to
license
Developed
Intangible
Property
Rights
within
the
Insmed
Ireland
Fieldof
Use
in
exchange
for
consideration,
pursuant
to
U.S.
Treas.
Reg.
Sec.
1.482-7(h)(2)(i)(B);
WHEREAS ,
the
Parties
desire
to
pool
their
resources
for
the
purpose
of
further
developing
and
otherwise
enhancing
the
value
of
the
Insmed
GroupProperty,
and
of
utilizing
the
Developed
Intangible
Property
Rights
in
their
respective
Field
of
Use;
and
WHEREAS ,
the
Parties
intend
that
the
arrangement
contemplated
by
this
Agreement
is
a
cost
sharing
arrangement
within
the
meaning
of
U.S.
Treas.Reg.
Sec.
1.482-7(b).
NOW, THEREFORE ,
in
consideration
of
the
mutual
covenants
and
promises
hereinafter
set
forth,
and
other
good
and
valuable
consideration,
receipt
ofwhich
is
hereby
acknowledged,
the
Parties
hereto
agree
as
follows:
ARTICLE 1 EFFECTIVENESS OF RECITALS/DEFINITIONS
The
Recitals
set
forth
above
are
an
integral
part
of
this
Agreement
and
shall
have
the
same
contractual
and
legal
significance
as
any
other
language
in
thisAgreement.
For
purposes
of
this
Agreement,
the
following
definitions
shall
apply
to
the
terms
set
forth
below
wherever
they
appear:
Section
1.1




































“
Affiliate ”
or
“
Affiliates ”
of
a
Party
means
any
entity
controlled
by,
controlling
or
under
common
control
with
such
Party,
wherecontrol”
in
any
of
the
foregoing
forms
means
ownership,
either
direct
or
indirect,
of
more
than
fitly
percent
(50%)
of
the
equity
interest
entitled
to
vote
for
theelection
of
directors
or
equivalent
governing
body.
An
entity
shall
be
considered
an
Affiliate
only
so
long
as
such
entity
continues
to
meet
the
foregoing
definition.
1
Section
1.2




































“
Aggregate Allocable Intangible Development Costs ”
for
any
Fiscal
Year,
or
part
thereof,
means
the
sum
of
the
IntangibleDevelopment
Costs
of
both
Parties
for
such
Fiscal
Year,
or
part
thereof,
less
Specific
In
tangible
Development
Costs,
as
calculated
under
Article
2.
Section
1.3




































“
Annual CSA Report ”
means
the
document
prepared
by
the
Parties
as
provided
in
Article
3.
Section
1.4




































“
Cost Share ”
and
“
Cost Share Percentage ”
for
any
Fiscal
Year
shall
be
the
amounts
respectively
specified
for
those
terms
inSection
3.5.
Section
1.5




































“
Developed Intangible Property Rights ”
means
any
and
all
rights
relating
to
the
Developed
Technology
and
the
DevelopedMarketing
Intangibles
and
arising
from
or
developed
as
a
result
of
the
Intangible
Development
Activity
on
or
after
the
Effective
Date
(by
whatever
name
or
termknown
or
designated),
including,
without
limitation:
(a)

































all
inventions,
know-how,
technical
data,
trade
secrets,
functional
or
detailed
design
specifications,
designs
and
enhancements,
whetherpatentable
or
un-patentable,
patented
or
un-patented;
(b)

































all
trademarks,
copyrights,
service
marks
and
trade
name
rights,
internet
domain
names,
social
media
designations,
and
otherdesignations
and
similar
rights;
(c)


































all
franchises,
licenses,
or
contracts;
(d)

































all
rights
associated
with
works
of
authorship
throughout
the
world,
including
but
not
limited
to
copyrights,
moral
rights
and
software;
(e)


































all
Patents
(including
provisionals,
continuations,
continuations-in-part,
and
divisionals
thereof),
reissues
and
re-examinations
thereof,database
rights,
design
rights
and
other
industrial
property
rights
that
have
the
benefit
of
a
filing
date
on
or
after
the
Effective
Date;
(f)



































all
patent
applications
(including
continuations,
continuations-in-part
and
divisionals
thereof)
now
or
hereafter
in
force,
that
have
thebenefit
of
a
filing
date
on
or
after
the
Effective
Date;
(g)


































all
rights,
including
copyrights,
source
code,
Confidential
Information
and
trade
secrets
underlying
the
technology
and
any
prints,packaging,
labels,
advertising
or
promotional
material
and
any
other
materials
of
any
kind
using
or
used
in
conjunction
with
trademarks
and
know­
how
underlyingthe
developed
marketing
intangibles,
whether
created
by
the
Parties
their
Affiliates
or
any
Third
Party
engaged
by
the
Patties
or
their
Affiliates
to
create
anythereof;
and
(h)

































any
additional
applicable
intangible
property
as
defined
under
U.S.
Treas.
Reg.
Sec.
1.482-4(b)
(whether
or
not
in
documentary
formand
whether
or
not
patentable,
copyrightable,
or
otherwise
protectable
under
applicable
laws).
2
Section
1.6




































“
Developed Marketing Intangibles ”
means
and
includes
any
and
all
trademarks,
trade
names,
service
marks,
copyrights,
domainnames,
applications
and
registrations
of
any
of
the
foregoing,
packaging,
marketing
strategies,
customer
lists
or
relationships,
and
other
marketing
information
usedin
the
marketing
and
promotion
of
the
Insmed
Group
Property,
arising
from
or
developed
as
a
result
of
the
Intangible
Development
Activity
on
or
after
theEffective
Date.
Section
1.7




































“
Developed Technology ”
means
and
includes
any
and
all
technologies,
products,
inventions,
updates,
adaptations,
know-how,technical
data,
source
code,
trade
secrets,
functional
or
detailed
specifications,
labels,
designs
and
enhancements
of
any
of
the
foregoing,
whether
patentable
or
un-patentable,
registered
or
unregistered,
underlying
the
Insmed
Group
Property,
arising
from
or
developed
as
a
result
of
the
Intangible
Development
Activity
on
orafter
the
Effective
Date.
Section
1.8




































“
Field of Use ”
of
a
Party
means
the
Insmed
Ireland
Field
of
Use
or
the
Insmed
U.S.
Field
of
Use.
as
the
case
may
be.
Section
1.9




































“
Fiscal Year ”
means
the
period
from
January
1

to
December
3
I
of
each
year.
“
Fiscal Quarter End ”
means
the
quarters
endingMarch
31,
June
30,
September
30,
and
December
3
I
and
“Fiscal
Year
End”
means
the
year
ending
December
31.
Section
1.10





























“
Gross Profit ”
means
revenue
recognized
from
the
sale
or
license
of
the
Products
minus
costs
of
goods
sold
associated
with
thoseProducts
determined
in
accordance
with
U.S.
Generally
Accepted
Accounting
Principles
(“GAAP”).
Section
1.11





























“
Insmed Ireland Field of Use ”
means
all
jurisdictions
throughout
the
world,
except
for
the
United
States
of
America
or
as
mutuallyagreed
upon
from
time
to
time
in
writing
by
the
Parties.
Section
1.12





























“
Insmed Group Property ”
means
the
comprehensive
suite
of
Insmed
products
comprised
of
the
pharmaceutical
products
anddevelopment
and
other
intangible
property
used
to
develop
or
distribute
Insmed
Group
Property.
Section
1.13





























“
Insmed U.S. Field of Use ”
means
the
United
States
of
America,
or
as
mutually
agreed
upon
from
time
to
time
in
writing
by
theParties.
Section
1.14





























“
Intangible Development Activity ”
means
the
activities
or
either
Party
under
this
Agreement
with
respect
to
Insmed
Group
Propertythat
give
rise
to
Intangible
Development
Costs.
Section
1.15





























“
Intangible Development Costs ”
of
a
Party
shall
be
the
amounts
specified
for
that
term
in
Article
2.
Section
1.16





























“
Products ”
means
any
and
all
items
sold
incorporating
the
intangibles
acquired
or
maintained
under
the
PCT
Intangible
PropertyLicense
Agreement
and
/or
Developed
Intangible
Property
Rights,
and
any
other
products
specified
by
the
Parties.
3
Section
1.17





























“
Representative(s) ”
means
and
includes
all
employees,
managers,
officers,
directors,
partners,
consultants,
independent
contractors,licensees,
successors.
assigns
and
agents,
of
a
Party.
Section
1.18





























“
Specific Development ”
means
any
Developed
Technology
or
Developed
Intangible
Property
Rights
which,
as
between
Insmed
U.S.and
Insmed
Ireland,
can
be
utilized
solely
by,
or
is
of
benefit
solely
to,
either
Insmed
U.S.
or
Insmed
Ireland,
as
the
case
may
be.
Section
1.19





























“
Specific Intangible Development Costs ”
means
Intangible
Development
Costs
incurred
during
a
Fiscal
Year,
or
part
thereof,
byeither
Insmed
U.S.
or
Insmed
Ireland
with
respect
to
any
particular
Specific
Development.
Section
1.20





























“
Sub-licensee ”
means
any
Affiliate
of
a
Party
or
any
Third
Party
to
whom
a
Party
sublicenses
or
transfers
any
portion
of
its
rightsunder
this
Agreement
to
use
the
Developed
Intangible
Property
Rights
within
such
Party’s
Field
of
Use,
and
who
agrees
in
writing
to
be
bound
by
and
to
complywith
all
of
the
terms,
conditions
and
obligations
pertaining
to
“Sub-licensees”
under
this
Agreement.
Section
1.21





























“
Third Party ”
means
and
includes
any
individual,
corporation,
trust,
estate,
partnership,
joint
venture,
company,
association,
league,governmental
bureau
or
agency
or
any
other
entity
regardless
of
the
type
or
nature,
which
is
not
a
Party
or
an
Affiliate.
ARTICLE 2 INTANGIBLE DEVELOPMENT COSTS
Section
2.1




































Specific
Intangible
Development
Costs
.

All
Specific
Intangible
Development
Costs
shall
be
allocated
in
their
entirety
to
the
Party
towhom
the
particular
Specific
Development
pertains.
Section
2.2




































Intangible
Development
Costs
.

Intangible
Development
Costs
of
a
Party
shall
include
the
following:
(a)

































All
costs
incurred
by
such
Party
from
activities
directly
or
indirectly
relating
to
the
creation
or
improvement
of
Developed
IntangibleProperty
Rights
on
or
after
the
Effective
Date;
and
(b)

































Stock-based
compensation
granted
to
employees
whose
salaries
are
included
in
the
cost
of
the
Developed
Intangible
Property
Rights,on
or
after
the
Effective
Date.
Section
2.3




































Determination
of
Costs
.

The
following
principles
shall
apply
in
the
determination
of
Intangible
Development
Costs:
(a)

































Intangible

Development
Costs

shall
be
determined
in
accordance
with
expenses
recognized
under
U.S.
GAAP
as
applied
by
InsmedU.S.
for
financial
reporting
purposes;
provided,
however,
that:
(i)
such
costs
shall
not
include
acquisition
costs
for
land
or
depreciable
property,
interest
expense
orforeign
or
domestic
income
taxes
incurred;
and
(ii)
such
costs
shall
include
a
reasonable
rental
charge
for
the
use
of
any
land
or
depreciable
tangible
personalproperty
used
in
connection
with
the
Intangible
Development
Activity.

For
4
administrative
convenience,
the
Parties
agree
that,
absent
any
evidence
to
the
contrary,
a
reasonable
rental
charge
shall
be
equal
to
depreciation
or
amortizationexpense
recognized
for
any
such
item
of
property
used
in
connection
with
the
Intangible
Development
Activity.
Intangible
Development
Costs
shall
include
directcosts
of
the
relevant
activities
and
an
allocable
share
of
administrative
or
overhead
costs.
Where
any
indirect
costs
or
direct
costs
benefit
both
Aggregate
AllocableIntangible
Development
Costs
and
Specific
Intangible
Development
Costs,
an
allocation
shall
be
made
using
methods
that
are
mutually
agreed
to
be
consistent,reasonable
and
in
keeping
with
sound
accounting
practices.
(b)

































The
stock-based
compensation
port
ion
of
Intangible
Development
Costs
shall
be
calculated
in
a
manner
consistent
with
U.S.
Treas.Reg.
Sec.
1.482-7(d)(3)(iii)(B).
(c)


































For
the
avoidance
of
doubt;
the
Parties
shall
use
a
consistent
method
of
accounting
to
determine
the
Intangible
Development
Costsunder
this
Section
2.3
and
the
Cost
Share
Percentages
under
Section
3.5
and
must
translate
currencies
on
a
consistent
basis.
Section
2.4




































Intangible
Development
Costs
Budget
.
Before
or
during
each
Fiscal
Year,
the
Parties
shall
agree
on
a
budget
of
IntangibleDevelopment
Costs
expected
to
be
incurred
pursuant
to
the
Intangible
Development
Activity
during
that
Fiscal
Year.
ARTICLE 3 INTANGIBLE DEVELOPMENT COST ALLOCATION
Section
3.1




































Annual
CSA
Report
.
As
soon
as
practical
after
the
closing
of
the
annual
financial
statements
of
each
Party
for
each
Fiscal
Year
End,the
Parties
shall
each
prepare
necessary
financial
statements
and
forecasts,
and
shall
jointly
reconcile
and
consolidate
such
statements
and
forecasts
into
a
report(the
“
Annual CSA Report ”}
containing
the
information
required
by
this
Article
3.
Section
3.2




































Determination
of
Aggregate
Allocable
Intangible
Development
Costs
.
The
Annual
CSA
Report
shall
indicate
the
types
and
amounts
ofIntangible
Development
Costs
incurred
by
each
Party
from
the
first
day
of
such
Fiscal
Year
through
such
Fiscal
Year
End,
comprising
the
Aggregate
AllocableIntangible
Development
Costs.
Such
Aggregate
Allocable
Intangible
Development
Costs
shall
be
determined
annually
and
paid
in
accordance
with
Section
3.4,Section
4.1,
Section
4.3,
Section
4.4
and
Section
4.6
as
well
as
reconciled
annually
in
accordance
with
Section
3.6,
Section
3.7
and
Section
4.2.
Section
3.3




































Measure
of
Reasonably
Anticipated
Benefits
.
The
Parties
agree
to
share
the
Aggregate
Allocable
Intangible
Development
Costs
underthe
terms
specified
in
this
Agreement.
Aggregate
Allocable
Intangible
Development
Costs
of
the
Intangible
Development
Activity
shall
be
borne
by
each
Partybased
upon
the
reasonably
anticipated
benefits
(‘“RAB”)
to
be
derived
by
each
Party
as
a
result
of
utilization
of
the
Developed
Intangible
Property
Rights.
TheParties
have
determined
that
the
most
reliable
basis
for
measuring
RAB
to
be
derived
by
them
from
Developed
Intangible
Property
Rights
is
Gross
Profit
projectedto
be
derived
by
them
within
their
Field
of
Use
for
the
then
current
Fiscal
Year
and
all
Fiscal
Years
over
the
remaining
life
of
IP;
however,
if
in
subsequent
years
adifferent
basis
is
determined
to
be
more
reliable,
this
basis
ma
y
be
used
instead
if
mutually
agreed
to
by
the
Parties
in
writing.
The
Parties
believe
that
5
each
Party’s
respective
ratio
of
Gross
Profit
for
all
Insmed
Group
Property
is
related
to
income
generated
or
costs
saved
by
the
Parties.
The
Parties
agree
toperiodically
adjust
how
Aggregate
Allocable
Intangible
Development
Costs
are
shared
to
appropriately
reflect
any
changes
in
economic
conditions,
their
businessoperations
and
practices
and
the
ongoing
research
and
development
efforts
under
this
Agreement.
Section
3.4




































Cost
Share
and
Cost
Share
Percentage
.
A
Party’s
“Cost
Share
Percentage”
shall
be
the
percentage
equivalent
of
that
Party’s
RAB
to
bederived
from
utilizing
the
Developed
Intangibles
over
the
sum
of
each
Party’s
Reasonably
Anticipated
Benefits
to
be
derived
from
utilizing
the
DevelopedIntangibles,
as
determined
under
Section
3.4
(Measure
of
Anticipated
Benefits)
of
this
Agreement.
A
Party’s
“Cost
Share”
tor
a
particular
Fiscal
Year
shall
be
theAggregate
Allocable
Intangible
Development
Costs
for
that
Fiscal
Year
multiplied
by
that
Party’s
Cost
Share
Percentage.
The
supporting
documentation
shallinclude
a
determination
of
each
Party’s
Cost
Share
Percentage
and
Cost
Share.
The
Annual
CSA
Report
shall
include
a
determination
of
each
Party’s
Cost
SharePercentage
and
Cost
Share.
For
the
avoidance
of
doubt,
the
Parties
shall
use
a
consistent
method
of
accounting
to
determine
the
Intangible
Development
Costsunder
Section
2.3
and
the
Cost
Share
Percentages
under
this
Section
3.4
and
must
translate
currencies
on
a
consistent
basis.
Section
3.5




































Calculations,
Amendments
and
Compensating
Adjustments
.
The
Parties
anticipate
applying,
amending
and
updating
the
calculationsspecified
i
n
Section
3.2
and
Section
3.4
as
follows:
(a)

































As
soon
as
practical
after
each
Fiscal
Year
End,
the
Parties
shall
calculate
the
projected
Gross
Profit
to
be
applied
to
the
current
FiscalYear
and
the
Aggregate
Allocable
Intangible
Development
Costs
for
the
current
Fiscal
Year;
(b)

































As
soon
as
practical
after
each
Fiscal
Quarter
End,
the
Parties
shall
calculate
the
net
Quarterly
Payment
Amount
specified
inSection
4.1
by
(1)
calculating
each
Party’s
Cost
Share
for
such
Fiscal
Quarter
End
under
Section
3.4,
(2)
adding
each
Party’s
Specific
Intangible
DevelopmentCosts
for
such
Fiscal
Quarter
End
under
Section
2.1,
and
(3)
subtracting
the
amount
of
Intangible
Development
Costs
incurred
by
each
Party
during
the
FiscalQuarter
End.
(c)


































The
Parties
shall
continue
to
perform
the
calculation
steps
outlined
in
Section
3.6(a)
through
this
Section
3.6(c)
for
successive
FiscalYears.
Section
3.6




































Reconciliation
of
Prior
Year
Cost
Shares
.
The
Annual
CSA
Report
shall
include
a
reconciliation
of
all
prior
year
Cost
Sharecomputations
that
relied
on
forecasts
of
current
Fiscal
Year
financial
results.
The
prior
year
Cost
Share
Percentages
shall
be
recomputed
replacing
the
priorforecasts
with
the
most
recent
actual
data
and
forecasts
available
and
for
any
revisions
to
the
RAB.

Potential
adjustments
shall
be
determined
for
all
prior
years,
inaccordance
with
the
cumulative
application
of
actual
financial
results
specified
in
Section
3.5(b),
for
which
either
Party’s
Cost
Share
Percentage
differs
by
morethan
twenty
percent
(20%)
from
the
Cost
Share
Percentage
recomputed
under
this
Section
3.6,
unless
such
difference
is
due
to
an
extraordinary
event
beyond
thecontrol
of
the
Parties
that
could
not
reasonably
have
been
6
anticipated.
Adjustments
for
prior
years
may
also
be
determined
upon
mutual
agreement
by
the
Parties.
ARTICLE 4 PAYMENTS
Section
4.1




































Quarterly
Payment
Amount
.

The
Parties
shall
pay
the
net
amount
to
reconcile
their
quarterly
Intangible
Development
Costs
incurredwith
their
quarterly
relative
Cost
Share
Percentage
as
applied
to
the
Aggregate
Allocable
Intangible
Development
Costs.
Such
amounts
are
specified
in
Section
3.2(Determination
of
Aggregate
Allocable
Intangible
Development
Costs)
and
Section
3.5
(Cost
Share
and
Cost
Share
Percentage),
respectively.
Section
4.2




































Year-End
Settlement
Amount
.
The
Parties
shall
pay
the
net
amount
to
reconcile
their
annual
Intangible
Development
Costs
incurredwith
their
annual
relative
Cost
Share
Percentage
as
applied
to
the
Aggregate
Allocable
Intangible
Development
Costs.
Such
amounts
are
specified
in
Section
3.2(Determination
of
Aggregate
Allocable
Intangible
Development
Costs)
and
Section
3.5
(Cost
Share
and
Cost
Share
Percentage),
respectively
(the
“Year-EndSettlement
Amount”).
The
Year-End
Settlement
Amount
shall
take
into
account
amounts
determined
under
Section
3.6
(Calculations,
Amendments
andCompensating
Adjustments).
Section
4.3




































Timing
of
Payments
.
Within
sixty
(60)
days
following
the
Fiscal
Quarter
End,
commencing
with
the
first
quarter
following
theEffective
Date
of
this
Agreement,
the
Parties
shall
pay
the
amount
due
under
Section
4.1
(Quarterly
Payment
Amount).
Similarly,
within
sixty
(60)
days
followingthe
Fiscal
Year
end,
commencing
with
the
first
Fiscal
Year
End
following
the
Effective
Date
of
this
Agreement,
the
Parties
shall
pay
the
amount
due
underSection
4.2
(Year-End
Settlement
Amount).
When
applicable,
interest
based
upon
U.S.
Treasury
Regulations§
1.482-2(a)
shall
be
applied.
Section
4.4




































Manner
of
Payment
.
All
payments
under
this
Article
4
shall
be
made
in
accordance
with
the
policies
and
procedures
of
the
Parties.Payment
may
be
made
by
either
Party
under
any
reasonable
method
agreed
upon
by
the
Parties,
including
without
limitation,
in
the
form
of
a
bank
draft,
wiretransfer,
note
or,
to
the
extent
allowable
under
applicable
law,
a
netting
of
amounts
due
from
one
Party
to
the
other
Party
under
this
Agreement
against
existingaccounts
receivable
by
the
first
mentioned
Party
from
the
other
Party.
In
the
event
payment
is
made
by
way
of
netting,
such
payment
shall
be
effective
as
of
thedate
of
the
netting
on
the
books
of
the
Parties.
Section
4.5




































Records
and
Audits
.
(a)

































Each
Party
shall
each
keep
and
maintain
complete
and
accurate
records
of
the
transactions
underlying
the
payments
to
be
madehereunder
for
at
least
seven
(7)
years
and,
promptly
upon
request,
shall
allow
the
other
Party
or
its
designee
to
inspect,
audit
and
make
extracts
or
copies
of
suchrecords
for
the
purpose
of
ascertaining
the
correctness
of
such
payments.
If
an
y
examination
or
audit
discloses
any
overpayment
or
underpayment,
the
appropriateParty
shall
pay
the
deficiency
plus
interest
thereon
at
the
U.S.
Applicable
Federal
Rate
under
U.S.
Treas.
Reg.
Sec.
1.482-2(a),
compounded
annually
from
the
datethe
deficiency
7
was
due
to
the
other
Party,
within
a
reasonable
time
after
the
conclusion
of
such
examination
or
audit.
(b)

































Each
Party
shall
comply
with
the
documentation,
accounting
and
reporting
requirements,
as
prescribed
under
U.S.
Treas.
Reg.
Sec.1.482-7(k)(2)-(4),
including
but
not
limited
to
the
following:
(i)





































each
Party
agrees
to
file
a
Settlement
of
Controlled
Participant
to
Section
1.482-7
Cost
Sharing
Arrangement
(“
Statement ”)with
the
Internal
Revenue
Service
no
later
than
ninety
(90)
days
after
the
first
occurrence
of
an
Intangible
Development
Cost;
and
(ii)


































each
Party
also
agrees,
during
the
term
of
this
Agreement,
to
annually
attach
a
copy
of
such
Statement,
or
an
updated
versionof
such
Statement,
if
required,
to
its
U.S.
income
tax
return,
or
if
no
such
income
tax
return
is
required,
to
Schedule
M
of
any
Form
5471,
Form
5472
or
Form
8865filed
with
respect
to
such
Party.
Section
4.6




































