Insmed

INSMED INC

FORM 10-K
(Annual Report)

Filed 02/23/17 for the Period Ending 12/31/16

Address

Telephone
CIK
Symbol
SIC Code
Industry

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

Sector Healthcare

Fiscal Year

12/31

http://www.edgar-online.com
© Copyright 2017, 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,
2016,
was
$603.2
million
(based
on
theclosing
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
registrant
hasassumed
solely
for
this
purpose
that
all
of
its
directors,
executive
officers,
persons
beneficially
owning
10%
or
more
of
the
registrant's
outstanding
common
stockand
certain
other
stockholders
of
the
registrant
may
be
considered
to
be
affiliates.
This
assumption
shall
not
be
deemed
conclusive
as
to
affiliate
status
for
this
orany
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,
2016ORo
TRANSITION
REPORT
PURSUANT
TO
SECTION
13
OR
15(d)
OF
THE
SECURITIES
EXCHANGE
ACT
OF
1934For
the
transition
period
from





































to





































On
February
1,
2017,
there
were
62,023,451
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
2017
Annual
Meeting
of
Shareholders
to
be
filed
with
the
Securities
and
ExchangeCommission
no
later
than
May
1,
2017
and
to
be
delivered
to
shareholders
in
connection
with
the
2017
Annual
Meeting
of
Shareholders,
are
herein
incorporated
byreference
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
and
ARIKAYCE
are
trademarks
of
InsmedIncorporated.
This
Form
10-K
also
contains
trademarks
of
third
parties.
Each
trademark
of
another
company
appearing
in
this
Form
10-K
is
the
property
of
itsowner.2








PAGE
REPORT:
FORM
10-K



CAUTIONARY
NOTE
REGARDING
FORWARD-LOOKING
STATEMENTS

3
PART
I




5


ITEM
1
BUSINESS

5


ITEM
1A
RISK
FACTORS

36


ITEM
1B
UNRESOLVED
STAFF
COMMENTS

62


ITEM
2
PROPERTIES

62


ITEM
3
LEGAL
PROCEEDINGS

63


ITEM
4
MINE
SAFETY
DISCLOSURES

63
PART
II





64


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

64


ITEM
6
SELECTED
FINANCIAL
DATA

65


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

67


ITEM
7A
QUANTITATIVE
AND
QUALITATIVE
DISCLOSURES
ABOUT
MARKET
RISK

82


ITEM
8
FINANCIAL
STATEMENTS
AND
SUPPLEMENTARY
DATA

83


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

83


ITEM
9A
CONTROLS
AND
PROCEDURES

83


ITEM
9B
OTHER
INFORMATION

84
PART
III





84


ITEM
10
DIRECTORS,
EXECUTIVE
OFFICERS
AND
CORPORATE
GOVERNANCE

84


ITEM
11
EXECUTIVE
COMPENSATION

84


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

84


ITEM
13
CERTAIN
RELATIONSHIPS
AND
RELATED
TRANSACTIONS
ANDDIRECTOR
INDEPENDENCE

85


ITEM
14
PRINCIPAL
ACCOUNTING
FEES
AND
SERVICES

85
PART
IV





85


ITEM
15
EXHIBITS
AND
FINANCIAL
STATEMENT
SCHEDULES

85


ITEM
16
FORM
10-K
SUMMARY

85
REPORTS
OF
INDEPENDENT
REGISTERED
PUBLIC
ACCOUNTING
FIRM

87
CONSOLIDATED
FINANCIAL
STATEMENTS

89
EXHIBIT
INDEX

116
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 following:·uncertainties in the research and development of our existing product candidates, including due to delays in patient enrollment or failure of ourpreclinical studies or clinical trials to satisfy pre-established endpoints;·failure to develop, or to license for development, additional product candidates, including a failure to attract experienced third party collaborators;·failure to obtain, or delays in obtaining, regulatory approval from the United States (US) Food and Drug Administration (FDA), the EuropeanMedicines Agency (EMA), and other regulatory authorities for our product candidates or their delivery devices, including due to insufficientclinical data or selection of endpoints that are not satisfactory to regulators;·failure of third parties on which we are dependent to conduct our clinical trials and to manufacture sufficient quantities of our product candidatesfor clinical or commercial needs;·failure to comply with license agreements that are critical for our product development, including our license agreements with PARI Pharma GmbH(PARI) and AstraZeneca AB (AstraZeneca);·lack of safety and efficacy of our product candidates;·inaccuracies in our estimate of the size of the potential markets for our product candidates;·failure to maintain regulatory approval for our product candidates, once received, due to a failure to satisfy post-approval regulatory requirements,such as the need for post-clinical trials;·uncertainties in the rate and degree of market acceptance of product candidates, if approved;·uncertainties in the timing, scope and rate of reimbursement for our product candidates;·competitive developments affecting our product candidates;·inaccurate estimates regarding our future capital requirements, including those necessary to fund milestone payments or royalties owed to thirdparties;·inability to repay our existing indebtedness or to obtain additional financing when needed;·failure to obtain, protect and enforce our patents and other intellectual property;·inability to create an effective direct sales and marketing infrastructure or to partner with a third party that offers such an infrastructure fordistribution of our product candidates;·the cost and potential reputational damage resulting from litigation to which we are a party, including, without limitation, the class action lawsuitpending against us;·failure to comply with the laws and regulations that impact our business;·loss of key personnel; and·changes in laws and regulations applicable to our business, including those related to pricing and reimbursement of our product candidates.














We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. You shouldcarefully read the factors discussed in Item 1A Risk Factors as well as those discussed in Item 7 Management's Discussion and Analysis of Financial Condition3Table
of
Contentsand Results of Operations and elsewhere throughout this Annual Report on Form 10-K for additional discussion of the risks and uncertainties that could cause ouractual results to differ materially from those in our forward-looking statements. We disclaim any obligation, except as specifically required by law, to publiclyupdate or revise any such statements to reflect any change in our expectations or in events after the date of this report.4Table
of
ContentsPART
IITEM
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
adult
patients
with
treatment
refractory
nontuberculous
mycobacteria
(NTM)
lungdisease
caused
by
Mycobacterium avium complex
(MAC),
a
rare
and
often
chronic
infection
that
is
capable
of
causing
irreversible
lung
damage
and
can
be
fatal.Our
earlier
clinical-stage
pipeline
includes
INS1007
and
INS1009.
INS1007
is
a
novel
oral,
reversible
inhibitor
of
dipeptidyl
peptidase
1
(DPP1),
an
enzymeresponsible
for
activating
neutrophil
serine
proteases,
which
are
implicated
in
the
pathology
of
chronic
inflammatory
lung
diseases,
such
as
non-cystic
fibrosis(non-CF)
bronchiectasis.
INS1009
is
an
inhaled
nanoparticle
formulation
of
a
treprostinil
prodrug
that
may
offer
a
differentiated
product
profile
for
rare
pulmonarydisorders,
including
pulmonary
arterial
hypertension
(PAH).













The
table
below
summarizes
the
current
status
and
anticipated
milestones
for
our
principal
product
candidates:
ARIKAYCE,
INS1007,
and
INS1009.5















Product
Candidate/TargetIndications




Status




Next
Expected
Milestones





ARIKAYCE(LAI)
for
adultpatients
withtreatmentrefractory
NTMlung
infectionscaused
by
MAC



•We
are
advancing
the
CONVERT
(or212)
study,
a
randomized,
open-labelglobal
phase
3
clinical
study
ofARIKAYCE
in
adult
patients
withtreatment
refractory
NTM
lung
diseasecaused
by
MAC.
We
have
achieved
ourenrollment
objective
for
the
CONVERTstudy.
•The
US
Food
and
Drug
Administration(FDA)
has
designated
ARIKAYCE
as
anorphan
drug,
a
breakthrough
therapy,and
a
qualified
infectious
diseaseproduct
(QIDP).
•The
European
Commission
has
grantedan
orphan
designation
for
ARIKAYCEfor
the
treatment
of
NTM
lung
disease.


•We
expect
to
report
top-line
results
forthe
Month
6
primary
endpoint
in
thesecond
half
of
2017.
•If
the
CONVERT
study
meets
itsprimary
endpoint,
we
intend
to
seekaccelerated
marketing
approval
forARIKAYCE
in
the
US.
We
intend
toseek
marketing
approvals
forARIKAYCE
in
certain
countries
outsidethe
US,
when
sufficient
data
areavailable.
If
approved,
we
expectARIKAYCE
would
be
the
first
inhaledantibiotic
specifically
indicated
for
thetreatment
of
refractory
NTM
lunginfections
caused
by
MAC
in
NorthAmerica,
Europe,
and
Japan.
•If
approved,
we
plan
to
commercializeARIKAYCE
in
the
US,
certain
countriesin
Europe,
Japan
and
certain
othercountries.

Table
of
Contents













Our
earlier-stage
pipeline
includes
preclinical
compounds
that
we
are
evaluating
in
multiple
rare
diseases
of
unmet
medical
need,
including
methicillin-resistant
staph
aureus
(MRSA)
and
NTM.
To
complement
our
internal
research
and
development,
we
actively
evaluate
in-licensing
and
acquisition
opportunitiesfor
a
broad
range
of
rare
diseases.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
for
thesite-specific
treatment
of
serious
lung
diseases.Our
Strategy













Our
strategy
focuses
on
the
needs
of
patients
with
rare
diseases.
We
are
currently
focused
on
the
development
and
commercialization
of
ARIKAYCE.
Weare
not
aware
of
any
inhaled
products6















Product
Candidate/TargetIndications




Status




Next
Expected
Milestones





INS1007
(oralreversibleinhibitor
ofdipeptidylpeptidase
1)
fornon-CFbronchiectasis



•In
October
2016,
we
entered
into
alicense
agreement
with
AstraZeneca
forthe
exclusive
global
rights
for
thepurpose
of
developing
andcommercializing
AZD7986
(AZ
LicenseAgreement).
We
renamed
the
compoundINS1007
and
plan
to
pursue
an
initialindication
of
non-CF
bronchiectasis.
•We
are
defining
our
regulatory
strategiesto
potentially
secure
US
and
EU
orphandrug
designations
and
expedite
thedevelopment
and
regulatory
review
ofINS1007
through
programs
such
as
USfast
track
designation
and
breakthroughtherapy.


•We
plan
to
submit
an
InvestigationalNew
Drug
(IND)
application
with
theFDA
for
non-CF
bronchiectasis
andsubsequently
commence
a
phase
2clinical
study
of
INS1007.
The
study
isexpected
to
begin
in
2017.



INS1009
(inhalednanoparticleformulation
of
atreprostinilprodrug)
for
rarepulmonarydisorders



•The
results
of
our
phase
1
study
ofINS1009
were
presented
at
the
EuropeanRespiratory
Society
internationalcongress
in
September
2016.
•The
phase
1
study
was
a
randomized,double-blind,
placebo-controlled,
singleascending
dose
study
of
INS1009
forinhalation
to
determine
its
safety,tolerability,
and
pharmacokinetics
inhealthy
volunteers.


•We
believe
INS1009
may
offer
adifferentiated
product
profile
for
rarepulmonary
disorders,
including
PAH,and
we
are
currently
evaluating
ouroptions
to
advance
its
development.

Table
of
Contentsspecifically
indicated
to
treat
refractory
NTM
lung
disease
in
North
America,
Europe
or
Japan.
While
we
believe
that
ARIKAYCE
has
the
potential
to
treat
anumber
of
different
bacterial
infections,
we
are
prioritizing
securing
US
regulatory
approval
of
ARIKAYCE
for
adult
patients
with
refractory
NTM
lung
diseasecaused
by
MAC.
We
are
also
advancing
earlier-stage
programs
in
other
rare
pulmonary
disorders.













Our
current
priorities
are
as
follows:·Advancing
the
CONVERT
study;·Preparing
a
New
Drug
Application
(NDA)
for
submission
to
the
FDA
for
ARIKAYCE,
which
we
plan
to
base
on
the
primary
endpoint
of
theCONVERT
study;·Ensuring
our
product
supply
chain
will
support
the
clinical
development
and,
if
approved,
commercialization
of
ARIKAYCE;·Preparing
for
potential
commercialization
of
ARIKAYCE
in
the
US,
certain
countries
in
Europe,
Japan,
and
certain
other
countries;·Developing
the
core
value
dossier
to
support
the
global
reimbursement
of
ARIKAYCE;·Supporting
further
research
and
lifecycle
management
strategies
for
ARIKAYCE;·Filing
an
IND
with
the
FDA
and
starting
a
phase
2
study
of
INS1007
in
non-CF
bronchiectasis;·Generating
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
liposomal
formulation
of
amikacin
that
is
in
late-stage
clinical
development
foradult
patients
with
treatment
refractory
NTM
lung
disease
caused
by
MAC,
a
rare
and
often
chronic
infection
that
is
capable
of
causing
irreversible
lung
damageand
which
can
be
fatal.
Amikacin
solution
for
parenteral
administration
is
an
established
drug
that
has
activity
against
a
variety
of
NTM;
however,
its
use
is
limitedby
the
need
to
administer
it
intravenously
and
by
toxicity
to
hearing,
balance,
and
kidney
function
(Peloquin
et
al.,
2004).
Unlike
intravenous
amikacin,
ouradvanced
liposome
technology
uses
charge-neutral
liposomes
to
deliver
amikacin
directly
to
the
lung
where
it
is
taken
up
by
the
lung
macrophages
where
the
NTMinfection
resides.
This
prolongs
the
release
of
amikacin
in
the
lungs
while
minimizing
systemic
exposure
thereby
offering
the
potential
for
decreased
systemictoxicities.
ARIKAYCE's
ability
to
deliver
high
levels
of
amikacin
directly
to
the
lung
distinguishes
it
from
intravenous
amikacin.
ARIKAYCE
is
administeredonce-daily,
using
a
portable
aerosol
delivery
system,
via
an
optimized,
investigational
eFlow®
Nebulizer
System
manufactured
by
PARI.













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.
As
a
result,
ARIKAYCE
would
have
12
years
ofpost-approval
marketing
exclusivity
in
the
US,
if
approved.
A
QIDP-designated
product
is
eligible
for
fast
track
status
and
is
often
granted
priority
review
status.
Apriority
review
designation
for
a
drug
means
the
FDA's
goal
is
to
take
action
on
the
NDA
within
six
months
following
the
60-day
filing
date,
as
compared
to10
months
of
the
60-day
filing
date
under
a
standard
review.The CONVERT study













ARIKAYCE
is
currently
being
evaluated
in
a
phase
3
randomized,
open-label
clinical
study
taking
place
in
North
America,
Europe,
Australia,
NewZealand
and
Asia
that
is
designed
to
confirm
the
culture
conversion
results
seen
in
our
phase
2
clinical
trial,
which
we
expect
will
provide
the
basis7Table
of
Contentsfor
submitting
an
NDA
to
the
FDA.
Because
the
highest
response
to
ARIKAYCE
treatment
in
our
phase
2
study
was
observed
in
the
subgroup
of
non-CF
patientswith
NTM
lung
infection
caused
by
MAC,
the
CONVERT
study
is
comprised
of
non-CF
patients
18
years
and
older
with
an
NTM
lung
infection
caused
by
MACthat
is
refractory
to
a
stable
multi-drug
regimen
for
at
least
six
months,
with
the
regimen
either
ongoing
or
interrupted
within
12
months
of
screening.
TheCONVERT
study
excludes
subjects
whose
susceptibility
scores
indicate
that
their
MAC
lung
infection
is
resistant
to
amikacin.
We
achieved
our
enrollmentobjective
for
the
CONVERT
study
in
the
fourth
quarter
of
2016.













After
a
screening
period
of
approximately
10
weeks,
eligible
subjects
were
randomized
2:1
to
once-daily
ARIKAYCE
plus
a
multi-drug
regimen
or
amulti-drug
regimen
without
ARIKAYCE.
The
first
analysis,
after
the
last
patient
has
completed
Month
6,
will
be
based
on
the
primary
efficacy
endpoint
comparingthe
proportion
of
subjects
who
achieve
culture
conversion
(three
consecutive
monthly
negative
sputum
cultures)
by
Month
6
in
the
ARIKAYCE
plus
multi-drugregimen
arm
compared
to
the
arm
in
which
subjects
receive
a
multi-drug
regimen
without
ARIKAYCE.
The
study's
key
secondary
endpoint
in
the
first
analysisincludes
the
change
from
baseline
in
the
six-minute
walk
test.
A
subsequent
analysis
will
examine
off-treatment
assessments
to
evaluate
the
durability
of
the
anti-mycobacterial
effect
on
sputum
culture
at
3
months
off
all
treatment.
The
study
also
includes
a
comprehensive
pharmacokinetic
sub-study
in
Japanese
subjects
inlieu
of
a
separate
local
pharmacokinetic
study
in
Japan.













At
Month
8,
after
all
sputum
culture
results
are
known
up
to
and
including
Month
6,
subjects
will
be
assessed
as
converters
(those
achieving
cultureconversion
by
Month
6)
or
non-converters
for
the
primary
efficacy
endpoint.
All
converters
will
continue
on
their
randomized
treatment
regimen
for
an
additional12
months.
All
converters
will
return
for
off-treatment
follow-up
visits.
A
12-month
off-treatment
study
visit
will
be
the
last
visit
for
the
CONVERT
study.
Allnon-converters,
as
determined
at
the
Month
8
visit,
may
be
eligible
to
enter
a
separate
12-month,
single-arm,
open-label
study
(the
312
study).
The
primaryobjective
of
the
312
study
is
to
evaluate
the
long-term
safety
and
tolerability
of
ARIKAYCE
in
combination
with
a
standard
multi-drug
regimen.
The
secondaryendpoints
of
the
312
study
include
evaluating
the
proportion
of
subjects
achieving
culture
conversion
(three
consecutive
monthly
negative
sputum
cultures)
byMonth
6
and
the
proportion
of
subjects
achieving
culture
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
in
other
countries,
including
Japan's
Pharmaceuticals
and
Medical
Devices
Agency.
If
the
CONVERT
study
meets
the
primary
endpoint
ofculture
conversion
by
Month
6,
we
believe
we
would
be
eligible
to
submit
an
NDA
pursuant
to
21
C.F.R.
Part
314
Subpart
H
(Accelerated
Approval
of
New
Drugsfor
Serious
or
Life-Threatening
Illnesses),
which
permits
the
FDA
to
approve
a
drug
based
on
a
surrogate
or
intermediate
endpoint,
provided
the
sponsor
commitsto
study
the
drug
further
to
verify
and
describe
the
confirmatory
data
of
the
drug's
clinical
benefit.
We
believe
that
efficacy
data
from
the
CONVERT
study
afterMonth
6
in
combination
with
the
durability
data,
if
successful,
will
suffice
to
meet
both
the
accelerated
and
confirmatory
data
requirements.Phase 2 Study (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
M. abscessus that
was
refractory
to
guideline-based
therapy.
In
October
2016,
theresults
from
the
phase
2
study
were
published
online
in
the
American Journal of Respiratory and Critical Care Medicine (Olivier
et
al.
2016).8Table
of
Contents













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
the
same
multi-drug
regimen.
The
study
also
included
28-day
and
12-month
off-ARIKAYCE
follow-upassessments.
Eighty-nine
(89)
subjects
were
randomized
and
dosed
in
the
study.
Of
the
80
subjects
who
completed
the
84-day
double-blind
phase,
78
subjectsentered
the
open-label
phase
and
received
ARIKAYCE
plus
the
same
multi-drug
regimen
for
an
additional
84
days.
Seventy-six
(76)
percent
(59/78)
of
subjectswho
entered
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.
A
shorter
time
to
first
negative
sputum
culture
was
also
observed
with
ARIKAYCE
relative
to
placebo
during
the
double-blind
phase(p=0.013).













The
microbiologic
outcomes
from
the
112
study
were
also
explored
post
hoc
using
a
more
stringent
definition
of
culture
conversion,
which
was
defined
asat
least
three
consecutive
monthly
sputum
samples
that
test
negative
for
NTM,
consistent
with
the
definition
of
culture
conversion
in
the
guidelines
and
in
clinicalpractice.
Twenty-three
(23)
subjects
achieved
at
least
three
consecutive
negative
monthly
sputum
samples
by
the
28-day
follow-up
assessment,
of
which
fourstarted
to
convert
at
baseline
prior
to
administration
of
study
drug.
For
the
other
19
patients
who
achieved
culture
conversion,
17
achieved
culture
conversion
afterreceiving
ARIKAYCE
(10
during
the
double-blind
phase
and
seven
after
entering
the
open-label
phase,
of
which
six
received
ARIKAYCE
for
the
first
time
in
theopen-label
phase).
Two
patients
achieved
culture
conversion
while
receiving
placebo
during
the
double-blind
phase.
The
majority
of
subjects
who
achieved
cultureconversion
(three
consecutive
negative
monthly
sputum
samples)
during
the
double-blind
phase
continued
to
have
negative
cultures
through
the
open-label
andfollow-up
phases.













At
the
end
of
the
double-blind
phase,
the
ARIKAYCE
group
improved
from
baseline
in
mean
distance
walked
in
the
six-minute
walk
test.
At
the
end
ofthe
open-label
phase,
patients
in
the
ARIKAYCE
group
continued
to
improve
in
the
mean
distance
walked
in
the
six-minute
walk
test,
while
the
patients
whopreviously
received
placebo
in
the
double-blind
phase
and
subsequently
received
ARIKAYCE
in
the
open-label
phase
demonstrated
a
reduced
rate
of
decline
frombaseline.













Ninety
(90)
percent
of
patients
in
both
treatment
groups
experienced
at
least
one
treatment-emergent
adverse
event
with
most
events
either
mild
ormoderate
in
severity.
During
the
double-blind
phase
a
greater
percentage
of
patients
treated
with
ARIKAYCE
experienced
dysphonia,
bronchiectasis
exacerbation,cough,
oropharyngeal
pain,
fatigue,
chest
discomfort,
wheezing,
and
infective
pulmonary
exacerbation
of
cystic
fibrosis.
No
clinically
relevant
changes
weredetected
in
laboratory
values
and
vital
signs.Further research and lifecycle management for ARIKAYCE













We
are
exploring
and
supporting
research
and
lifecycle
management
programs
for
ARIKAYCE
beyond
NTM
lung
infections
caused
by
MAC.
Lifecyclemanagement
initiatives
are
company-driven
planning
programs
to
help
us
reach
more
potential
patients
for
ARIKAYCE,
once
sufficient
data
are
generated
andapplicable
regulatory
bodies
approve
ARIKAYCE
for
these
indications.
These
programs
may
include
new
clinical
studies
sponsored
by
us
to
develop
data
for
suchadditional
indications.
We9Table
of
Contentsmay
also
support
investigator-initiated
studies,
which
are
clinical
studies
initiated
and
sponsored
by
physicians
or
research
institutions
with
funding
from
us.Marketing Authorization Application (MAA) for ARIKAYCE













In
the
fourth
quarter
of
2014,
we
filed
an
MAA
with
the
EMA
for
ARIKAYCE
as
a
treatment
for
NTM
lung
disease
in
adult
patients
and
for
cystic
fibrosis(CF)
patients
with
Pseudomonas lung
infections.
The
filing
was
based
on
data
from
our
phase
3
study
in
CF
patients
with
Pseudomonas and
our
phase
2
study
inpatients
with
NTM.
In
February
2015,
the
EMA
validated
our
MAA
as
complete
for
review.
The
EMA
subsequently
requested
additional
information
with
respectto
the
CF
indication
regarding
the
similarity
of
ARIKAYCE
to
another
product
that
has
an
orphan
designation
for
the
same
Pseudomonas indication.
In
the
thirdquarter
of
2015,
the
EMA
adopted
our
request
to
withdraw
the
Pseudomonas indication
from
our
MAA.
In
April
2016,
we
submitted
our
written
responses
to
theEMA's
180-day
list
of
outstanding
issues
(LOI).
In
May
2016,
we
participated
in
an
oral
explanation
meeting
with
the
EMA's
Committee
for
Medicinal
Productsfor
Human
Use
(CHMP)
for
the
NTM
indication
to
address
the
LOI.
After
the
oral
explanation
meeting,
the
CHMP
concluded
that
the
data
submitted
did
notprovide
enough
evidence
to
support
an
approval.
In
June
2016,
we
withdrew
our
MAA.
We
intend
to
resubmit
our
MAA
when
sufficient
clinical
data
are
available.NTM Lung Disease Market Opportunity













NTM
is
a
rare
and
serious
disorder
associated
with
increased
morbidity
and
mortality.
NTM
currently
includes
over
185
species.
MAC
is
the
predominantpathogenic
species
in
NTM
pulmonary
disease
in
the
US,
Japan
and
Europe,
followed
by
M. abscessus ,
both
of
which
we
have
studied
in
our
development
ofARIKAYCE.
Our
CONVERT
trial
is
studying
refractory
NTM
lung
infections
caused
by
MAC
in
adult
patients.
The
prevalence
of
human
disease
attributable
toNTM
has
increased
over
the
past
two
decades,
and
it
is
an
emerging
public
health
concern
worldwide.













A
2015
publication
from
co-authors
from
several
US
government
departments
projected
approximately
180,000
cases
of
NTM
lung
disease
in
the
US
in2014
(Strollo
et
al.,
2015)
(the
Strollo
publication)
and
is
increasing
at
a
rate
of
approximately
8%
per
year
(1997-2007
research
study).
Previously,
based
onmarket
research
in
2012
and
2013
conducted
by
Clarity
Pharma
Research,
we
estimated
that
of
patients
who
had
a
confirmed
diagnosis
of
NTM
lung
disease,
anestimated
10
to
30
percent
were
refractory
to
current
treatments.
In
2013,
we
engaged
Clarity
Pharma
Research
to
perform
a
chart
audit
study
of
NTM
lung
diseasein
Europe
and
Japan,
which
estimated
that
there
are
approximately
20,000
cases
of
pulmonary
disease
attributable
to
NTM
within
the
EU5,
approximately
30,000total
cases
in
the
28
countries
then-comprising
the
European
Union
(EU)
and
nearly
32,000
cases
in
Japan.
Although
population-based
data
on
the
epidemiology
ofNTM
lung
disease
are
limited,
and
determining
the
true
prevalence
and
incidence
of
rare
diseases
can
be
challenging,
studies
worldwide
have
described
anincreasing
prevalence
of
NTM
lung
disease.













Patients
with
NTM
lung
disease
may
experience
a
multitude
of
symptoms
such
as
chronic
cough,
fever,
weight
loss,
lack
of
appetite,
night
sweats,
bloodin
the
sputum,
and
fatigue,
and
frequently
require
lengthy,
and
repeat,
hospital
stays
to
manage
their
condition.
In
a
burden
of
illness
study
that
we
conducted
in
theUS
with
a
major
medical
benefits
provider,
we
concluded
that
patients
with
NTM
lung
infections
are
costly
to
healthcare
plans
and
ATS/IDSA
guideline-basedtreatment
results
in
healthcare
savings
as
opposed
to
suboptimal
treatment.
Other
claims-based
studies
have
shown
the
following:·A
36.1%
increase
in
the
incidence
of
NTM
lung
infections
between
2008
and
2013
in
the
US
Medicare
population
of
a
national
managed
care
healthplan,
with
the
greatest
incidence
increase
(56.3%)
observed
in
members
65
to
74
years
of
age.
Following
diagnosis
with
NTM10Table
of
Contentslung
infections,
over
50%
of
members
were
still
in
the
plan
after
six
years
(Abraham
et
al.,
2015).·Patients
with
NTM
lung
infections
were
using
greater
healthcare
resources
than
their
age
and
gender-matched
controls
in
the
period
preceding
theirinitial
diagnosis.
Ordering
mycobacterial
testing
of
sputum
earlier
may
help
in
preventing
a
misdiagnosis
or
delaying
a
diagnosis
(Holt
et
al.,
2015).·Higher
resource
utilization
and
costs
for
patients
with
NTM
lung
infections
than
their
age
and
gender-matched
controls
both
pre-
and
post-diagnosis.
Patients
who
received
treatment
regimens
conforming
to
the
2007
ATS/IDSA
guidelines
showed
lower
healthcare
resource
utilizationand
total
medical
costs
than
patients
who
received
suboptimal
treatment
(Abraham
et
al.,
2015).













Current
ATS/IDSA
guideline-based
approaches
involve
multi-drug
regimens
that
may
cause
severe
side
effects
and
treatment
can
last
two
years
or
more.We
are
not
aware
of
any
inhaled
antibiotic
treatments
specifically
indicated
for
the
treatment
of
refractory
NTM
lung
disease
in
North
America,
Europe
or
Japan.INS1007













INS1007
is
a
small
molecule,
oral,
reversible
inhibitor
of
DPP1,
which
we
in-licensed
from
AstraZeneca
in
October
2016.
DPP1
is
an
enzyme
responsiblefor
activating
neutrophil
serine
proteases
in
neutrophils
when
they
are
formed
in
the
bone
marrow.
Neutrophils
are
the
most
common
type
of
white
blood
cell
andplay
an
essential
role
in
pathogen
destruction
and
inflammatory
mediation.
Neutrophils,
which
play
a
key
role
in
the
pathologic
inflammatory
process,
contain
threeneutrophil
serine
proteases,
neutrophil
elastase,
proteinase
3,
and
cathepsin
G,
that
have
been
implicated
in
a
variety
of
inflammatory
diseases.
In
chronicinflammatory
lung
diseases,
neutrophils
accumulate
in
the
airways
and
result
in
excessive
active
neutrophil
serine
proteases
that
cause
lung
destruction
andinflammation.
INS1007
may
decrease
the
damaging
effects
of
inflammatory
diseases,
such
as
non-CF
bronchiectasis,
by
inhibiting
DPP1
and
its
activation
ofneutrophil
serine
proteases.Non-CF bronchiectasis













Non-CF
bronchiectasis
is
a
rare,
progressive
pulmonary
disorder
in
which
the
bronchi
become
permanently
dilated
due
to
chronic
inflammation
andinfection.
Symptoms
include
chronic
cough,
excessive
sputum
production,
shortness
of
breath,
and
repeated
respiratory
infections,
which
can
worsen
theunderlying
condition.
There
is
currently
no
cure
for
non-CF
bronchiectasis.
Bronchiectasis
increases
susceptibility
to
NTM
lung
disease,
and
up
to
50
percent
ofpatients
with
bronchiectasis
may
also
have
an
active
NTM
lung
infection.Phase 1 study results













In
a
phase
1
study
of
healthy
volunteers,
INS1007
(previously
AZD7986)
was
well
tolerated
and
demonstrated
inhibition
of
the
activity
of
the
neutrophilserine
protease
neutrophil
elastase
in
a
dose
and
concentration
dependent
manner.
In
preclinical
studies,
it
was
shown
to
reversibly
inhibit
DPP1
and
the
activationof
neutrophil
serine
proteases
within
maturing
neutrophils.













We
plan
to
submit
an
IND
application
with
the
FDA
for
INS1007
in
non-CF
bronchiectasis,
and
after
it
becomes
effective,
to
commence
a
phase
2
clinicalstudy
of
INS1007
in
that
indication.
We
expect
the
study
to
begin
in
2017.
In
addition,
we
are
evaluating
INS1007
in
other
potential
indications.11Table
of
ContentsINS1009













INS1009
is
an
investigational
sustained-release
inhaled
treprostinil
prodrug
nanoparticle
formulation
that
has
the
potential
to
address
certain
of
the
currentlimitations
of
existing
prostanoid
therapies.
We
believe
that
INS1009
prolongs
duration
of
effect
and
may
provide
PAH
patients
with
greater
consistency
inpulmonary
arterial
pressure
reduction
over
time.
Current
inhaled
prostanoid
therapies
must
be
dosed
four
to
nine
times
per
day
for
the
treatment
of
PAH.
Reducingdose
frequency
has
the
potential
to
ease
patient
burden
and
improve
compliance.
Additionally,
we
believe
that
INS1009
may
be
associated
with
fewer
side
effects,including
elevated
heart
rate,
low
blood
pressure,
and
severity
and/or
frequency
of
cough,
associated
with
high
initial
drug
levels
and
local
upper
airway
exposurewhen
using
current
inhaled
prostanoid
therapies.
We
believe
INS1009
may
offer
a
differentiated
product
profile
for
rare
pulmonary
disorders,
including
PAH,
andwe
are
currently
evaluating
our
options
to
advance
its
development.Phase 1 study results













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.













We
have
completed
a
phase
1
study
of
INS1009.
The
phase
1
study
was
a
randomized,
double-blind,
placebo-controlled
single
ascending
dose
study
ofINS1009
for
inhalation
to
determine
its
safety,
tolerability,
and
pharmacokinetics
in
healthy
volunteers.
Twenty-four
(24)
subjects
were
enrolled
and
receivedINS1009
with
cohorts
of
eight
subjects
receiving
doses
of
85
micrograms
(mcg),
170
mcg,
340
mcg
or
placebo.
Participants
in
the
first
cohort
(8
patients)
receiveda
single
dose
of
open
label
treprostinil
(Tyvaso)
at
54
mcg
24
hours
prior
to
receiving
INS1009
at
85
mcg.
The
85
mcg
dose
of
INS1009
provides
an
equivalentamount
of
treprostinil
on
a
molar
basis
as
the
54
mcg
dose
of
Tyvaso.
The
peak
serum
concentration
was
approximately
90%
lower
for
treprostinil
after
INS1009administration
compared
with
Tyvaso,
which
could
indicate
a
reduced
future
adverse
event
(AE)
profile.
The
pharmacokinetic
characteristics
also
supported
once-or
twice-daily
dosing.
The
longer
half-life
of
treprostinil
for
INS1009
was
likely
due
to
a
sustained
pulmonary
release.
The
AE
profile
was
consistent
with
otherinhaled
prostanoids.
These
data
were
presented
at
the
European
Respiratory
Society
international
congress
in
September
2016.Research
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
candidates
forclinical
study
(primarily
related
to
activities
at
contract
manufacturing
organizations
(CMOs)
that
manufacture
ARIKAYCE
for
our
use),
the
cost
of
conductingclinical
studies
(primarily
related
to
activities
at
contract
research
organizations
(CROs)
that
conduct
and
manage
clinical
trials
on
our
behalf),
and
the
cost
ofconducting
preclinical
and
research
activities.
In
addition,
research
and
development
expenses
include
payments
to
third
parties
for
the
license
rights
to
products
indevelopment
(prior
to
marketing
approval).
We
incurred
approximately
$122.7
million,
$74.3
million,
and
$56.3
million
for
research
and
development
expenses
in2016,
2015
and
2014,
respectively.12Table
of
ContentsCorporate
Development













In
October
2016,
we
exclusively
licensed
global
rights
to
INS1007
from
AstraZeneca
and
we
plan
to
continue
to
develop,
acquire,
in
license
or
co-promotecomplementary
products
that
address
rare
diseases.
We
are
focused
broadly
on
rare
disease
therapeutics
and
prioritizing
those
areas
that
best
align
with
our
corecompetencies
and
current
therapeutic
focus
in
the
area
of
rare
pulmonary
diseases.Manufacturing













We
do
not
have
any
in-house
manufacturing
capability
other
than
for
small-scale
pre-clinical
development
programs,
and
depend
on
a
small
number
ofthird-party
manufacturers
and
suppliers
for
the
manufacture
of
our
product
candidates
for
use
in
clinical
trials.
We
plan
to
rely
on
third-party
manufacturers
andsuppliers
for
the
commercial
manufacture
and
supply
of
any
product
candidates
that
we
may
commercialize.
ARIKAYCE
is
manufactured
by
TherapureBiopharma
Inc.
(Therapure)
in
Canada
at
a
200
liter
scale
and
by
Ajinimoto
Althea,
Inc.
(Althea)
in
the
US
at
a
50
liter
scale.
For
additional
information
about
ouragreements
with
Therapure
and
Althea,
see
License and Other Agreements—ARIKAYCE-Related Agreements .
We
have
also
identified
certain
second
sourcesuppliers
for
our
supply
chain
and
plan
to
enter
into
supply
and
quality
agreements
with
certain
of
these
second
source
suppliers
in
preparation
forcommercialization
of
ARIKAYCE.
In
addition,
we
have
entered
into
a
commercialization
agreement
with
PARI,
the
manufacturer
of
our
drug
delivery
nebulizerfor
ARIKAYCE,
to
address
our
commercial
supply
needs
(Commercialization
Agreement).













We
expect
to
enter
into
a
commercial
supply
agreement
with
AstraZeneca
related
to
certain
short-term
production
needs
for
INS1007.
We
expect
ourfuture
requirements
for
INS1007,
beyond
phase
2,
will
be
manufactured
by
a
CMO.













We
currently
produce
INS1009
and
plan
to
utilize
third
parties
to
manufacture
INS1009
at
a
larger
scale
and
to
manufacture
the
nebulizer
used
to
deliverthe
drug.Intellectual
Property













We
own
or
license
rights
to
more
than
350
issued
patents
and
pending
patent
applications
in
the
US
and
in
foreign
countries,
including
more
than
175issued
patents
and
pending
patent
applications
related
to
ARIKAYCE.
Our
success
depends
in
large
part
on
our
ability
to
maintain
proprietary
protectionsurrounding
our
product
candidates,
technology
and
know-how;
to
operate
without
infringing
the
proprietary
rights
of
others;
and
to
prevent
others
from
infringingour
proprietary
rights.
We
actively
seek
patent
protection
by
filing
patent
applications,
including
on
inventions
that
are
important
to
the
development
of
ourbusiness
in
the
US,
Europe,
Japan,
Canada,
and
selected
other
foreign
markets
that
we
consider
key
for
our
product
candidates.
These
international
marketsgenerally
include
Australia,
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.