Currency
.
All
payments
contemplated
hereby
or
made
by
either
Party
in
connection
herewith
shall
be
made
in
U.S.
Dollars
or
in
acurrency
as
mutually
agreed
to
by
the
Parties.
Any
reported
amount
in
currencies
other
than
the
U.S.
Dollars
shall
be
translated
into
U.S.
Dollars
at
the
prevailingbookkeeping
rate
used
by
the
Parties
during
the
period
in
which
the
amount
is
recognized
under
U.S.
GAAP
as
applied
for
financial
reporting
purposes.
Section
4.7




































Assumption
of
Development
Risk
.
Each
Party
shall
bear
its
Cost
Share
in
accordance
with
the
terms
of
this
Agreement
without
regardto
the
success
or
failure
of
the
Intangible
Development
Activity
or
the
commercial
viability
of
the
Developed
Intangible
Property
Rights.
Section
4.8




































Platform
Contribution
Transactions
.
For
all
platform
contributions
under
U.S.
Treas.
Reg.
Sec.
1.482-7(c)
occurring
with
respect
to
theIntangible
Development
Activity
after
the
Effective
Date,
the
Patties
commit
to
engage
in
further
platform
contribution
transactions
(“PCTs”)
as
follows:
(a)

































The
Party
that
develops,
maintains
or
acquires
such
resource,
capability
or
right
shall
make
such
resource,
capability
or
right
availableto
the
Intangible
Development
Activity
as
of
the
date
it
is
developed,
maintained
or
acquired;
(b)

































The
other
Party
shall
make
arm’s
length
payments
to
the
first
mentioned
Party
pursuant
to
U.S.
Treas.
Reg.
Sec.
1.482-7(b)(l)(ii);
and
(c)


































Unless
otherwise
specified
by
the
Parties,
the
form
of
payment
for
all
PCTs
will
be
contingent
payments
pursuant
to
U.S.
Treas.
Reg.Sec.
1.482-7(h)(2)(i)(B).
To
the
extent
a
platform
contribution
arises
from
an
asset
acquisition,
each
Party
shall
be
treated
as
if
it
acquired
its
share
of
the
related
resource,
capability
or
rightdirectly
from
the
seller.
8
ARTICLE 5 OWNERSHIP OF AND LICENSES UNDER DEVELOPED INTANGIBLE PROPERTY RIGHTS
Section
5.1




































Bare
Legal
Title
.
For
administrative
convenience
only,
bare
legal
title
to
the
Developed
Intangible
Property
Rights
shall
remain
withthe
Party
registered,
to
utilize
fully
anywhere
in
the
world,
subject
to
the
rights
of
the
Parties
under
this
Agreement,
including
without
limitation,
under
Section
5.2.For
the
avoidance
of
doubt,
unless
otherwise
specified
in
this
Agreement,
the
Parties
hold
the
following
rights:
(i)
the
right
to
control
the
quality
standard
relative
tothe
Developed
Intangible
Property
Rights;
(ii)
the
right
to
apply
for
and
obtain
registrations
for
the
Developed
Intangible
Property
Rights;
(iii)
the
right
to
enforcethe
Developed
Intangible
Property
Rights
against
Third
Parties;
(iv)
the
right
to
defend
Third
Party
objections
to
or
claims
against
the
Developed
IntangibleProperty
Rights;
and
(v)
the
right
to
maintain
and
abandon
the
applications,
registrations
and
other
statutory
rights
in
and
to
the
Developed
Intangible
PropertyRights.
For
purposes
of
interpretation
of
this
Section
5.1
under
the
Lanham
(Trademark)
Act,
all
use
of
trademarks
will
inure
to
the
benefit
of
the
Parties.
All
legalrights
associated
with
the
Developed
Intangible
Property
Rights
related
thereto
will
automatically
vest
in
the
Parties
at
the
time
that
such
Developed
IntangibleProperty
Rights
are
first
created.
Section
5.2




































Beneficial
Ownership;
All
Substantial
Rights
.

Insmed
U.S.
shall
have
beneficial
ownership
of
the
Developed
Intangible
PropertyRights
in
the
Insmed
U.S.
Field
of
Use
and
Insmed
Ireland
shall
have
beneficial
ownership
of
the
Developed
Intangible
Property
Rights
in
the
Insmed
Ireland
Fieldof
Use.
Section
5.3




































Reciprocal
Rights
.

So
that
Insmed
Ireland
may
utilize
the
Developed
Intangible
Property
Rights
in
its
business
and
fully
enjoy
itsbeneficial
ownership
thereof,
and
unless
otherwise
mutually
agreed
to
by
the
Parties
in
writing,
Insmed
U.S.
grants
to
Insmed
Ireland
an
exclusive,
perpetual,royalty-free
right
and
license
in,
to
and
under
the
Developed
Intangible
Property
Rights
to
make,
have
made,
develop,
have
developed,
use,
sell,
offer
to
sell,import,
perform,
display,
reproduce
and
distribute
(through
one
or
more
tiers
of
distribution)
the
Insmed
Group
Property
in
the
Insmed
Ireland
Field
of
Use,
tomake
improvements,
modifications
and/or
enhancements
to
the
Insmed
Group
Property
and
the
Developed
Intangible
Property
Rights
in
the
Insmed
Ireland
Fieldof
Use
and
to
sublicense
the
Developed
Intangible
Property
Rights
in
the
Insmed
Ireland
Field
of
Use
(including
the
right
to
sublicense
through
one
or
more
tiers
ofsub-licensees).
So
that
Insmed
U.S.
may
utilize
the
Developed
Intangible
Property
Rights
in
its
business
and
fully
enjoy
its
beneficial
ownership
thereof,
and
unlessotherwise
mutually
agreed
to
by
the
Parties
in
writing,
Insmed
Ireland
grants
to
Insmed
U.S.
an
exclusive,
perpetual,
royalty-free
right
and
license
in,
to
and
underthe
Developed
Intangible
Property
Rights
to
make,
have
made,
develop,
have
developed,
use,
sell,,
offer
to
sell,
import,
perform,
display,
reproduce
and
distribute(through
one
or
more
tiers
of
distribution)
the
Insmed
Group
Property
in
the
Insmed
U.S.
Field
of
Use,
to
make
improvements,
modifications
and
/or
enhancementsto
the
Insmed
Group
Property
and
the
Developed
Intangible
Property
Rights
in
the
Insmed
U.S.
Field
of
Use
and
to
sublicense
the
Developed
Intangible
PropertyRights
in
the
Insmed
U.S.
Field
of
Use
(including
the
right
to
sublicense
through
one
or
more
tiers
of
sub-licensees).
9
Section
5.4




































Disclosure
for
Purposes
of
the
Intangible
Development
Activity
.
During
the
term
of
this
Agreement,
the
Parties
shall
make
available
toeach
other
all
Developed
Intangible
Property
Rights
for
the
purpose
of
enabling
each
other
to
undertake
and
continue
their
respective
participation
in
the
IntangibleDevelopment
Activity.
Developed
Intangible
Property
Rights
may
be
furnished
in
documentary
or
consultative
form
at
such
time
and
in
such
manner
as
may
bemutually
convenient
to
the
Parties.
Section
5.5




































No
Waiver
or
Release
.
Making
available
Developed
Intangible
Property
Rights
under
Section
5.4
shall
not
constitute
any
release
orwaiver
by
a
Party
of
its
rights
in
the
Developed
Intangible
Property
Rights.
To
the
extent
required
or
appropriate,
solely
for
the
purpose
of
establishing
bare
legaltitle
to
the
Developed
Intangible
Property
Rights
in
accordance
with
Section
5.1,
and
subject
to
the
licenses
granted
in
Section
5.2
and
elsewhere
in
this
Agreement:
(a)

































The
Parties
and
Sub-licensees
hereby
assign
all
their
rights,
title
and
interest
in
and
to
the
Developed
Intangible
Property
Rights,including
without
limitation:
(i)
all
rights
under
the
United
States
Copyright
Act
or
any
other
country’s
copyright
law,
including
without
limitation,
any
rightsprovided
in
1
7
U.S.C.
§§
106
and
106A,
and
(ii)
any
rights
of
attribution
and
integrity
or
any
other
“moral
rights
of
authors”
existing
under
statutory,
common
orany
other
law,
and
will
execute
and
provide
to
the
Parties
documents
and
instruments
of
conveyance
with
respect
to
such
Developed
Intangible
Property
Rights
asmay
be
appropriate
to
perfect
title
thereto.
The
absence
of
such
written
documentation
shall
not
limit
the
rights
of
the
Parties
in
the
Developed
Intangible
PropertyRights
hereunder.
(b)

































To
the
extent
any
of
the
rights,
title
and
interest
in
and
to
the
foregoing
Developed
Intangible
Property
Rights
cannot
be
assigned
by
theParties
and/or
Sub-licensees,
each
Party
and/or
Sub-licensees
hereby
grant
to
the
other
Party
a
non-exclusive,
royalty-free,
transferable,
perpetual,
unrestricted,worldwide
license
(with
rights
to
sublicense
through
one
or
more
tiers
of
sub­
licensees)
under
such
non-assignable
Developed
Intangible
Property
Rights.
(c)


































To
the
extent
any
of
such
Developed
Intangible
Property
Rights
can
be
neither
assigned
nor
licensed
by
the
Parties
and/or
Sub-licensees,
the
Parties
and/or
Sub-licensees
hereby
waive
and
agree
never
to
assert
their
rights
in
any
such
non-assignable
and
non-licensable
Developed
IntangibleProperty
Rights
against
either
Party,
their
Affiliates,
licensees
or
successors
or
its
and
their
respective
customers.
The
Parties
shall
have
an
agreement
in
place
with
all
of
its
Sub-licensees
to
enable
each
Party
to
satisfy
and
fulfill
its
obligations
under
this
Section
5.5.
Section
5.6




































Power
of
Attorney
.
Solely
for
the
purpose
of
satisfying
its
obligations
under
Section
5.5,
each
Party
hereby
authorizes
the
other
Partyto
make,
constitute
and
appoint
any
representative,
in
its
sole
discretion,
as
true
and
lawful
attorney-in-fact,
with
power
to
endorse
that
Party
on
all
applications,documents,
papers
and
instruments
necessary
or
desirable
to
implement
some,
all
or
any
of
the
rights
that
the
Parties
have
assigned
or
agreed
to
assign
underSection
5.5.
The
Parties
hereby
ratify
all
that
such
attorney
shall
do
or
cause
to
be
done
by
virtue
hereof.
10
Section
5.7




































Mutual
Cooperation
and
Notice
.
Each
Party
will
cooperate
fully
with
the
other
Party
in
the
defense
of
any
lawsuit,
action,
legalproceeding,
claim
or
demand
relating
to
the
Developed
Intangible
Property
Rights.
Section
5.8




































Utilization
of
Developed
Intangible
Property
Rights
.
(a)

































To
the
extent
practicable,
the
Parties
shall
jointly
enter
into
all
contracts
or
agreements
for
the
worldwide
utilization
of
the
DevelopedIntangible
Property
Rights.
Such
contracts
or
agreements
shall
provide
that
each
Party
derives
the
benefits
of
utilization
of
the
Developed
Intangible
PropertyRights
within
such
Party’s
Field
of
Use
only.
To
the
extent
payments
under
such
a
contract
or
agreement
are
to
be
received
by
only
one
of
the
Parties,
such
Partyshall
act
as
collection
agent
for
the
other
Party
and
shall
rem
it
to
such
other
Party
the
portion
of
such
payment
allocable
to
utilization
of
the
Developed
IntangibleProperty
Rights
within
such
other
Party’s
Field
of
Use.
(b)

































To
the
extent
it
is
not
practicable
for
the
Parties
to
jointly
enter
into
a
contract
or
agreement
for
the
worldwide
utilization
of
theDeveloped
Intangible
Property
Rights,
any
such
contract
or
agreement
entered
into
by
only
one
of
the
Parties
shall
provide
for
the
utilization
of
the
DevelopedIntangible
Property
Rights
in
such
Party’s
Field
of
Use
only.
ARTICLE 6 SCOPE, FUNCTIONS AND RISKS
Section
6.1




































Scope
of
the
Intangible
Development
Activity
.
The
scope
of
the
Intangible
Development
Activity
shall
be
any
and
all
activitiesinvolving
the
development
of
Developed
Intangible
Property
Rights.
Section
6.2




































Functions
of
the
Parties
.
The
Parties
anticipate
that
each
Party
will
perform
or
subcontract
the
performance
of
Intangible
DevelopmentActivities
in
its
respective
Field
of
Use
i
n
order
to
develop
the
Developed
Technology,
Developed
Marketing
Intangibles
and
underlying
Developed
IntangibleProperty
Rights.
The
Parties
also
anticipate
that
each
Party
will
market,
sell
and
distribute
(or
license
the
right
to
market,
sell
and
distribute)
the
Insmed
GroupProperty
in
its
respective
Field
of
Use
and
will
perform
such
general
and
administrative
activities
as
are
necessary
to
utilize
the
Developed
Intangible
PropertyRights
in
its
respective
Field
of
Use.
Section
6.3




































Risks
of
the
Parties
.
Subject
to
any
terms
in
this
Agreement
and
any
other
agreement
between
the
Parties
to
the
contrary,
the
Partiesacknowledge
that
each
Party
incurs
the
risk
of
funding
Intangible
Development
Costs
without
guarantee
of
success
under
Section
4.7,
the
risk
of
developing
andmaintaining
its
Insmed
Group
Property,
the
risk
that
its
customers
or
licensees
may
not
pay
any
accounts
receivable
due
and
such
other
genera
l
business
risks
asrelate
to
the
functions
listed
in
Section
6.2.
ARTICLE 7 CONFIDENTIAL INFORMATION
Section
7.1




































Definition
of
Confidential
Information
.
The
Patties
acknowledge
that,
from
time
to
time,
one
Party
(the
“
Discloser ”)
may
disclose
tothe
other
Party
(the
“
Recipient ”)
11
information:
(a)
which
is
marked
with
“confidential”
or
a
similar
legend;
(b)
which
is
described
orally
and
designated
as
confidential;
(c)
which
would,
under
thecircumstances,
be
understood
by
a
reasonable
person
to
be
confidential;
or
(d)
which
is
defined
as
confidential
elsewhere
in
this
Agreement
(“
ConfidentialInformation ”).
Notwithstanding
the
foregoing,
any
unmarked
or
oral
information
between
employees
or
Representatives
of
the
Parties
discussing
ConfidentialInformation
will
be
Confidential
Information
by
default
whether
or
not
declared
confidential
and
whether
or
not
it
is
subsequently
described
in
writing.
Uponsubsequent
disclosure
of
previously
disclosed
Confidential
Information
to
the
Recipient
by
the
Discloser,
the
information
will
remain
Confidential
Informationeven
if
not
identified
as
Confidential
Information
at
the
subsequent
disclosure.
Section
7.2




































Confidentiality
Obligations
.
The
Recipient
shall
retain
such
Confidential
Information
in
confidence,
and
shall
not
disclose
it
to
anyThird
Party
or
use
it
for
other
than
the
purposes
of
this
Agreement
without
the
Discloser’s
prior
written
consent,
unless
disclosure
is
made
to
the
Recipient’sprofessional
consultants
who
are
bound
to
confidentiality
under
their
professional
law
(e.g.
lawyers,
tax
advisers
and
auditors)
excluding
Securities
ExchangeCommission
(“SEC”)
filings
and
investor
presentations.
Each
Party
shall
use
at
least
the
same
procedures
and
degree
of
care
with
respect
to
such
ConfidentialInformation
which
it
uses
to
protect
its
own
confidential
information
of
like
importance,
and
in
no
event
less
than
reasonable
care.
The
Recipient
will
immediatelygive
written
notice
to
the
Discloser
of
any
unauthorized
use
or
disclosure
of
the
Discloser’s
Confidential
Information,
and
the
Recipient
will
assist
the
Disc
loser
inremedying
such
unauthorized
use
or
disclosure.
Section
7.3




































Compelled
Disclosure
.
In
the
event
that
the
Recipient
or
(to
the
knowledge
of
the
Recipient)
any
of
its
Representatives
is
requested
orrequired
(by
oral
questions,
interrogatories,
requests
for
information
or
documents
in
legal
proceedings,
subpoenas,
civil
investigative
demands
or
other
similarprocesses)
to
disclose
any
of
the
Discloser’s
Confidential
Information,
the
Recipient
shall
provide
the
Discloser
with
prompt
written
notice
of
any
such
request
orrequirement
sufficiently
timely
to
allow
the
Discloser
adequate
time
to
seek
a
protective
order
or
other
appropriate
remedy
and/or
waive
compliance
with
theprovisions
of
this
Agreement.
Section
7.4




































Exceptions
.
Notwithstanding
the
foregoing,
Confidential
Information
will
not
include
information
to
the
extent
that
such
information:
(a)

































was
generally
available
to
the
public
at
the
time’
of
its
disclosure
to
the
Recipient
hereunder;
(b)

































became
generally
available
to
the
public
after
its
disclosure
other
than
through
an
act
or
omission
of
the
Recipient
(or
one
of
itsemployees,
agents
or
Representatives)
in
breach
of
this
Agreement;
or
(c)


































was
subsequently
lawfully
and
independently
disclosed
to
the
Recipient
by
a
person
other
than
the
Discloser
without
an
obligation
ofconfidentiality.
In
the
event
that
the
Recipient
intends
to
disclose
to
a
Third
Party
any
of
the
Discloser’s
Confidential
Information
under
the
exceptions
(a),
(b)
or
(c)
above,
theRecipient
must
first
12
obtain
the
Discloser’s
written
permission
to
do
so,
which
approval
will
be
at
the
Discloser’s
sole
discretion.
Section
7.5




































Third
Party
Contracts
.
Prior
to
the
Recipient’s
disclosure
of
any
of
the
Discloser’s
Confidential
Information
to
any
Third
Party,
theRecipient
must
require
the
Third
Party
to
enter
into
a
nondisclosure
agreement
(“
NDA ”)
provided
by
the
Discloser;
the
NDA
will
take
precedence
over
the
ThirdParty
agreement.
Section
7.6




































Third
Party
Confidential
Information
.
To
the
extent
that
any
information
is:
(a)
received
by
a
Party
from
a
Third
Party
and
(b)
suchParty
is
under
an
obligation
to
such
Third
Party
to
maintain
the
confidentiality
of
such
information,
such
information
shall
be
deemed
to
be
Third
PartyConfidential
Information
and
the
other
Party,
to
the
extent
that
such
Third
Party
Confidential
Information
is
disclosed
to
it
hereunder,
shall
maintain
theconfidentiality
of
such
Third
Party
Confidential
Information
in
accordance
with
such
obligation
of
confidentiality
as
if
it
had
entered
into
such
obligation
with
suchThird
Party.
Section
7.7




































Ownership
of
Confidential
Information
.
The
Recipient
agrees
that
all
Confidential
Information
received,
including,
without
limitation,files,
lists,
records,
documents,
drawings,
models,
source
code,
apparatus,
sketches
and
specifications,
which
incorporate
or
refer
to
or
embody
all
or
a
portion
ofthe
Confidential
Information,
is
and
will
remain
the
property
of
the
Discloser
and
that
such
Confidential
Information
shall
not
be
copied
or
reproduced
without
theexpress
permission
of
the
Disc
loser,
except
for
such
copies
as
may
be
reasonably
necessary
in
order
to
accomplish
the
purpose
of
this
Agreement.
Upon
writtenrequest
of
the
Discloser,
the
Recipient
shall
immediately
discontinue
all
use
of
all
Confidential
Information
of
the
Discloser,
other
than
such
items
of
ConfidentialInformation
developed
pursuant
to
this
Agreement
as
may
specifically
relate
to
improvements/refinements
to
the
Developed
Intangible
Property
Rights,
and
shall,at
the
Discloser’s
option,
either
destroy
or
return
to
the
Discloser
all
hard
copies
in
its
possession
of
such
Confidential
Information
and
any
derivatives
thereof(including
all
hard
copies
of
any
translation,
modification,
compilation,
abridgement
or
other
form
in
which
the
Confidential
Information
has
been
recast,transformed
or
adapted)
and
to
delete
all
on-line
electronic
copies
thereof;
provided,
however,
that
the
Recipient
may
retain
one
(1)
archival
copy
of
theConfidential
Information,
which
shall
be
used
only
in
case
of
a
dispute
concerning
this
Agreement.
Notwithstanding
the
foregoing,
neither
Party
shall
be
requiredto
destroy
or
alter
any
computer-based
back-up
files
generated
in
the
normal
course
of
its
business,
provided
that
such
files
are
maintained
confidential
inaccordance
with
the
terms
of
this
Agreement
for
the
full
period
provided
for
in
Section
7.9.
Section
7.8




































Equitable
Remedies
.
Since
unauthorized
use
or
disclosure
of
a
Discloser’s
Confidential
Information
will
diminish
the
value
to
theDiscloser
of
its
proprietary
interests
in
the
Confidential
Information,
if
the
Recipient
breaches
any
of
its
obligations
under
this
Artic
le
7,
the
Discloser
shall
beentitled
to
equitable
relief
to
protect
its
interests
therein,
including,
but
not
limited
to,
injunctive
relief,
as
well
as
money
damages.
Section
7.9




































Confidentiality
Obligations
Survival
.

With
respect
to
each
item
of
Confidential
Information
transferred
under
this
Agreement,
theprovisions
of
this
Article
7
shall
remain
in
effect
until
such
time
as
the
Recipient
can
demonstrate,
using
only
legally
admissible
13
evidence,
that
such
item
of
Confidential
Information
is
publicly
known
or
was
made
generally
available
through
no
action
or
inaction
of
the
Recipient.
ARTICLE 8 LIMITATION OF LIABILITY; NO WARRANTY
Section
8.1




































LIMITATION
ON
LIABILITY
.
IN
NO
EVENT
WILL
EITHER
PARTY’S
LIABILITY
IN
CONNECTION
WITH
THISAGREEMENT
EXCEED
$25,000.

THIS
LIMITATION
APPLIES
TO
ALL
CAUSES
OF
ACTION
IN
THE
AGGREGATE,
INCLUDING,
WITHOUTLIMITATION,
BREACH
OF
CONTRACT,
BREACH
OF
WARRANTY,
NEGLIGENCE,
STRICT
LIABILITY.
MISREPRESENTATION
AND
OTHERTORTS.
Section
8.2




































LIMITATION
ON
DAMAGES
.
IN
NO
EVENT
WILL
EITHER
PARTY
HAVE
ANY
LIABILITY
TO
THE
OTHER
PARTY
FORANY
INDIRECT,
INCIDENTAL,
SPECIAL,
EXEMPLARY
OR
CONSEQUENTIAL
DAMAGES
ARISING
OUT
OF
OR
RELATED
TO
THIS
AGREEMENT,HOWEVER
CAUSED
AND
ON
ANY
THEORY
OF
LIABILITY,
WHETHER
FOR
BREACH
OF
CONTRACT,
TORT
OR
OTHER
WISE,
INCLUDING
BUTNOT
LIMITED
TO,
LOSS
OF
ANTICIPATED
PROFITS,
LOSS
OF
DATA
OR
LOSS
OF
USE,
EVEN
IF
SUCH
PARTY
HAS
BEEN
ADVISED
OF-THEPOSSIBILITY
OF
SUCH
DAMAGES.
Section
8.3




































DISCLAIMER
OF
WARRANTIES
.
ALL
INSMED
U.S.
AND
INSMED
IRELAND
INTANGIBLE
PROPERTY
RIGHTS
AREPROVIDED
“AS
IS”
AND
WITHOUT
ANY
WARRANTY,
EXPRESS,
IMPLIED
OR
OTHERWISE,
REGARDING
THEIR
ACCURACY
ORPERFORMANCE,
AND
INSMED
U.S.
EXPRESSLY
DISCLAIMS
ANY
WARRANTY
OF
MERCHANTABILITY,
FITNESS
FOR
A
PARTICULARPURPOSE
OR
NON-INFRINGEMENT.
Section
8.4




































Representation
and
Warranty
.
Each
Party
represents
and
warrants
to
the
other
Party
that
all
Developed
Intangible
Property
Rights
willnot,
to
the
best
of
each
respective
Party’s
knowledge,
infringe
any
patents,
copyrights,
trade
secret
rights,
trademark
or
trade
dress
rights
or
any
other
proprietaryrights
(including
but
not
limited
to
moral
rights
or
rights
of
privacy
or
publicity)
of
any
Third
Party,
worldwide.
If
either
Party
incorporates
an
y
technology
orother
Intangible
property
right
owned
by
a
Third
Party
into
any
Developed
Technology
or
Developed
Marketing
Intangible,
such
Party
will

identify
all
such
ThirdParty
rights
and
will
obtain
an
assignment,
license
or
written
waiver
and
agreement
from
such
Third
Party
as
necessary
for
such
Party
to
comply
with
itsobligations
under
this
Section
8.4.
ARTICLE 9 TERM AND TERMINATION
Section
9.1




































Term
.
This
Agreement
shall
enter
into
effect
on
the
Effective
Date
and
shall
remain
in
full
force
and
effect
until
terminated
by
awritten
agreement
between
the
Parties,
unless
terminated
in
accordance
with
Section
9.2,
Section
9.3
or
Section
9.4.
14
Section
9.2




































Termination
for
Convenience
.
This
Agreement
may
be
terminated
by
either
Party,
for
any
reason,
by
giving
the
other
Party
writtennotice
of
the
termination
sixty
(60)
days
in
advance.
Section
9.3




































Termination
for
Cause
.
This
Agreement
may
be
terminated
by
either
Party
(“
Non-Breaching Party ”),
if
the
other
Party
(“
BreachingParty ”)
is
in
material
breach
of
this
Agreement
and
fails
to
cure
such
breach
within
thirty
(30)
days
following
receipt
of
notice
of
such
breach.
In
the
event
thatBreaching
Party
fails
to
cure
such
breach
or
default
with
in
thirty
(30)
days
after
the
date
of
Non-Breaching
Party’s
notice
hereunder,
Non-Breaching
Party
mayterminate
this
Agreement
immediately
upon
providing
written
notice
of
termination
to
Breaching
Party.
Termination
of
this
Agreement
in
accordance
with
thisSection
9.3
shall
not
affect
or
impair
Non­
Breaching
Party’s
right
to
pursue
any
legal
remedy,
including
the
right
to
recover
damages,
for
all
harm
suffered
orincurred
as
a
result
of
Breaching
Party’s
breach
or
default.
Section
9.4




































Change
in
Control
or
Substantial
Encumbrance
.
In
the
event
that
the
Parties
cease
to
be
Affiliates,
either
Party
undergoes
aninvoluntary
change
in
control
or
a
substantial
portion
of
either
Party’s
assets
or
the
conduct
of
either
Party’s
business
is
substantially
encumbered
by
extraordinarygovernmental
action
or
by
operation
of
Jaw,
either
Party
may,
at
its
opt
ion
and
in
its
sole
discretion,
terminate
this
Agreement,
effective
immediately
upon
givingwritten
notice
of
termination
to
the
other
Party.
For
purposes
of
this
Section
9.4,
notice
shall
be
effective
when
sent.
Section
9.5




































Effect
of
Termination
.
Upon
any
termination
of
this
Agreement:
(a)

































the
Parties
shall
retain
the
rights
in
the
Developed
Intangible
Property
Rights
as
set
forth
in
this
Agreement,
including
Section
5.1
andSection
5.2;
and
(b)

































if
such
termination
is
pursuant
to
Section
9.3,
the
Breaching
Party
shall
promptly
comply
with
the
provisions
of
Section
7.7.
Section
9.6




































Final
Payment
.
Upon
any
termination,
treating
the
date
of
termination
as
the
final
Fiscal
Year
End,
the
Parties
shall
prepare
a
finalAnnual
CSA
Report
as
provided
in
Article
3
and
shall
arrange
to
pay
or
otherwise
settle
the
Annual
Payment
Amount
within
sixty
(60)
days
of
termination
or
asprovided
by
Section
4.1,
Section
4.3,
Section
4.4
and
Section
4.6.
Section
9.7




































Survival
.
In
the
event
of
the
termination
of
this
Agreement
for
any
reason
whatsoever,
Article
1,
Article
3,
Article
4,
Article
5,Article
7,
Article
8
and
Article
10,
and
Section
9.5,
Section
9.6
and
this
Section
9.7
of
this
Agreement
shall
survive
for
as
long
as
necessary
to
effectuate
theirpurposes
and
shall
bind
the
Parties
and
their
Affiliates.
The
termination
of
this
Agreement
shall
not
relieve
either
Party
of
any
liability
under
this
Agreement
thataccrued
prior
to
such
termination.
Section
9.8




































Modification
.
Pursuant
to
U.S.
Treas.
Reg.
Sec.
1.482-7(f),
in
the
event
of
a
“change
in
participation”
as
defined
therein,
thisAgreement
shall
be
modified
and
arm’s
length
consideration
shall
be
due
as
provided
therein.
15 ARTICLE 10 GENERAL PROVISIONS
Section
10.1





























Assignment
.
Neither
Party
may
assign
this
Agreement,
its
rights
or
its
responsibilities
hereunder
without
the
other
Party’s
prior
writtenauthorization.
Any
assignment
in
derogation
of
the
foregoing
shall
be
void.
Section
10.2





























Notices
.
Any
notice
required
or
permitted
to
be
given
under
this
Agreement
shall
be
given
to
the
other
Party
either
1)
in
writing
anddelivered
by
overnight
courier
(signature
of
receipt
required)
and
shall
be
deemed
delivered
upon
written
confirmation
of
delivery
by
the
courier
or
2)
via
e-m
ail,and
shall
be
deemed
delivered
provided
no
transmission
error
was
received
(if
by
e­mail),
if
sent
to
the
following
respective
addresses
or
such
new
addresses
as
mayfrom
time
to
time
be
supplied
hereunder:
IF TO Insmed U.S.: IF TO Insmed Ireland:10
Finderne
Avenue,
Building
10,
Bridgewater,
New
Jersey
Attention:
General
Counsel
E-mail:
generalcounsel@insmed.com
25-28
North
Wall
Quay
Dublin
1,
Ireland
Attention:
Nickola
Murphy
/Geraldine
Lillis
E-mail:
Nickola.Murphy@canyoncts.com
/
Geraldine.Lillis@canyoncts.com
Section
10.3





























Force
Majeure
.
Neither
Party
shall
be
liable
to
the
other
Party
for
failure
or
delay
in
the
performance
of
any
obligations
under
thisAgreement,
other
than
the
obligation
to
pay
monies
(“
Excused Obligation ”),
for
the
time
and
to
the
extent
such
failure
or
delay
is
due
to
any
cause
or
conditionbeyond
the
reasonable
control
of
the
Party
obliged
to
perform,
including,
but
not
limited
to,
strikes
or
other
labor
difficulties.
acts
of
God,
earthquakes,
acts
ofgovernment
(in
particular
with
respect
to
the
refusal
to
issue
necessary
import
or
export
licenses),
war,
terrorism,
riots,
embargoes
or
inability
to
obtain
supplies(collectively
“
Force Majeure ”).
If
Force
Majeure
prevents
or
delays
the
performance
by
a
Party
hereto
of
any
Excused
Obligation
under
this
Agreement,
theParty
claiming
Force
Majeure
shall
promptly
notify
the
affected
Party
thereof
in
writing.
Section
10.4





























Successors
and
Assigns
.
This
Agreement
shall
be
binding
on
and
shall
inure
to
the
benefit
of
the
Parties,
Affiliates,
their
respectivesuccessors,
successors
in
title,
and
assigns,
and
each
Party
agrees,
on
behalf
of
it,
its
Affiliates,
successors,
successors
in
tit
le,
and
assigns,
to
execute
anyinstruments
that
may
be
necessary
or
appropriate
to
carry
out
and
execute
the
purpose
and
intentions
of
this
Agreement
and
hereby
authorizes
and
directs
itsAffiliates,
successors,
successors
in
title,
an
d
assigns
to
execute
any
and
all
such
instruments.
Each
and
every
successor
in
interest
to
any
Party
or
Affiliate,whether
such
successor
acquires
such
interest
by
way
of
gift,
devise,
assignment,
purchase,
conveyance,
pledge,
hypothecation,
foreclosure,
or
by
any
othermethod,
shall
hold
such
interest
subject
to
all
of
the
terms
and
provisions
of
this
Agreement.
The
rights
of
the
Parties,
Affiliates,
and
their
successors
in
interest,
asamong
themselves
and
shall
be
governed
by
the
terms
of
this
Agreement,
and
the
right
of
any
Party,
Affiliate
or
successor
in
interest
to
assign,
sell
or
otherwisetransfer
or
deal
with
its
interests
under
this
Agreement
shall
be
subject
to
the
limitations
and
restrictions
of
this
Agreement.
16
Section
10.5





























Amendment
.
This
Agreement
may
only
be
amended
or
supplemented
by
additional
written
agreements
or
instruments
specificallyreferencing
this
Agreement
and
signed
by
the
Parties.
Section
10.6





























Remedies
Cumulative
.
A
Party’s
remedies
under
this
Agreement
are
cumulative
and
shall
not
exclude
any
other
remedy
to
which
theParty
may
be
entitled.
Termination
of
this
Agreement
by
a
Party
shall
not
adversely
affect
or
impair
such
Party’s
right
to
pursue
any
other
remedy
including,without
limitation,
the
right
to
recover
damages
for
all
harm
suffered
as
a
result
the
other
Party’s
breach
or
default.
Section
10.7





























Further
Assurances
.
Each
Party
hereby
covenants
and
agrees
that
it
shall
execute
and
deliver
such
deeds
and
other
documents
as
maybe
required
to
implement
any
of
the
provisions
of
this
Agreement.
Section
10.8





























No
Waiver
.
The
failure
of
any
Party
to
insist
on
strict
performance
of
a
covenant
hereunder
or
of
any
obligation
hereunder
shall
not
bea
waiver
of
such
Party’s
right
to
demand
strict
compliance
therewith
in
the
future,
nor
shall
the
same
be
construed
as
a
novation
of
this
Agreement.
Section
10.9





























Entire
Agreement
.

This
Agreement
(including
its
Exhibits
and
any
amendments)
contains
the
entire
agreement
of
the
Parties
withrespect
to
the
subject
matter
of
this
Agreement,
except
for
agreements
referenced
in
this
Agreement,
and
supersedes
all
previous
communications,
representations,understandings
and
agreements,
either
oral
or
written,
between
the
Parties
with
respect
to
the
subject
matter
hereof.
Section
10.10






















Headings;
Construction
.

The
headings
in
this
Agreement
are
for
convenience
only
and
will
not
be
construed
to
affect
the
meaning
ofany
provision
of
this
Agreement.
Any
use
of
“including”
shall
also
be
deemed
to
mean
“including
without
limitation.”
Section
10.11






















Number
and
Gender
.
Whenever
required
by
the
context,
the
singular
number
shall
include
the
plural,
the
plural
number
shall
includethe
singular,
and
the
gender
of
any
pronoun
shall
include
all
genders.
Section
10.12






















Counterparts
.
This
Agreement
may
be
executed
in
multiple
copies,
each
of
which
shall
for
all
purposes
constitute
an
Agreement,binding
on
the
Parties,
and
each
Party
hereby
covenants
and
agrees
to
execute
all
duplicates
or
replacement
counterparts
of
this
Agreement
as
may
be
required.
Section
10.13






















Governing
Law
and
Jurisdiction
.

Any
questions,
claims,
disputes
or
litigation
concerning
or
arising
from
this
Agreement
shall
begoverned
by
the
laws
of
the
State
of
New
Jersey,
United
States
of
America,
without
giving
effect
to
the
conflicts
of
laws
principles
of
that
state
or
doctrines
of
anyother
state
of
the
United
States,
or
any
nation
state.
Each
of
the
Parties
agrees
to
submit
to
the
exclusive
jurisdiction
of
the
courts
in
the
State
of
New
Jersey
and
theUnited
States
Federal
courts,
for
any
matter
arising
out
of
or
relating
to
this
Agreement
Notwithstanding
the
foregoing,
in
actions
seeking
to
enforce
any
order
orany
judgment
of
any
such
courts
located
in
State
of
New
Jersey,
personal
jurisdiction
shall
be
non-exclusive.
The
Parties
agree
that
the
United
Nations
Conventionon
Contracts
for
the
International
Sale
of
Goods
is
specifically
excluded
from
application
to
this
Agreement.
17
Section
10.14






















Computation
of
Time
.
Whenever
the
last
day
for
the
exercise
of
any
privilege
or
the
discharge
of
any
duty
hereunder
shall
fall
on
aSaturday,
Sunday
or
any
public
or
legal
holiday,
whether
local
or
national,
the
person
having
such
privilege
or
duty
shall
have
until
5:00
p.m.
on
the
nextsucceeding
business
day
to
exercise
such
privilege,
or
to
discharge
such
duty.
Section
10.15






















Severability
.
I
n
the
event
any
provision,
clause,
sentence,
phrase,
or
word
hereof,
or
the
application
thereof
in
any
circumstances,
isheld
to
be
invalid
or
unenforceable,
such
invalidity
or
unenforceability
shall
not
affect
the
validity
or
enforceability
of
the
remainder
hereof,
or
of
the
application
ofany
such
provision,
sentence,
clause,
phrase,
or
word
in
any
other
circumstances.
Section
10.16






















Costs
and
Expenses
.
Unless
otherwise
provided
in
this
Agreement,
each
Party
shall
bear
all
fees
and
expenses
incurred
in
performingits
obligations
under
this
Agreement.
Section
10.17






















Taxes
.
Each
Party
hereto
shall
be
responsible
for
any
and
all
taxes
levied
on
such
Party
as
a
result
of
the
performance
of
each
Party’srespective
activities
under
this
Agreement.
To
the
extent
any
withholding
taxes
apply
to
any
payment,
such
payment
shall
be
made
net
of
such
withholding
tax.
TheParties
shall
cooperate
to
provide
each
other
with
any
documentation
necessary
to
claim
a
reduced
rate
of
withholding
tax
under
any
relevant
tax
treaty.
Section
10.18






















Authority
and
Compliance
Under
Corporate
Charter
.
Each
Party
hereby
warrants,
represents
and
covenants
that
it
is
a
duly
organizedand
existing
company
under
the
respective
laws
of
its
jurisdiction
of
incorporation
and
has
the
full
rights,
power
and
authority
pursuant
to
its
corporate
charter,articles
of
incorporation
and
/or
by-laws
to
enter
into
and
perform
all
obligations
under
this
Agreement.
Each
Party
further
warrants,
represents
and
covenants
thatin
exercising
any
and/or
all
rights
and
in
performing
any
and/or
all
obligations
under
this
Agreement,
each
Party
and/or
its
Representatives
will
act
in
fullaccordance
with
its
respective
corporate
charter,
articles
of
incorporation
and/or
by-laws.
[SIGNATURE
PAGE
FOLLOWS]
18
By
their
Signatures,
the
authorized
representatives
of
the
Parties
acknowledge
the
Parties’
acceptance
of
this
Agreement:
Insmed IncorporatedInsmed Ireland Limited  By:/s/
Andrew
Drechsler By:/s/
Geraldine
LillisName:Andrew
DrechslerName:Geraldine
LillisTitle:Chief
Financial
OfficerTitle:DirectorDate:May
28,
2015 Date:May
29,
2015
19
Schedule
3

PLATFORM CONTRIBUTION TRANSACTION (“PCT”) INTANGIBLE PROPERTY LICENSE AGREEMENT
INSMED INCORPORATED - INSMED IRELAND LIMITED
This
PLATFORM
CONTRIBUTION
TRANSACTION
INTANGIBLE
PROPERTY
LICENSE
AGREEMENT
(“Agreement”),
effective
as
of
April
1,2015
is
by
and
between
Insmed
Ireland
Limited
(“Insmed
Ireland”),
a
limited
liability
company
organized
under
the
laws
of
Ireland,
with
registered
office
at
25-28North
Wall
Quay,
Dublin
l,
Ireland,
registered
with
the
Registrar
of
Companies
under
number
550604
and
Insmed
Incorporated
(“Insmed
U.S.”),
a
corporationorganized
under
the
laws
of
Virginia
with
principal
place
of
business
at
10
Finderne
Avenue,
Building
10,
Bridgewater.
New
Jersey
(collectively,
the
“Parties”
andindividually,
“Party”).
RECITALS
WHEREAS ,
Insmed
U.S.
is
engaged,
directly
or
through
its
subsidiaries,
affiliates,
sub­
contractors,
contract
developers
or
licensors,
in
the
business
ofresearching,
developing,
marketing
and
distributing
pharmaceuticals
products
(collectively,
the
“Products”
as
further
defined
below
)
and
has
developed
certainintangibles
related
to
said
Products;
WHEREAS ,
Insmed
U.S.
is
currently
the
owner
or
licensee
of
legal
and
beneficial
rights
to
specific
products
and
intangibles
(as
defined
in
Section
1.5);
WHEREAS ,
the
Parties
have
entered
into
the
certain
Cost
Sharing
Agreement
effective
as
of
April
l,
2015,
a
qualified
cost
sharing
arrangement
inaccordance
with
U.S.
Treasury
Regulations
§
1.482-7
(the
“CSA”),
to
pool
their
resources
for
the
purpose
of
developing
and
otherwise
enhancing
the
value
offuture
intangibles
and
to
share
the
benefits
therefrom;
WHEREAS ,
in
conjunction
with
the
CSA,
Insmed
Ireland
desires
to
obtain
from
Insmed
U.S.
a
license
to
certain
pre-existing
rights
and
platformcontributions
(collectively
“Intangibles”,
as
further
defined
in
Section
1.5)
in
its
Field
of
Use
(as
defined
in
Section
1.3);
WHEREAS ,
the
Parties
des
ire
to
use
their
respective
Intangible
Property
Rights
to
develop
technologies.
products
and
to
further
enhance
theirintangible
right
s
with
respect
to
the
Parties·
respective
Field
of
Use;
and
WHEREAS ,
Insmed
U.S.
is
willing
to
grant
a
non-exclusive
right
to
exercise
certain
product
technologies
and
intangible
property
rights
under
theaforementioned
license
within
Insmed
Ireland’s
Field
of
Use,
and
Insmed
Ireland
is
willing
to
accept
such
rights
and
obligations.
NOW, THEREFORE ,
in
consideration
of
the
mutual
covenants
and
conditions
contained
herein
and
intending
to
be
legally
bound,
the
Parties
herebyagree
as
follows:
1
ARTICLE 1 DEFINITIONS
Section
1.1




































“
Affiliate ”
or
“
Affiliates ”
of
a
Party
means
any
entity
controlled
by,
controlling
or
under
common
control
with
such
Party,where
“control”
in
any
of
the
foregoing
forms
means
ownership,
either
direct
or
indirect.
of
more
than
fifty
percent
(50%)
of
the
equity
interest
entitled
to
vote
forthe
election
of
directors
or
equivalent
governing
body.

An
entity
shall
be
considered
an
Affiliate
only
so
long
as
such
entity
continues
to
meet
the
foregoingdefinition.
Section
1.2




































“
Effective Date ”
means
April
1,
2015.
Section
1.3




































“
Field of Use ”
means
customers
and
business
operations
located
outside
of
the
United
States
of
America
for
Insmed
Irelandand
customers
and
business
operations
located
in
the
United
States
of
America
for
Insmed
U.S.
Section
1.4




































“
Fiscal Year ”
means
the
period
from
January
1
to
December
31
of
each
year.
Section
1.5




































“
Intangibles ”
or
“
Intangible Property Rights ”
means
any
and
all
rights
of
any
kind,
including
intellectual
property
rights,existing
whether
or
not
registered
and
all
applications,
renewals,
extensions
of
the
same
and
whenever
arising,
registered
or
applied
to
be
registered,
arising
beforethe
Effective
Date
that
Insmed
U.S.
presently
owns
or
has
the
right
to
license
to
Insmed
Ireland,
Affiliates,
assignees
and/or
licensees
(by
whatever
name
or
termknown
or
designated)
related
to
the
Products
outlined
in
Exhibit
A,
including,
without
limitation:
(a)

































all
inventions,
know-how,
technical
data,
trade
secrets,
functional
or
detailed
design
specifications,
designs
and
enhancements,whether
patentable
or
un-patentable,
patented
or
un-patented;
(b)

































all
trademarks,
copyrights,
service
marks
and
trade
name
rights,
internet
domain
names,
social
media
designations,
and
otherdesignations
and
similar
rights;
(c)


































all
franchises,
licenses,
or
contracts;
(d)

































all
rights
associated
with
works
of
authorship
throughout
the
world,
including
but
not
limited
to
copyrights,
moral
rights
andsoftware;
(e)


































all
Patents
(including
provisionals,
continuations,
continuations-in-part,
and
divisionals
thereof),
reissues
and
re-examinationsthereof,
database
rights,
design
rights
and
other
industrial
property
rights
that
have
the
benefit
of
a
filing
date
on
or
after
the
Effective
Date;
(f)



































all
patent
applications
(including
continuations,
continuations-in-part
and
divisionals
thereof)
now
or
hereafter
in
force,
thathave
the
benefit
of
a
filing
date
on
or
after
the
Effective
Date;
2
(g)


































all
rights,
including
copyrights.
Confidential
Information
and
trade
secrets
underlying
the
technology
and
any
prints,packaging,
labels,
advertising
or
promotional
material
and
any
other
materials
of
any
kind
using
or
used
in
conjunction
with
trademarks
and
know-how
underlyingthe
developed
marketing
intangibles,
whether
created
by
the
Parties
their
Affiliates
or
any
Third
Party
engaged
by
the
Parties
or
their
Affiliates
to
create
anythereof;
and
(h)

































any
additional
applicable
intangible
property
as
defined
under
U.S.
Treas.
Reg.
Sec.
1.482-4(b)
(whether
or
not
indocumentary
form
and
whether
or
not
patentable,
copyrightable,
or
otherwise
protectable
under
applicable
laws).
Section
1.6




































“
Revenues ”
means
the
gross
revenues
determined
in
accordance
with
U.S.
Generally
Accepted
Accounting
Principles(“GAAP”)
for
financial
reporting
purposes
and
shall
mean
the
revenues
recognized
by
or
for
the
account
of
Insmed
Ireland
from
the
sale
or
license
of
the
Productsand
any
related
services.
provided
that
Revenues
shall
not
include
any
of
the
following:
(a)

































Any
government
taxes
or
levies
collected
from
customers
with
respect
to
the
sale
of
or
the
license
relating
to
the
Products
thatare
to
be
paid
over
to
any
applicable
governmental
authority:
or
(b)

































Any
amounts
associated
with
the
shipment
and
delivery
of
the
Products,
including,
without
limitation,
all
freight
charges,freight
forwarding
fees.
customs
fees
and
insurance
premiums;
or
(c)


































Any
portion
of
the
sales
or
license
revenues
of
the
Products
that
is
refunded
to
a
customer;
or
(d)

































Any
revenues
received
from
an
Affiliate.
Section
1.7




































“
Sublicensee ”
means
a
license
entered
into
by
Insmed
Ireland
in
accordance
with
Section
2.2
of
Artic
le
2
of
this
Agreement.
Section
1.8




































“
Sub-contractor ”
means
an
affiliate
or
unrelated
party,
under
an
agreement.
as
a
sub-contractor,
undisclosed
agent,commissionaire,
or
similar
party,
acting
on
behalf
of
one
of
the
Parties.
Section
1.9




































“
Third Party ”
or “
Third Parties ”
means
any
entity
other
than
a
Party
to
this
Agreement
or
an
Affiliate
of
the
Parties.
ARTICLE 2 GRANT OF RIGHT TO USE INTANGIBLES AND INTANGIBLE PROPERTY RIGHTS
Section
2.1




