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,13Table
of
Contentswe
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.ARIKAYCE Patents and Trade Secrets













Of
the
patents
and
applications
related
to
ARIKAYCE,
there
are
seven
issued
US
patents
that
cover
the
ARIKAYCE
composition
and
its
use
in
treatingNTM.
Upon
ARIKAYCE
approval
for
the
treatment
of
NTM,
these
patents
may
be
eligible
for
listing
in
the
FDA
Orange
Book.
These
patents
and
their
expirationdates
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)·US
Patent
No.
9,566,234
(expires
January
18,
2034)













In
addition,
we
own
five
pending
US
patent
applications
that
cover
the
ARIKAYCE
composition
and
its
use
in
treating
NTM.
Upon
ARIKAYCE
approvalfor
the
treatment
of
refractory
NTM
lung
disease
caused
by
MAC,
these
patent
applications,
if
issued
as
patents,
may
be
eligible
for
listing
in
the
FDA
OrangeBook.
We
also
own
a
pending
US
application
that
covers
methods
for
making
ARIKAYCE.













Four
patents
have
been
granted
by
the
European
Patent
Office
(EPO)
(European
Patent
Nos.
1581236,
1909759,
1962805
and
2363114)
that
coverARIKAYCE
and
its
use
in
treating
NTM.
In
addition,
we
have
five
applications
pending
before
the
EPO
that
cover
ARIKAYCE
and
its
use
in
treating
NTM
lungdisease.
We
also
have
a
pending
European
application
that
covers
methods
of
making
ARIKAYCE.
More
than
40
patents
have
also
been
issued
in
other
majorforeign
markets,
e.g.,
Japan,
China,
Korea,
Australia,
and
India,
that
cover
ARIKAYCE
and/or
methods
of
using
ARIKAYCE
for
treating
various
pulmonarydisorders,
including
NTM
lung
disease.
More
than
60
foreign
patent
applications
are
pending
that
cover
the
ARIKAYCE
composition
and/or
its
use
in
treatingvarious
pulmonary
disorders,
including
NTM
lung
disease.
We
anticipate
that
in
the
US,
we
will
have
potential
patent
coverage
for
ARIKAYCE
and
its
use
intreating
NTM
lung
disease,
through
January
18,
2034,
which
does
not
include
a
potential
six
months
of
pediatric
exclusivity.













Currently,
our
European
Patent
No.
2363114
is
being
opposed
by
Generics
(UK)
Ltd,
a
wholly-owned
subsidiary
of
Mylan
NV.
The
European
PatentOffice
Opposition
Division
(EPOOD)
issued
a
preliminary
non-binding
opinion
regarding
the
opposition
on
January
2,
2017,
and
an
oral
hearing
regarding
theopposition
has
been
scheduled
for
November
15,
2017.
The
preliminary
non-binding
opinion
did
not
address
every
issue
in
the
opposition,
but
was
favorable
to
usregarding
the
issues
that
were
addressed.
European
Patent
No.
1909759,
owned
by
us,
was
previously
opposed
by
Generics
(UK)
Ltd.
An
oral
hearing
was
held
onOctober
19,
2015
during
which,
we
submitted
amended
claims.
The
EPOOD
maintained
the
patent
as
amended.
This
decision
is
currently
under
appeal
by
Generics(UK)
Ltd.14Table
of
Contents













Through
our
agreements
with
PARI,
we
have
license
rights
to
US
and
foreign
patents
and
applications
that
cover
the
eFlow
Nebulizer
System
medicaldevice
through
January
18,
2034.
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.
All
ARIKAYCE
patent
applications
have
earliest
effective
filing
dates
falling
after
June
8,
1995.
The
basic
term
offoreign
utility
patents
may
vary
in
accordance
with
provisions
of
applicable
local
law,
but
is
typically
20
years
from
the
earliest
effective
filing
date.INS1007 Patents













Through
our
agreement
with
AstraZeneca,
we
have
licensed
U.S.
Patent
No.
9,522,894,
which
has
claims
directed
to
INS1007
and
expires
January
21,2035
(not
taking
into
account
any
potential
patent
term
extension).
Counterpart
patent
applications
are
pending
throughout
the
world
and
a
continuation
applicationis
pending
in
the
US.INS1009 Patents













We
own
US
Patent
No.
9,255,064
(expires
October
24,
2034),
which
is
the
first
patent
to
issue
with
claims
covering
hexadecyl-treprostinil,
the
treprostinilcomponent
of
INS1009.
Other
treprostinil
prodrugs
are
also
claimed
and
described
in
the
patent.
We
also
own
US
Patent
No.
9,469,600,
which
has
claims
directedto
INS1009
and
other
treprostinil
prodrug
nanoparticle
formulations
and
expires
October
24,
2034.
Counterpart
patent
applications
to
US
Patent
Nos.
9,255,064
and9,469,600
are
pending
in
Europe,
Japan
and
other
foreign
jurisdictions.













We
own
pending
patent
applications
that
if
granted,
would
cover
methods
for
using
treprostinil
prodrugs
and
nanoparticle
formulations
comprising
thesame,
including
INS1009
in
treating
patients
with
PAH
and
other
diseases,
as
well
as
methods
for
manufacturing
such
treprostinil
prodrugs
and
nanoparticleformulations.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
andARIKAYCE.
At
present,
we
have
received
either
a
registration
or
a
notice
of
allowance
for
the
INSMED
and
ARIKAYCE
marks
from
the
US
Patent
andTrademark
Office.
We
have
also
received
foreign
notices
of
allowance
or
registrations
for
the
INSMED
and
ARIKAYCE
marks,
among
others.
The
EMA
hasindicated
it
has
no
objection
to
our
use
of
the
name
ARIKAYCE,
and
the
FDA
has
conditionally
approved
our
use
of
the
name
ARIKAYCE
as
the
proposed
tradename
for
our
LAI
product
candidate.
Our
ability
to
obtain
and
maintain
trademark
registrations
will
in
certain
geographical
locations
depend
on
making
use
of
themark
in
commerce
on
or
in
connection
with
our
products
and
approval
of
the
trademarks
for
our
products
by
regulatory
authorities
in
each
country.15Table
of
ContentsLicense
and
Other
AgreementsARIKAYCE-related
Agreements













We
currently
rely,
and
will
continue
to
rely,
on
agreements
with
a
number
of
third
parties
in
connection
with
the
development
and
manufacture
ofARIKAYCE.PARI Pharma GmbH













We
have
a
licensing
agreement
with
PARI
for
use
of
the
optimized
eFlow
Nebulizer
System
for
delivery
of
ARIKAYCE
in
treating
patients
with
NTMlung
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.
We
currently
have
rights
to
use
the
nebulizers
in
clinicaltrials.
The
eFlow
Nebulizer
System
is
labeled
as
investigational
for
use
in
our
clinical
trials
in
the
US,
Japan,
Canada
and
Australia
and
must
receive
regulatoryapproval
before
we
can
market
ARIKAYCE;
the
eFlow
Nebulizer
System
has
been
approved
for
use
in
the
EU.













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.
Termination
ofthe
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
do
not
meet
certainmilestones
contained
in
the
licensing
agreement
such
as
obtaining
marketing
approval
or
achieving
the
first
commercial
sale
of
ARIKAYCE.













Under
the
licensing
agreement,
we
paid
PARI
an
upfront
license
fee
and
PARI
is
entitled
to
receive
milestone
payments
up
to
an
aggregate
of
€4.3
millioneither
in
cash,
qualified
stock
or
a
combination
of
both,
at
PARI's
discretion,
based
on
achievement
of
certain
future
milestone
events
including
first
acceptance
ofMAA
submission
(or
equivalent)
in
the
US
of
ARIKAYCE
and
the
device,
first
receipt
of
marketing
approval
in
the
US
for
ARIKAYCE
and
the
device,
and
firstreceipt
of
marketing
approval
in
a
major
EU
country
for
ARIKAYCE
and
the
device.
In
addition,
PARI
is
entitled
to
receive
royalty
payments
in
the
mid-singledigits
on
the
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
specifiedobligations.
PARI
has
the
right
to
terminate
this
license
agreement
upon
written
notice
for
our
uncured
material
breach,
if
we
are
the
subject
of
specifiedbankruptcy
or
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
setforth
in
the
agreement,
or
if
we
fail
to
reach
certain
specified
milestones.16Table
of
Contents













In
July
2014,
we
entered
into
the
Commercialization
Agreement
with
PARI
for
the
manufacture
and
supply
of
eFlow
nebulizer
systems
and
relatedaccessories
(the
Device)
as
optimized
for
use
with
our
proprietary
LAI.
The
Commercialization
Agreement
envisages
that
PARI
will
undertake
the
manufacturingof
the
Device
except
in
the
case
of
certain
defined
supply
failures,
when
we
will
have
the
right
to
make
the
Device
and
have
it
made
by
third
parties
(but
not
certainthird
parties
deemed
under
the
Commercialization
Agreement
to
compete
with
PARI).
The
Commercialization
Agreement
has
an
initial
term
of
fifteen
years
fromthe
first
commercial
sale
of
ARIKAYCE
pursuant
to
the
licensing
agreement.
The
term
of
the
Commercialization
Agreement
may
be
extended
by
us
for
anadditional
five
years
by
providing
written
notice
to
PARI
at
least
one
year
prior
to
the
expiration
of
the
initial
term.Althea













In
September
2015,
we
entered
into
a
Commercial
Fill/Finish
Services
Agreement
(the
Fill/Finish
Agreement)
with
Althea
to
produce,
on
a
non-exclusivebasis,
ARIKAYCE
in
finished
dosage
form
at
a
50-liter
scale.
We
are
obligated
to
pay
a
minimum
of
$2.7
million
for
the
batches
of
ARIKAYCE
produced
byAlthea
each
calendar
year
during
the
term
of
the
Fill/Finish
Agreement.
The
Fill/Finish
Agreement
became
effective
as
of
January
1,
2015,
and
had
an
initial
termthat
was
to
end
on
December
31,
2017.
In
2016,
we
signed
an
extension
of
the
Fill/Finish
Agreement
through
December
31,
2019,
and
it
may
be
extended
foradditional
two-year
periods
upon
mutual
written
agreement
of
us
and
Althea
at
least
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
to
us.Therapure













In
February
2014,
we
entered
into
a
Contract
Manufacturing
Agreement
with
Therapure
for
the
manufacture
of
ARIKAYCE
at
a
200-liter
scale.
Pursuantto
the
agreement,
we
collaborated
with
Therapure
to
construct
a
production
area
for
the
manufacture
of
ARIKAYCE
in
Therapure's
existing
manufacturing
facilityin
Mississauga,
Ontario,
Canada.
Therapure
manufactures
ARIKAYCE
for
us
on
a
non-exclusive
basis.
The
agreement
has
an
initial
term
of
five
years
from
thefirst
date
on
which
Therapure
delivers
ARIKAYCE
to
us
after
we
obtain
permits
related
to
the
manufacture
of
ARIKAYCE,
and
will
renew
automatically
forsuccessive
periods
of
two
years
each,
unless
terminated
by
either
party
by
providing
the
required
two
years'
prior
written
notice
to
the
other
party.
Notwithstandingthe
foregoing,
the
parties
have
rights
and
obligations
under
the
agreement
prior
to
the
commencement
of
the
initial
term.
Under
the
agreement,
we
are
obligated
topay
certain
minimum
amounts
for
the
batches
of
ARIKAYCE
produced
each
calendar
year.
The
agreement
allows
for
termination
by
either
party
upon
theoccurrence
of
certain
events,
including
(i)
the
material
breach
by
the
other
party
of
any
provision
of
the
agreement
or
the
quality
agreement
expected
to
be
enteredinto
between
the
parties,
and
(ii)
the
default
or
bankruptcy
of
the
other
party.
In
addition,
we
may
terminate
the
agreement
for
any
reason
upon
no
fewer
than180
days'
advance
notice.SynteractHCR, Inc. (Synteract)













We
entered
into
a
services
agreement
with
Synteract
pursuant
to
which
we
retained
Synteract
to
perform
implementation
and
management
services
inconnection
with
the
212
study.
We
may17Table
of
Contentsterminate
the
services
agreement
or
any
work
order
for
any
reason
and
without
cause
with
30
days'
written
notice.
Either
party
may
terminate
the
agreement
in
theevent
of
a
material
breach
or,
bankruptcy
petition
by
the
other
party
or,
if
any
approval
from
a
regulatory
authority
is
revoked,
suspended
or
expires
withoutrenewal.
We
anticipate
that
aggregate
costs
relating
to
all
work
orders
for
the
212
study
will
be
approximately
$45
million
over
the
period
of
the
study.
In
April2015,
we
entered
into
a
work
order
with
Synteract
to
perform
implementation
and
management
services
for
the
312
study.
We
anticipate
that
aggregate
costsrelating
to
all
work
orders
for
the
312
study
will
be
approximately
$25
million
over
the
period
of
the
study.Cystic Fibrosis Foundation Therapeutics, Inc. (CFFT)













In
2004
and
2009,
we
entered
into
research
funding
agreements
with
CFFT
whereby
we
received
$1.7
million
and
$2.2
million
for
each
respectiveagreement
in
research
funding
for
the
development
of
ARIKAYCE.
If
ARIKAYCE
becomes
an
approved
product
for
CF
in
the
US,
we
will
owe
a
payment
toCFFT
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
salesmilestones
are
met
within
five
years
of
the
drug
commercialization,
we
would
owe
an
additional
payment
of
$3.9
million.
Under
the
2009
agreement,
in
the
eventwe
terminate
development
of
ARIKAYCE
for
CF
prior
to
first
commercial
sale
of
a
product
containing
ARIKAYCE
for
a
period
of
360
continuous
days,
and
suchtermination
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
developARIKAYCE
and
(2)
will
have
the
right
to
receive
from
us
an
exclusive
(subject
to
certain
exceptions),
royalty-free,
sub-licensable
license
to
use,
develop,
sell
andcommercialize
a
product
containing
ARIKAYCE
in
the
treatment
of
certain
infections
in
CF
patients
or
pulmonary
disease.INS1007-related
License
Agreement













In
October
2016,
we
entered
into
the
AZ
License
Agreement,
pursuant
to
which
AstraZeneca
granted
us
exclusive
global
rights
for
the
purpose
ofdeveloping
and
commercializing
AZD7986
(renamed
INS1007).
In
consideration
of
the
licenses
and
other
rights
granted
by
AstraZeneca,
we
made
an
upfrontpayment
of
$30.0
million
in
late
October
2016.
We
are
obligated
to
make
a
series
of
contingent
milestone
payments
to
AstraZeneca
totaling
up
to
an
additional$85.0
million
upon
the
achievement
of
clinical
development
and
regulatory
filing
milestones.
If
we
elect
to
develop
INS1007
for
a
second
indication,
we
will
beobligated
to
make
an
additional
series
of
contingent
milestone
payments
totaling
up
to
$42.5
million.
We
are
not
obligated
to
make
any
additional
milestonepayments
for
any
additional
indications.
In
addition,
we
have
agreed
to
pay
AstraZeneca
tiered
royalties
ranging
from
a
high
single-digit
to
mid-teen
on
net
sales
ofany
approved
product
based
on
INS1007
and
one
additional
payment
of
$35.0
million
upon
the
first
achievement
of
$1
billion
in
annual
net
sales.
The
AZ
LicenseAgreement
provides
AstraZeneca
with
the
option
to
negotiate
a
future
agreement
with
us
for
commercialization
of
INS1007
in
chronic
obstructive
pulmonarydisease
or
asthma.
If
we
fail
to
comply
with
our
obligations
under
our
agreements
with
AstraZeneca
(including,
among
other
things,
if
we
fail
to
use
commerciallyreasonable
efforts
to
develop
and
commercialize
a
product
based
on
INS1007,
or
we
are
subject
to
a
bankruptcy
or
insolvency),
AstraZeneca
would
have
the
rightto
terminate
the
license.INS1009-related
Agreement













In
November
2015,
we
entered
into
an
agreement
with
Respironics
Inc.,
a
division
of
Philips
(Respironics),
for
the
clinical
supply
of
nebulizers
to
be
usedin
the
development
of
INS1009
for
PAH.
The
agreement
calls
for
payments
to
Respironics
upon
the
achievement
of
certain
clinical
milestones18Table
of
Contentsrelating
to
the
development
of
INS1009,
aggregating
to
$7.6
million.
In
addition,
we
will
be
required
to
pay
a
royalty
on
net
sales
of
the
product,
if
any.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.
Additionally,
there
currentlyare,
and
in
the
future
there
may
be,
already-approved
products
for
certain
of
the
indications
for
which
we
are
developing,
or
in
the
future
may
choose
to
develop,our
product
candidates.
For
instance,
PAH
is
a
competitive
indication
with
established
products,
including
other
formulations
of
treprostinil.NTM
lung
disease
competitive
overview













In
the
NTM
lung
disease
market,
our
major
competitors
include
pharmaceutical
and
biotechnology
companies
that
have
approved
therapies
or
therapies
indevelopment
for
the
treatment
of
chronic
lung
infections.
While
some
companies
have
expressed
interest
in
studying
their
products
for
NTM,
we
are
not
aware
ofany
companies
that
are
currently
conducting
clinical
trials
for
the
treatment
of
refractory
NTM
lung
disease
or
of
any
approved
inhaled
therapies
specificallyindicated
for
refractory
NTM
lung
infections
in
North
America,
Europe
or
Japan,
but,
as
previously
described,
there
is
an
ATS/IDSA-recommended
treatmentregimen
that
is
utilized.Government
RegulationOrphan
Drug
DesignationUnited States













Under
the
Orphan
Drug
Act
(ODA),
the
FDA
may
grant
orphan
drug
designation
to
drugs
intended
to
treat
a
rare
disease
or
condition
(for
the
purposes
ofthe
ODA,
"rare"
is
generally
defined
as
a
disease
or
condition
for
which
the
drug
is
intended
affects
fewer
than
200,000
people
in
the
US)
if
it
meets
certain
criteriaspecified
by
the
ODA
and
FDA.
After
the
FDA
grants
orphan
drug
designation,
the
drug
and
the
specific
intended
use(s)
for
which
it
has
obtained
designation
arelisted
by
the
FDA
in
a
publicly-accessible
database.
The
FDA
has
designated
ARIKAYCE
as
an
orphan
drug
for
treatment
of
(i)
infections
caused
by
NTM,(ii)
bronchiectasis
in
patients
with
Pseudomonas aeruginosa
or
other
susceptible
microbial
pathogens
and
(iii)
bronchopulmonary
Pseudomonas aeruginosainfections
in
CF
patients.