License
of
Rights
.
Subject
to
the
terms
and
conditions
of
this
Agreement
and
unless
otherwise
mutually
agreed
to
by
theParties
in
writing,
as
of
the
Effective
Date.
Insmed
U.S.
hereby
grants
to
Insmed
Ireland
a
non-exclusive.
perpetual
right
and
license
in
and
to
the
Intangibles
withinits
Field
of
Use
to
make,
have
made,
use,
sell,
offer
to
sell,
perform,
display,
reproduce,
and
distribute
the
Products
and
to
make
improvements,
modificationsand/or
enhancements
to
the
intangibles.
3
Section
2.2




































Licenses
from
Third
Parties
.
The
license
granted
under
Section
2.1
(License
of
Rights)
includes
all
economic
rights
andlicenses
granted
to
the
Parties
by
Third
Parties
to
the
extent
those
rights
relate
to
the
development
and/or
use
of
the
Products
and
may
be
sublicensed
to
the
Parties.
Section
2.3




































Right
to
Sublicense
.
Insmed
Ireland
shall
have
the
right
to
sublicense
to
Third
Parties
the
rights
licensed
to
Insmed
Irelandpursuant
to
Section
2.1
(License
of
Rights).
Section
2.4




































Quality
.
Sales
by
Insmed
Ireland
(or
a
Sublicensee
or
Sub-contractor)
shall
meet
the
quality
control
standards
andspecifications
established
from
time-to-time
by
Insmed
U.S.,
including
any
requirements
of
applicable
regulatory
agencies
in
the
Parties’
respective
Field
of
Use.Insmed
U.S.
shall
have
the
right,
at
its
expense,
to
audit
Insmed
Ireland’s
quality
control
of
Sales
from
time-to-time
on
a
reasonable
basis
and
on
reasonable
priornotice
to
Insmed
Ireland.
In
the
event
that
quality
control
of
Insmed
Ireland
(or
a
Sublicensee
or
a
Sub-contractor)
falls
below
Insmed
U.S.’s
standards
andspecifications,
Insmed
U.S.
shall
give
Insmed
Ireland
written
notice
of
such
failures,
and
Insmed
Ireland
shall,
at
its
expense
and
within
the
reasonable
noticeperiod
set
out
in
the
notice,
take
such
corrective
action
as
is
necessary
to
restore
quality
to
the
appropriate
level.
ARTICLE 3 PAYMENT
Section
3.1




































Compensation
.
Subject
to
this
Article
3
and
consideration
for
the
license
granted
to
Insmed
Ireland
under
thisAgreement,
Insmed
Ireland
agrees
to
make
a
PCT
Payment
to
Insmed
U.S.
that
produces
an
arm’s
length
result,
as
provided
in
Exhibit
B
.
Section
3.2




































Timing
and
Manner
of
Payments
.
The
PCT
Payments
shall
be
payable
and
due
as
outlined
in
Exhibit
B
through
the
final
date,on
which
date
all
such
PCT
amounts
shall
be
fully
paid.
Section
3.3




































Pre-Payment
Option
.
The
Patties
agree
that
Insmed
Ireland
has
the
option,
without
penalty,
to
pre-pay
the
PCT
Payments,
inwhole
or
in
part,
during
the
term
of
this
Agreement,
but
in
no
event
prior
to
2016.
Any
pre-payment
amount
shall
reduce
the
net
present
value
of
the
outstandingpayments
still
remaining
under
Section
3.1
(Compensation).
Upon
such
pre­
payment.
if
any,
the
net
present
value
of
the
outstanding
future
PCT
Payments
shall
becalculated
using
a
discount
rate
that
is
reflective
of
the
then
current
risk
associated
with
the
forecasted
Bookings.
Upon
such
pre-payment,
the
Parties
will
mutuallydevelop
a
new
schedule
for
payment
of
the
remaining
amounts
due,
if
any,
under
this
Agreement.
Section
3.4




































Manner
of
Payment
.
A
netting
of
any
amount
payable
under
this
Agreement
as
against
existing
accounts
payable
andaccounts
receivable
shall
be
acceptable
payment,
effective
as
of
the
date
of
the
netting
on
the
books
of
the
Parties.
Section
3.5




































Currency
.
All
royalties
contemplated
hereby
shall
be
made
in
U.S.
Dollars
or
in
a
currency
as
mutually
agreed
to
by
theParties.
Any
reported
amount
in
currencies
other
than
the
U.S.
Dollars
shall
be
translated
into
U.S.
Dollars
at
the
prevailing
bookkeeping
4
rate
used
by
the
Parties
during
the
period
in
which
the
amount
is
recognized
under
U.S.
GAAP
as
applied
for
financial
reporting
purposes.
Section
3.6




































Withholding
Taxes
and
Related
Matters
.
Any
withholding
or
related
tax
or
other
obligations
relating
to
the
payments
dueunder
the
terms
of
this
Agreement
shall
be
complied
with
by
Insmed
Ireland.
and
shall
not
alter
the
amount
of
the
obligation
of
Insmed
Ireland
under
this
Article
3.
Section
3.7




































Revenues
Data
.
Insmed
Ireland
shall
maintain
complete
and
accurate
records
of
all
Revenues.
Insmed
U.S.
shall
have
theright,
at
its
expense
and
on
a
reasonable
basis
with
reasonable
prior
written
notice
to
Insmed
Ireland,
to
examine
such
records
during
regular
business
hours
duringthe
term
of
this
Agreement
and
for
6
months
after
termination
of
this
Agreement.
ARTICLE 4 CONFIDENTIAL INFORMATION
Section
4.1




































Definition
of
Confidential
Information
.
The
Parties
acknowledge
that
from
time
to
time,
one
Party
(the
“Discloser”)
maydisclose
to
the
other
Party
(the
“Recipient”)
information:
(a)
that
is
marked
with
“confidential”
or
a
similar
legend;
or
(b)
that
is
described
orally
and
designated
asconfidential;
or
(c)
that
would,
under
the
circumstances,
be
understood
by
a
reasonable
person
to
be
confidential
(“Confidential
Information”).
Any
unmarked
ororal
information
conveyed
during
a
meeting
between
employees
of
the
Parties
discussing
Confidential
Information
will
be
Confidential
Information
by
defaultwhether
or
not
declared
confidential
and
whether
or
not
it
is
subsequently
described
in
writing.
Upon
subsequent
disclosure
of
previously
disclosed
ConfidentialInformation
to
the
Recipient
by
the
Discloser,
the
information
will
remain
Confidential
Information
even
if
not
identified
as
confidential
information
at
thesubsequent
disclosure.
The
Intangibles
shall
be
considered
Confidential
Information
of
the
Parties.
Section
4.2




































Confidentiality
Obligations
.
The
Recipient
shall
retain
such
Confidential
Information
in
confidence,
and
shall
not
disclose
itto
any
Third
Party
or
use
it
for
other
than
the
purposes
of
this
Agreement
without
the
Discloser’s
prior
written
consent,
unless
disclosure
is
made
to
the
Recipient’sprofessional
consultants
who
are
bound
to
confidentiality
under
their
professional
law
(e.g.
lawyers,
tax
advisers
and
auditors)
excluding
Securities
ExchangeCommission
(“SEC”)
filings
and
investor
presentations.
Each
Party
shall
use
at
least
the
same
procedures
and
degree
of
care
with
respect
to
such
ConfidentialInformation
that
it
uses
to
protect
its
own
confidential
information
of
like
importance,
and
in
no
event
less
than
reasonable
care.
The
Recipient
will
immediatelygive
written
notice
to
the
Discloser
of
any
unauthorized
use
or
disclosure
of
the
Discloser’s
Confidential
Information,
and
the
Recipient
will
assist
the
Discloser
inremedying
such
unauthorized
use
or
disclosure.
Section
4.3




































Compelled
Disclosure
.
In
the
event
that
the
Recipient
or
(to
the
knowledge
of
the
Recipient)
any
of
its
Representatives
isrequested
or
required
(by
oral
questions,
interrogatories,
requests
for
information
or
documents
in
legal
proceedings,
subpoenas,
civil
investigative
demands
orother
similar
processes)
to
disclose
any
of
the
Discloser’s
Confidential
Information,
the
Recipient
shall,
unless
legally
prohibited,
provide
the
5
Discloser
with
prompt
written
notice
of
any
such
request
or
requirement
sufficiently
timely
to
allow
the
Discloser
adequate
time
to
seek
a
protective
order
or
otherappropriate
remedy
and/or
waive
compliance
with
the
provisions
of
this
Agreement.
If,
in
the
absence
of
a
protective
order
or
other
remedy,
or
where
applicablelaw
or
regulation
does
not
permit
Recipient
to
provide
such
notice,
or
in
the
event
of
the
receipt
of
a
waiver
by
the
Discloser,
the
Recipient
or
any
of
itsrepresentatives
are,
upon
the
advice
of
counsel,
required
to
disclose
the
Confidential
Information
to
any
tribunal
or
regulatory
authority,
or
stand
liable
forcontempt
or
suffer
other
censure
or
penalty,
the
Recipient
or
any
of
its
representatives
may,
without
liability
hereunder,
disclose
to
such
tribunal
only
that
portionof
the
Confidential
Information
which
such
counsel
advises
the
Recipient
that
it
is
required
to
disclose;
provided,
that
the
Recipient
exercises
its
best
efforts
topreserve
the
confidentiality
of
the
Confidential
Information,
including,
without
limitation,
by
cooperating,
to
the
extent
permissible
by
applicable
law
or
regulation,with
the
Discloser
in
the
Discloser’s
efforts
to
obtain
an
appropriate
protective
order
or
other
reliable
assurance
that
confidential
treatment
will
be
accorded
theConfidential
Information
by
such
tribunal
or
regulatory
authority.
Section
4.4




































Exceptions
.
Notwithstanding
the
foregoing,
Confidential
Information
will
not
include
certain
information
to
the
extent
suchinformation:
(a)

































was
generally
available
to
the
public
at
the
time
of
its
disclosure
to
the
Recipient
hereunder;
(b)

































became
generally
available
to
the
public
after
its
disclosure
other
than
through
an
act
or
omission
of
the
Recipient
(or
one
ofits
employees,
agents
or
Representatives)
in
breach
of
this
Agreement;
or
(c)


































was
subsequently
lawfully
and
independently
disclosed
to
the
Recipient
by
a
person
other
than
the
Discloser
without
anobligation
of
confidentiality.
Section
4.5




































Contractors
.
Prior
to
the
Recipient’s
disclosure
of
any
of
the
Discloser’s
Confidential
Information
to
any
Third
Party
forwhich
the
Recipient
has
obtained
the
Discloser’s
prior
consent,
the
Recipient
must
require
the
Third
Party
to
enter
into
a
nondisclosure
agreement
(“NDA”)provided
by
the
Discloser,
the
terms
of
which
NDA
will
take
precedence
over
the
Third
Party
agreement.
Section
4.6




































Ownership
of
Materials
.

Each
Recipient
agrees
that
all
Confidential
Information
received
is
and
will
remain
the
property
ofthe
Discloser
and
that
such
shall
not
be
copied
or
reproduced
without
the
express
permission
of
the
Discloser,
except
for
such
copies
as
may
be
reasonablynecessary
in
order
to
accomplish
the
purpose
of
this
Agreement.
Upon
written
request
of
the
Discloser,
the
Recipient
shall
immediately
discontinue
all
use
of
allConfidential
In
formation
of
the
Discloser
and
shall,
at
the
Discloser’s
option,
either
destroy
or
return
to
the
Discloser
all
hard
copies
in
its
possession
of
suchConfidential
Information
and
any
derivatives
thereof
(including
all
hard
copies
of
any
translation,
modification,
compilation,
abridgement
or
other
form
in
whichthe
Confidential
Information
has
been
recast,
transformed
or
adapted),
and
to
delete
all
electronic
copies
thereof;
provided,
however,
that
the
Recipient
may
retainone
(1)
archival
copy
of
the
Confidential
Information,
which
shall
be
used
only
in
case
of
a
dispute
concerning
this
Agreement.
Notwithstanding
the
6
foregoing,
neither
Party
shall
be
required
to
destroy
or
alter
any
computer-based
back-up
files
generated
in
the
normal
course
of
its
business,
provided
that
suchfiles
are
maintained
confidential
in
accordance
with
the
terms
of
this
Agreement
for
the
full
period
provided
for
in
Section
4.8
(Confidentiality
ObligationsSurvival).
Section
4.7




































Equitable
Remedies
.

Since
unauthorized
use
or
disclosure
of
the
Discloser’s
Confidential
Information
will
diminish
the
valueto
the
Discloser
of
its
proprietary
interests
in
the
Confidential
Information,
if
the
Recipient
breaches
any
of
its
obligations
under
this
Article
4,
the
Discloser
shallbe
entitled
to
equitable
relief
to
protect
its
interests
therein,
including,
but
not
limited
to,
injunctive
relief,
as
well
as
money
damages.
Section
4.8




































Confidentiality
Obligations
Survival
.

With
respect
to
each
item
of
Confidential
Information
transferred
under
thisAgreement,
the
provisions
of
this
Article
4
shall
remain
in
effect
until
such
time
as
the
Recipient
can
demonstrate,
using
only
legally
admissible
evidence,
that
suchitem
of
Confidential
Information
is
publicly
known
or
was
made
generally
available
through
no
action
or
inaction
of
the
Recipient.
ARTICLE 5 WARRANTIES AND REPRESENTATIONS AND DISCLAIMERS
Section
5.1




































Warranties
.
Each
of
the
Parties
hereby
represents
and
warrants
to
the
other
as
of
the
Effective
Date
that:
(i)
it
is
a
companyduly
organized,
validly
existing,
and
in
good
standing
under
the
laws
of
the
jurisdiction
of
organization,
and
has
full
corporate
power
and
authority
to
enter
into
thisAgreement;
(ii)
this
Agreement
has
been
duly
executed
and
delivered
by
it
and
is
a
binding
obligation
of
it,
enforceable
in
accordance
with
its
terms,
subject,
as
toenforcement
of
remedies,
to
applicable
bankruptcy,
insolvency,
moratorium,
reorganization,
and
similar
laws
affecting
creditors’
rights
generally,
and
to
generalequitable
principles;
(iii)
it
is
not
subject
to
a
pet
it
ion
for
relief
under
any
bankruptcy
legislation,
it
has
not
made
an
assignment
for
the
benefit
of
creditors,
it
is
notsubject
to
the
appointment
of
a
receiver
for
all
or
a
substantial
part
of
its
assets,
and
it
is
not
contemplating
taking
or
becoming
subject
to
any
of
the
foregoing;
and(iv)
it
is
in
compliance,
and
has
complied,
with
all
applicable
laws
and
regulations
(including
labor
laws
and
tax
laws).
Section
5.2




































Disclaimers
.
EXCEPT
FOR
THE
EXPRESS
WARRANTIES
SET
FORTH
IN
SECTION
6.1
(WARRANTIES),
EACHPARTY
MAKES
NO
REPRESENTATIONS
OR
WARRANTIES
UNDER
THIS
AGREEMENT
AND
DISCLAIMS
ALL
IMPLIED
REPRESENTATIONS
ANDWARRANTIES,
INCLUDING
ANY
IMPLIED
WARRANTIES
OF
MERCHANTABILITY.
FITNESS
FOR
A
PARTICULAR
PURPOSE,
TITLE,
ANDNONINFRINGEMENT.
THE
INTANGIBLES
PROVIDED
UNDER
THIS
AGREEMENT
ARE
“AS
IS”
AND
MAY
CONTAIN
DEFICIENCIES,
ANDINSMED
U.S.
MAKES
NO
REPRESENTATIONS
OR
WARRANTIES
UNDER
THIS
AGREEMENT
REGARDING
THE
USE
OR
PERFORMANCE
OFSUCH
INTANGIBLES.
Section
5.3




































Limitation
on
Liability
.
IN
NO
EVENT
WILL
INSMED
U.S.
HAVE
ANY
LIABILITY
FOR
ANYINDIRECT,
INCIDENTAL,
SPECIAL,
EXEMPLARY,
OR
CONSEQUENTIAL
DAMAGES,
HOWEVER
CAUSED
AND
ON
ANY
THEORY
OF
LIABILITY,WHETHER
FOR
BREACH
OF
CONTRACT,
TORT
OR
OTHERWISE,
7
ARISING
OUT
OF
OR
RELATED
TO
THIS
AGREEMENT,
INCLUDING
BUT
NOT
LIMITED
TO,
LOSS
OF
ANTICIPATED
PROFITS,
LOSS
OF
DATA,OR
LOSS
OF
USE,
EVEN
IF
INSMED
U.S.
HAS
BEEN
ADVISED
OF
THE
POSSIBILITY
OF
SUCH
DAMAGES.
Section
5.4




































No
Damages
for
Termination
or
Expiration
.
Neither
Party
shall
be
liable
to
the
other
for
damages
of
any
kind,
includingincidental
or
consequential
damages,
or
arising
from
any
expenditure,
investment,
lease
or
other
commitment,
on
account
of
the
termination
or
expiration
of
thisAgreement
in
accordance
with
its
terms.
Each
Party
waives
any
right
it
may
have
to
receive
any
compensation
or
reparations
on
termination
or
expiration
of
thisAgreement
in
accordance
with
the
terms
of
this
Agreement
not
including
any
payment
obligations,
and
notwithstanding,
the
law
of
any
territory
or
otherwise.
EachParty
acknowledges
that
they
will
not
have
or
acquire
by
virtue
of
this
Agreement
or
otherwise
any
vested,
proprietary
or
other
right
in
the
“goodwill”
of
the
otherParty’s
trademarks
or
service
marks.
ARTICLE 6 INDEMNIFICATION
Section
6.1




































Indemnification
by
Insmed
U.S
.
Insmed
U.S.
shall
defend,
indemnify
and
hold
harmless
Insmed
Ireland
from
and
against
anyclaims,
demands,
causes
of
actions,
liabilities,
damages,
losses,
costs,
liabilities
or
expenses
of
any
kind,
including
reasonable
attorneys’
fees
(collectively,“Claims”)
arising
from
(i)
actual
or
alleged
infringement
or
misappropriation
of
any
third
party
patent,
trademark,
copyright,
trade
secret
or
other
intellectualproperty
right
held
by
a
third
party
(unless
such
actual
or
alleged
infringement
arises
from
Intangible
Property
Rights
owned
by
Insmed
Ireland
or
subsequentlydeveloped
by
Insmed
Ireland),
(ii)
Insmed
U.S.’s
gross
negligence,
willful
misconduct
and/or
violation
of
applicable
laws
or
regulations,
and/or
(iii)
Insmed
U.S.’sbreach
of
any
of
its
representations
or
warranties
unless
gross
negligence
or
willful
misconduct
of
Insmed
Ireland.
Insmed
U.S.
shall
defend
any
such
claim
oraction
at
its
own
expense
provided
that
Insmed
Ireland
promptly
notifies
Insmed
U.S.
upon
learning
of
such
Claim,
provides
Insmed
U.S.
with
sole
control
of
thedefense
and
settlement
of
any
such
Claim,
and
cooperates
with
Insmed
U.S.
in
defending
any
such
Claim.
Section
6.2




































Indemnification
by
Insmed
Ireland
.
Insmed
Ireland
shall
defend,
indemnify
and
hold
harmless
Insmed
U.S.
from
and
againstany
Claims
arising
from
(i)
actual
or
alleged
infringement
or
misappropriation
of
any
third
party
patent,
trademark,
copyright,
trade
secret
or
other
intellectualproperty
right
held
by
a
third
party
(unless
such
actual
or
alleged
infringement
arises
from
Intangible
Property
Rights
owned
by
Insmed
U.S.
or
subsequentlydeveloped
by
Insmed
U.S.),
(ii)
Insmed
Ireland’s
gross
negligence,
willful
misconduct
and/or
violation
of
applicable
laws
or
regulations,
and/or
(iii)
InsmedIreland’s
breach
of
any
of
its
representations
or
warranties
unless
gross
negligence
or
willful
misconduct
of
Insmed
U.S.
Insmed
Ireland
shall
defend
any
suchclaim
or
action
at
its
own
expense
provided
that
Insmed
U.S.
promptly
notifies
Insmed
Ireland
upon
teaming
of
such
Claim,
provides
Insmed
Ireland
with
solecontrol
of
the
defense
and
settlement
of
any
such
Claim,
and
cooperates
with
Insmed
Ireland
in
defending
any
such
Claim.
8
ARTICLE 7 INTANGIBLES OWNERSHIP
Section
7.1




































Retention
of
Legal
Title
.
Except
for
the
license
grants
expressly
provided
in
t
h
is
Agreement,
all
rights,
title
and
interests
inand
to
the
Intangibles,
whether
made
by
Insmed
U.S.,
Insmed
Ireland,
or
its
Sublicensees
(“Rights
and
Technology”),
is
and
shall
at
al
l
times
remain
with
InsmedU.S.
Insmed
Ireland
and
/or
its
Sublicensees
shall
not
at
any
time
during
or
after
the
expiration
or
termination
of
this
Agreement
in
any
way
question
or
dispute
theownership
thereof
by
Insmed
U.S.
For
purposes
of
clarity,
unless
otherwise
specified
in
this
Agreement,
Insmed
U.S.
holds
the
following
rights,
which
Insmed
U.S.may
exercise
in
its
sole
discretion:
(i)
the
right
to
control
the
quality
standard
relative
to
the
Intangibles;
(ii)
the
right
to
apply
for
and
obtain
registrations
for
theIntangibles;
(ii
i)
the
right
to
enforce
the
Intangibles
against
Third
Parties;
(iv)
the
right
to
defend
Third
Party
objections
to
or
claims
against
the
Intangibles;
and(v)
the
right
to
maintain
and
abandon
the
applications,
registrations,
and
other
statutory
rights
in
and
to
the
Intangibles.
In
addition,
Insmed
U.S.
covenants
tomaintain
(at
its
own
expense)
the
existing
registrations
and
legal
protections
in
respect
of
the
Intangibles
throughout
the
term
of
this
Agreement.
For
purposes
ofinterpretation
of
this
Section
under
the
Lanham
(Trademark)
Act
and
all
other
applicable
trademark
laws
or
regulations,
all
goodwill
arising
from
the
use
of
theIntangibles
will
inure
to
the
benefit
of
Insured
U.S.
Subject
to
the
rights
licensed
to
Insmed
Ireland
in
this
Agreement,
Insmed
Ireland
and/or
its
Sublicenseeshereby
assigns
to
Insmed
U.S.
any
and
all
rights,
title
and
interest
i
t
may
have
or
acquire
in
such
Rights
and
Technology,
and
will
execute
and
provide
to
InsmedU.S.
all
documents
and
instruments
of
conveyance
respecting
the
foregoing
Rights
and
Technology
as
may
be
appropriate
to
perfect
Insmed
U.S.’s
legal
titlethereto.
The
absence
of
such
documents
and
instruments
of
conveyance
shall
not
limit
the
rights
of
Insmed
U.S.
in
the
foregoing
Rights
and
Technology.
To
theextent
any
of
the
rights,
title
and
interest
in
and
to
the
Rights
and
Technology
cannot
be
assigned
by
Insmed
Ireland
and/or
its
Sublicensees
to
Insmed
U.S.,
InsmedIreland
and/or
its
Sublicensees
hereby
grant
to
Insmed
U.S.
an
exclusive,
royalty-free,
transferable,
perpetual,
unrestricted,
worldwide
license
(with
rights
tosublicense
through
one
or
more
tiers
of
Sublicensees)
to
any
non-assignable
Rights
and
Technology.
To
the
extent
any
of
such
Rights
and
Technology
can
beneither
assigned
nor
licensed
by
Insmed
Ireland
and/or
its
Sublicensees
to
Insmed
U.S.,
Insmed
Ireland
and/or
its
Sublicensees
hereby
waives
and
agrees
never
toassert
such
non­assignable
and
non-licensable
Rights
and
Technology
against
Insmed
U.S.,
Insmed
U.S.’s
Affiliates,
Insmed
U.S.’s
licensees
or
Insmed
U.S.’ssuccessors,
or
its
and
their
respective
customers.
ARTICLE 8 TERM AND TERMINATION
Section
8.1




































Term
.
This
Agreement
shall
enter
into
effect
on
the
Effective
Date
and
shall
remain
in
full
force
and
effect
until
terminated
bya
written
agreement
between
the
Parties,
unless
terminated
in
accordance
with
Section
8.2,
Section
8.3
or
Section
8.4.
Section
8.2




































Termination
for
Convenience
.
This
Agreement
may
be
terminated
by
either
Party,
for
any
reason,
by
giving
the
other
Partywritten
notice
of
the
termination
sixty
(60)
days
in
advance.
9
Section
8.3




































Termination
for
Cause
.
This
Agreement
may
be
terminated
by
either
Party
(“
Non-Breaching Party ”),
if
the
other
Party
(“Breaching Party ”)
is
in
material
breach
of
this
Agreement
and
fails
to
cure
such
breach
within
thirty
(30)
days
following
receipt
of
notice
of
such
breach.

In
theevent
that
Breaching
Party
fails
to
cure
such
breach
or
default
within
thirty
(30)
days
after
the
date
of
Non-Breaching
Party’s
notice
hereunder,
Non-BreachingParty
may
terminate
this
Agreement
immediately
upon
providing
written
notice
of
termination
to
Breaching
Party.
Termination
of
this
Agreement
in
accordancewith
this
Section
8.3
shall
not
affect
or
impair
Non­
Breaching
Party’s
right
to
pursue
any
legal
remedy,
including
the
right
to
recover
damages,
for
all
harm
sufferedor
incurred
as
a
result
of
Breaching
Party’s
breach
or
default.
Section
8.4




































Change
in
Control
or
Substantial
Encumbrance
.
In
the
event
that
the
Parties
cease
to
be
Affiliates,
either
Party
undergoes
aninvoluntary
change
in
control
or
a
substantial
portion
of
either
Party’s
assets
or
the
conduct
of
either
Party’s
business
is
substantially
encumbered
by
extraordinarygovernmental
action
or
by
operation
of
law,
either
Party
may,
at
its
option
and
in
its
sole
discretion,
terminate
this
Agreement,
effective
immediately
upon
givingwritten
notice
of
termination
to
the
other
Party.
For
purposes
of
this
Section
8.4,
notice
shall
be
effective
when
sent.
Section
8.5




































Effect
of
Termination
.
Upon
any
termination
of
this
Agreement,
Insmed
U.S.
shall
have
the
right
to
retain
any
sums
alreadypaid
by
Insmed
Ireland
under
this
Agreement,
and
Insmed
Ireland
shall
pay
all
sums
accrued
that
are
then
due
under
this
Agreement.
Further,
Insmed
Ireland
shallimmediately
cease
to
exercise
all
use
of
the
Intangibles
and
shall
have
no
further
right,
title,
or
interest
i
n
any
trademark
or
other
valuable
intangible
property
rightunder
this
agreement
other
than
the
rights
obtained
under
the
Cost
Sharing
Agreement
entered
into
by
the
parties.
Section
8.6




































Modification
.
Pursuant
to
U.S.
Treas.
Reg.
Sec.
1.482-7(f),
in
the
event
of
a
“change
in
participation”
as
defined
therein,
thisAgreement
shall
be
modified
and
arm’s
length
consideration
shall
be
due
as
provided
therein.
ARTICLE 9 GENERAL PROVISIONS
Section
9.1




































Assignment
.
Neither
Party
may
assign
this
Agreement,
its
rights,
or
responsibilities
hereunder
without
the
prior
writtenauthorization
of
the
other
Party.
Any
assignment
in
derogation
of
the
foregoing
shall
be
void.
Section
9.2




































Notices
.
Any
notice
required
or
permitted
to
be
given
under
this
Agreement
shall
be
given
to
the
other
Party
either
1)
inwriting
and
delivered
by
overnight
courier
(signature
of
receipt
required)
and
shall
be
deemed
delivered
upon
written
confirmation
of
delivery
by
the
courier
or
2)via
e-mail,
and
shall
be
deemed
delivered
provided
no
transmission
error
was
received
(if
by
e-mail),
if
sent
to
the
following
respective
addresses
or
such
newaddresses
as
may
from
time
to
time
be
supplied
hereunder:
10
IF TO Insmed U.S.: IF TO Insmed Ireland:10
Finderne
Avenue,
Building
10,
Bridgewater,
New
Jersey
Attention:
General
Counsel
E-mail:
generalcounsel@insmed.com
25-28
North
Wall
Quay
Dublin
1,
Ireland
Attention:
Nickola
Murphy/Geraldine
Lillis
E-mail:
Nickola.Murphy@canyoncts.com
/
Geraldine.Lillis@canyoncts.com
Section
9.3




































Force
Majeure
.
Neither
Party
shall
be
liable
to
the
other
Party
for
failure
or
delay
in
the
performance
of
any
obligations
underthis
Agreement.
other
than
the
obligation
to
pay
monies
(“
Excused Obligation ”),
for
the
time
and
to
the
extent
such
failure
or
delay
is
due
to
any
cause
orcondition
beyond
the
reasonable
control
of
the
Party
obliged
to
perform,
including,
but
not
limited
to,
strikes
or
other
labor
difficulties,
acts
of
God,
earthquakes,acts
of
government
(in
particular
with
respect
to
the
refusal
to
issue
necessary
import
or
export
licenses),
war,
terrorism,
riots,
embargoes
or
in
ability
to
obtainsupplies
(collectively
“
Force Majeure ”).
If
Force
Majeure
prevents
or
delays
the
performance
by
a
Party
hereto
of
any
Excused
Obligation
under
this
Agreement,the
Party
claiming
Force
Majeure
shall
promptly
notify
the
affected
Party
thereof
in
writing.
Section
9.4




































Successors
and
Assigns
.
This
Agreement
shall
be
binding
on
and
shall
inure
to
the
benefit
of
the
Parties,
Affiliates,
theirrespective
successors,
successors
in
title,
and
assigns,
and
each
Party
agrees,
on
behalf
of
it,
its
Affiliates.
successors,
successors
in
title,
and
assigns,
to
execute
anyinstruments
that
may
be
necessary
or
appropriate
to
carry
out
and
execute
the
purpose
and
intentions
of
this
Agreement
and
hereby
authorizes
and
directs
itsAffiliates,
successors,
successors
in
title,
and
assigns
to
execute
any
and
all
such
instruments.

Each
and
every
successor
in
interest
to
any
Party
or
Affiliate,whether
such
successor
acquires
such
interest
by
way
of
gift,
devise,
assignment,
purchase,
conveyance,
pledge,
hypothecation,
foreclosure,
or
by
any
othermethod,
shall
hold
such
interest
subject
to
all
of
the
terms
and
provisions
of
this
Agreement.
The
rights
of
the
Parties,
Affiliates,
and
their
successors
in
interest,
asamong
themselves
and
shall
be
governed
by
the
terms
of
this
Agreement.
and
the
right
of
any
Party,
Affiliate
or
successor
in
interest
to
assign,
sell
or
otherwisetransfer
or
deal
with
its
interests
under
this
Agreement
shall
be
subject
to
the
limitations
and
restrictions
of
this
Agreement.
Section
9.5




































Amendment
.
This
Agreement
may
only
be
amended
or
supplemented
by
additional
written
agreements
or
instrumentsspecifically
referencing
this
Agreement
and
signed
by
the
Parties.
Section
9.6




































Remedies
Cumulative
.
A
Party’s
remedies
under
this
Agreement
are
cumulative
and
shall
not
exclude
any
other
remedy
towhich
the
Party
may
be
entitled.
Termination
of
this
Agreement
by
a
Party
shall
not
adversely
affect
or
impair
such
Party’s
right
to
pursue
any
other
remedyincluding,
without
limitation,
the
right
to
recover
damages
for
all
harm
suffered
as
a
result
the
other
Party’s
breach
or
default.
Section
9.7




































Further
Assurances
.
Each
Party
hereby
covenants
and
agrees
that
it
shall
execute
and
deliver
such
deeds
and
other
documentsas
may
be
required
to
implement
any
of
the
provisions
of
this
Agreement.
11
Section
9.8




































No
Waiver
.
The
failure
of
any
Party
to
insist
on
strict
performance
of
a
covenant
hereunder
or
of
any
obligation
hereundershall
not
be
a
waiver
of
such
Party’s
right
to
demand
strict
compliance
therewith
in
the
future,
nor
shall
the
same
be
construed
as
a
novation
of
this
Agreement.
Section
9.9




































Entire
Agreement
.
This
Agreement
constitutes
the
full
and
complete
agreement
of
the
Parties.
Section
9.10





























Headings;
Construction
.
The
headings
in
this
Agreement
are
for
convenience
only
and
will
not
be
construed
to
affect
themeaning
of
any
provision
of
this
Agreement.
Any
use
of
“including”
shall
also
be
deemed
to
mean
“including
without
limitation.
Section
9.11





























Number
and
Gender
.
Whenever
required
by
the
context,
the
singular
number
shall
include
the
plural,
the
plural
number
shallinclude
the
singular,
and
the
gender
of
any
pronoun
shall
include
all
genders.
Section
9.12





























Counterparts
.
This
Agreement
may
be
executed
in
multiple
copies,
each
of
which
shall
for
all
purposes
constitute
anAgreement,
binding
on
the
Parties,
and
each
Party
hereby
covenants
and
agrees
to
execute
all
duplicates
or
replacement
counterparts
of
this
Agreement
as
may
berequired.
Section
9.13





























Governing
Law
and
Jurisdiction
.
Any
questions,
claims,
disputes
or
litigation
concerning
or
arising
from
this
Agreement
shallbe
governed
by
the
laws
of
the
State
of
New
Jersey,
United
States
of
America,
without
giving
effect
to
the
conflicts
of
laws
principles
of
that
state
or
doctrines
ofany
other
state
of
the
United
States,
or
any
nation
state.
Each
of
the
Parties
agrees
to
submit
to
the
exclusive
jurisdiction
of
the
courts
in
the
State
of
New
Jersey
andthe
United
States
Federal
courts,
for
any
matter
arising
out
of
or
relating
to
this
Agreement.
Notwithstanding
the
foregoing,
in
actions
seeking
to
enforce
any
orderor
any
judgment
of
any
such
courts
located
in
State
of
New
Jersey,
personal
jurisdiction
shall
be
non-exclusive.
The
Parties
agree
that
the
United
NationsConvention
on
Contracts
for
the
International
Sale
of
Goods
is
specifically
excluded
from
application
to
this
Agreement.
Section
9.14





























Computation
of
Time
.
Whenever
the
last
day
for
the
exercise
of
any
privilege
or
the
discharge
of
any
duty
hereunder
shall
fallon
a
Saturday,
Sunday
or
any
public
or
legal
holiday,
whether
local
or
national,
the
person
having
such
privilege
or
duty
shall
have
until
5:00
p.m.
on
the
nextsucceeding
business
day
to
exercise
such
privilege,
or
to
discharge
such
duty.
Section
9.15





























Severability
.
In
the
event
any
provision,
clause,
sentence,
phrase,
or
word
hereof,
or
the
application
thereof
in
anycircumstances,
is
held
to
be
invalid
or
unenforceable,
such
invalidity
or
unenforceability
shall
not
affect
the
validity
or
enforceability
of
the
remainder
hereof,
or
ofthe
application
of
any
such
provision,
sentence,
clause,
phrase,
or
word
in
any
other
circumstances.
Section
9.16





























Costs
and
Expenses
.
Unless
otherwise
provided
in
this
Agreement,
each
Party
shall
bear
all
fees
and
expenses
incurred
inperforming
its
obligations
under
this
Agreement.
12
Section
9.17





























Taxes
.
Each
Party
hereto
shall
be
responsible
for
any
and
all
taxes
levied
as
a
result
of
the
performance
of
each
Party’srespective
activities
under
this
Agreement.
To
the
extent
any
withholding
taxes
apply
to
any
payment,
such
payment
shall
be
made
net
of
such
withholding
tax.
Section
9.18





























Authority
and
Compliance
Under
Corporate
Charter
.
Each
Party
hereby
warrants,
represents
and
covenants
that
it
is
a
dulyorganized
and
existing
company
under
the
respective
laws
of
its
jurisdiction
of
incorporation
and
has
the
full
rights,
power
and
authority
pursuant
to
its
corporatecharter,
articles
of
incorporation
and
/or
by-laws
to
enter
in
to
and
perform
all
obligations
under
this
Agreement.
Each
Party
further
warrants,
represents
andcovenants
that
in
exercising
any
and/or
all
rights
and
in
performing
any
and/or
all
obligations
under
this
Agreement,
each
Party
and/or
its
Representatives
will
actin
full
accordance
with
its
respective
corporate
charter,
articles
of
incorporation
and/or
by-laws.
[SIGNATURE
PAGE
FOLLOWS]
13
By
their
signatures,
the
authorized
representatives
of
the
Parties
acknowledge
the
Parties’
acceptance
of
this
Agreement
INSMED IRELAND LIMITEDINSMED INCORPORATED  /s/
Geraldine
Lillis /s/
Andrew
DrechslerSignatureSignature  Name:
Geraldine
LillisName:
Andrew
DrechslerTitle:
DirectorTitle:
Chief
Financial
OfficerDate:May
29,
2015 Date:May
28,
2015
14
EXHIBIT A DETAIL OF PRODUCTS RELATED TO THE INTANGIBLE PROPERTY RIGHTS
Pursuant
to
Section
1.5,
Insmed
U.S.
shall
grant
a
license
with
respect
to
the
Intangible
Property
Rights
related
to
the
patents
and
products
associated
with:
1.






































ARIKAYCE
2.






































INS-1009
3.






































Any
other
products
or
development
currently
owned
by
Insmed
U.S.
prior
to
the
execution
of
this
Agreement
15
EXHIBIT BPAYMENTS
Pursuant
to
Article
3
(‘·Payment”),
Insmed
Ireland
shall
make
payments
in
consideration
for
payments
due
under
this
Agreement
payments
in
thefollowing
manner:
2015




















$6,000,000
due
on
June
1,
2015
2016




















$10.000,000
due
on
July
1,
2016
2017




















$12,000,000
due
on
July
l,
2017
Insmed
Ireland
will
then
make
quarterly
PCT
payment
to
Insmed
U.S.
pursuant
to
Section
3.2.
The
payments
may
be
based
on
a
reasonable
estimate
foreach
quarter
and
trued
up
at
the
end
of
the
year.
The
payments
shall
be
made
in
the
following
manner:
2018




















12%
of
Revenues
2019




















10%
of
Revenues
2020




















8%
of
Revenues
2021




















4%
of
Revenues
All
of
the
above
payments
are
in
conformity
with
the
arm’s
length
methodologies
as
specified
in
1.482-7(h)(2)(i)(B).
Subject
to
Section
3.3,
Insmed
Ireland
reserves
the
right
to
pre-pay
the
remainder
of
the
contingent
payments,
based
on
estimated
Revenues
as
agreed
by
theParties.
16Exhibit 10.12.5
AMENDMENT NO. 5TOLOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 5 TO LOAN AND SECURITY AGREEMENT (this
“Amendment”)
is
dated
as
of
December
22,
2015
and
is
entered
intoby
and
among
(a)

INSMED INCORPORATED, a
Virginia
corporation
(“Parent”),

INSMED PHARMACEUTICALS, INC., a
Virginia
corporation
(“InsmedPharma”),
CELTRIX PHARMACEUTICALS, INC., a
Delaware
corporation
(“Celtrix”),
TRANSAVE, LLC, a
Delaware
limited
liability
company(“Transave”,
together
with
Parent,
Insmed
Pharma,
and
Celtrix
are
hereinafter
collectively
referred
to
as
the
“Borrowers”
and
each
individually
as
a
“Borrower”),and
(b)

HERCULES TECHNOLOGY GROWTH CAPITAL, INC., a
Maryland
corporation
(“Hercules
Growth”),
HERCULES CAPITAL FUNDINGTRUST 2012-1, a
statutory
trust
created
and
existing
under
the
laws
of
the
State
of
Delaware
(“Hercules
2012”),
and
HERCULES CAPITAL FUNDINGTRUST 2014-1, a
statutory
trust
created
and
existing
under
the
laws
of
the
State
of
Delaware
(“Hercules
2014”,
together
with
Hercules
Growth
and
Hercules
2012collectively
referred
to
as
the
“Lender”).
Capitalized
terms
used
herein
without
definition
shall
have
the
same
meanings
given
them
in
the
Loan
Agreement
(asdefined
below).
RECITALS
A. 











Borrowers
and
Lender
have
entered
into
that
certain
Loan
and
Security
Agreement
dated
as
of
June
29,
2012,
as
amended
by
that
certainAmendment
No.
1
to
Loan
and
Security
Agreement
dated
as
of
July
24,
2012,
as
amended
by
that
certain
Amendment
No.
2
to
Loan
and
Security
Agreement
datedas
of
November
25,
2013,
as
amended
by
that
certain
Amendment
No.
3
to
the
Loan
and
Security
Agreement
dated
as
of
December
15,
2014,
and
as
furtheramended
by
that
certain
Consent
and
Amendment
No.
4
to
the
Loan
and
Security
Agreement
dated
as
of
June
9,
2015
(as
may
be
further
amended,
restated,supplemented
or
otherwise
modified
from
time
to
time,
the
“Loan
Agreement”),
pursuant
to
which
Lender
has
extended
and
make
available
to
Borrowers
certainextensions
of
credit.
B. 











Borrowers
and
Lender
have
agreed
to
amend
the
Loan
Agreement
upon
the
terms
and
conditions
more
fully
set
forth
herein.
AGREEMENT
NOW,
THEREFORE,
in
consideration
of
the
foregoing
Recitals
and
intending
to
be
legally
bound,
the
parties
hereto
agree
as
follows:
1. 












AMENDMENT.
1.1 









Section 1.1 (Definitions and Rules of Construction). The
following
definitions
set
forth
in
Section
1.1
of
the
Loan
Agreement
shallbe
amended
in
their
entirety
and
replaced
with
the
following:
“Amortization
Date”
means
October
1,
2016.

“Term
Loan
Maturity
Date”
means
January
1,
2018.
2. 












BORROWERS’ REPRESENTATIONS AND WARRANTIES. Each
Borrower
represents
and
warrants
that:
(a) 










immediately
upon
giving
effect
to
this
Amendment
(i)
the
representations
and
warranties
contained
in
the
Loan
Documentsare
true,
accurate
and
complete
in
all
material
respects
as
of
the
date
hereof
(except
to
the
extent
such
representations
and
warranties
relate
to
an
earlier
date,
inwhich
case
they
are
true
and
correct
as
of
such
date),
and
(ii)
no
Event
of
Default
has
occurred
and
is
continuing;
(b) 










such
Borrower
has
the
corporate
or
limited
liability
company,
as
applicable,
power
and
authority
to
execute
and
deliver
thisAmendment
and
to
perform
its
obligations
under
the
Loan
Agreement,
as
amended
by
this
Amendment;
(c) 










the
certificate
of
incorporation,
bylaws
and
other
organizational
documents
of
such
Borrower
delivered
to
Lender
on
theClosing
Date
remain
true,
accurate
and
complete
and
have
not
been
amended,
supplemented
or
restated
and
are
and
continue
to
be
in
full
force
and
effect;
(d) 










the
execution
and
delivery
by
such
Borrower
of
this
Amendment
and
the
performance
by
such
Borrower
of
its
obligationsunder
the
Loan
Agreement,
as
amended
by
this
Amendment,
have
been
duly
authorized
by
all
necessary
corporate
or
limited
liability
company,
as
applicable,action
on
the
part
of
such
Borrower;
(e) 










this
Amendment
has
been
duly
executed
and
delivered
by
such
Borrower
and
is
the
binding
obligation
of
such
Borrower,enforceable
against
it
in
accordance
with
its
terms,
except
as
such
enforceability
may
be
limited
by
bankruptcy,
insolvency,
reorganization,
liquidation,
moratoriumor
other
similar
laws
of
general
application
and
equitable
principles
relating
to
or
affecting
creditors’
rights;
and
(f) 











as
of
the
date
hereof,
such
Borrower
has
no
defenses
against
the
obligations
to
pay
any
amounts
under
the
SecuredObligations.
Each
Borrower
understands
and
acknowledges
that
Lender
is
entering
into
this
Amendment
in
reliance
upon,
and
in
partial
consideration
for,
the
aboverepresentations
and
warranties,
and
agrees
that
such
reliance
is
reasonable
and
appropriate.
3. 












LIMITATION. 
The
amendments
set
forth
in
this
Amendment
shall
be
limited
precisely
as
written
and
shall
not
be
deemed
(a)
to
be
a
waiveror
modification
of
any
other
term
or
condition
of
the
Loan
Agreement
or
of
any
other
instrument
or
agreement
referred
to
therein
or
to
prejudice
any
right
orremedy
which
Lender
may
now
have
or
may
have
in
the
future
under
or
in
connection
with
the
Loan
Agreement
or
any
instrument
or
agreement
referred
to
therein;or
(b)
to
be
a
consent
to
any
future
amendment
or
modification
or
waiver
to
any
instrument
or
agreement
the
execution
and
delivery
of
which
is
consented
tohereby,
or
to
any
waiver
of
any
of
the
provisions
thereof.
Except
as
expressly
amended
hereby,
the
Loan
Agreement
shall
continue
in
full
force
and
effect.

4. 












EFFECTIVENESS. This
Amendment
shall
become
effective
upon
the
satisfaction
of
all
the
following
conditions
precedent:
4.1 









Election to Extend; Fee. The
Borrowers
are
electing
to
extend
the
Term
Loan
Maturity
Date
as
set
forth
under
the
definition
of
“TermLoan
Maturity
Date”
(as
such
term
was
defined
in
Amendment
No.
3
to
the
Loan
and
Security
Agreement
dated
as
of
December
15,
2014)
and
shall
pay
Agent
afully-earned,
non-renewable
facility
fee
equal
to
Two
Hundred
Fifty
Thousand
Dollars
($250,000.00)
as
required
under
the
definition
of
“Financing
Event”.
4.2 









Expenses.   The
Borrowers
shall
have
paid
all
of
Lender’s
reasonable,
documented
costs
and
out-of-pocket
expenses
in
connectionwith
this
Amendment.
4.3 









Amendment. 
The
Lender
shall
have
received
duly
executed
counterparts
of
this
Amendment
signed
by
the
parties
hereto.
5. 












Future Amendments. 

To
the
extent
Borrower
and
Lender
enter
into
a
substantial
restructure
of
the
Loan
Agreement,
in
Lender’s
sole
andabsolute
discretion
and
based
upon
its
then
current
underwriting
credit
criteria,
Lender
agrees
to
apply
the
facility
fee
received
pursuant
to
Section
4.1
hereof,towards
the
payment
of
any
facility
fee
due
in
connection
with
such
restructure.
6. 












COUNTERPARTS. 

This
Amendment
may
be
signed
in
any
number
of
counterparts,
and
by
different
parties
hereto
in
separate
counterparts,with
the
same
effect
as
if
the
signatures
to
each
such
counterpart
were
upon
a
single
instrument.
All
counterparts
shall
be
deemed
an
original
of
this
Amendment.
7. 












INCORPORATION BY REFERENCE. 






The
provisions
of
Section
11
of
the
Agreement
shall
be
deemed
incorporated
herein
byreference,
mutatis mutandis.
[signature
page
follows]

IN WITNESS WHEREOF ,
the
parties
have
duly
authorized
and
caused
this
Amendment
to
be
executed
as
of
the
date
first
written
above.
BORROWERS :
INSMED INCORPORATED


By:/s/
Andrew
T.
Drechsler
Name:Andrew
T.
Drechsler
Title:CFO


INSMED PHARMACEUTICALS, INC.