Orphan
drug
designation
qualifies
the
sponsor
for
various
development
incentives
of
the
ODA,
including
tax
credits
for
qualified
clinical
testing,
and
awaiver
of
the
NDA
user
fee
(unless
the
application
seeks
approval
for
an
indication
not
included
in
the
orphan
drug
designation).
Orphan
drug
designation
alsoaffords
the
company
a
period
of
marketing
exclusivity
upon
approval
of
the
drug.
Specifically,
the
first
NDA
applicant
with
an
FDA
orphan
drug
designation
for
aparticular
active19Table
of
Contentsmoiety
to
receive
FDA
approval
of
the
drug
for
an
indication
covered
by
the
orphan
designation
is
entitled
to
a
seven-year
exclusive
marketing
period,
oftenreferred
to
as
orphan
drug
exclusivity,
in
the
US
for
that
drug
and
indication.
A
product
that
has
several
separate
orphan
designations
may
have
several
separatemarket
exclusivities.
During
the
orphan
drug
exclusivity
period,
the
FDA
may
not
approve
any
other
applications
to
market
the
same
drug
for
the
same
indicationfor
use,
except
in
limited
circumstances,
such
as
a
showing
of
clinical
superiority
to
the
product
that
has
orphan
drug
exclusivity.
Orphan
drug
exclusivity
does
notprevent
the
FDA
from
approving
a
different
drug
for
the
same
disease
or
condition
or
the
same
drug
for
a
different
disease
or
condition,
and
it
does
not
alter
thetiming
or
scope
of
the
regulatory
review
and
approval
process;
the
sponsor
must
still
submit
evidence
from
clinical
and
non-clinical
studies
sufficient
todemonstrate
the
safety
and
effectiveness
of
the
drug.European 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.
The
EuropeanCommission
has
granted
an
orphan
designation
for
ARIKAYCE
for
the
treatment
of
NTM
lung
disease.













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
application
forauthorization,
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
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.
The
exclusivity
period
may
alsobe
reduced
to
six
years
if
the
designation
criteria
are
no
longer
met,
including
where
it
is
shown
that
the
product
is
sufficiently
profitable
not
to
justify
maintenanceof
market
exclusivity.
Each
orphan
designation
carries
the
potential
for
one
market
exclusivity
for
all
the
therapeutic
indications
that
are
covered
by
thedesignation.
A
product
that
has
several
separate
orphan
designations
may
have
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
status.
In
addition,
Member
States
may
provide
national
benefits
to
orphan
drugs,
such
as
earlyaccess
to
the
reimbursement
procedure
or
exemption
from
any
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
benefits
from
orphan
exclusivity,
fee
reductions
orexemptions,
and
national
benefits.20Table
of
ContentsDrug
ApprovalUnited States













In
the
US,
pharmaceutical
products
are
subject
to
extensive
regulation
by
the
FDA
and
other
government
bodies.
The
FDCA
and
other
federal
and
statestatutes
and
regulations
govern,
among
other
things,
the
research,
development,
testing,
manufacture,
storage,
recordkeeping,
approval,
labeling,
promotion
andmarketing,
distribution,
post-approval
monitoring
and
reporting,
sampling
and
import
and
export
of
pharmaceutical
products.
Failure
to
comply
with
applicable
USrequirements
at
any
time
during
product
development,
approval,
or
after
approval
may
subject
a
company
to
a
variety
of
administrative
or
judicial
sanctions,
suchas
imposition
of
clinical
holds,
FDA
refusal
to
file
or
approve
new
drug
applications,
warning
letters,
product
recalls,
product
seizures,
total
or
partial
suspension
ofproduction
or
distribution,
injunctions,
fines,
refusals
of
government
contracts,
restitution,
disgorgement,
civil
penalties,
and
criminal
prosecution.
The
descriptionbelow
summarizes
the
current
approval
process
in
the
US
for
our
product
candidates.Preclinical
Studies













Preclinical
studies
include
laboratory
evaluation
of
product
chemistry,
formulation
and
toxicity,
and
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
the
FDA's
good
laboratory
practices
(GLP)
regulations
and
the
US
Department
of
Agriculture's
regulations
implementing
the
Animal
Welfare
Act.
AnIND
sponsor
must
submit
the
results
of
the
preclinical
tests,
together
with
manufacturing
information,
analytical
data,
any
available
clinical
data
or
literature,
and
aproposed
clinical
trial
protocol,
among
other
things,
to
the
FDA
as
part
of
an
IND
application.
Certain
non-clinical
tests,
such
as
animal
tests
of
reproductivetoxicity
and
carcinogenicity,
may
continue
even
after
the
IND
is
submitted.
An
IND
automatically
becomes
effective
30
days
after
receipt
by
the
FDA,
unlessbefore
that
time
the
FDA
raises
concerns
or
questions
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
resolve
any
outstanding
concerns
before
the
clinical
trial
can
begin.
As
a
result,
submission
of
an
IND
may
not
result
in
theFDA
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
(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
includedas
a
submission
to
the
IND,
and
the
FDA
must
be
notified
of
subsequent
protocol
amendments,
including
new
protocols.
In
addition,
the
protocol
must
be
reviewedand
approved
by
an
institutional
review
board
(IRB),
and
all
study
subjects
must
provide
informed
consent.
Typically,
before
any
clinical
trial,
each
institutionparticipating
in
the
trial
will
require
review
of
the
protocol
before
the
trial
commences
at
that
institution.
Progress
reports
detailing
the
results
of
the
clinical
trialsmust
be
submitted
at
least
annually
to
the
FDA
and
there
are
additional,
more
frequent
reporting
requirements
for
certain
adverse
events.21Table
of
Contents













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
the
FDA
requirements
or
presentsan
unacceptable
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
of
subjects
(typically
up
to
several
hundred)
with
the
target
condition
to
further
evaluate
its
safety
and
gather
preliminary
evidence
of
efficacy.
Phase
3studies
typically
last
between
several
months
and
two
years.
In
Phase
3,
the
drug
is
given
to
a
large
group
of
subjects
with
the
target
disease
or
condition
(typicallyseveral
hundred
to
several
thousand),
often
at
multiple
geographical
sites,
to
confirm
its
effectiveness,
monitor
side
effects,
and
collect
data
to
support
drugapproval.
Only
a
small
percentage
of
investigational
drugs
complete
all
three
phases
of
development
and
obtain
marketing
approval.NDA













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
is
a
large
submission
that
must
include,
among
other
things,
the
results
of
all
preclinical,
clinical
and
othertesting
and
a
compilation
of
data
relating
to
the
product's
pharmacology,
chemistry,
manufacture,
and
controls.
The
application
also
includes
representativesamples,
copies
of
all
drug
product
labeling,
patent
information,
and
a
financial
certification
or
disclosure
statement.
The
cost
of
preparing
and
submitting
an
NDAis
substantial.
Under
federal
law,
the
submission
of
most
NDAs
is
additionally
subject
to
a
substantial
application
user
fee,
and
annual
product
and
establishmentuser
fees
also
apply,
which
typically
increase
annually.













The
FDA
has
60
days
from
its
receipt
of
an
NDA
to
determine
whether
the
application
is
accepted
for
filing
based
on
the
FDA's
threshold
determinationthat
it
is
sufficiently
complete
to
permit
substantive
review.
Once
the
submission
is
accepted
for
filing,
the
FDA
begins
a
substantive
review.
The
FDA
may
referapplications
for
novel
drug
products
or
drug
products
that
present
difficult
questions
of
safety
or
efficacy
to
an
advisory
committee,
typically
a
panel
that
includesoutside
clinicians
and
other
experts,
for
review,
evaluation
and
a
recommendation
as
to
whether
the
application
should
be
approved.
The
FDA
is
not
bound
by
therecommendation
of
an
advisory
committee,
but
it
generally
follows
such
recommendations.













Before
approving
an
NDA,
the
FDA
will
typically
inspect
one
or
more
clinical
sites
to
assure
compliance
with
GCP.
Additionally,
the
FDA
will
typicallyinspect
the
facility
or
the
facilities
at
which
the
drug
is
manufactured.
FDA
will
not
approve
the
product
unless
compliance
with
current
good
manufacturingpractices
(cGMP)
is
satisfactory
and
the
NDA
contains
data
that
provide
substantial
evidence,
generally
consisting
of
adequate
and
well-controlled
clinicalinvestigations,
that
the
drug
is
safe
and
effective
in
the
indication(s)
studied.
The
FDA
also
reviews
the
proposed
labeling
submitted
with
the
NDA
and
typicallyrequires
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
for22Table
of
Contentsthe
FDA
to
reconsider
the
application.
If
and
when
those
deficiencies
have
been
addressed
to
the
FDA's
satisfaction
in
a
resubmission
of
the
NDA,
the
FDA
willissue
an
approval
letter.
An
approval
letter,
which
may
specify
post
approval
requirements,
authorizes
commercial
marketing
of
the
drug
for
the
approvedindication
or
indications
and
the
other
conditions
of
use
set
out
in
the
approved
prescribing
information.
Once
granted,
product
approvals
may
be
withdrawn
ifcompliance
with
regulatory
standards
is
not
maintained
or
problems
are
identified
following
initial
marketing.
Under
priority
review
status,
the
FDA
has
180
daysfrom
the
date
of
an
NDA
filing
to
issue
either
an
approval
letter
or
a
complete
response
letter,
unless
the
review
period
is
adjusted
by
mutual
agreement
betweenthe
FDA
and
the
applicant
or
as
a
result
of
the
applicant
submitting
a
major
amendment.
In
practice,
however,
the
performance
goals
established
pursuant
to
thePrescription
Drug
User
Fee
Act
have
effectively
extended
the
initial
review
cycle
beyond
180
days.
The
FDA's
current
performance
goals
call
for
the
FDA
tocomplete
review
of
90
percent
of
standard
(non-priority)
NDAs
within
10
months
of
filing
and
within
six
months
of
filing
for
priority
NDAs
(two
additionalmonths
are
added
to
standard
and
priority
NDAs
for
a
new
molecular
entity
(NME)
after
the
FDA
receives
an
application
for
the
agency
to
determine
whether
theapplication
may
be
filed).













As
a
condition
of
NDA
approval,
the
FDA
may
require
substantial
post-approval
testing,
known
as
phase
4
studies,
to
be
conducted
in
order
to
gatheradditional
information
on
the
drug's
effect
in
various
populations
and
any
side
effects
associated
with
long-term
use.
Beyond
routine
post
marketing
safetysurveillance,
the
FDA
may
require
specific
additional
surveillance
to
monitor
the
drug's
safety
or
efficacy
and
may
impose
other
conditions,
including
labelingrestrictions
that
can
materially
affect
the
potential
market
and
profitability
of
the
drug.
As
a
condition
of
approval,
or
after
approval,
the
FDA
also
may
requiresubmission
of
a
risk
evaluation
and
mitigation
strategy
(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
distribution
methods,
patient
registries,
or
other
riskminimization
tools.
Further
post-approval
requirements
are
discussed
below.Expedited
Review
and
Approval
of
Eligible
Drugs













Accelerated
approval
regulations
allow
certain
drugs
for
serious
or
life-threatening
conditions
to
be
approved
on
the
basis
of
surrogate
endpoints(i.e.,
clinical
endpoints
other
than
survival
or
irreversible
morbidity)
or
intermediate
clinical
endpoints,
which
can
substantially
reduce
time
to
approval.
Asurrogate
endpoint
used
for
accelerated
approval
is
a
marker—a
laboratory
measurement,
radiographic
image,
physical
sign
or
other
measure
that
is
thought
topredict
clinical
benefit,
but
is
not
itself
a
measure
of
clinical
benefit.
Likewise,
an
intermediate
clinical
endpoint
is
a
measure
of
a
therapeutic
effect
that
isconsidered
reasonably
likely
to
predict
the
clinical
benefit
of
a
drug,
such
as
an
effect
on
irreversible
morbidity
and
mortality.
The
FDA
bases
its
decision
onwhether
to
accept
the
proposed
surrogate
or
intermediate
clinical
endpoint
on
the
scientific
support
for
that
endpoint.













As
a
condition
of
approval,
the
FDA
may
require
certain
adequate
and
well-controlled
post-marketing
clinical
studies
to
verify
and
describe
clinicalbenefit
of
the
product,
and
may
impose
restrictions
on
distribution
to
assure
safe
use.
Post
marketing
studies
would
usually
be
required
to
be
studies
alreadyunderway
at
the
time
of
the
accelerated
approval.
In
addition,
promotional
materials
for
an
accelerated
approval
drug
to
be
used
in
the
first
120
days
post-approvalmust
be
submitted
to
the
FDA
prior
to
approval,
and
materials
to
be
used
after
that
120-day
period
must
be
submitted
30
days
prior
to
first
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
under
streamlined
procedures
in
accordance
with
the
agency's
regulations.
The
agency
may
also
withdraw
approval
of
a
drug
if,among
other
things,
the
promotional23Table
of
Contentsmaterials
for
the
product
are
false
or
misleading,
or
other
evidence
demonstrates
that
the
drug
product
is
not
shown
to
be
safe
or
effective
under
its
conditions
ofuse.













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.
The
FDA
must
respond
to
requests
for
fast
track
designation
within
60
days
of
receipt
of
the
request.
If
granted,
the
applicant
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.
The
FDA
may
withdraw
fast
track
designation
if
the
agency
determines
that
thedesignation
is
no
longer
supported
by
data
emerging
in
the
clinical
trial
process.













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.
The
FDA
must
respond
within
60
days
of
receipt
of
therequest.
If
granted,
the
review
time
is
shortened
from
the
standard
10
months
to
6
months,
with
two
additional
months
in
the
case
of
a
NME.













Breakthrough
therapy
designation
applies
to
a
drug
that
is
intended
to
treat
a
serious
condition
and
for
which
preliminary
clinical
evidence
indicates
thatthe
drug
may
demonstrate
substantial
improvement
on
a
clinically
significant
endpoint(s)
over
available
therapies.
It
can
be
requested
with
the
IND
submission
andideally
no
later
than
the
end-of-phase
2
meeting.
The
FDA
must
respond
within
60
days
of
receipt
of
the
request.
If
granted,
the
applicant
receives
intensiveguidance
on
efficient
drug
development,
intensive
involvement
of
senior
managers
and
experienced
review
and
regulatory
health
project
management
staff
in
aproactive,
collaborative,
cross-disciplinary
review,
rolling
review,
and
other
actions
to
expedite
review.
Designation
may
be
rescinded
if
the
product
no
longermeets
the
criteria
for
breakthrough
therapy
designation.
ARIKAYCE
has
been
designated
as
a
breakthrough
therapy.













Drugs
that
are
designated
as
QIDPs
are
eligible
for
priority
review
and
fast
track
designation,
and
well
as
market
exclusivity.
A
product
is
eligible
if
it
isan
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
pathogens
listed
by
the
FDA.
A
drug
sponsor
may
request
thatthe
FDA
designate
its
product
as
a
QIDP
at
any
time
prior
to
NDA
submission.
The
FDA
must
make
a
QIDP
determination
within
60
days
of
receiving
thedesignation
request.
ARIKAYCE
has
been
designated
as
a
QIDP
for
NTM
lung
disease.24Table
of
ContentsExclusivities













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
the
FDA
determines
that
the
applicant
did
not
pursue
approval
withdue
diligence.
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
anNDA
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
US
is
granted
to
the
first
applicant
to
gain
approval
of
an
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
the
FDA
in
anyother
application
submitted
under
section
505(b)
of
the
Act.
During
the
exclusivity
period
for
a
NCE,
the
FDA
may
not
accept
for
review
an
abbreviated
new
drugapplication,
or
ANDA,
or
a
505(b)(2)
NDA
submitted
by
another
company
that
references
(i.e.,
relies
on
FDA
prior
approval
of)
the
NCE
drug.
However,
anANDA
or
505(b)(2)
NDA
may
be
submitted
after
four
years
if
it
contains
a
certification
of
patent
invalidity
or
non-infringement
with
respect
to
a
patent
listed
withthe
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
the
FDA
may
approve
applications
for
other
versions
of
the
original,
unmodified
drugproduct.
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,
the
FDA
may
accept
and
review
ANDAs
or
505(b)(2)
NDAs
during
the
three-year
period.













These
exclusivities
also
do
not
preclude
FDA
approval
of
a
505(b)(1)
application
for
a
duplicate
version
of
the
drug
during
the
period
of
exclusivity,provided
that
the
applicant
conducts
or
obtains
a
right
of
reference
to
all
of
the
preclinical
studies
and
adequate
and
well-controlled
clinical
trials
necessary
todemonstrate
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.
The
exclusivitydoes
not
prevent
the
FDA
from
approving
a
subsequent
application
for
a
change
to
the
QIDP-designated
drug
that
results
in
a
new
indication,
route
ofadministration,
dosing,
schedule,
dosage
form,
delivery
system,
delivery
device
or
strength.
For
example,
an
approved
product
with
orphan
designation
and
QIDPdesignation,
like
ARIKAYCE,
would
have
12
years
of
marketing
exclusivity.25Table
of
ContentsMedical
Device
Regulation













Medical
devices,
such
as
the
eFlow
Nebulizer
System,
may
receive
marketing
authorization
from
the
FDA
as
stand-alone
devices,
or
in
some
cases,
mayreceive
marketing
authorization
as
part
of
a
combination
product.
In
either
case,
the
ultimate
product
will
need
to
satisfy
FDA
requirements.
The
primary
pathwaysfor
marketing
authorization
for
devices
in
the
US
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
permits
medical
devices
intended
for
investigational
use
to
be
shipped
to
clinical
sites
if
such
devices
comply
with
prescribed
procedures
andconditions.
Devices
intended
for
investigational
use
may
be
exempted
from
premarket
notification
and
premarket
approval
requirements
when
shipped
for
use
inclinical
trials,
but
they
must
bear
a
label
indicating
that
they
are
for
investigational
use.
This
labeling
may
not
represent
that
the
device
is
safe
or
effective
for
thepurposes
for
which
it
is
being
investigated.Combination
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
a
nebulizer,
such
asARIKAYCE
or
INS1009,
is
an
example
of
a
combination
drug/device
product.













The
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,
the
FDA
must
assign
a
lead
Center
to
review
the
product,
based
on
the
combination
product's
primary
mode
ofaction
(PMOA),
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.
In
addition,
the
Office
of
Combination
Products
(OCP)
oversees
the
alignment
of
feedback
regarding
reviews
involving
multipleCenters
and
ensures
that
each
Center
completes
its
review
and
provides
results
to
the
lead
Center
in
a
timely
manner.