By:/s/
Andrew
T.
Drechsler
Name:Andrew
T.
Drechsler
Title:CFO


TRANSAVE, LLC


By:/s/
Andrew
T.
Drechsler
Name:Andrew
T.
Drechsler
Title:CFO


CELTRIX PHARMACEUTICALS, Inc.


/s/
Andrew
T.
Drechsler
Andrew
T.
Drechsler
CFO

By:Name:Title:
LENDER :
HERCULES CAPITAL FUNDING TRUST 2012-1


By: Hercules Technology Growth Capital, Inc., its servicer


By:/s/
Ben
Bang
Name:Ben
Bang
Its:Associate
General
Counsel


HERCULES CAPITAL FUNDING TRUST 2014-1


By: Hercules Technology Growth Capital, Inc., its servicer


/s/
Ben
Bang
Name:Ben
Bang
Its:Associate
General
Counsel


HERCULES TECHNOLOGY GROWTH CAPITAL, INC.


By:/s/
Ben
Bang
Name:Ben
Bang
Its:Associate
General
Counsel

[Signature page to Amendment No. 5 to Loan and Security Agreement]
By:Exhibit 10.14.1
CONFIDENTIAL
TREATMENT
HAS
BEEN
REQUESTED
AS
TO
CERTAIN
PORTIONS
OF
THIS
DOCUMENT.

EACH
SUCH
PORTION,
WHICH
HASBEEN
OMITTED
HEREIN
AND
REPLACED
WITH
ASTERISKS
(***),
HAS
BEEN
FILED
SEPARATELY
WITH
THE
SECURITIES
AND
EXCHANGECOMMISSION.
AMENDMENT NO. 5TO LICENSE AGREEMENT BETWEENINSMED INCORPORATED AND PARI PHARMA GMBH
This
fifth
amendment
(“
Amendment No. 5 ”)
effective
October
05
2015
(“
Amendment No. 5 Effective Date ”)
to
the
License
Agreement
dated
andeffective
the
25

of
April
2008
between
PARI
Pharma
GmbH,
a
German
corporation
with
a
principal
place
of
business
at
Moosstrasse
3,
D-82319
Starnberg,Germany
(“PARI ”)
and
Transave,
Inc.,
a
Delaware
corporation,
as
amended
by
Amendment
No.
1
the
24

day
of
June
2009,
Assignment
and
Amendment
No.
2the
22

day
of
December
2010,
Amendment
No.
3
the
6

day
of
March
2012,
and
Amendment
No.
4
the
21

day
of
May
2012
(collectively,
the
“
Agreement”),
is
entered
into
between
PARI
and
Insmed
Incorporated
(successor
in
interest
to
Transave,
Inc.),
with
registered
offices
at
10
Finderne
Avenue,
Building
10,Bridgewater,
NJ
08807-3365
(“
Insmed ”).
PARI
and
Insmed
shall
be
referred
to
collectively
as
the
“
Parties ”.
WHEREAS,
the
Parties
now
desire
to
amend
the
terms
and
conditions
of
the
Agreement
to
reflect
certain
business
discussions
between
the
Parties,
thecurrent
development
status
of
the
Drug
Product
and
its
use
together
with
the
Device
in
compassionate
use,
expanded
access,
named
patient
or
similar
programs(collectively
“Early
Access
Programs”).
NOW,
THEREFORE,
in
consideration
of
the
recitals
set
forth
above,
the
mutual
covenants,
terms
and
conditions
set
forth
below,
and
other
good
andvaluable
consideration,
the
receipt
and
sufficiency
of
which
is
hereby
acknowledged,
the
Parties
agree
as
follows:
1. 





































Definitions. Capitalized
terms
used
but
not
defined
in
this
Amendment
No.
5
shall
have
the
meanings
ascribed
to
them
in
the
Agreement.
“Arikayce”
means
the
same
as
Arikace.
“NTM”
means
Non-tuberculous
Mycobacteria
infections.
2. 





































Section 4.2 (a). Section
4.2(a)
shall
be
deleted
and
replaced
as
follows:
Subject
to
Section
4.2(b)
below
and
the
AKITA
Rights,
during
the
Term
of
this
Agreement,
PARI
agrees
that
it
and
its
Affiliates
shall
(x)
notcompete
with
Insmed
in
CF
and/or
Bronchiectasis
with
a
Competing
Nebulizer
in
the
Transave
Field,
within
the
Transave
Territory,
(y)
not
engage
in
theresearch,
development,
manufacture
and/or
commercialization
of
amikacin
for
pulmonary
administration
using
a
Competing
Nebulizer,
and
(z)
notcompete
with
Insmed
in
NTM
with
any
***
(for
clarity
the
***
shall
not
be
considered
a
***)
for
pulmonary
administration
of
amikacin.
In
addition,during
the
term
of
this
Agreement,
PARI
agrees
that
it
and
its
Affiliates
shall
not
compete
with
Insmed
or
otherwise
engage
in
the
research,
development,manufacture
and/or
commercialization
of
any
liposomal
formulation
of
amikacin,
tobramycin,
ciprofloxacin,
and
levofloxacin
for
pulmonaryadministration,
provided,
however,
that
the
foregoing
restrictions
in
this
sentence
shall
not
apply
with
respect
to
(i)
the
right
of
any
third
party
licensee(but
only
to
the
extent
that
***
Certain
information
on
this
page
has
been
omitted
and
filed
separately
with
the
Securities
and
Exchange
Commission.
Confidential
treatment
has
beenrequested
with
respect
to
the
omitted
portions.
th
th
nd
th
st

such
right
is
existing
and
in
effect
as
of
the
Effective
Date)
to
research,
develop,
manufacture
and/or
commercialize
any
liposomal
formulation
oftobramycin,
ciprofloxacin,
and
levofloxacin
for
pulmonary
administration
pursuant
to
any
licensing
agreements
entered
into
by
PARI
or
its
Affiliates
priorto
the
date
of
this
Agreement,
and
(ii)
the
right
of
PARI
and
its
Affiliates
to
enter
into
additional
agreements
that
would
be
necessary
or
useful
to
exploit,but
do
not
expand,
existing
rights
under
such
licensing
agreements
referred
to
in
(i),
such
as
testing
agreements,
and
clinical
and
commercial
supplyagreements,
with
any
such
third
party
licensee
related
to
the
research,
development
and
manufacture
and/or
commercialization
of
products
generatedpursuant
to
those
respective
licensing
agreements,
except
the
foregoing
restrictions
in
this
sentence
shall
apply,
notwithstanding
(i)
or
(ii),
with
respect
toany
research,
development,
manufacture
and/or
commercialization
of
any
such
liposomal
formulations
for
pulmonary
administration
using
a
Nebulizerthat
includes
any
developments
or
optimizations
generated
under
Feasibility
Statement
of
Work
No.
3.
Notwithstanding
the
foregoing,
the
Partiesacknowledge
and
agree
that
PARI
is
able
to
supply
medical
device
product
information
to
customers
and
sell
medical
devices
other
than
CompetingNebulizers
to
customers
and
patients
indicated
to
deliver
amikacin,
tobramycin,
ciprofloxacin,
and
levofloxacin
(including
liposomal
formulationsthereof)
for
any
indication
(including
clinical
development
and
clinical
research),
including
CF
and
Bronchiectasis
and
NTM
and
that
such
uses
shall
notconflict
with
the
prohibitions
of
this
Section
4.2(a).
3. 





















































































A
new
Section
7.2
(B)
is
hereby
added:
First Right to Negotiate a License for ***
in ***
. Until
***
PARI
shall
notify
Insmed
in
writing
in
case
it
is
approached
by
a
third
party
or
it
would
liketo
approach
a
third
party
for
a
license
under
PARI
Intellectual
Property
regarding
pulmonary
delivery
of
***
to
patients
who
suffer
from
***
via
***
(the“***
Notice”).
Within
***
days
after
the
date
of
the
***
Notice
Insmed
shall
inform
PARI
in
writing
if
Insmed
is
interested
to
develop
***
delivered
via***
to
patients
suffering
from
***
and
the
Parties
shall
negotiate
in
good
faith
and
execute
an
agreement
which
governs
a
license
to
deliver
***
to
patientssuffering
from
***
(and
potentially
other
indications)
via
***
(the
“***
License
Agreement”).
Within
***
after
the
date
of
the
***
Notice
the
Parties
shallnegotiate
in
good
faith
and
execute
such
***
License
Agreement.
If
(i)
Insmed
informs
PARI
that
it
is
not
interested
in
a
license
to
deliver
***
via
***,(ii)
Insmed
does
not
inform
PARI
about
its
interest
to
enter
into
the
***
License
Agreement
within
***
after
the
date
of
the
***
Notice,
or
(iii)
the
***License
Agreement
is
not
executed
within
***
from
the
date
of
the
***
Notice,
then
PARI
shall
be
free
to
collaborate
with
any
third
party
and
to
enter
intoa
license
agreement
with
any
third
party
regarding
the
delivery
of
***
to
patients
suffering
from
***.
4. 





































Section 7.1 (a). The
first
sentence
of
Section
7.1(a)
of
the
Agreement
shall
be
deleted
and
replaced
as
follows:
(a)

































Insmed
agrees
to
use
Commercially
Reasonable
Efforts
to
pursue
the
clinical
development
of
and
to
obtain
Marketing
Approval
andreimbursement
funding
for
CF
for
***
Certain
information
on
this
page
has
been
omitted
and
filed
separately
with
the
Securities
and
Exchange
Commission.
Confidential
treatment
has
beenrequested
with
respect
to
the
omitted
portions.

the
Drug
Product
intended
for
use
with
the
Device
in
two
(2)
or
more
Major
EU
Countries,
and
after
obtaining
such
Marketing
Approval
andreimbursement
funding,
to
use
Commercially
Reasonable
Efforts
to
market
and
sell
the
Drug
Product
with
the
Device
in
such
Major
EU
Countries,
exceptthat
Insmed
may,
in
its
sole
discretion,
permanently
discontinue:
development,
seeking
regulatory
approval,
or
commercialization
based
on:
safety
issues,negative
and/or
unfavorable
clinical
trial
results,
lack
of
commercial
viability,
strength
of
competitors
prohibiting
an
effective
marketing
of
the
DrugProduct
in
the
marketplace,
or
weak
financial
forecasts;
provided,
however,
that
in
such
event
Insmed
shall
immediately
notify
PARI
in
writing
of
suchdecision
and,
if
Insmed
also
fails
to
meet
a
milestone
under
Section
7.2A
of
the
Agreement,
then
CF
shall
no
longer
be
included
in
the
Insmed
Field
andPARI’s
obligations
under
Section
4.2(a)
shall
no
longer
apply
as
to
CF.
5. 





































Section 7.2 (A). Section
7.2
(A)
Insmed
Development
and
Commercial
Diligence
for
Non-tuberculous
Mycobacteria
Infections.
The
table
in
Section
7.2A(a)
shall
be
deleted
and
replaced
with
the
following
table:
  MilestoneMilestone Activity DeadlineCompletion
of
the
INS-212
Clinical
Study
Report
(CSR)
***


Completion
of
submission
to
US
FDA
for
the
Drug
Product
in
NTM
***


First
Commercial
Sale
of
the
Drug
Product
in
US
in
NTM
***


First
Commercial
Sale
of
the
Drug
Product
in
the
EU
in
NTM
***


First
Commercial
Sale
of
the
Drug
Product
in
Canada
in
NTM
***
The
second
paragraph
of
Section
7.2A(a)
(directly
below
the
table
shown
above)
is
hereby
deleted.
In
the
third
sentence
of
the
third
paragraph
of
Section
7.2A(a),
“***”
shall
be
replaced
with
“***”.
In
addition,
the
following
sentences
shall
be
added
to
the
second
paragraph
of
Section
7.2A(a):
“PARI’s
options
to
render
the
license
granted
hereunder
non-exclusive,
to
terminate
its
obligations
to
not
compete
with
Insmed
or
to
terminate
the
licenseas
described
in
this
***
Certain
information
on
this
page
has
been
omitted
and
filed
separately
with
the
Securities
and
Exchange
Commission.
Confidential
treatment
has
beenrequested
with
respect
to
the
omitted
portions.

Section
shall
only
apply
to
(i)
the
US
in
case
Insmed
fails
to
meet
the
milestones
for
the
US,
(ii)
Europe
in
case
Insmed
fails
to
meet
the
milestone
for
theEU;
or
(iii)
the
Territory
in
case
both
(i)
and
(ii)
above
occur.
If
the
diligence
milestone
First
Commercial
Sale
of
the
Drug
Product
in
the
US
in
NTM
is
not
met
***
months
after
the
applicable
milestone
deadline
asset
forth
in
the
table
above
and
First
Commercial
Sale
of
the
Drug
Product
in
the
US
did
not
occur
or
commercial
sale
has
been
ceased
for
anotherindication
in
the
US,
PARI
shall
be
free
to
terminate
the
entire
License
with
respect
to
US.
If
the
diligence
milestone
First
Commercial
Sale
of
the
Drug
Product
in
Canada
in
NTM
is
not
met
***
months
after
the
applicable
milestone
deadline
asset
forth
in
the
table
above
and
First
Commercial
Sale
of
the
Drug
Product
in
Canada
or
the
US
did
not
occur
or
commercial
sale
has
been
ceased
foranother
indication
in
Canada
or
the
US
or
NTM
in
the
US,
PARI
shall
be
free
to
terminate
the
entire
License
with
respect
to
Canada.
If
the
diligence
milestone
First
Commercial
Sale
of
the
Drug
Product
in
the
EU
in
NTM
is
not
met
***
months
after
the
applicable
milestone
deadline
asset
forth
in
the
table
above
and
First
Commercial
Sale
of
the
Drug
Product
did
not
occur
or
commercial
sale
has
been
ceased
for
another
indication
in
theEU,
PARI
shall
be
free
to
terminate
the
entire
License
with
respect
to
Europe.
In
case
the
preconditions
for
the
termination
of
the
entire
license
in
all
regions,
the
US,
Canada
and
Europe
as
set
forth
above,
are
given,
PARI
shall
befree
to
terminate
the
entire
license
with
respect
to
the
Territory.”
6. 





































Section 8.8 (f). A
new
Section
8.8
(f)
is
hereby
added
to
the
Agreement:
“In
addition
to
what
is
written
in
Section
8.8
(b)
above,
Insmed
shall
be
permitted
to
use
the
Device
for
Early
Access
Programs
and
therefore
may
releasethe
Devices
supplied
for
clinical
trial
purposes
also
to
individuals
who
will
be
participating
in
Early
Access
Programs
and
who
have
a
need
to
access
theDevice
in
connection
with
use
of
the
Device
in
such
Early
Access
Programs,
subject
to
the
terms
and
conditions
of
this
Agreement
(including
withoutlimitation
Section
7.7)
and
any
Applicable
Laws
and
Standards.
Insmed
shall
be
solely
responsible
for
compliance
with
such
Applicable
Laws
andStandards.
The
Parties
anticipate
that
the
same
Device
which
is
supplied
for
clinical
trial
purposes
may
be
utilized
in
the
Early
Access
Programs
(withrespect
to
both
technical
specifications
and
labelling).
.
If
the
Device
does
not
meet
such
Applicable
Laws
and
Standards
for
use
in
Early
AccessPrograms,
if
requested
by
Insmed,
PARI
will
use
commercially
reasonable
efforts
to
ensure
that
the
Device
fulfills
such
Applicable
Laws
and
Standards
atInsmed’s
cost.
Insmed
shall
be
responsible
for
the
traceability
of
the
Devices
and
upon
request
by
PARI
Insmed
shall
within
***
business
days
informPARI
whether
a
specific
Device
was
used
in
an
Early
Access
Program
or
in
a
clinical
trial
(including
the
unique
identifier
of
the
clinical
trial)
and
inwhich
country
it
was
used.
For
clarity,
to
the
extent
that
any
of
these
programs
reimburse
Insmed,
such
reimbursement
***
Certain
information
on
this
page
has
been
omitted
and
filed
separately
with
the
Securities
and
Exchange
Commission.
Confidential
treatment
has
beenrequested
with
respect
to
the
omitted
portions.

shall
not
trigger
the
Royalty
Term
or
the
Annual
Minimum
Royalty
as
such
programs
are
not
commercial
sales
nor
do
these
programs
require
MarketingApproval.”
7. 





































Section 11.5 (a). Section
11.5(a)
of
the
Agreement
is
hereby
amended
by
deleting
the
last
sentence
and
replacing
it
with
the
following:
“Notwithstanding
the
foregoing,
all
press
releases
and
similar
disclosures
issued
by
Insmed
that
contain
material
or
substantive
information
regardingARIKAYCE™
(liposomal
amikacin
for
inhalation)
as
an
inhaled
product
shall
include
the
language
set
forth
on
Exhibit
11.5
attached
hereto,
as
suchExhibit
may
be
amended
from
time
to
time
by
PARI
upon
reasonable
written
notice
to
Insmed.”
8. 





































Amendment of Section 16.2. Section
16.2
of
the
Agreement
is
hereby
amended
by
deleting
the
notice
addresses
for
Insmed
and
replacing
themwith
the
following:
If
to
Insmed:
Insmed
Incorporated

10
Finderne
Avenue,
Building
10

Bridgewater,
NJ
08807

United
States
of
America

Attn.:
CEO

Fax:
***


with
a
copy
to:
Insmed
Incorporated

10
Finderne
Avenue,
Building
10

Bridgewater,
NJ
08807

United
States
of
America

Attn.:
General
Counsel

Fax:
***
9. 





































Amendment of Exhibit 11.5. Exhibit
11.5
to
the
Agreement
is
hereby
amended
by
deleting
the
first
sentence
and
replacing
it
with
thefollowing:
“The
Device
shall
be
mentioned
in
every
press
release
by
Insmed
that
contains
material
or
substantive
information
regarding
ARIKAYCE™
(liposomalamikacin
for
inhalation),
as
an
inhaled
product.”
10. 






























Miscellaneous. Upon
execution,
this
Amendment
No.
5
shall
be
made
part
of
the
Agreement
and
shall
be
incorporated
therein
by
reference.Except
as
provided
herein,
all
other
terms
and
conditions
of
the
Agreement
shall
remain
in
full
force
and
effect.
IN
WITNESS
WHEREOF,
the
Parties
have
executed
this
Amendment
No.
5
as
of
the
Amendment
No.
5
Effective
Date
indicated
above.
***
Certain
information
on
this
page
has
been
omitted
and
filed
separately
with
the
Securities
and
Exchange
Commission.
Confidential
treatment
has
beenrequested
with
respect
to
the
omitted
portions.

INSMED INCORPORATEDPARI PHARMA GMBH



By:/s/
William
H.
Lewis
By:/s/
Dr.
Martin
Knoch




Name:William
H.
Lewis
Name:Dr.
Martin
Knoch



Title:CEO
&
PresidentTitle:President



Date:October
13,
2015Date:Oct.
13,
2015
Exhibit 10.14.2
CONFIDENTIAL
TREATMENT
HAS
BEEN
REQUESTED
AS
TO
CERTAIN
PORTIONS
OF
THIS
DOCUMENT.

EACH
SUCH
PORTION,
WHICH
HASBEEN
OMITTED
HEREIN
AND
REPLACED
WITH
ASTERISKS
(***),
HAS
BEEN
FILED
SEPARATELY
WITH
THE
SECURITIES
AND
EXCHANGECOMMISSION.
AMENDMENT NO. 6TO LICENSE AGREEMENT BETWEENINSMED INCORPORATED AND PARI PHARMA GMBH
This
sixth
amendment
(“
Amendment No. 6 ”)
effective
October
9,
2015
(“
Amendment No. 6 Effective Date ”)
to
the
License
Agreement
dated
andeffective
the
25

of
April
2008
between
PARI
Pharma
GmbH,
a
German
corporation
with
a
principal
place
of
business
at
Moosstrasse
3,
D-82319
Starnberg,Germany
(“
PARI ”)
and
Transave,
Inc.,
a
Delaware
corporation,
as
amended
by
Amendment
No.
1
the
24

day
of
June
2009,
Assignment
and
Amendment
No.
2the
22

day
of
December
2010,
Amendment
No.
3
the
6

day
of
March
2012,
Amendment
No.
4
the
21

day
of
May
2012,
and
Amendment
No.
5
the
5th
dayof
October
2015
(collectively,
the
“
Agreement ”),
is
entered
into
between
PARI
and
Insmed
Incorporated
(successor
in
interest
to
Transave,
Inc.),
with
registeredoffices
at
10
Finderne
Avenue,
Building
10,
Bridgewater,
NJ
08807-3365
(“
Insmed ”).
PARI
and
Insmed
shall
be
referred
to
collectively
as
the
“
Parties ”.
WHEREAS,
the
Parties
now
desire
to
amend
the
terms
and
conditions
of
the
Agreement
to
reflect
certain
business
discussion
between
the
Parties
and
thecurrent
development
status
of
the
Drug
Product.
NOW,
THEREFORE,
in
consideration
of
the
recitals
set
forth
above,
the
mutual
covenants,
terms
and
conditions
set
forth
below,
and
other
good
andvaluable
consideration,
the
receipt
and
sufficiency
of
which
is
hereby
acknowledged,
the
Parties
agree
as
follows:
1. 












Definitions. Capitalized
terms
used
but
not
defined
in
this
Amendment
No.
6
shall
have
the
meanings
ascribed
to
them
in
the
Agreement.
2. 












Section 1.20A. Section
1.20A
is
hereby
added
to
the
Agreement
as
follows:
1.20A
“
Full Approval ”
means
receipt
of
a
centralised
marketing
authorisation
granted
by
the
European
Commission
under
Regulation
(EC)726/2004;
and
such
a
marketing
authorization
is
not
encumbered
with
specific
conditions
that
form
the
basis
of
the
requirement
of
annual
renewalpursuant
to
Article
14(7)
of
Regulation
(EC)
726/2004
and
Regulation
(EC)
507/2006.
3. 












Section 1.48. Section
1.48
is
hereby
deleted
in
its
entirety
and
replaced
with
the
following:
1.48







“
Royalty Term ”
means
on
a
country-by-country
basis
the
period
commencing
on
the
date
of
First
Commercial
Sale
of
Drug
Product,and
ending
upon
the
later
of
(a)
Expiration
of
the
(x)
last
Valid
Claim
covering
the
particular
Device
or
(y)
the
Assigned
Invention
Patents,
in
each
case,
inthe
particular
country
in
which
such
Product
is
sold,
or
(b)
***
years
after
(X)
First
Commercial
Sale
of
the
Drug
Product
in
such
country
outside
of
theEuropean
Union
in
the
Insmed
Territory
or
(Y)
the
date
that
all
of
the
following
criteria
(i),
(ii)
and
(iii)
have
occurred:
(i)
a
Drug
Product
receives
FullApproval,
(ii)
the
First
Commercial
Sale
of
Drug
Product
in
atleast
***
Major
***
Certain
information
on
this
page
has
been
omitted
and
filed
separately
with
the
Securities
and
Exchange
Commission.
Confidential
treatment
has
beenrequested
with
respect
to
the
omitted
portions.
th
th
nd
th
st

EU
Countries
and
(iii)
the
First
Commercial
Sale
in
that
particular
country
in
the
European
Union.
4. 












Section 6.3. Section
6.3
of
the
Agreement
is
hereby
amended
by
deleting
“During
the
Royalty
Term”
and
replacing
it
with
“After
the
FirstCommercial
Sale
in
the
United
States
but
no
later
than
***”.
5. 












Section 9.3. Section
9.3
of
the
Agreement
is
hereby
amended
by
adding
“in
the
United
States
but
no
later
than
***”
after
“First
CommercialSale”
in
both
the
first
and
second
sentence
of
the
section.
6. 












Miscellaneous. Upon
execution,
this
Amendment
No.
5
shall
be
made
part
of
the
Agreement
and
shall
be
incorporated
therein
by
reference.Except
as
provided
herein,
all
other
terms
and
conditions
of
the
Agreement
shall
remain
in
full
force
and
effect.
***
Certain
information
on
this
page
has
been
omitted
and
filed
separately
with
the
Securities
and
Exchange
Commission.
Confidential
treatment
has
beenrequested
with
respect
to
the
omitted
portions.
[SIGNATURE
PAGE
FOLLOWS]

IN
WITNESS
WHEREOF,
the
Parties
have
executed
this
Amendment
No.
6
as
of
the
Amendment
No.
6
Effective
Date
indicated
above.

INSMED INCORPORATEDPARI PHARMA GMBH











By:/s/
William
H.
Lewis
By:/s/
Dr.
Martin
Knoch






Name:William
H.
Lewis
Name:Dr.
Martin
Knoch






Title:CEO
&
President
Title:President






Date:Oct.
13,
2015
Date:Oct.
13,
2015

Exhibit 10.17.1
FIRST AMENDMENT TO LEASE
THIS
FIRST
AMENDMENT
TO
LEASE
(the
“
Amendment ”)
is
entered
into
this
29
day
of
April
,
2014,
between
DENVER
ROAD,
LLC,
a
NewJersey
limited
liability
company
(“
Landlord ”),
and
INSMED
INCORPORATED,
a
Virginia
corporation
(“
Tenant ”).
For
purposes
of
this
Amendment,
the
“Effective Date ”
shall
be
the
date
this
Amendment
has
been
executed
and
delivered
by
Landlord
and
Tenant.
Landlord
and
Tenant
are
parties
to
a
certain
Lease
(the
“
Lease ”)
dated
December
31,
2013,
covering
premises
deemed
to
contain
approximately
27,435rentable
square
feet
(the
“
Existing Premises ”)
located
in
Building
10
(the
“
Building ”),
10
Finderne
Avenue,
Bridgewater,
New
Jersey,
as
more
particularlydescribed
in
the
Lease.
By
written
notice
dated
February
19,
2014,
Tenant
notified
Landlord,
pursuant
to
Section
15.2
of
the
Lease,
that
(i)
Tenant
desires
to
lease
a
portion
of
theAvailable
Third
Floor
Space
(as
defined
in
said
Section
15.2),
and
(ii)
Tenant
desires
to
lease
a
portion
of
the
First
Floor
Space
(as
defined
in
said
Section
15.2).The
portion
of
the
Available
Third
Floor
Space
to
be
leased
by
Tenant
consists
of
an
area
deemed
to
contain
14,121
rentable
square
feet
located
on
the
third
(3rd)floor
of
the
Building,
as
shown
on
the
plan
attached
hereto
and
made
a
part
hereof
as
Exhibit
A
(the
“
Third Floor Area ”),
and
the
portion
of
the
First
Floor
Spaceto
be
leased
by
Tenant
consists
of
an
area
deemed
to
contain
1,301
rentable
square
feet
located
on
the
first
(1st)
floor
of
the
Building,
as
shown
on
the
plan
attachedhereto
and
made
a
part
hereof
as
Exhibit
B
(the
“
First Floor Area ”)
(the
Third
Floor
Area
and
the
First
Floor
Area
are
sometimes
referred
to
together
herein
asthe
“
New Space ”,
and
together
are
deemed
to
contain
15,422
rentable
square
feet).
The
purpose
of
this
Amendment
is
to
document
the
leasing
of
the
New
Space,as
provided
in
said
Section
15.2,
and
otherwise
subject
to
and
in
accordance
with
the
terms
and
conditions
set
forth
in
this
Amendment.
For
good
and
valuable
consideration
the
receipt
and
sufficiency
of
which
is
acknowledged
by
Landlord
and
Tenant,
and
intending
to
be
legally
boundhereby,
Landlord
and
Tenant
agree
as
follows:
1.






































Effective
as
of
the
Effective
Date,
(i)
Landlord
shall
deliver
possession
of
the
New
Space
to
Tenant,
and
the
Premises
shall
for
all
purposesunder
the
Lease,
as
amended
by
this
Amendment,
include
both
the
Existing
Premises
and
the
New
Space,
and
(ii)
the
total
space
being
leased
by
Landlord
toTenant,
and
by
Tenant
from
Landlord,
under
the
Lease,
as
amended
by
this
Amendment
(and,
therefore,
the
“
Premises ”,
as
defined
in
the
Lease)
shall
be
deemedto
contain
a
total
of
42,857
rentable
square
feet.
2.






































The
Term
of
the
Lease
with
respect
to
the
New
Space
shall
commence
upon
the
Effective
Date,
and
shall
end
coterminously
with
the
Term
forthe
Existing
Premises,
on
the
Expiration
Date
(as
defined
in
the
Lease).
3.






































With
respect
to
the
New
Space,
the
following
terms
and
conditions
shall
be
applicable:
(a)

































Upon
execution
of
this
Amendment
by
Landlord
and
Tenant,
Landlord
shall
deliver
possession
of
the
New
Space
to
Tenant,
and
Tenantshall
accept
possession
of
the
1
New
Space,
vacant
and
in
its
current
“AS
IS”
condition.
Landlord’s
obligations
under
clause
(i)
of
the
second
sentence
of
Section
1.4
of
the
Lease
shall
not
beapplicable
to
the
New
Space.
(b)

































Commencing
as
of
the
seven
(7)
month
anniversary
of
the
Effective
Date
(the
“
New Space Rent Commencement Date ”),
andcontinuing
throughout
the
remainder
of
the
Term,
Tenant
shall
pay
to
Landlord
Fixed
Rent
(as
defined
in
the
Lease)
for
the
New
Space
at
the
following
rates
forthe
following
periods
(in
addition
to
the
Fixed
Rent
payable
by
Tenant
for
the
Existing
Premises
under
the
Lease,
which
shall
remain
unaffected
by
thisAmendment):
(i)





































$246,752.04
(i.e.,
$16.00
per
rentable
square
foot
of
the
New
Space),
per
annum,
payable
in
equal
monthly
installments
of$20,562.67,
for
the
period
from
the
New
Space
Rent
Commencement
Date,
to
and
including
May
31,
2015;
(ii)


































$254,463.00
(i.e.,
$16.50
per
rentable
square
foot
of
the
New
Space),
per
annum,
payable
in
equal
monthly
installments
of$21,205.25,
for
the
period
from
June
1,
2015,
to
and
including
May
31,
2016;
(iii)































$262,173.96
(i.e.,
$17.00
per
rentable
square
foot
of
the
New
Space),
per
annum,
payable
in
equal
monthly
installments
of$21,847.83,
for
the
period
from
June
1,
2016,
to
and
including
May
31,
2017;
(iv)






























$269,885.04
(i.e.,
$17.50
per
rentable
square
foot
of
the
New
Space),
per
annum,
payable
in
equal
monthly
installments
of$22,490.42,
for
the
period
from
June
1,
2017,
to
and
including
May
31,
2018;
(v)

































$277,596.00
(i.e.,
$18.00
per
rentable
square
foot
of
the
New
Space),
per
annum,
payable
in
equal
monthly
installments
of$23,133.00,
for
the
period
from
June
1,
2018,
to
and
including
May
31,
2019;
and
(vi)






























$285,306.96
(i.e.,
$18.50
per
rentable
square
foot
of
the
New
Space),
per
annum,
payable
in
equal
monthly
installments
of$23,775.58,
for
the
period
from
June
1,
2019,
to
and
including
November
30,
2019.
Provided
no
Event
of
Default
(as
defined
in
the
Lease)
is
then
in
existence,
Tenant
shall
receive
a
credit
against
the
Fixed
Rent
first
payable
under
this
Amendmentfor
the
New
Space
in
the
amount
of
$112,161.12,
to
be
applied
until
exhausted
against
the
monthly
installments
of
Fixed
Rent
for
the
New
Space
first
coming
duefrom
and
after
the
New
Space
Rent
Commencement
Date.
In
addition,
Tenant
shall
not
be
required
to
pay
any
Tax
Payment
(as
defined
in
the
Lease)
or
OperatingPayment
(as
defined
in
the
Lease)
with
respect
to
the
New
Space
allocable
to
any
period
prior
to
the
date
such
credit
against
Fixed
Rent
is
exhausted.
(c)


































The
provisions
of
Section
1.5
of
the
Lease
shall
be
applicable
to
Tenant’s
lease
of
the
New
Space
pursuant
to
this
Amendment,
exceptas
follows:
(i)





































As
to
the
portion
of
the
Available
Third
Floor
Space
being
leased
by
Tenant
hereunder
(i.e.,
the
Third
Floor
Area),
Landlordand
Tenant
acknowledge
that
the
location
and
configuration
of
the
Third
Floor
Area
reflects
a
modification
of
the
configuration
of
the
existing
common
corridorabutting
said
area
from
that
shown
on
Exhibit
G-l
attached
to
the
Lease
(in
that
the
wall
between
the
Third
Floor
Area
and
such
corridor
shall
be
straight,
as
2
shown
on
Exhibit
A
attached
hereto,
rather
than
a
series
of
angled
abutments,
as
shown
on
Exhibit
G-l
attached
to
the
Lease).
Tenant
acknowledges
and
confirmsthat
all
modifications
to
the
existing
corridor
required
to
so
modify
the
wall
between
the
Third
Floor
Area
and
said
corridor
shall
be
performed
by
Tenant
as
part
ofthe
Initial
Tenant
Work
(as
defined
in
the
Lease)
with
respect
to
the
Third
Floor
Area.
Landlord
agrees
that
Tenant
shall
not
be
required
to
restore
said
corridor
atthe
expiration
of
the
Lease
to
its
condition
prior
to
the
modification
of
the
configuration
thereof
as
described
above.
(ii)










































The
Tenant
Allowance
(as
defined
in
the
Lease)
with
respect
to
the
Initial
Tenant
Work
for
the
Third
Floor
Area
shall
equal$231,073.22.
(iii)







































The
Tenant
Allowance
with
respect
to
the
Initial
Tenant
Work
for
the
First
Floor
Area
shall
equal
$21,289.30.
(iv)






































Tenant
acknowledges
that
the
First
Floor
Area
is
not
separately
demised,
and
that
it
shall
be
Tenant’s
responsibility,
as
part
ofthe
Initial
Tenant
Work
for
the
First
Floor
Area,
to
construct
walls,
doorways
and
other
improvements
required
to
fully
enclose
and
separately
demise
the
FirstFloor
Area
(the
“
Demising Work ”);
provided,
however,
that
the
Initial
Tenant
Work
(and,
if
applicable,
the
Demising
Work)
for
the
First
Floor
Area
shallpreserve
the
doorway
to
the
mechanical
room
area
shown
on
Exhibit
B
attached
hereto,
and
at
all
times
during
the
Term
of
the
Lease,
Landlord
shall
be
entitled
toaccess
such
mechanical
room
through
the
First
Floor
Area
and
such
doorway.
(d)

































Notwithstanding
anything
to
the
contrary
contained
in
the
Lease
or
this
Amendment,
unless
and
to
the
extent
that
Landlord
providesnotice
to
Tenant
to
the
contrary
(Landlord
will
not
provide
such
notice
later
than
nine
(9)
months
prior
to
the
Expiration
Date
and
any
later
notice
shall
be
deemednull
and
void)
prior
to
the
expiration
or
sooner
termination
of
the
Lease,
Tenant
shall
remove,
prior
to
the
expiration
of
the
Lease
(or
within
thirty
(30)
daysfollowing
the
earlier
termination
thereof),
Tenant
Improvements
(as
defined
in
the
Lease)
that
consist
of
Alterations
constructed
as
part
of
the
Initial
Tenant
Work(as
defined
in
the
Lease)
or
to
the
Third
Floor
Area
or
the
First
Floor
Area
under
this
Amendment
that
(i)
are
to
portions
of
the
Premises
that
are
to
consist
oflaboratory
space
or
are
to
be
used
for
laboratory
purposes,
(ii)
constitute
Tenant’s
Rooftop
Equipment
(as
defined
in
the
Lease),
or
(iii)
constitute
an
internalstaircase
connecting
the
Existing
Premises
to
the
Third
Floor
Area
or
the
First
Floor
Area.
4.






































With
respect
to
all
periods
from
and
after
the
Effective
Date,
(i)
Tenant’s
Share
(as
defined
in
the
Lease)
for
the
Premises
(i.e.,
the
ExistingPremises
and
the
New
Space)
shall
be
10.2087%,
and
(ii)
Tenant’s
Building
10
Share
(as
defined
in
the
Lease)
for
the
Premises
(i.e.,
the
Existing
Premises
and
theNew
Space)
shall
be
66.2887%.
5.






































Landlord
shall
not
be
required
to
provide
interior
cleaning
services
to
the
laboratory
areas
located
in
the
Third
Floor
Area
(the
“
Third FloorLaboratory Area ”)
and
to
the
First
Floor
Area
under
Section
4.6
of
the
Lease.
Landlord
shall
provide
Tenant
with
a
credit
against
the
Fixed
Rent
payable
byTenant
for
the
New
Space
under
this
Amendment
in
an
annual
amount
equal
to
the
product
of
(i)
the
per
rentable
square
foot
amount
paid
by
Landlord
per
annumfor
standard
office
cleaning
services
at
the
Complex
(as
defined
in
the
Lease)
times
(ii)
the
number
of
rentable
square
feet
of
the
Third
Floor
Laboratory
Area
andthe
First
Floor
Area.
Landlord
shall
notify
Tenant
from
time
to
time
of
Landlord’s
calculation
of
such
credit
and
any
change
thereto.
Tenant
shall
be
solelyresponsible,
at
Tenant’s
sole
cost
and
expense,
for
3
providing
cleaning
services
for
the
Third
Floor
Laboratory
Area
and
the
First
Floor
Area,
and
shall
keep
and
maintain
the
Third
Floor
Laboratory
Area
and
the
FirstFloor
Area
(including
all
bathroom
and
shower
facilities
therein)
at
all
times
in
a
clean,
sanitary
and
safe
condition.
Tenant
shall
indemnify,
defend
and
holdharmless
Landlord
from
and
against
all
liability
arising
in
connection
with
all
activities
of
Tenant
and
any
Tenant
Party
in
the
Third
Floor
Laboratory
Area
and
theFirst
Floor
Area,
including
but
not
limited
to
liability
arising
from
injuries
(including
death)
resulting
from
or
in
connection
with
such
activities
unless
due
toLandlord’s
gross
negligence
or
willful
misconduct.
6.






































Subject
to
the
terms
hereof,
Tenant
shall
be
provided
exclusive
use
of
the
first
(1st)
floor
point
of
entry
room
(“
POE Room ”),
for
the
uses
forwhich
the
Premises
may
be
used,
in
the
location
identified
on
Exhibit
B
attached
hereto.
Except
for
the
payment
of
Fixed
Rent,
charges
for
Building-standardelectricity,
Tax
Payments
(as
defined
in
the
Lease)
and
Operating
Payments
(as
defined
in
the
Lease),
Tenant’s
obligations
under
the
Lease
with
respect
to
thePremises
shall
be
applicable
to
Tenant’s
use
and
occupancy
of
the
POE
Room.
Landlord
shall
not
be
required
to
provide
any
services
to
the
POE
Room,
or
anyallowance
for
the
construction
of
Alterations
in
the
POE
Room.
Tenant
shall
accept
the
POE
Room
in
its
“AS
IS”
condition,
as
of
Landlord’s
delivery
ofpossession
thereof
to
Tenant
(the
POE
Room
to
be
so
delivered
at
the
same
time
as
Landlord
delivers
possession
of
the
First
Floor
Area).
In
the
event
Landlordrequires
the
use
of
the
POE
Room
by
any
entity
other
than
Tenant,
Landlord
shall
provide
prior
written
notice
to
Tenant
along
with
plans
as
to
how
Landlord
willdemise
the
POE
Room
for
use
by
another
Tenant.
Prior
to
any
other
tenant’s
use
of
the
POE
Room,
Landlord
shall
demise
the
POE
Room
into
a
separate
spacewith
a
separate
entry
at
Landlord’s
sole
cost
and
expense.
Prior
to
performing
any
work,
Landlord
shall
submit
its
demising
plan
to
Tenant
for
Tenant’s
priorwritten
approval,
which
approval
shall
not
be
unreasonably
withheld,
conditioned
or
delayed,
but
which
approval
shall
take
into
consideration
Tenant’s
requiredsecurity
level.
Demising
costs
shall
include,
without
limitation,
installation
of
any
additional
entrances,
the
relocation
of
equipment
including
but
not
limited
totransformers
and
electrical
panels
and
relocation
or
removal
of
any
obstructions
blocking
or
interfering
with
any
new
entrance.
7.






































Each
party
covenants,
warrants
and
represents
to
the
other
party
that
no
broker,
other
than
Jones
Lang
LaSalle
and
Linque
ManagementCompany,
Inc.
(together,
“
Broker ”),
was
instrumental
in
bringing
about
or
consummating
this
Amendment
and
that
it
has
had
no
conversations
or
negotiationswith
any
broker
except
Broker
concerning
the
leasing
of
the
New
Space.
Each
party
agrees
to
indemnify
and
hold
harmless
the
other
party
against
and
from
anyclaims
for
any
brokerage
commissions
and
all
costs,
expenses
and
liabilities
in
connection
therewith,
including,
without
limitation,
reasonable
attorneys’
fees
andexpenses,
arising
out
of
any
conversations
or
negotiations
had
by
such
party
with
any
broker
other
than
Broker.
Landlord
agrees
to
pay
Broker
any
commissionowing
to
Broker
in
connection
with
this
Amendment
pursuant
to
a
separate
agreement
or
agreements.
8.






































If
there
is
any
conflict
between
the
terms
and
provisions
of
the
Lease
and
the
terms
and
provisions
of
this
Amendment,
the
terms
and
provisionsof
this
Amendment
shall
prevail.
Landlord
and
Tenant
ratify
and
affirm
the
Lease
as
modified
by
this
Amendment.
Except
as
modified
by
this
Amendment,
theLease
shall
remain
unmodified,
in
full
force
and
effect.
Except
as
herein
otherwise
expressly
provided,
or
except
as
the
terms
of
the
Lease
may
be
in
conflict
withor
inconsistent
with
the
terms
of
this
Amendment,
all
of
the
terms,
covenants
and
provisions
of
the
Lease
are
hereby
incorporated
into
and
made
a
part
of
thisAmendment
as
if
fully
set
forth
herein.
4
9.






































This
Amendment
may
be
executed
and
delivered
by
the
undersigned
in
counterparts.
The
electronically
transmitted
signature
of
a
party
to
thisAmendment
shall
be
binding
upon
such
party.
IN WITNESS WHEREOF, Landlord
and
Tenant
have
executed
this
Amendment
as
of
the
day
and
year
first
above
written.
LANDLORD:

DENVER
ROAD,
LLC

By/s/
Menashe
FrankelName:Menashe
FrankelTitle:Member

TENANT:

INSMED
INCORPORATED

By/s/
William
H.
LewisName:William
H.
LewisTitle:President
and
CEO
5
EXHIBIT A
The Third Floor Area


EXHIBIT B
The First Floor Area

Exhibit 10.17.2
SECOND AMENDMENT TO LEASE

20

liability
company
(“
Landlord ”),
and
INSMED
INCORPORATED,
a
Virginia
corporation
(“
Tenant ”).
For
purposes
of
this
Amendment,the
“
Effective Date ”
shall
be
the
date
this
Amendment
has
been
executed
and
delivered
by
Landlord
and
Tenant.
Landlord
and
Tenant
are
parties
to
a
certain
Lease
(the
“
Original Lease ”)
dated
December
31,
2013,
as
amended
by
a
certain
First
Amendment
to
Lease(the
“
First Amendment ”)
dated
April
29,
2014
(the
Original
Lease
and
the
First
Amendment
are
referred
to
together
herein
as
the
“
Lease ”).
The
Lease
coverspremises
deemed
to
contain
approximately
42,857
rentable
square
feet
(the
“
Existing Premises ”)
located
in
Building
10
(the
“
Building ”),
10
Finderne
Avenue,Bridgewater,
New
Jersey,
as
more
particularly
described
in
the
Lease.
Landlord
and
Tenant
desire
for
Tenant
to
lease
additional
premises
consisting
of
an
area
deemed
to
contain
13,760
rentable
square
feet
located
on
the
third(3rd)
floor
of
the
Building,
as
shown
on
the
plan
attached
hereto
and
made
a
part
hereof
as
Exhibit
A
(the
“
2015 New Space ”),
and
to
otherwise
amend
certainterms
and
provisions
of
the
Lease,
subject
to
and
in
accordance
with
the
terms
and
conditions
set
forth
in
this
Amendment.
For
good
and
valuable
consideration
the
receipt
and
sufficiency
of
which
is
acknowledged
by
Landlord
and
Tenant,
and
intending
to
be
legally
boundhereby,
Landlord
and
Tenant
agree
as
follows:
1.












Effective
as
of
the
Effective
Date,
(i)
Landlord
shall
deliver
possession
of
the
2015
New
Space
to
Tenant,
and
the
Premises
shall
for
all
purposesunder
the
Lease,
as
amended
by
this
Amendment,
include
both
the
Existing
Premises
and
the
2015
New
Space,
and
(ii)
the
total
space
being
leased
by
Landlord
toTenant,
and
by
Tenant
from
Landlord,
under
the
Lease,
as
amended
by
this
Amendment
(and,
therefore,
the
“
Premises ”,
as
defined
in
the
Lease)
shall
be
deemedto
contain
a
total
of
56,617
rentable
square
feet.
2.












The
Term
of
the
Lease
with
respect
to
the
2015
New
Space
shall
commence
upon
the
Effective
Date,
and
shall
end
coterminously
with
the
Termfor
the
Existing
Premises,
on
the
Expiration
Date
(as
defined
in
the
Lease).
3.