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.
Depending
on
the
type
of
combination
product,
approval
or
clearance
could
be
obtained
through
submission
of
asingle
marketing
application
or
through
separate
applications
for
the
individual
constituent
parts
(i.e.,
an
NDA
for
the
drug
and
a
premarket
notification
for
thedevice).
The
FDCA
directs
the
FDA
to
conduct
a
review
of
a
combination
product
under
a
single
marketing
application
whenever
appropriate.
This
application
issubmitted
to
the
Center
selected
to
be
the
lead
evaluator.
The
agency
has
the
discretion
to
require26Table
of
Contentsseparate
applications
to
more
than
one
Center,
and
applicants
may
choose
to
submit
separate
applications
for
constituent
parts
of
a
combination
(unless
the
FDAdetermines
one
application
is
necessary).
One
reason
to
submit
multiple
applications
is
if
the
applicant
wishes
to
receive
some
benefit
that
accrues
only
fromapproval
under
a
particular
type
of
application,
like
new
drug
product
exclusivity.
If
multiple
applications
are
submitted,
each
application
is
generally
reviewed
bythe
Center
with
authority
over
each
application
type.
For
combination
products
that
contain
an
approved
constituent
part
(such
as
a
drug-device
combinationproduct
in
which
the
device
has
previously
received
clearance),
the
FDA
may
require
that
the
application(s)
include
only
such
information
as
is
necessary
to
meetthe
standard
for
clearance
or
approval,
taking
into
account
any
prior
finding
of
safety
or
effectiveness
for
the
approved
constituent
part.













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.
Under
a
recently
revised
regulation
in
the
US,
sponsorsare
obligated
to
disclose
the
results
of
these
trials
after
completion
(prior
to
the
new
rulemaking,
disclosure
of
results
was
only
required
if
the
product
or
newindication
was
approved
by
the
FDA).
In
the
US,
disclosure
of
the
results
of
these
trials
can
be
delayed
for
up
to
two
years
if
the
sponsor
is
seeking
approval
of
theproduct
or
a
new
indication.
Competitors
may
use
this
publicly-available
information
to
gain
knowledge
regarding
the
progress
of
development
programs.Other
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
cGMP,
as
well
as
registration,
listing,
and
inspection.
There
also
are
continuing,
annual
user
fee
requirements
for
any
marketedproducts
and
the
establishments
at
which
such
products
are
manufactured,
as
well
as
new
application
fees
for
supplemental
applications
with
clinical
data.













The
FDA
regulates
the
content
and
format
of
prescription
drug
labeling,
advertising,
and
promotion,
including
direct-to-consumer
advertising
andpromotional
Internet
communications.
FDA
also
establishes
parameters
for
permissible
non-promotional
communications
between
industry
and
the
medicalcommunity,
including
industry-supported
scientific
and
educational
activities.
The
FDA
and
other
agencies
actively
enforce
the
laws
and
regulations
prohibitingthe
promotion
for
uses
not
consistent
with
the
approved
labeling,
and
a
company
that
is
found
to
have
improperly
promoted
off-label
uses
or
otherwise
not
to
havemet
applicable
promotion
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
an
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
the
FDA
and
certain
state
agencies,
and
are
subject
to
periodic
unannounced
inspections
by
the
FDA27Table
of
Contentsduring
which
the
FDA
inspects
manufacturing
facilities
to
assess
compliance
with
cGMPs.
Changes
to
the
manufacturing
process
are
strictly
regulated
and
oftenrequire
prior
FDA
approval
before
being
implemented.
FDA
regulations
also
require
investigation
and
correction
of
any
deviations
from
cGMP
and
imposereporting
and
documentation
requirements
upon
the
sponsor
and
any
third-party
manufacturers
that
the
sponsor
may
decide
to
use.
Accordingly,
manufacturersmust
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.













As
previously
mentioned,
the
FDA
also
may
require
phase
4
studies
and
may
require
a
REMS,
which
could
restrict
the
distribution
or
use
of
the
product.













In
addition,
the
distribution
of
prescription
pharmaceutical
products
is
subject
to
the
Prescription
Drug
Marketing
Act
(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.European 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
state
as
a
national
marketing
authorization.
As
a
general
rule,
only
one
marketing
authorization
may
be
granted
for
drugs
approved
through
the
centralizedprocedure
and
the
marketing
authorization
is
also
relevant
for
the
EEA
countries.













Under
the
centralized
procedure,
the
CHMP
is
required
to
adopt
an
opinion
on
a
valid
application
within
210
days,
excluding
clock
stops
when
additionalinformation
is
to
be
provided
by
the
applicant
in
response
to
questions.
More
specifically,
on
day
120
of
the
procedure,
once
the
CHMP
has
received
thepreliminary
assessment
reports
and
opinions
from
the
Rapporteur
and
Co-Rapporteur
designated
by
the
CHMP,
it
adopts
a
list
of
questions,
which
are
sent
to
theapplicant
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's
replies,
revise
the
assessment
report
as
necessary
and
may
prepare
a
list
of
outstanding
issues.
The
revisedassessment
report
and
list
of
outstanding
issues
are
sent
to
the
applicant
together
with
the
CHMP's
recommendation
by
day
180
of
the
procedure.
Applicants
thenhave
one
month
to
respond
to
the
CHMP
(and
can
request
a
one
or
two-month
extension).
The
Rapporteur
and
Co-Rapporteur
assess
the
applicant's
replies,
submitthem
for
discussion
to
the
CHMP
and
prepare
a
final
assessment
report.
Once
its
scientific
evaluation
is
completed,
the
CHMP
gives
a
favorable
or
unfavorableopinion
as
to28Table
of
Contentswhether
to
grant
the
marketing
authorization.
After
the
adoption
of
the
CHMP
opinion,
a
decision
must
be
adopted
by
the
European
Commission,
after
consultingthe
Standing
Committee
of
the
Member
States.
The
European
Commission
prepares
a
draft
decision
and
circulates
it
to
the
member
states;
if
the
draft
decisiondiffers
from
the
CHMP
opinion,
the
Commission
must
provide
detailed
explanations.
The
European
Commission
adopts
a
decision
within
15
days
of
the
end
of
theconsultation
procedure.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,
theyare
unable
to
provide
comprehensive
data
on
the
efficacy
and
safety
of
the
drug
under
normal
conditions
of
use.
Such
marketing
authorizations
are
subject
tocertain
conditions,
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
indefiniteperiod
of
time,
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.29Table
of
ContentsExclusivities













If
an
approved
drug
contains
a
new
active
substance,
it
is
protected
by
data
exclusivity
for
eight
years
from
the
notification
of
the
Commission
decisiongranting
the
marketing
authorization
and
then
by
marketing
protection
for
an
additional
two
or
three
years.
Overall,
the
drug
is
protected
for
ten
or
eleven
yearsagainst
generic
competition,
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
generic
drugs.
The
period
of
marketing
protection
is
normally
two
years
butmay
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
it
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
procedures.
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
EU
and
thus
prevents
EU
Member
States
from
restricting
sales
and
marketing
of
the30Table
of
Contentsdevices,
unless
such
measure
is
justified
on
the
basis
of
evidence
of
non-compliance.
Ultimately,
the
manufacturer
is
responsible
for
the
conformity
of
the
devicewith
the
essential
requirements
and
for
the
affixing
of
the
CE
mark.
The
eFlow
Nebulizer
System
is
CE
marked
by
PARI
in
the
EU.













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.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
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
take
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.Pediatric
InformationUnited States













Under
the
Pediatric
Research
Equity
Act
of
2003
(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
the
FDA's
"written
request"
for
pediatric
research.
Sponsors
may
seek
to
negotiate
the
terms
of
a
written
request
during
drug
development.
Whilethe31Table
of
Contentssponsor
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.European Union













In
the
EU,
new
drugs
(i.e.
drugs
containing
a
new
active
substance)
for
adults,
must
also
be
tested
in
children.
This
mandatory
pediatric
testing
is
carriedout
through
the
implementation
of
a
pediatric
investigation
plan,
or
PIP,
which
is
proposed
by
the
applicant
and
approved
by
the
EMA.
A
PIP
contains
all
thestudies
to
be
conducted
and
measures
to
be
taken
in
order
to
support
the
approval
of
the
new
drug,
including
pediatric
pharmaceutical
forms,
in
all
subsets
of
thepediatric
population.
Validation
of
the
marketing
authorization
application
for
adults
is
subject
to
the
implementation
of
the
PIP,
subject
to
one
or
more
waivers
ordeferrals.
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
the
approval
of
the
drug
inadults,
and,
on
another
hand,
the
EMA
may
grant
either
a
product-specific
waiver
for
the
(adult)
disease/condition
or
one
or
more
pediatric
subsets
or
a
class
waiverfor
the
disease/condition.
PIPs
are
subject
to
modifications
from
time
to
time,
when
they
no
longer
are
workable.
Prior
to
obtaining
the
validation
of
a
marketingauthorization
application
for
adults,
the
applicant
has
to
demonstrate
compliance
with
the
PIP
at
the
time
of
submission
of
the
application.
In
the
case
of
orphanmedicinal
products,
completion
of
an
approved
PIP
can
result
in
an
extension
of
the
market
exclusivity
period
from
ten
to
twelve
years.Regulation
Outside
the
US,
Europe
and
Japan













In
addition
to
regulations
in
the
US,
Europe
and
Japan,
we
will
be
subject
to
a
variety
of
regulations
in
other
jurisdictions
governing
clinical
studies
of
ourcandidate
products,
including
medical
devices.
Regardless
of
whether
we
obtain
FDA
approval
for
a
product
candidate,
we
must
obtain
approval
of
the
productcandidate
(including
a
medical
device)
by
the
comparable
regulatory
authorities
of
countries
outside
the
US
before
we
can
commence
clinical
studies
or
marketingof
the
product
candidate
in
those
countries.
The
requirements
for
approval
and
the
approval
process
vary
from
country
to
country,
and
the
time
may
be
longer
orshorter
than
that
required
for
FDA
approval.
Under
certain
harmonized
medical
device
approval/clearance
regulations
outside
the
US,
reference
to
US
clearancepermits
fast-tracking
of
market
clearance.
Other
regions
are
harmonized
with
EU
standards,
and
therefore
recognize
the
CE
mark
as
a
declaration
of
conformity
toapplicable
standards.
Furthermore,
we
must
obtain
any
required
pricing
approvals
in
addition
to
regulatory
approval
prior
to
launching
a
product
candidate
in
theapproving
country.Health Canada













Health
Canada
(HC)
is
the
government
agency
that
provides
regulatory
and
marketing
approval
for
drugs
and
therapeutic
products
in
Canada.
The
ongoingLegislative
and
Regulatory
Modernization
(LRM)
is
the
most
significant
drug
regulatory
system
reform
in
Canada
in
more
than
50
years
and
is
expected
tooverhaul
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).32Table
of
ContentsAustralia













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
appropriateregulatory
controls
for
the
manufacturing
processes,
and
monitoring
approved
products
with
a
comprehensive
adverse
event
reporting
program.
The
TGA
requiresthat
a
marketing
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.Early
Access
Programs
in
the
European
Union













Under
EU
law,
member
states
are
authorized
to
adopt
national
legal
regimes
for
the
supply
or
use
of
non-authorized
drugs
in
case
of
therapeutic
needs.The
most
common
national
legal
regimes
are
compassionate
use
programs
and
named
patient
sales,
but
other
national
regimes
for
early
access
may
be
available,depending
on
the
member
state.
For
drugs
that
must
be
approved
through
the
centralized
procedure,
such
as
orphan
drugs,
compassionate
use
programs
are
alsoregulated
at
the
European
level.
ARIKAYCE
is
available
in
certain
European
countries
under
early
access
programs.













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
long
time
required
for
both
their
approval
and
effective
marketing.













Doctors
can
also
obtain
certain
drugs
for
their
patients
by
requesting
a
supply
of
a
drug
from
the
manufacturer
or
a
pharmacist
located
in
another
country,to
be
used
for
an
individual
patient
under
their
direct
responsibility.
This
is
often
called
treatment
on
a
'named-patient
basis'
and
is
distinct
from
compassionate
useprograms.
In
this
case,
the
doctor
responsible
for
the
treatment
will
either
contact
the
manufacturer
directly
or
issue
a
prescription
to
be
fulfilled
by
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
provides33Table
of
Contentshealth
care
benefits
to
senior
citizens
and
certain
disabled
and
chronically
ill
persons.
Medicaid
is
the
need-based
federal
and
state
program
administered
by
thestates
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
by
federal
statutes
to
receive
drugs
at
prices
that
are
significantly
below
the
price
we
charge
to
commercial
pharmaceutical
distributors.
These
programsand
contracts
are
highly
regulated
and
will
impose
restrictions
on
our
business.
Failure
to
comply
with
these
regulations
and
restrictions
could
result
in
a
loss
of
ourability
to
continue
receiving
reimbursement
for
our
drugs
once
approved.
We
may
also
be
subject
to
penalties
for
improper
marketing,
including
off-labelmarketing,
of
our
drugs
that
are
reimbursed
by
Medicare
and
Medicaid.













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.
The
newly
elected
US
President
has
indicated
an
interest
in
having
the
federal
government
negotiate
drug
prices
with
pharmaceutical
manufacturers.













Different
pricing
and
reimbursement
schemes
exist
in
other
countries.
In
the
EU,
governments
influence
the
price
of
drugs
through
their
pricing
andreimbursement
rules
and
control
of
national
health
care
systems
that
fund
a
large
part
of
the
cost
of
those
products
to
patients.
Some
jurisdictions
operate
positiveand
negative
list
systems
under
which
drugs
may
only
be
marketed
once
a
reimbursement
price
has
been
agreed.
To
obtain
reimbursement
or
pricing
approval,some
of
these
countries
may
require
the
completion
of
clinical
trials
that
compare
the
cost-effectiveness
of
a
particular
drug
candidate
to
currently
availabletherapies.
Other
member
states
allow
companies
to
fix
their
own
prices
for
drugs,
but
monitor
and
control
company
profits.
The
downward
pressure
on
health
carecosts
in
general,
particularly
prescription
drugs,
has
become
very
intense.
As
a
result,
increasingly
high
barriers
are
being
erected
to
the
entry
of
new
drugs.
Inaddition,
in
some
countries,
cross-border
imports
from
low-priced
markets
exert
a
commercial
pressure
on
pricing
within
a
country.
There
can
be
no
assurance
thatany
country
that
has
price
controls
or
reimbursement
limitations
for
drugs
will
allow
favorable
reimbursement
and
pricing
arrangements
for
any
of
our
products.Fraud
and
Abuse
and
Other
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,
and
a
broad
range
of
fraudand
abuse
and
transparency
laws
are
relevant
to
pharmaceutical
companies.
US
federal
and
state
healthcare
laws
and
regulations
in
these
areas
include
thefollowing:·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;34Table
of
Contents·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
EU,
which
have
been
set
out
by
laws
or
industry
codes
of
conducts.Employees













As
of
December
31,
2016,
we
had
a
total
of
161
employees,
including
86
in
research,
clinical,
regulatory,
medical
affairs
and
quality
assurance;
17
intechnical
operations,
manufacturing
and
quality
control;
42
in
general
and
administrative
functions;
and
16
in
pre-commercial
activities.
We
had
140
employees
inthe
US
and
21
employees
in
Europe.
We
anticipate
increasing
our
headcount
in
2017.













None
of
our
employees
are
represented
by
a
labor
union
and
we
believe
that
our
relations
with
our
employees
are
generally
good.
Generally,
ouremployees
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
(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
(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
after
filing,
or
furnishingthem
to,
the
SEC.
The
public
can
also
obtain
materials
that
we
file
with
the
SEC
through
the
SEC's
website
at
http://www.sec.gov
or
at
the
SEC's
Public
ReferenceRoom
at
100
F
Street,
NE,
Washington,
DC
20549.
Information
on
the
operation
of
the
Public
Reference
Room
is
available
by
calling
the
SEC
at
1-800-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, and the value of an investment in our common stock.In addition, 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,
financial
condition,
results
of
operations,
thevalue
of
our
common
stock
and
our
prospects
may
be
materially
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.
In
addition,even
if
we
believe
our
clinical
trials
demonstrate
promising
results,
regulators
may
decline
to
grant
regulatory
approval—conditional
or
otherwise.
Further,
even
ifwe
subsequently
obtain
conditional
approval,
it
may
be
withdrawn
under
certain
circumstances
and
confirmatory
clinical
studies
may
be
required
and
could
fail
todemonstrate
sufficient
safety
and
efficacy
to
obtain
full
approval.













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).
CONVERT
study
subjects
who
are
non-converters
by
Month
6
may
be
eligible
to
enter
a
separate
12-month
open-label
study
(the
312
study).
Theprimary
objective
of
the
312
study
is
to
evaluate
the
long-term
safety
and
tolerability
of
ARIKAYCE
in
combination
with
a
standard
multi-drug
regimen.
Theclinical
trial
process
may
fail
to
demonstrate
with
statistical
significance
that
our
drug
product
candidates
are
effective
for
the
proposed
indications,
or
may
fail
toestablish
adequate
safety.
Such
failure
may
cause
us
to
abandon
a
drug
product
candidate
and
may
delay
development
of
other
drug
product
candidates.













In
the
fourth
quarter
of
2014,
we
filed
an
MAA
with
the
EMA
for
ARIKAYCE
as
a
treatment
for
NTM
lung
disease
in
adult
patients
and
for
cystic
fibrosis(CF)
patients
with
Pseudomonas lung36Table
of
Contentsinfections.
The
filing
was
based
on
data
from
our
phase
3
study
in
CF
patients
with
Pseudomonas and
our
phase
2
study
in
patients
with
NTM.
In
February
2015,the
EMA
validated
our
MAA
as
complete
for
review.
The
EMA
subsequently
requested
additional
information
with
respect
to
the
CF
indication
regarding
thesimilarity
of
ARIKAYCE
to
another
product
that
has
an
orphan
designation
for
the
same
Pseudomonas indication.
In
the
third
quarter
of
2015,
the
EMA
adoptedour
request
to
withdraw
the
Pseudomonas indication
from
our
MAA.
In
April
2016,
we
submitted
our
written
responses
to
the
EMA's
180-day
list
of
outstandingissues
(LOI).
In
May
2016,
we
participated
in
an
oral
explanation
meeting
with
the
CHMP
for
the
NTM
indication
to
address
the
LOI.
After
the
oral
explanationmeeting,
the
CHMP
concluded
that
the
data
submitted
did
not
provide
enough
evidence
to
support
an
approval.
In
June
2016,
we
withdrew
our
MAA.
We
intend
toresubmit
our
MAA
when
sufficient
clinical
data
are
available.













We
do
not
expect
ARIKAYCE
or
any
other
drug
candidates
we
may
develop
to
be
commercially
available
in
any
market
until
we
receive
requisiteapproval
from
the
FDA,
EMA
or
equivalent
regulatory
agency.
The
failure
to
obtain
such
approvals
may
materially
adversely
affect
our
business,
financialcondition,
results
of
operations,
the
value
of
our
common
stock
and
our
prospects.We
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,
and
the
failure
to
do
so
will
prevent
us
from
commercializing
our
products,
which
would
materially
adversely
affect
our
business,
financial
condition,results
of
operations,
prospects
and
the
value
of
our
common
stock.
The
regulatory
review
and
approval
processes
in
both
the
US
and
Europe
require
evaluation
ofpreclinical
studies
and
clinical
studies,
as
well
as
the
evaluation
of
our
manufacturing
process.
These
processes
are
complex,
lengthy,
expensive,
resource
intensiveand
uncertain.
Securing
regulatory
approval
to
market
our
products
requires
the
submission
of
much
more
extensive
preclinical
and
clinical
data,
manufacturinginformation
regarding
the
process
and
facility,
scientific
data
characterizing
our
product
and
other
supporting
data
to
the
regulatory
authorities
in
order
to
establishits
safety
and
effectiveness.
This
process
also
is
complex,
lengthy,
expensive,
resource
intensive
and
uncertain.
We
have
limited
experience
in
submitting
andpursuing
applications
necessary
to
gain
these
regulatory
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.
Resolving
such
delays
could
force
us
or
third
parties
to
incur
significantcosts,
could
limit
our
allowed
activities
or
the
allowed
activities
of
third
parties,
could
diminish
any
competitive
advantages
that
we
or
our
third
parties
may
attainor
could
adversely
affect
our
ability
to
receive
royalties,
any
of
which
could
materially
adversely
affect
our
business,
financial
condition,
results
of
operations
orprospects.
Even
with
these
designations,
there
is
no
guarantee
we
will
receive
approval
for
ARIKAYCE
on
a
timely
basis,
or
at
all.
Similarly,
we
are
defining
ourregulatory
strategies
to
potentially
secure
US
and
EU
orphan
drug
designations
and
expedite
the
development
and
regulatory
review
of
INS1007
through
programssuch
as
US
fast
track
designation
and
breakthrough
therapy,
but
we
may
be
unable
to
obtain
them.
In
addition,
although
we
believe
that
INS1009
could
be
eligiblefor
approval
under
Section
505(b)(2)
of
the
FDCA,
and
thus
could
rely
at
least
in
part
on
studies
not37Table
of
Contentsconducted
by
or
for
us
and
for
which
we
do
not
have
a
right
of
reference,
we
may
not
obtain
approval
from
the
FDA
to
use
this
pathway.













Approval
by
the
FDA
or
the
EMA
does
not
ensure
approval
by
the
regulatory
authorities
of
other
countries.
To
market
our
products
outside
of
the
US
andEurope
we,
and
potentially
our
third
party
providers,
must
comply
with
numerous
and
varying
regulatory
requirements
of
other
countries.
The
approval
proceduresvary
among
countries
and
can
involve
additional
product
testing
and
administrative
review
periods.
The
time
required
to
obtain
approval
in
these
other
territoriesmight
differ
from
that
required
to
obtain
FDA
or
EMA
approval.
In
addition,
we
may
be
subject
to
fines,
suspension
or
withdrawal
of
marketing
approvals,
productrecalls,
seizure
of
products,
operating
restrictions
(including
with
respect
to
our
target
market)
and
criminal
prosecution
if
we
fail
to
comply
with
applicable
US
andforeign
regulatory
requirements.We
have
not
completed
the
research
and
development
stage
of
ARIKAYCE
or
any
other
product
candidates.
If
we
are
unable
to
successfully
commercializeARIKAYCE
or
any
other
products,
it
may
materially
adversely
affect
our
business,
financial
condition,
results
of
operations,
the
value
of
our
common
stockand
our
prospects.













Our
long-term
viability
and
growth
depend
on
the
successful
commercialization
of
ARIKAYCE
and
potentially
other
product
candidates.
Pharmaceuticalproduct
development
is
an
expensive,
high
risk,
lengthy,
complicated,
resource
intensive
process.
In
order
to
conduct
the
development
programs
for
our
products,we
must,
among
other
things,
be
able
to
successfully:·Identify
potential
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
GLP
and
GCP
and
disease-specific
expectations
of
the
FDA
and
otherregulatory
bodies;·Select
and
recruit
clinical
investigators
and
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
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
associated
with
thatproduct.
In
addition,
potential
products
that
appear
promising
at
early
stages
of
development
may
fail
for
a
number
of
reasons,
including
the
possibility
that
theproducts
may
require
significant
additional
testing
or
turn
out
to
be
unsafe,
ineffective,
too
difficult
or
expensive
to
develop
or
manufacture,
too
difficult
toadminister
or
unstable,
or
regulators
may
require
additional
testing
to
substantiate
our
claims.
If
we
do
not
proceed
with
the
development
of
our
ARIKAYCEprogram
in
the
NTM
lung
disease
or
CF
indications,
certain
organizations
that
provided
funding
to
us
for
such
developmental
efforts
may
elect
to
proceed
with
thedevelopment
of
these
indications.
Even
if
we
are
successful
in
obtaining
regulatory
approval
for
our
product
candidates,
including
ARIKAYCE,
we
may
not
obtainlabeling
that
permits
us
to
market
them
with
commercially
viable
claims
because
the
final
wording
of
the
approved
indication
may
be
restrictive,
or
the
availableclinical
data
may
not
provide
adequate
comparative
data
with
other
products.
Failure
to
successfully
commercialize
our
products
will
adversely
affect
our
business,financial
condition,
results
of
operations,
the
value
of
our
common
stock,
and
our
prospects.38Table
of
ContentsIf
our
clinical
studies
do
not
produce
positive
results
or
our
clinical
trials
are
delayed,
or
if
serious
side
effects
are
identified
during
drug
development,
we
mayexperience
delays,
incur
additional
costs
and
ultimately
be
unable
to
commercialize
our
product
candidates
in
the
US,
Europe,
Japan
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.













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
(IRBs)
may
prevent
us
from
commencing
a
clinical
trial
or
conducting
a
clinical
trial
at
a
prospective
trialsite;·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
experience
diffculties
or
delays
due
to
the
number
of
clinical
sites
involved
in
our
clinical
trials;·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,
IRBs
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
IRBs
determine
that
the
participants
are
beingexposed
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
IRBs
may
require
that
we
hold,
suspend
or
terminate
clinical
research
for
various
reasons,
including
potential
safety
concerns
ornoncompliance
with
regulatory
requirements;·The
cost
of
our
clinical
trials
may
be
greater
than
we
anticipate;·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;·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;·Shortening
of
the
patent
protection
period
during
which
we
may
have
the
exclusive
right
to
commercialize
our
product
candidates;
and·Our
competitors
may
be
able
to
bring
products
to
market
before
we
do.39Table
of
Contents













For
example,
results
from
our
rat
carcinogenicity
study
showed
that
when
rats
were
given
ARIKAYCE
daily
by
inhalation
for
two
years,
two
of
the
120rats
receiving
the
highest
dose
developed
lung
carcinomas.
These
rats
received
ARIKAYCE
doses
that
were
within
two-fold
of
those
in
clinical
studies
(normalizedon
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
for
ARIKAYCE,which
holds
were
lifted
in
2012.
Approvability
or
labeling
of
ARIKAYCE
may
be
negatively
affected
by
the
results
from
this
rat
carcinogenicity
study.
In
addition,we
withdrew
our
MAA
for
ARIKAYCE
in
June
2016
after
the
CHMP
concluded
the
data
underlying
it
did
not
provide
enough
evidence
to
support
approval,thereby
delaying
approval
and
commercialization
of
ARIKAYCE
in
Europe.













Significant
preclinical
or
clinical
trial
delays
also
could
shorten
the
patent
protection
period
during
which
we
may
have
the
exclusive
right
tocommercialize
our
product
candidates.
Such
delays
could
allow
our
competitors
to
bring
products
to
market
before
we
do
and
impair
our
ability
to
commercializeour
products
or
product
candidates.













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:·Experience
increased
product
development
costs,
as
we
have
in
the
past;·Be
delayed
in
obtaining,
or
be
unable
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;·Have
the
product
removed
from
the
market
after
obtaining
marketing
approval;
or·Face
a
shortened
patent
protection
period
during
which
we
may
have
the
exclusive
right
to
commercialize
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
the
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
adversely
affect
our
business,
financial
condition,
results
of
operations,
the
value
of
our
common
stock
and
our
prospects.40Table
of
ContentsWe
may
not
be
able
to
enroll
enough
patients
to
complete
our
clinical
trials
or
retain
a
sufficient
number
of
patients
in
our
clinical
trials
to
generate
the
datanecessary
for
regulatory
approval
of
our
product
candidates.













The
completion
rate
of
our
clinical
studies
is
dependent
on,
among
other
factors,
the
patient
enrollment
rate.
Patient
enrollment
is
a
function
of
manyfactors,
including:·Investigator
identification
and
recruitment;·Regulatory
approvals
to
initiate
study
sites;·Patient
population
size;·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;·Discontinue
rates;
and·Competition
from
other
companies'
potential
clinical
studies
for
the
same
patient
population













Delays
in
patient
enrollment
for
future
clinical
trials,
such
as
those
we
encountered
in
enrolling
the
CONVERT
study,
could
increase
costs
and
delayultimate
commercialization
and
sales,
if
any,
of
our
products.
We
achieved
our
enrollment
objective
for
the
CONVERT
study
in
the
fourth
quarter
of
2016.
TheCONVERT
study
was
designed
to
enroll
enough
subjects
to
ensure
a
sufficient
number
of
patients
are
evaluable
for
the
primary
endpoint.
Once
enrolled,
patientsmay
elect
to
discontinue
participation
in
a
clinical
trial
at
any
time.
If
patients
elect
to
discontinue
participation
in
our
clinical
trials
at
a
higher
rate
than
expected,we
may
be
unable
to
generate
the
data
required
by
regulators
for
approval
of
our
product
candidates.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
our
product
candidates
to
market,
they
may
notgain
market
acceptance
by
physicians,
patients,
third-party
payers
and
others
in
the
medical
community.
If
ARIKAYCE,
or
any
other
product
candidate
we
bring
tomarket,
does
not
achieve
an
adequate
level
of
acceptance,
we
may
not
generate
significant
product
revenue
and
we
may
not
become
profitable.
The
degree
ofmarket
acceptance
of
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.41Table
of
Contents













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
to
educate
the
medical
community
and
third-party
payers
on
the
benefits
of
our
productcandidates
may
require
significant
resources
and
may
never
be
successful.
Such
efforts
to
educate
the
marketplace
may
require
more
resources
than
are
required
tocommercialize
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,
our
ability
to
generate
product
revenues
will
be
adversely
affected.













We
have
a
small
commercial
organization
for
the
marketing,
market
access,
sales
and
distribution
of
our
products.
In
order
to
commercialize
ARIKAYCEor
any
other
product
candidates,
we
must
develop
these
capabilities
on
our
own
or
make
arrangements
with
third
parties
for
the
marketing,
sales
and
distribution
ofour
products.
The
establishment
and
development
of
our
own
sales
force
will
be
expensive
and
time
consuming
and
could
delay
any
product
launch,
and
we
may
beunable
to
successfully
develop
this
capability.
As
a
result,
we
may
seek
one
or
more
partners
to
handle
some
or
all
of
the
sales
and
marketing
of
ARIKAYCE
incertain
markets.
However,
we
may
not
be
able
to
enter
into
arrangements
with
third
parties
to
sell
ARIKAYCE
on
favorable
terms
or
at
all.
In
the
event
we
areunable
to
develop
our
own
marketing,
market
access,
and
sales
force
or
collaborate
with
a
third-party
marketing,
market
access,
and
sales
organization,
we
may
notbe
able
to
successfully
commercialize
ARIKAYCE
or
any
other
product
candidates
that
we
develop,
which
would
adversely
affect
our
ability
to
generate
productrevenues.
Further,
whether
we
commercialize
products
on
our
own
or
rely
on
a
third
party
to
do
so,
our
ability
to
generate
revenue
will
be
dependent
on
theeffectiveness
of
the
sales
force.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
currently
have
limited
operations
outside
of
the
US.
As
of
December
31,
2016,
we
had
21
employees
located
in
Europe,
and
we
have
suppliers
locatedaround
the
world.
In
order
to
meet
our
long-term
goals,
we
will
need
to
grow
our
international
operations
over
the
next
several
years,
including
in
Japan,
andcontinue
to
source
material
used
in
the
manufacture
of
our
product
candidates
from
abroad.
Consequently,
we
are
and
will
continue
to
be
subject
to
additional
risksrelated
to
operating
in
foreign
countries,
including:·Our
limited
experience
operating
our
business
internationally;·An
inability
to
achieve
the
optimal
pricing
and
reimbursement
for
ARIKAYCE
or
subsequent
changes
in
reimbursement,
pricing
and
otherregulatory
requirements;·Any
implementation
of,
or
changes
to,
tariffs,
trade
barriers
and
other
import-export
regulations
in
the
US
or
other
countries
in
which
we
operate;·Unexpected
adverse
events
related
to
ARIKAYCE
or
our
other
product
candidates
occurring
in
foreign
markets
that
we
have
not
experienced
in
theUS;·Economic
and
political
conditions,
including
geopolitical
events,
such
as
war
and
terrorism,
foreign
currency
fluctuations
and
inflation,
which
couldresult
in
increased
or
unpredictable
operating
expenses
and
reduced
revenues
and
other
obligations
incident
to
doing
business
in,
or
with
a
companylocated
in,
another
country;42Table
of
Contents·Changes
resulting
from
(i)
the
uncertainty
and
instability
in
economic
and
market
conditions
caused
by
the
UK's
vote
to
exit
the
European
Union;and
(ii)
the
uncertainty
regarding
how
the
UK's
access
to
the
EU
Single
Market
and
the
wider
trading,
legal,
regulatory
and
labor
environments,especially
in
the
UK
and
European
Union,
will
be
impacted
by
the
UK's
vote
to
exit
the
European
Union,
including
the
resulting
impact
on
ourbusiness;
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,
financial
condition,
results
of
operationsand
the
value
of
our
common
stock.If
estimates
of
the
size
of
the
potential
markets
for
our
product
candidates
are
overstated
or
regulators
limit
the
proposed
treatment
population
for
our
productcandidates,
our
ability
to
commercialize
such
product
candidates
successfully
or
achieve
sufficient
revenue
to
support
our
business
could
be
materiallyadversely
affected.













We
have
relied
on
market
research,
funded
by
us
and
third
parties,
and
certain
government
publications
to
estimate
the
potential
market
opportunity
forNTM
lung
disease
and
we
expect
to
do
so
in
the
future
with
respect
to
market
opportunities
for
other
product
candidates.
Development
of
such
estimates,
however,necessarily
requires
a
number
of
assumptions
subject
to
significant
judgment,
and
such
assumptions,
as
well
as
the
resulting
market
opportunity
estimates,
couldprove
to
be
inaccurate.
In
addition,
a
potential
market
opportunity
could
be
reduced
if
a
regulator
limits
the
proposed
treatment
population
for
a
product
candidate.In
such
circumstances,
even
if
we
obtain
regulatory
approval
for
a
product
candidate,
we
may
be
unable
to
commercialize
it
on
a
scale
sufficient
to
generatematerial
revenues,
which
could
have
a
material
adverse
effect
on
our
business,
results
of
operations,
financial
condition,
the
value
of
our
common
stock
and
ourprospects.Risks
Related
to
Our
Reliance
on
Third
PartiesWe
rely
on
third
parties
including
collaborators,
CROs,
clinical
and
analytical
laboratories,
CMOs
and
other
providers
for
many
services
that
are
critical
to
ourbusiness.
If
we
are
unable
to
form
and
sustain
these
relationships,
or
if
any
third-party
arrangements
that
we
may
enter
into
are
unsuccessful,
including
due
tonon-compliance
by
such
third
parties
with
our
agreements
or
applicable
law,
our
ability
to
develop
and
commercialize
our
products
may
be
materially
adverselyaffected.













We
currently
rely,
and
expect
that
we
will
in
the
future
continue
to
rely,
on
third
parties
for
significant
research,
analytical
services,
preclinicaldevelopment,
clinical
development
and
manufacturing
of
our
product
candidates.
For
example,
almost
all
of
our
clinical
trial
work
is
done
by
CROs,
such
asSynteract,
our
CRO
for
both
the
212
and
312
studies,
and
clinical
laboratories.
Reliance
on
these
third
parties
poses
a
number
of
risks,
including
the
following:·Significant
competition
in
seeking
appropriate
partners;·The
complex
and
time-consuming
nature
of
negotiation,
documentation
and
implementation
of
agreements
with
third
parties
in
the
pharmaceuticalindustry;·Our
potential
inability
to
establish
and
implement
collaborations
or
other
alternative
arrangements
that
we
might
pursue
on
favorable
terms;43Table
of
Contents·Our
potential
inability
to
control
whether
third
parties
devote
sufficient
resources
to
our
programs
or
products,
including
with
respect
to
meetingcontractual
deadlines;·Our
potential
inability
to
control
the
regulatory
and
contractual
compliance
of
third
parties,
including
their
processes
and
procedures,
systemsutilized
to
collect
and
analyze
data,
and
equipment
used
to
test
drug
product
and/or
clinical
supplies;·Disagreements
with
third
parties,
including
CROs,
that
result
in
a
dispute
over
and
loss
of
intellectual
property
rights,
delay
or
termination
ofresearch,
development,
or
commercialization
of
product
candidates
or
litigation
or
arbitration;·Contracts
with
our
collaborators
that
fail
to
provide
sufficient
protection
of
our
intellectual
property;
and·Difficulty
enforcing
the
contracts
if
one
of
these
third
parties
fails
to
perform.













Such
risks
could
materially
harm
our
business,
financial
condition,
results
of
operations,
the
value
of
our
common
stock
and
our
prospects.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,
which
would
materially
harm
our
business.













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.
For
instance,
we
are
and
expect
to
remaindependent
upon
Althea
and
Therapure
being
able
to
provide
an
adequate
supply
of
ARIKAYCE
both
for
our
clinical
trials
and
for
commercial
sale
in
the
eventARIKAYCE
receives
marketing
approvals.
Althea
currently
manufactures
ARIKAYCE
at
a
relatively
small
scale.
In
order
to
meet
potential
commercial
demand,if
ARIKAYCE
is
approved,
we
have
constructed
a
manufacturing
operation
at
Therapure
in
Canada
that
operates
at
a
larger
scale.
We
may
not
be
able
to
secure
analternative
source
of
ARIKAYCE
at
an
adequate
scale
of
production
should
either
of
these
suppliers
be
unable
to
provide
us
with
ARIKAYCE.