With
respect
to
the
2015
New
Space,
the
following
terms
and
conditions
shall
be
applicable:
(a)










Upon
execution
of
this
Amendment
by
Landlord
and
Tenant,
Landlord
shall
deliver
possession
of
the
2015
New
Space
to
Tenant,
and,subject
to
Tenant
completing
the
2015
New
Space
Landlord
Work
(as
hereinafter
defined),
Tenant
shall
accept
possession
of
the
2015
New
Space,
vacant
and
in
itscurrent
“AS
IS”
condition.
Landlord’s
obligations
under
clause
(i)
of
the
second
sentence
of
Section
1.4
of
the
Lease
shall
not
be
applicable
to
the
2015
New
Space.Landlord
shall
perform
the
following
work
in
and
to
the
2015
New
Space
(the
“
2015 New Space Landlord Work ”)
at
Landlord’s
cost:
(i)
repair
or
replace
anybroken
or
malfunctioning
window
blinds
or
treatments
in
the
2015
New
Space,
and
(ii)
by
December
31,
2015,
replace
contactors,
motors
and
filters
in
the
twenty-six
(26)
VAV
boxes
in
the
2015
New
Space
identified
on
Exhibit
D
attached
hereto
and
made
a
part
hereof,
such
that
said
VAV
boxes
1THIS
SECOND
AMENDMENT
TO
LEASE
(the
“
Amendment ”)

is
entered
into
this
th

day
of
November,
2015,
between
DENVER
ROAD,
LLC,
aNew
Jersey
limited

shall
be
in
proper
working
condition,
and
remove
the
existing
crossover
duct
and
cap
the
tap
thereof
in
the
2015
New
Space
(said
work
described
in
this
clause(ii)
being
referred
to
as
the
“
VAV Box Work ”).
Tenant
shall
be
entitled
to
confirm
that
the
VAV
Box
Work
has
been
completed.
(b)










Commencing
as
of
the
date
that
is
one
hundred
twenty
(120)
days
after
the
Effective
Date
(the
“
2015 New Space RentCommencement Date ”),
and
continuing
throughout
the
remainder
of
the
Term,
Tenant
shall
pay
to
Landlord
Fixed
Rent
(as
defined
in
the
Lease)
for
the
2015New
Space
at
the
following
rates
for
the
following
periods
(in
addition
to
the
Fixed
Rent
payable
by
Tenant
for
the
Existing
Premises
under
the
Lease,
which
shallremain
unaffected
by
this
Amendment):
(i)











$247,680.00
(i.e.,
$18.00
per
rentable
square
foot
of
the
2015
New
Space),
per
annum,
payable
in
equal
monthly
installmentsof
$20,640.00,
for
the
period
from
the
2015
New
Space
Rent
Commencement
Date
to
and
including
the
day
immediately
preceding
the
one
(1)
year
anniversary
ofthe
2015
New
Space
Rent
Commencement
Date;
(ii)










$254,559.96
(i.e.,
$18.50
per
rentable
square
foot
of
the
2015
New
Space),
per
annum,
payable
in
equal
monthly
installmentsof
$21,213.33,
for
the
period
from
the
one
(1)
year
anniversary
of
the
2015
New
Space
Rent
Commencement
Date
to
and
including
the
day
immediately
precedingthe
two
(2)
year
anniversary
of
the
2015
New
Space
Rent
Commencement
Date;
(iii)









$261,440.04
(i.e.,
$19.00
per
rentable
square
foot
of
the
2015
New
Space),
per
annum,
payable
in
equal
monthly
installmentsof
$21,786.67,
for
the
period
from
the
two
(2)
year
anniversary
of
the
2015
New
Space
Rent
Commencement
Date
to
and
including
the
day
immediately
precedingthe
three
(3)
year
anniversary
of
the
2015
New
Space
Rent
Commencement
Date;
and
(iv)









$268,320.00
(i.e.,
$19.50
per
rentable
square
foot
of
the
2015
New
Space),
per
annum,
payable
in
equal
monthly
installmentsof
$22,360.00,
for
the
period
from
the
three
(3)
year
anniversary
of
the
2015
New
Space
Rent
Commencement
Date
to
and
including
November
30,
2019.
Provided
no
Event
of
Default
(as
defined
in
the
Lease)
is
then
in
existence,
Tenant
shall
receive
a
credit
against
the
Fixed
Rent
first
payable
under
this
Amendmentfor
the
2015
New
Space
in
the
amount
of
$66,420.00,
to
be
applied
until
exhausted
against
the
monthly
installments
of
Fixed
Rent
for
the
2015
New
Space
firstcoming
due
from
and
after
the
2015
New
Space
Rent
Commencement
Date.
(c)










The
provisions
of
Section
1.5
of
the
Original
Lease
shall
be
applicable
to
Tenant’s
lease
of
the
2015
New
Space
pursuant
to
thisAmendment,
except
that
the
Tenant
Allowance
(as
defined
in
the
Original
Lease)
with
respect
to
the
Initial
Tenant
Work
for
the
2015
New
Space
shall
equal$165,120.00.
(d)










Notwithstanding
anything
to
the
contrary
contained
in
the
Lease
or
this
Amendment,
unless
and
to
the
extent
that
Landlord
providesnotice
to
Tenant
to
the
contrary
(Landlord
will
not
provide
such
notice
later
than
nine
(9)
months
prior
to
the
Expiration
Date
and
any
later
notice
shall
be
deemednull
and
void)
prior
to
the
expiration
or
sooner
termination
of
2
the
Lease,
Tenant
shall
remove,
prior
to
the
expiration
of
the
Lease
(or
within
thirty
(30)
days
following
the
earlier
termination
thereof),
Tenant
Improvements
(asdefined
in
the
Original
Lease)
that
consist
of
Alterations
(as
defined
in
the
Original
Lease)
constructed
as
part
of
the
Initial
Tenant
Work
(as
defined
in
the
OriginalLease)
or
to
the
Third
Floor
Area
or
the
First
Floor
Area
(as
such
terms
are
defined
in
the
First
Amendment)
or
to
the
2015
New
Space
under
this
Amendment
that(i)
are
to
portions
of
the
Premises
that
are
to
consist
of
laboratory
space
or
are
to
be
used
for
laboratory
purposes,
(ii)
constitute
Tenant’s
Rooftop
Equipment
(asdefined
in
the
Original
Lease),
or
(iii)
constitute
an
internal
staircase
connecting
portions
of
the
Premises.
4.












With
respect
to
the
2015
New
Space
only,
(i)
the
Base
Tax
Year
(as
defined
in
the
Original
Lease)
and
the
Base
Operating
Year
(as
defined
inthe
Original
Lease)
shall
mean
the
calendar
year
2016,
(ii)
Tenant’s
Share
(as
defined
in
the
Original
Lease)
for
the
2015
New
Space
shall
be
3.2777%,
and
(ii)Tenant’s
Building
10
Share
(as
defined
in
the
Original
Lease
Lease)
for
the
2015
New
Space
shall
be
21.2382%.
Tenant’s
obligations
to
pay
Tax
Payments
(asdefined
in
the
Original
Lease)
and
Operating
Payments
(as
defined
in
the
Original
Lease)
with
respect
to
the
Existing
Premises
shall
remain
unaffected
by
thisAmendment.
5.












Any
laboratory
areas
located
in
the
2015
New
Space
shall
be
included
in
and
constitute
a
part
of
Third
Floor
Laboratory
Area
(as
defined
in
theFirst
Amendment)
for
purposes
of
Section
5
of
the
First
Amendment.
6.












The
number
of
Tenant’s
Reserved
Spaces
(as
defined
in
the
Original
Lease),
to
be
governed
by
Section
3.4.2
of
the
Original
Lease
is
herebyincreased
from
ten
(10)
to
twenty
(20)
reserved
parking
spaces,
and
shall
included,
in
addition
to
the
parking
spaces
shown
on
Exhibit
J
attached
to
the
OriginalLease,
the
parking
spaces
identified
on
the
plan
attached
hereto
and
made
a
part
hereof
as
Exhibit
B
.
7.












The
provisions
of
Section
4.2
of
the
Original
Lease
shall
be
applicable
to
the
2015
New
Space
for
the
purpose
of
determining
Tenant’s
cost
forelectricity
furnished
to
the
2015
New
Space.
8.












(a)










The
amount
of
the
Security
Deposit
(as
defined
in
the
Original
Lease)
under
Section
11.6
of
the
Original
Lease
shall
be
$200,000.Tenant
shall
cause
a
replacement
letter
of
credit
(or
amendment
to
the
existing
letter
of
credit
held
by
Landlord
under
said
Section
11.6)
to
be
issued
to
Landlord
insuch
amount
(and
in
the
event
of
a
replacement
letter
of
credit,
upon
receipt
thereof
Landlord
shall
return
the
replaced
letter
of
credit
to
Tenant).
(b)










Section
11.6(e)
of
the
Original
Lease
is
deleted
in
its
entirety.
9.












Each
party
covenants,
warrants
and
represents
to
the
other
party
that
no
broker,
other
than
Jones
Lang
LaSalle
and
Linque
ManagementCompany,
Inc.
(together,
“
Broker ”),
was
instrumental
in
bringing
about
or
consummating
this
Amendment
and
that
it
has
had
no
conversations
or
negotiationswith
any
broker
except
Broker
concerning
the
leasing
of
the
2015
New
Space.
Each
party
agrees
to
indemnify
and
hold
harmless
the
other
party
against
and
fromany
claims
for
any
brokerage
commissions
and
all
costs,
expenses
and
liabilities
in
connection
therewith,
including,
without
limitation,
reasonable
attorneys’
feesand
expenses,
arising
out
of
any
conversations
or
negotiations
had
by
such
party
with
any
broker
other
than
Broker.
Landlord
agrees
to
pay
Broker
any
commissionowing
to
Broker
in
connection
with
this
Amendment
pursuant
to
a
separate
agreement
or
agreements,
and
agrees
to
indemnify
and
hold
3
harmless
Tenant
from
and
against
any
claims
by
Broker
for
any
commissions
owing
with
respect
to
Tenant’s
leasing
of
the
2015
New
Space.
10.









If
there
is
any
conflict
between
the
terms
and
provisions
of
the
Lease
and
the
terms
and
provisions
of
this
Amendment,
the
terms
and
provisionsof
this
Amendment
shall
prevail.
Landlord
and
Tenant
ratify
and
affirm
the
Lease
as
modified
by
this
Amendment.
Except
as
modified
by
this
Amendment,
theLease
shall
remain
unmodified,
in
full
force
and
effect.
Except
as
herein
otherwise
expressly
provided,
or
except
as
the
terms
of
the
Lease
may
be
in
conflict
withor
inconsistent
with
the
terms
of
this
Amendment,
all
of
the
terms,
covenants
and
provisions
of
the
Lease
are
hereby
incorporated
into
and
made
a
part
of
thisAmendment
as
if
fully
set
forth
herein.
11.









This
Amendment
may
be
executed
and
delivered
by
the
undersigned
in
counterparts.
The
electronically
transmitted
signature
of
a
party
to
thisAmendment
shall
be
binding
upon
such
party.
12.









Tenant
shall
have
the
exclusive
right
to
utilize
the
first
floor
lobby
of
the
Building,
as
shown
on
the
plan
attached
hereto
and
made
a
part
hereofas
Exhibit
C
,
as
a
reception
area
at
no
additional
rental
charge;
provided
that
ingress
and
egress
to
and
from
the
remainder
of
the
Building
is
in
compliance
withapplicable
codes
requirements.
Such
area
shall
constitute
a
portion
of
the
Premises,
and
Tenant’s
obligations
under
the
Lease,
as
amended
by
this
Amendment,
asto
the
Premises
shall
be
applicable
to
said
area.
Tenant
shall
reasonably
cooperate
with
Landlord
to
coordinate
security
and
code
compliant
ingress
and
egress
toand
from
the
remainder
of
the
Building.
IN WITNESS WHEREOF, Landlord
and
Tenant
have
executed
this
Amendment
as
of
the
day
and
year
first
above
written.
LANDLORD:

DENVER
ROAD,
LLC

By/s/
Menashe
Frankel
Name:
Menashe
Frankel
Title:
Managing
Member

TENANT:

INSMED
INCORPORATED

DocuSigned
by:

By/s/
Will
Lewis
Name:
Will
Lewis
Title:
Chief
Executive
Officer
4
EXHIBIT A

INSMED
EXPANSION
PREMISES
10
Finderne
Avenue
Bridgewater,
NJ
Third
Floor

ARCHITECTURE
INTERIORS
PLANNING















G3
The 2015 New Space

Tenant’s Additional Reserved Parking

EXHIBIT B
EXHIBIT C

10
Finderne
Avenue
Bridgewater,
NJ
First
Floor

ARCHITECTURE
INTERIORS
PLANNING















G3
First Floor Lobby
EXHIBIT D
VAV Boxes
BLDG.
10
3RD
FLR
11/4/2015
10:54:04
AM


QuickLinks
--
Click
here
to
rapidly
navigate
through
this
documentEXHIBIT
21.1
APPENDIX
A
LIST
OF
SUBSIDIARIES
Name
Jurisdiction
of
IncorporationInsmed
Pharmaceuticals,
Inc.

VirginiaCeltrix
Pharmaceuticals,
Inc.
DelawareInsmed
Limited
England
and
WalesTransave,
LLC
DelawareInsmed
Holdings
Limited
IrelandInsmed
Ireland
Limited
IrelandInsmed
Germany
GmbH
GermanyInsmed
France
SAS
FranceInsmed
Netherlands
B.V.
NetherlandsQuickLinks
EXHIBIT
21.1
APPENDIX
A
LIST
OF
SUBSIDIARIES
QuickLinks
--
Click
here
to
rapidly
navigate
through
this
documentEXHIBIT
23.1
Consent
of
Independent
Registered
Public
Accounting
Firm
We
consent
to
the
incorporation
by
reference
in
the
following
Registration
Statements:(1)Registration
Statement
on
Form
S-3
Nos.
333-188851
and
333-196418
of
Insmed
Incorporated,
and
(2)Registration
Statements
on
Form
S-8
Nos.
333-39200,
333-87878,
333-129479,
333-175532,
333-188852
and
333-204503
of
Insmed
Incorporated;of
our
reports
dated
February
25,
2016,
with
respect
to
the
consolidated
financial
statements
of
Insmed
Incorporated
and
the
effectiveness
of
internal
control
overfinancial
reporting
of
Insmed
Incorporated
included
in
this
Annual
Report
(Form
10-K)
of
Insmed
Incorporated
for
the
year
ended
December
31,
2015.Iselin,
New
Jersey
February
25,
2016

/s/
Ernst
&
Young
LLPQuickLinks
EXHIBIT
23.1
Consent
of
Independent
Registered
Public
Accounting
Firm
QuickLinks
--
Click
here
to
rapidly
navigate
through
this
documentEXHIBIT
31.1
Section
302
Certification
I,
William
H.
Lewis,
Chief
Executive
Officer
of
Insmed
Incorporated,
certify
that:(1)
I
have
reviewed
this
annual
report
on
Form
10-K
of
Insmed
Incorporated;(2)
Based
on
my
knowledge,
this
report
does
not
contain
any
untrue
statement
of
a
material
fact
or
omit
to
state
a
material
fact
necessary
to
make
the
statementsmade,
in
light
of
the
circumstances
under
which
such
statements
were
made,
not
misleading
with
respect
to
the
period
covered
by
this
report;(3)
Based
on
my
knowledge,
the
financial
statements,
and
other
financial
information
included
in
this
report,
fairly
present
in
all
material
respects
the
financialcondition,
results
of
operations
and
cash
flows
of
the
registrant
as
of,
and
for,
the
periods
presented
in
this
report;(4)
The
registrant's
other
certifying
officer
and
I
are
responsible
for
establishing
and
maintaining
disclosure
controls
and
procedures
(as
defined
in
Exchange
ActRules
13a-15(e)
and
15d-15(e))
and
internal
control
over
financial
reporting
(as
defined
in
Exchange
Act
Rules
13a-15(f)
and
15d-15(f))
for
the
registrant
and
have:(a)
Designed
such
disclosure
controls
and
procedures,
or
caused
such
disclosure
controls
and
procedures
to
be
designed
under
our
supervision,
toensure
that
material
information
relating
to
the
registrant,
including
its
consolidated
subsidiaries,
is
made
known
to
us
by
others
within
thoseentities,
particularly
during
the
period
in
which
this
report
is
being
prepared;(b)
Designed
such
internal
control
over
financial
reporting,
or
caused
such
internal
control
over
financial
reporting
to
be
designed
under
oursupervision,
to
provide
reasonable
assurance
regarding
the
reliability
of
financial
reporting
and
the
preparation
of
financial
statements
for
externalpurposes
in
accordance
with
generally
accepted
accounting
principles;(c)
Evaluated
the
effectiveness
of
the
registrant's
disclosure
controls
and
procedures
and
presented
in
this
report
our
conclusions
about
theeffectiveness
of
the
disclosure
controls
and
procedures,
as
of
the
end
of
the
period
covered
by
this
report
based
on
such
evaluation;
and(d)
Disclosed
in
this
report
any
change
in
the
registrant's
internal
control
over
financial
reporting
that
occurred
during
the
registrant's
most
recentfiscal
quarter
(the
registrant's
fourth
fiscal
quarter
in
the
case
of
an
annual
report)
that
has
materially
affected,
or
is
reasonably
likely
to
materiallyaffect,
the
registrant's
internal
control
over
financial
reporting;
and(5)
The
registrant's
other
certifying
officer
and
I
have
disclosed,
based
on
our
most
recent
evaluation
of
internal
control
over
financial
reporting,
to
the
registrant'sauditors
and
the
audit
committee
of
the
registrant's
board
of
directors
(or
persons
performing
the
equivalent
functions):(a)
All
significant
deficiencies
and
material
weaknesses
in
the
design
or
operation
of
internal
control
over
financial
reporting
which
are
reasonablylikely
to
adversely
affect
the
registrant's
ability
to
record,
process,
summarize
and
report
financial
information;
and(b)
Any
fraud,
whether
or
not
material,
that
involves
management
or
other
employees
who
have
a
significant
role
in
the
registrant's
internal
controlover
financial
reporting.Date:
February
25,
2016

By:
/s/
William
H.
Lewis
William
H.
Lewis
Chief Executive Officer (Principal Executive Officer) and DirectorQuickLinks
EXHIBIT
31.1
Section
302
Certification
QuickLinks
--
Click
here
to
rapidly
navigate
through
this
documentEXHIBIT
31.2
CERTIFICATION
PURSUANT
TO
18
USC.
SECTION
1350,
AS
ADOPTED
PURSUANT
TO
SECTION
906
OF
THE
SARBANES-OXLEY
ACT
OF
2003
In
connection
with
this
Annual
Report
on
Form
10-K
of
Insmed
Incorporated
(the
"Company")
for
the
period
ended
December
31,
2015
as
filed
with
the
Securitiesand
Exchange
Commission
on
the
date
hereof
(the
"Report"),
I,
William
H.
Lewis,
Chief
Executive
Officer
of
the
Company,
certify,
pursuant
to
18
USC.
§
1350,as
adopted
pursuant
to
§
906
of
the
Sarbanes-Oxley
Act
of
2003,
that:(1)

the
Report
fully
complies
with
the
requirements
of
Section
13(a)
or
15(d)
of
the
Securities
Exchange
Act
of
1934,
as
amended;
and(2)

the
information
contained
in
the
Report
fairly
presents,
in
all
material
respects,
the
financial
condition
and
results
of
operations
of
the
Company.February
25,
2016This
certification
accompanies
the
Form
10-K
to
which
it
relates,
is
not
deemed
filed
with
the
Securities
and
Exchange
Commission
and
is
not
to
be
incorporatedby
reference
into
any
filing
of
Insmed
Incorporated
under
the
Securities
Act
of
1933,
as
amended,
or
the
Securities
Exchange
Act
of
1934,
as
amended
(whethermade
before
or
after
the
date
of
the
Form
10-K),
irrespective
of
any
general
incorporation
language
contained
in
such
filing.

By:
/s/
William
H.
Lewis
William
H.
Lewis
Chief Executive Officer (Principal Executive Officer) and DirectorQuickLinks
EXHIBIT
31.2
CERTIFICATION
PURSUANT
TO
18
USC.
SECTION
1350,
AS
ADOPTED
PURSUANT
TO
SECTION
906
OF
THE
SARBANES-OXLEY
ACT
OF
2003
QuickLinks
--
Click
here
to
rapidly
navigate
through
this
documentEXHIBIT
32.1
Section
302
Certification
I,
Andrew
T.
Drechsler,
Chief
Financial
Officer
of
Insmed
Incorporated,
certify
that:(1)
I
have
reviewed
this
annual
report
on
Form
10-K
of
Insmed
Incorporated;(2)
Based
on
my
knowledge,
this
report
does
not
contain
any
untrue
statement
of
a
material
fact
or
omit
to
state
a
material
fact
necessary
to
make
the
statementsmade,
in
light
of
the
circumstances
under
which
such
statements
were
made,
not
misleading
with
respect
to
the
period
covered
by
this
report;(3)
Based
on
my
knowledge,
the
financial
statements,
and
other
financial
information
included
in
this
report,
fairly
present
in
all
material
respects
the
financialcondition,
results
of
operations
and
cash
flows
of
the
registrant
as
of,
and
for,
the
periods
presented
in
this
report;(4)
The
registrant's
other
certifying
officer
and
I
are
responsible
for
establishing
and
maintaining
disclosure
controls
and
procedures
(as
defined
in
Exchange
ActRules
13a-15(e)
and
15d-15(e))
and
internal
control
over
financial
reporting
(as
defined
in
Exchange
Act
Rules
13a-15(f)
and
15d-15(f))
for
the
registrant
and
have:(a)
Designed
such
disclosure
controls
and
procedures,
or
caused
such
disclosure
controls
and
procedures
to
be
designed
under
our
supervision,
toensure
that
material
information
relating
to
the
registrant,
including
its
consolidated
subsidiaries,
is
made
known
to
us
by
others
within
thoseentities,
particularly
during
the
period
in
which
this
report
is
being
prepared;(b)
Designed
such
internal
control
over
financial
reporting,
or
caused
such
internal
control
over
financial
reporting
to
be
designed
under
oursupervision,
to
provide
reasonable
assurance
regarding
the
reliability
of
financial
reporting
and
the
preparation
of
financial
statements
for
externalpurposes
in
accordance
with
generally
accepted
accounting
principles;(c)
Evaluated
the
effectiveness
of
the
registrant's
disclosure
controls
and
procedures
and
presented
in
this
report
our
conclusions
about
theeffectiveness
of
the
disclosure
controls
and
procedures,
as
of
the
end
of
the
period
covered
by
this
report
based
on
such
evaluation;
and(d)
Disclosed
in
this
report
any
change
in
the
registrant's
internal
control
over
financial
reporting
that
occurred
during
the
registrant's
most
recentfiscal
quarter
(the
registrant's
fourth
fiscal
quarter
in
the
case
of
an
annual
report)
that
has
materially
affected,
or
is
reasonably
likely
to
materiallyaffect,
the
registrant's
internal
control
over
financial
reporting;
and(5)
The
registrant's
other
certifying
officer
and
I
have
disclosed,
based
on
our
most
recent
evaluation
of
internal
control
over
financial
reporting,
to
the
registrant'sauditors
and
the
audit
committee
of
the
registrant's
board
of
directors
(or
persons
performing
the
equivalent
functions):(a)
All
significant
deficiencies
and
material
weaknesses
in
the
design
or
operation
of
internal
control
over
financial
reporting
which
are
reasonablylikely
to
adversely
affect
the
registrant's
ability
to
record,
process,
summarize
and
report
financial
information;
and(b)
Any
fraud,
whether
or
not
material,
that
involves
management
or
other
employees
who
have
a
significant
role
in
the
registrant's
internal
controlover
financial
reporting.Date:
February
25,
2016

/s/
Andrew
T.
Drechsler
Andrew
T.
Drechsler
Chief
Financial
Officer
(Principal
Financial
and
Accounting
Officer)QuickLinks
EXHIBIT
32.1
Section
302
Certification
QuickLinks
--
Click
here
to
rapidly
navigate
through
this
documentEXHIBIT
32.2
CERTIFICATION
PURSUANT
TO
18
USC.
SECTION
1350,
AS
ADOPTED
PURSUANT
TO
SECTION
906
OF
THE
SARBANES-OXLEY
ACT
OF
2003
In
connection
with
this
Annual
Report
on
Form
10-K
of
Insmed
Incorporated
(the
"Company")
for
the
period
ended
December
31,
2015
as
filed
with
the
Securitiesand
Exchange
Commission
on
the
date
hereof
(the
"Report"),
I,
Andrew
T.
Drechsler,
Chief
Financial
Officer
of
the
Company,
certify,
pursuant
to
18
USC.
§
1350,as
adopted
pursuant
to
§
906
of
the
Sarbanes-Oxley
Act
of
2003,
that:(1)

the
Report
fully
complies
with
the
requirements
of
Section
13(a)
or
15(d)
of
the
Securities
Exchange
Act
of
1934,
as
amended;
and(2)

the
information
contained
in
the
Report
fairly
presents,
in
all
material
respects,
the
financial
condition
and
results
of
operations
of
the
Company.February
25,
2016This
certification
accompanies
the
Form
10-K
to
which
it
relates,
is
not
deemed
filed
with
the
Securities
and
Exchange
Commission
and
is
not
to
be
incorporatedby
reference
into
any
filing
of
Insmed
Incorporated
under
the
Securities
Act
of
1933,
as
amended,
or
the
Securities
Exchange
Act
of
1934,
as
amended
(whethermade
before
or
after
the
date
of
the
Form
10-K),
irrespective
of
any
general
incorporation
language
contained
in
such
filing.

/s/
Andrew
T.
Drechsler
Andrew
T.
Drechsler
Chief
Financial
Officer
(Principal
Financial
and
Accounting
Officer)QuickLinks
EXHIBIT
32.2
CERTIFICATION
PURSUANT
TO
18
USC.
SECTION
1350,
AS
ADOPTED
PURSUANT
TO
SECTION
906
OF
THE
SARBANES-OXLEY
ACT
OF
2003