We
are
also
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,
as
PARI
is
the
sole
manufacturer
of
the
eFlow
Nebulizer
System.
We
have
no
alternative
supplier
for
the
Device,
and
wedo
not
intend
to
seek
an
alternative
or
secondary
supplier.
Significant
effort
and
time
were
expended
in
the
optimization
of
the
nebulizer
for
use
with
ARIKAYCE.In
the
event
PARI
cannot
provide
us
with
sufficient
quantities
of
the
Device,
replication
of
the
optimized
device
by
another
party
may
require
considerable
timeand
additional
regulatory
approval.
In
the
case
of
certain
defined
supply
failures,
we
will
have
the
right
under
the
Commercialization
Agreement
to
make
theDevice
and
have
it
made
by
certain
third
parties,
but
not
those
deemed
under
the
Commercialization
Agreement
to
compete
with
PARI.













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.
For
instance,
an
inadequate
supply
of
ARIKAYCE
or
the
Device
could
delay,impair
or
prevent
clinical
trials,
the
development
and
commercialization
of
ARIKAYCE
and
adversely
affect
our
business,
financial
condition,
results
ofoperations,
the
value
of
our
common
stock
and
our
prospects.













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,44Table
of
Contentspotentially,
the
approval
of
our
products.
In
particular,
as
part
of
our
new
drug
approval
submissions,
we
must
disclose
any
financial
interests
of
investigators
whoparticipated
in
any
of
the
clinical
studies
being
submitted
in
support
of
approval,
or
must
certify
to
the
absence
of
such
financial
interests.
The
FDA
evaluates
theinformation
contained
in
such
disclosures
to
determine
whether
disclosed
interests
may
have
an
impact
on
the
reliability
of
a
study.
If
the
FDA
determines
thatfinancial
interests
of
any
clinical
investigator
raise
serious
questions
of
data
integrity,
the
FDA
can
institute
a
data
audit,
request
that
we
submit
further
dataanalyses,
conduct
additional
independent
studies
to
confirm
the
results
of
the
questioned
study,
or
refuse
to
use
the
data
from
the
questioned
study
as
a
basis
forapproval.
A
finding
by
the
FDA
that
a
financial
relationship
of
an
investigator
raises
serious
questions
of
data
integrity,
could
delay
or
otherwise
adversely
affectapproval
of
our
products.Risks
Related
to
Our
Financial
Condition
and
Capital
RequirementsWe
have
a
history
of
operating
losses,
and
we
currently
have
no
material
source
of
revenue.
We
expect
to
incur
operating
losses
for
the
foreseeable
future
andmay
never
achieve
or
maintain
profitability.













We
have
incurred
losses
each
previous
year
of
our
operation,
except
in
2009,
when
we
sold
our
manufacturing
facility
and
certain
other
assets
to
Merckand
we
did
not
generate
material
revenue
in
2016,
2015
or
2014.
We
expect
to
continue
incurring
operating
losses
for
the
foreseeable
future.
The
process
ofdeveloping
and
commercializing
our
products
requires
significant
pre-clinical
and
clinical
testing
as
well
as
regulatory
approvals
for
commercialization
andmarketing
before
we
are
allowed
to
begin
product
sales.
In
addition,
commercialization
of
our
drug
candidates
likely
would
require
us
to
significantly
expand
oursales
and
marketing
organization
and
establish
contractual
relationships
to
enable
product
manufacturing
and
other
related
activities.
We
expect
that
our
activities,together
with
our
general
and
administrative
expenses,
will
continue
to
result
in
substantial
operating
losses
for
the
foreseeable
future.
As
of
December
31,
2016,our
accumulated
deficit
was
$765.2
million.
For
the
year
ended
December
31,
2016,
our
consolidated
net
loss
was
$176.3
million.
To
achieve
and
maintainprofitability,
we
need
to
generate
significant
revenues
from
future
product
sales.
The
process
of
developing
and
commercializing
our
products
will
requiresignificant
expenditures
for
pre-clinical
and
clinical
testing,
regulatory
approvals
for
commercialization
and
marketing,
development
of
an
internal
or
external
salesand
marketing
organization
and
other
related
activities.
Because
of
the
numerous
risks
and
uncertainties
associated
with
drug
development
and
commercialization,we
are
unable
to
predict
the
extent
of
any
future
losses,
and
we
may
never
generate
significant
future
revenues
or
achieve
and
sustain
profitability.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
will
need
to
seek
additional
funding
in
order
to
complete
any
clinical
trials
related
to
ARIKAYCE,
seek
regulatory
approvals
of
ARIKAYCE,and
commercially
launch
ARIKAYCE,
including
due
to
changes
in
our
product
development
plans
or
misjudgment
of
expected
costs.
We
also
may
requireadditional
future
capital
in
order
to
continue
our
other
research
and
development
activities,
fund
corporate
development,
maintain
our
intellectual
property
portfolioor
resolve
litigation.
As
of
December
31,
2016,
we
had
$162.6
million
of
cash
and
cash
equivalents
on
hand
but
no
committed
sources
of
capital.
We
do
not
knowwhether
additional
financing
will
be
available
when
needed,
or,
if
available,
that
the
terms
will
be
favorable.
If
adequate
funds
are
not
available
to
us
when
needed,we
may
be
required
to
reduce
or
eliminate
research
and
development
programs
or
commercial
efforts,
which
would
likely
have
a
material
adverse
effect
on
ourbusiness
and
prospects,
as
well
as
the
value
of
our
common
stock.45Table
of
ContentsOur
loan
agreement
with
Hercules
Capital,
Inc.
(Hercules)
contains
covenants
and
other
provisions
that
impose
restrictions
on
our
operations,
which
mayadversely
affect
our
ability
to
optimally
operate
our
business
or
to
maximize
shareholder
value.













Our
A&R
Loan
Agreement
contains
various
restrictive
covenants,
including
restrictions
on
our
ability
to
incur
additional
debt,
transfer
or
place
a
lien
orsecurity
interest
on
our
assets,
including
our
intellectual
property,
merge
with
or
acquire
other
companies,
redeem
or
repurchase
any
shares
of
our
capital
stock
orpay
cash
dividends
to
our
shareholders.
The
loan
agreement
also
contains
certain
other
covenants
(including
limitations
on
other
indebtedness,
liens,
acquisitions,investments
and
dividends).
Upon
the
occurrence
of
an
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
lending
commitment,
declare
all
outstanding
obligations
immediately
due
and
payable,
and
take
such
other
actions
as
set
forth
inthe
A&R
Loan
Agreement.
In
addition,
pursuant
to
the
A&R
Loan
Agreement,
the
lender
has
the
right
to
participate,
in
an
amount
of
up
to
$2.0
million,
in
asubsequent
private
financing
that
involves
the
issuance
of
our
equity
securities.













The
interest-only
period
under
the
A&R
Loan
Agreement
extends
through
November
1,
2018,
and
can
only
be
extended
up
to
six
months
under
certainconditions.
The
maturity
date
of
the
loan
facility
is
October
1,
2020.
Pursuant
to
the
A&R
Loan
Agreement,
we
are
required
to
have
a
consolidated
minimum
cashliquidity
in
an
amount
no
less
than
$25.0
million.
Such
requirement
terminates
upon
the
earlier
of
the
date
by
which
we
complete
an
equity
financing
with
at
least$75.0
million
in
proceeds
or
the
date
we
generate
and
announce
data
from
the
CONVERT
study
in
a
manner
that
could
support
an
NDA
filing.













Our
borrowings
under
the
A&R
Loan
Agreement
are
secured
by
a
lien
on
our
assets,
excluding
our
intellectual
property,
and
in
the
event
of
a
default
onthe
loan,
Hercules
may
have
the
right
to
seize
our
assets
securing
our
obligations
under
the
A&R
Loan
Agreement.
The
terms
and
restrictions
provided
for
in
theA&R
Loan
Agreement
may
inhibit
our
ability
to
conduct
our
business
and
to
maximize
shareholder
value.
Future
debt
securities
or
other
financing
arrangementscould
contain
negative
covenants
similar
to,
or
even
more
restrictive
than,
the
Hercules
loan.In-process
research
and
development
(IPRD)
currently
comprises
approximately
24%
of
our
total
assets.
A
reduction
in
the
value
of
our
IPRD
could
have
amaterial
adverse
effect
on
our
results
of
operations,
financial
condition
and
the
value
of
our
common
stock.













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
the
clinical
hold
on
ARIKAYCE
announced
in
late
2011,
we
recorded
a
charge
of
$26.0
million
in
the
fourth
quarter
of
2011
that
reduced
the
valueof
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
couldmaterially
adversely
affect
our
results
of
operations,
financial
condition
and
the
value
of
our
common
stock.We
may
be
unable
to
use
our
net
operating
losses.













We
have
substantial
tax
loss
carry
forwards
for
US
federal
income
tax
and
state
income
tax
purposes
and
beginning
in
2015,
we
have
tax
loss
carryforwards
in
Ireland
as
well.
Our
ability
to
fully
use
certain
US
tax
loss
carry
forwards
prior
to
December
2010
to
offset
future
income
or
tax
liability
is
limitedunder
section
382
of
the
Internal
Revenue
Code
of
1986,
as
amended.
Changes
in
the
ownership
of
our
stock,
including
those
resulting
from
the
issuance
of
sharesof
our
common
stock
upon
exercise
of
outstanding
options,
may
limit
or
eliminate
our
ability
to
use
certain
net
operating
losses
in
the
future.46Table
of
ContentsAny
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,
but
wecannot
assure
you
that
we
will
identify
suitable
products
or
enter
into
such
acquisitions
on
acceptable
terms.













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.













If
we
make
one
or
more
significant
acquisitions
or
enter
into
a
significant
collaboration
in
which
the
consideration
includes
cash,
we
may
be
required
touse
a
substantial
portion
of
our
available
cash
and/or
need
to
raise
additional
capital.
For
instance,
in
September
and
October
of
2016,
we
borrowed
$30.0
millionunder
the
A&R
Loan
Agreement
to
fund
the
payment
due
under
the
AZ
License
Agreement,
and
this
investment—as
with
any
acquisition
or
collaboration—maynot
be
successful.Risks
Related
to
Regulatory
MattersThere
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,
which
could
delay
commercialization
of
our
product
candidates
or
subject
us
tothe
risk
of
having
any
approval
withdrawn.













The
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
surrogateor
an
intermediate
clinical
endpoint
(other
than
survival
or
irreversible
morbidity).
We
are
using
a
surrogate
endpoint
in
our
CONVERT
study.
Developing
clinicalendpoints
that
are
unsatisfactory
to
regulators
could
delay
clinical
trials
and
the
FDA
approval
process
which
could
materially
adversely
affect
our
business,financial
condition,
results
of
operations,
the
value
of
our
common
stock
and
our
prospects.













If
one
or
more
of
our
product
candidates
is
approved
based
on
a
surrogate
or
an
intermediate
clinical
endpoint
under
the
accelerated
approval
regulations,the
approval
will
be
subject
to
the
requirement
that
we
study
the
product
candidate
further
to
verify
and
describe
its
clinical
benefit,47Table
of
Contentswhere
there
is
uncertainty
as
to
the
relation
of
the
surrogate
or
intermediate
clinical
endpoint
to
clinical
benefit
or
of
the
observed
clinical
benefit
to
the
ultimateoutcome.
Thus,
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
prospects.
For
example,
we
may
not
successfully
complete
required
post-approval
trials,
or
such
trialsmay
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
a
given
market,
in
addition
to
regulatory
approvals
required
for
ARIKAYCE,
the
eFlownebulizer
system
must
satisfy
certain
regulatory
requirements
and
its
use
as
a
delivery
system
for
ARIKAYCE
must
be
approved
for
use
by
regulators.













The
eFlow
Nebulizer
System
must
receive
regulatory
approval
in
order
for
us
to
develop
and
commercialize
ARIKAYCE.
Although
the
optimized
eFlowNebulizer
System
is
CE
marked
by
PARI
the
EU,
outside
the
EU,
it
is
labeled
as
investigational
for
use
in
our
clinical
trials
in
the
US,
Japan,
Canada
and
Australia.The
optimized
eFlow
Nebulizer
System
is
not
approved
for
commercial
use
in
the
US,
Canada
or
certain
other
markets
in
which
we
may
choose
to
commercializeARIKAYCE
if
approved.
We
continue
to
work
closely
with
PARI
to
coordinate
efforts
regarding
regulatory
requirements,
including
our
proposed
filings
for
a
drugand
device.
However,
we
or
PARI
may
not
be
successful
in
meeting
the
regulatory
requirements
for
the
eFlow
Nebulizer
System,
which
would
prevent
or
hinderour
ability
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
(REMS),
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;·Compliance
with
cGMPs;·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
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
(PDMA);·Sales,
marketing
and
scientific
or
educational
grant
programs
must
comply
with
federal
and
state
laws;
and·Pricing
and
rebate
programs
must
comply
with
the
Medicaid
rebate
requirements,
and
if
products
are
made
available
to
authorized
users
of
theFederal
Supply
Schedule
of
the
General
Services
Administration,
additional
laws
and
requirements
apply.48Table
of
Contents













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













If
we
fail
to
comply
with
applicable
regulatory
requirements,
a
regulatory
agency
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;
and/or·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.The
manufacturing
facilities
of
our
third
party
manufacturers
are
subject
to
significant
government
regulations
and
approvals,
which
are
often
costly
andcould
result
in
adverse
consequences
to
our
business
if
we
and
our
manufacturing
partner
fail
to
comply
with
the
regulations
or
maintain
the
approvals.













Manufacturers
of
our
product
candidates
are
subject
to
cGMP
and
similar
standards,
and
we
do
not
have
control
over
compliance
with
these
regulations
byour
manufacturers.
If
one
of
them
fails
to
obtain
or
maintain
compliance
or
experiences
problems
in
the
scale-up
of
commercial
production,
the
production
of
ourproduct
candidates
could
be
interrupted,
resulting
in
delays,
additional
costs
or
restrictions
on
the
marketing
or
sale
of
our
products.
In
addition,
thesemanufacturers
and
their
facilities
will
be
subject
to
continual
review
and
periodic
inspections
by
the
FDA
and
other
regulatory
authorities
following
regulatoryapproval,
if
any,
of
our
product
candidates.
For
instance,
to
monitor
compliance
with
applicable
regulations,
the
FDA
routinely
conducts
inspections
of
facilitiesand
may
identify
potential
deficiencies.
For
example,
the
FDA
issues
what
are
referred
to
as
"FDA
Form
483s"
that
set
forth
observations
and
concerns
that
areidentified
during
its
inspections.
Failure
to
satisfactorily
address
the
concerns
or
potential
deficiencies
identified
in
a
Form
483
could
result
in
the
issuance
of
awarning
letter,
which
is
a
notice
of
the
issues
that
the
FDA
believes
to
be
significant
regulatory
violations
requiring
prompt
corrective
actions.
Failure
to
respondadequately
to
a
warning
letter,
or
to
otherwise
fail
to
comply
with
applicable
regulatory
requirements
could
result
in
enforcement,
remedial
and/or
punitive
actionsby
the
FDA
or
other
regulatory
authorities.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
than49Table
of
Contentsthey
were
used
in
clinical
trials.
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,
or
the
issuance
of"Dear
Doctor
Letters"
or
similar
communications
to
healthcare
professionals;·Regulatory
authorities
may
impose
additional
restrictions
on
marketing
and
distribution
of
the
products,
or
other
risk
management
measures,
such
asa
REMS;·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;
and·We
could
be
subject
to
negative
publicity,
including
communications
issued
by
regulatory
authorities.













Any
of
these
events
could
prevent
us
from
maintaining
market
acceptance
of
the
affected
product,
cause
substantial
reduction
in
sales
or
substantiallyincrease
the
costs
of
commercializing
our
product
candidates,
cause
significant
financial
losses
or
result
in
significant
reputational
damage.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.50Table
of
Contents













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
inreturn
for
near-term
cost
effectiveness
or
budget
impact.
For
instance,
the
Medicare
Prescription
Drug,
Improvement,
and
Modernization
Act
of
2003
(MMA)expanded
Medicare
outpatient
prescription
drug
coverage
for
the
elderly
through
Part
D
prescription
drug
plans
sponsored
by
private
entities
and
authorized
suchplans
to
use
formularies
where
they
can
limit
the
number
of
drugs
that
will
be
covered
in
any
therapeutic
class.
The
plans
generally
negotiate
significant
priceconcessions
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
have
resulted
in
lower
Medicare
reimbursement
for
physician-administered
drugs.
These
cost
reductioninitiatives
and
other
provisions
of
this
legislation
provide
additional
pressure
to
contain
and
reduce
drug
prices
and
could
decrease
the
coverage
and
price
that
wereceive
for
any
approved
products
and
could
seriously
harm
our
business.
Although
the
MMA
applies
only
to
drug
benefits
for
Medicare
beneficiaries,
privatepayers
often
follow
Medicare
coverage
policy
and
payment
limitations
when
setting
their
own
reimbursement
rates,
and
any
reimbursement
reduction
resultingfrom
the
MMA
may
result
in
a
similar
reduction
in
payments
from
private
payers.
Additionally,
the
Patient
Protection
and
Affordable
Care
Act
(ACA)
revised
thedefinition
of
"average
manufacturer
price"
for
reporting
purposes,
which
could
increase
the
amount
of
Medicaid
drug
rebates
to
states,
and
has
imposed
asignificant
annual
fee
on
companies
that
manufacture
or
import
branded
prescription
drug
products.
We
believe
it
is
likely
that
the
ACA,
or
any
legislation
enactedto
replace
it,
will
continue
the
pressure
on
pharmaceutical
pricing,
especially
under
the
Medicare
program,
and
also
may
increase
our
regulatory
burdens
andoperating
costs.
If
one
or
more
of
our
product
candidates
reaches
commercialization,
such
changes
may
have
a
significant
impact
on
our
ability
to
set
a
price
webelieve
is
fair
for
our
products
and
may
adversely
affect
our
ability
to
generate
revenue
and
achieve
or
maintain
profitability.
We
expect
further
federal
and
stateproposals
and
health
care
reforms
to
continue
to
be
proposed
by
legislators
and/or
the
newly
elected
US
President,
which
could
limit
the
prices
that
can
be
chargedfor
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
ACA
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
materially
adversely
affect
our
business,
financial
condition,
results
of
operations,
thevalue
of
our
common
stock
and
our
prospects.













Our
industry
is
highly
regulated
and
changes
in
or
revisions
to
laws
and
regulations
that
make
gaining
regulatory
approval,
reimbursement
and
pricingmore
difficult
or
subject
to
different
criteria
and
standards
may
adversely
impact
our
business,
operations
or
financial
results.
For
example,
under
the
ACA,
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.
In
addition,
some
states,
as
well
as
other
countries,
including
France,
require
the
disclosure
of
certain
payments
to
health
care51Table
of
Contentsprofessionals.
In
the
coming
years,
we
expect
additional
and
potentially
substantial,
changes
to
governmental
programs
that
could
significantly
impact
the
successof
our
product
candidates.













The
new
Administration
and
the
majority
party
in
both
Houses
of
Congress
have
indicated
their
desire
to
repeal
the
ACA.
It
is
unclear
whether,
when
andhow
that
repeal
will
be
effectuated
and
what
the
effect
on
the
healthcare
sector
will
be.
The
new
US
President
has
indicated
an
interest
in
having
the
federalgovernment
negotiate
drug
prices
with
pharmaceutical
manufacturers.
Changes
to
the
ACA,
to
the
Medicare
or
Medicaid
programs,
or
to
the
ability
of
the
federalgovernment
to
negotiate
drug
prices,
or
other
federal
legislation
regarding
healthcare
access,
financing
or
legislation
in
individual
states,
could
affect
our
business,financial
condition,
results
of
operations,
the
value
of
our
common
stock
and
our
prospects.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.
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.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.
Although
we
seek
to
structure
our
business
arrangements
in
compliance
with
allapplicable
requirements,
these
laws
are
broadly
written,
and
it
is
often
difficult
to
determine
precisely
how
the
law
will
be
applied
in
specific
circumstances.Accordingly,
it
is
possible
that
our
practices
may
be
challenged
under
these
laws.
Violations
of
fraud
and
abuse
laws
may
be
punishable
by
criminal
and/or
civilsanctions,
including
fines
or
exclusion
or
suspension
from
federal
and
state
health
care
programs
such
as
Medicare
and
Medicaid
and
debarment
from
contractingwith
the
US
government,
and
our
business,
financial
condition,
and
results
of
operations
and
the
value
of
our
common
stock
may
be
adversely
affected.
Ourreputation
could
also
suffer.
In
addition,
private
individuals
have
the
ability
to
bring
actions
on
behalf
of
the
government
under
the
federal
FCA
as
well
as
under
thefalse
claims
laws
of
several
states.













Several
states
also
impose
other
marketing
restrictions
or
require
pharmaceutical
companies
to
make
marketing
or
price
disclosures
to
the
state.
Healthrecord
privacy
laws
may
limit
access
to
information
identifying
those
individuals
who
may
be
prospective
users
or
prohibit
contact
with
any
persons
enrolled
inMedicare
or
Medicaid.
There
are
ambiguities
as
to
what
is
required
to
comply
with
these
state
requirements,
and
we
could
be
subject
to
penalties
if
a
statedetermines
that
we
have
failed
to
comply
with
an
applicable
state
law
requirement.52Table
of
ContentsRisks
Related
to
Our
Intellectual
PropertyIf
we
are
unable
to
protect
our
intellectual
property
rights
adequately,
the
value
of
our
product
candidates
could
be
diminished.













The
patent
position
of
biotechnology
and
pharmaceutical
companies
generally
is
highly
uncertain
and
involves
complex
legal,
technical,
scientific
andfactual
questions,
and
our
success
depends
in
large
part
on
our
ability
to
protect
our
proprietary
technology
and
to
obtain
patent
protection
for
our
products,
preventthird
parties
from
infringing
on
our
patents,
both
domestically
and
internationally.
We
have
sought
to
protect
our
proprietary
position
by
filing
patent
applicationsin
the
US
and
abroad
related
to
our
novel
technologies
and
products
that
are
important
to
our
business.
This
process
is
expensive
and
time-consuming,
and
we
maynot
be
able
to
file
and
prosecute
all
necessary
or
desirable
patent
applications
at
a
reasonable
cost
or
in
a
timely
manner.
It
is
also
possible
that
we
will
fail
toidentify
patentable
aspects
of
our
research
and
development
output
before
it
is
too
late
to
obtain
patent
protection.
Our
existing
patents
and
any
future
patents
weobtain
may
not
be
sufficiently
broad
to
prevent
others
from
using
our
technologies
or
from
developing
competing
products
and
technologies.













Even
if
our
owned
and
licensed
patent
applications
issue
as
patents,
they
may
not
issue
in
a
form
that
will
provide
us
with
any
meaningful
protection,prevent
competitors
from
competing
with
us
or
otherwise
provide
us
with
any
competitive
advantage.
Any
conclusions
we
may
reach
regarding
non-infringement,inapplicability
or
invalidity
of
a
third
party's
intellectual
property
vis-à-vis
our
proprietary
rights,
or
those
of
a
licensor,
are
based
in
significant
part
on
a
review
ofpublicly
available
databases
and
other
information.
There
may
be
information
not
available
to
us
or
otherwise
not
reviewed
by
us
that
could
render
theseconclusions
inaccurate.
Our
competitors
may
also
be
able
to
circumvent
our
owned
or
licensed
patents
by
developing
similar
or
alternative
technologies
or
productsin
a
non-infringing
manner.













Additionally,
patents
issued
to
us
or
our
licensors
may
be
challenged,
narrowed,
invalidated,
held
to
be
unenforceable
or
circumvented
through
litigation,which
could
limit
our
ability
to
stop
competitors
from
marketing
similar
products
or
reduce
the
term
of
patent
protection
we
may
have
for
our
products.
US
patentsand
patent
applications
may
also
be
subject
to
interference
or
derivation
proceedings,
and
US
patents
may
be
subject
to
re-examination
proceedings,
reissue,
post-grant
review
and/or
inter
partes
review
in
the
USPTO.
Foreign
patents
may
be
subject
to
opposition
or
comparable
proceedings
in
the
corresponding
foreign
patentoffice,
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
more
of
the
claims
of
the
patent
orpatent
application.
See
Intellectual Property—ARIKAYCE Patents and Trade Secrets for
information
on
our
European
Patent
that
is
being
opposed
by
Generics(UK)
Ltd.













Changes
in
either
patent
laws
or
in
interpretations
of
patent
laws
in
the
US
and
other
countries
may
also
diminish
the
value
of
our
intellectual
property
ornarrow
the
scope
of
our
patent
protection,
including
making
it
easier
for
competitors
to
challenge
our
patents.
For
example,
the
America
Invents
Act
included
anumber
of
changes
to
established
practices,
including
the
transition
to
a
first-inventor-to-file
system
and
new
procedures
for
challenging
patents
andimplementation
of
different
methods
for
invalidating
patents.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,53Table
of
Contentsand
other
third
parties
and
partners
to
protect
our
trade
secrets
and
other
proprietary
information.
These
agreements
may
not
effectively
prevent
disclosure
ofconfidential
information
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
continues
to
considerwhether
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.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
US.
Many
companies
have
encounteredsignificant
problems
in
protecting
and
defending
intellectual
property
rights
in
certain
foreign
jurisdictions.
The
legal
systems
of
some
countries,
particularlydeveloping
countries,
do
not
favor
the
enforcement
of
patents
and
other
intellectual
property
protection,
especially
those
relating
to
life
sciences.
This
could
make
itdifficult
for
us
to
stop
the
infringement
of
our
patents
or
in-licensed
patents
or
the
misappropriation
of
our
other
intellectual
property
rights.
For
example,
manyforeign
countries
have
compulsory
licensing
laws
under
which
a
patent
owner
may
be
required
to
grant
licenses
to
third
parties.
In
addition,
many
countries
limitthe
enforceability
of
patents
against
third
parties,
including
government
agencies
or
government
contractors.
In
these
countries,
patents
may
provide
limited
or
nobenefit.













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
US
and
foreign
countries
may
affect
our
ability
to
obtain
adequate
protection
for
our
technology
and
to
enforce
intellectual
property
rights.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.
Any
existing
third-party
patents,
or
patents
that
may
laterissue
to
third
parties,
could
negatively
affect
our
commercialization
of
ARIKAYCE,
INS1007,
INS1009
or
any
other
product.
For
instance,
PAH
is
a
competitiveindication
with
established
products,
including
other
formulations
of
treprostinil.
Our
supply
of
the
active
pharmaceutical
ingredient
for
INS1009
is
dependentupon
a
single
supplier.
The
supplier
owns
patents
on
its
manufacturing
process,
and
we
have
filed
patent
applications
for
INS1009;
however,
a
competitor
in
thePAH
indication
may
claim
that
we
or
our
supplier
have
infringed
upon
or
misappropriated
its
proprietary
rights.
In
the
event
of
a
successful
claim
against
us
forinfringement
or
misappropriation
of
a
third
party's
proprietary
rights,
we
may
be
required
to
take
actions
including
but
not
limited
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/or54Table
of
Contents·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.













Such
litigation,
and
any
resulting
resolution,
could
have
a
material
adverse
effect
on
our
business,
financial
condition,
results
of
operations,
the
value
ofour
common
stock
and
our
prospects.Any
lawsuits
or
other
proceedings
relating
to
infringement
by
us
or
third
parties
of
intellectual
property
rights
may
be
costly
and
time
consuming.













We
may
have
to
undertake
costly
litigation
or
engage
in
other
proceedings,
such
as
interference
or
inter
partes
review,
to
enforce
any
patents
issued
orlicensed
to
us,
to
confirm
the
scope
and
validity
of
our
or
a
licensor's
proprietary
rights
or
to
defend
against
allegations
that
we
have
infringed
a
third
party'sintellectual
property
rights.
Such
proceedings
are
also
likely
to
be
time
consuming
and
may
divert
management
attention
from
operation
of
our
business.If
we
fail
to
comply
with
our
obligations
in
the
agreements
under
which
we
license
rights
to
technology
from
third
parties,
or
if
the
license
agreements
areterminated
for
other
reasons,
we
could
lose
license
rights
that
are
important
to
our
business.













We
are
a
party
to
licensing
agreements
with
PARI
and
AZ,
which
we
view
as
material
to
our
business.
For
additional
information
regarding
the
terms
ofthese
agreements,
see
Business—License and Other Agreements .
If
we
fail
to
comply
with
our
obligations
under
these
agreements,
our
counterparty
may
have
theright
to
take
action
against
us,
up
to
and
including
termination
of
the
relevant
license.
For
instance,
under
our
licensing
agreement
with
PARI,
with
respect
to
NTM,CF
and
bronchiectasis,
we
have
specific
obligations
to
use
commercially
reasonable
efforts
to
achieve
certain
developmental
and
regulatory
milestones
by
setdeadlines.
Additionally,
for
NTM,
we
are
obligated
to
use
commercially
reasonable
efforts
to
achieve
certain
commercial
milestones
in
the
US,
Europe
andCanada.
The
consequences
of
our
failing
to
use
commercially
reasonable
efforts
to
achieve
certain
commercial
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.
Similarly,under
the
AZ
License
Agreement,
AstraZeneca
may
terminate
our
license
to
INS1007
if
we
fail
to
use
commercially
reasonable
efforts
to
develop
andcommercialize
a
product
based
on
INS1007,
or
we
are
subject
to
a
bankruptcy
or
insolvency.
Reduction
or
elimination
of
our
licensed
rights
may
result
in
ourhaving
to
negotiate
new
or
reinstated
licenses
with
less
favorable
terms
and
may
materially
harm
our
business.Risks
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.
In
each
of
ourpotential
product
areas,
we
face
substantial
competition
from
pharmaceutical,
biotechnology
and
other
companies,
universities
and
research
institutions.
Relative
tous,
most
of
these
entities
have
substantially
greater
capital
resources,
research
and
development
staffs,
facilities
and
experience
in
conducting
clinical
studies
andobtaining
regulatory
approvals,
as
well
as
in55Table
of
Contentsmanufacturing
and
marketing
pharmaceutical
products.
Many
of
our
competitors
may
achieve
product
commercialization
or
patent
protection
earlier
than
us.Furthermore,
we
believe
that
our
competitors
have
used,
and
may
continue
to
use,
litigation
to
gain
a
competitive
advantage.
Our
competitors
may
also
usedifferent
technologies
or
approaches
to
the
development
of
products
similar
to
the
products
we
are
seeking
to
develop.













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.
For
instance,
there
are
potential
competitive
products,
both
approved
and
in
development,
which
include
oral,systemic,
or
inhaled
antibiotic
products
to
treat
chronic
respiratory
infections.
If
any
of
our
competitors
develops
a
product
that
is
more
effective,
safer,
tolerable
or,convenient
or
less
expensive
than
ARIKAYCE
or
our
other
product
candidates,
it
would
likely
materially
adversely
affect
our
ability
to
generate
revenues.
We
alsomay
face
lower
priced
generic
competitors
if
third-party
payers
encourage
use
of
generic
or
lower-priced
versions
of
our
product
or
if
competing
products
areimported
into
the
US
or
other
countries
where
we
may
sell
ARIKAYCE.













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
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.
If
we
are
unable
to
compete
successfully,
it
will
materially
adversely
affect
our
business,
financialcondition,
results
of
operations,
the
value
of
our
common
stock
and
our
prospects.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.
The
company
that
obtainsthe
first
marketing
approval
from
the
FDA
for
a
designated
orphan
drug
for
a
rare
disease
receives
marketing
exclusivity
for
use
of
that
drug
for
the
designatedcondition
for
a
period
of
seven
years.
Similar
laws
exist
in
EU
with
a
term
of
ten
years.
See
Business—Government Regulation—Orphan Drugs for
additionalinformation.
If
a
competitor
obtains
approval
of
the
same
drug
for
the
same
indication
or
disease
before
us,
we
would
be
prohibited
from
obtaining
approval
for
ourproduct
for
seven
or
more
years,
unless
our
product
can
be
shown
to
be
clinically
superior.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
US
for
the
first
product
in
a
class
licensed
for
the
treatmentof
a
rare
disease.
Orphan
exclusivity
does
not,
however,
bar
approval
of56Table
of
Contentsanother
product
under
certain
circumstances.
One
such
circumstance
is
if
a
product
with
the
same
active
ingredient
is
proven
safe
and
effective
for
a
differentindication.
Another
circumstance
is
if
a
subsequent
product
with
the
same
active
ingredient
for
the
same
indication
is
shown
to
be
clinically
superior
to
theapproved
product
on
the
basis
of
greater
efficacy
or
safety,
or
providing
a
major
contribution
to
patient
care.
The
FDA
may
also
approve
another
product
with
thesame
active
ingredient
and
the
same
indication
if
the
company
with
orphan
drug
exclusivity
is
not
able
to
meet
market
demand.
Further,
the
FDA
may
approvemore
than
one
product
for
the
same
orphan
indication
or
disease
as
long
as
the
products
contain
different
active
ingredients.
As
a
result,
even
if
one
of
our
productcandidates
receives
orphan
exclusivity,
the
FDA
can
still
approve
other
drugs
that
have
a
different
active
ingredient
for
use
in
treating
the
same
indication
ordisease.
All
of
the
above
circumstances
could
create
a
more
competitive
market
for
us
and
could
have
a
material
adverse
effect
on
our
business.Our
research,
development
and
manufacturing
activities
used
in
the
production
of
ARIKAYCE
involve
the
use
of
hazardous
materials,
which
could
expose
usto
damages,
fines,
penalties
and
sanctions
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
and
ourother
product
candidates
involve
the
controlled
use
of
hazardous
materials
and
chemicals.
We
generally
contract
with
third
parties
for
the
disposal
of
thesematerials
and
wastes.
Although
we
strive
to
comply
with
all
pertinent
regulations,
we
cannot
eliminate
the
risk
of
environmental
contamination,
damage
to
facilitiesor
injury
to
personnel
from
the
accidental
or
improper
use
or
control
of
these
materials.
In
addition
to
any
liability
we
could
have
for
any
misuse
by
us
of
hazardousmaterials
and
chemicals,
we
could
also
potentially
be
liable
for
activities
of
our
CMOs
or
other
third
parties.
Any
such
liability,
or
even
allegations
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,
which
can
lead
to
significant
adverse
publicityand
obligations
to
pay
damages.
We
currently
have
only
limited
product
liability
insurance
for
our
products.
We
do
not
know
if
we
will
be
able
to
maintainexisting,
or
obtain
additional,
product
liability
insurance
on
acceptable
terms
or
with
adequate
coverage
against
potential
liabilities.
This
type
of
insurance
isexpensive
and
may
not
be
available
on
acceptable
terms.
If
we
are
unable
to
obtain
or
maintain
sufficient
insurance
coverage
on
reasonable
terms
or
to
otherwiseprotect
against
potential
product
liability
claims,
we
may
be
unable
to
commercialize
our
products.
A
successful
product
liability
claim
brought
against
us
in
excessof
our
insurance
coverage,
if
any,
may
require
us
to
pay
substantial
amounts
and
may
materially
adversely
affect
our
business,
financial
condition,
results
ofoperations
or
prospects.57Table
of
ContentsRisks
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
and
have
a
longerhistory
in
the
industry
than
we
do.
We
also
experience
competition
for
the
hiring
of
our
scientific
and
clinical
personnel
from
universities,
research
institutions,
andother
third
parties.
We
cannot
assure
that
we
will
attract
and
retain
such
persons
or
maintain
such
relationships.
Our
inability
to
retain
and
attract
qualifiedemployees
would
materially
harm
our
business,
financial
condition,
results
of
operations,
the
value
of
our
common
stock
and
our
prospects.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,
including
those
discussed
herein,
many
of
which
are
beyondour
control.
In
addition,
the
stock
market
has
from
time
to
time
experienced
extreme
price
and
volume
fluctuations,
which
have
particularly
affected
the
marketprices
for
emerging
biotechnology
and
pharmaceutical
companies
like
us,
and
which
have
often
been
unrelated
to
their58Table
of
Contentsoperating
performance.
These
broad
market
fluctuations
may
adversely
affect
the
market
price
of
our
common
stock.
Historically,
when
the
market
price
of
a
stockhas
been
volatile,
shareholders
are
more
likely
to
institute
securities
and
derivative
class
action
litigation
against
the
issuer
of
such
stock.
As
described
below,
asecurities
class
action
lawsuit
was
initiated
against
us
during
2016
following
a
decline
in
our
stock
price.We
and
certain
of
our
officers
and
directors
are
subject
to
a
securities
class
action
lawsuit,
which
may
require
significant
management
and
board
time
andattention
and
significant
legal
expenses
and
may
result
in
an
unfavorable
outcome,
which
could
have
a
material
adverse
effect
on
our
business,
financialcondition,
results
of
operations
and
cash
flows.













We
and
certain
of
our
executive
officers
and
directors
have
been
named
as
defendants
in
a
securities
class
action
lawsuit
initially
filed
on
July
15,
2016.The
amended
complaint,
filed
December
15,
2016,
alleges
that
we
and
certain
of
our
executive
officers
and
directors
violated
Sections
11
and
12(a)(2)
of
theSecurities
Act
of
1933,
as
amended
(Securities
Act),
and
that
we
and
certain
of
our
executive
officers
violated
Section
10(b)
of
the
Exchange
Act,
Rule
10b-5promulgated
thereunder
of
the
Exchange
Act,
by
making
materially
false
or
misleading
statements
and
omissions
relating
to
the
development
of
ARIKAYCEand/or
related
requests
for
regulatory
approval.
It
also
alleges
that
the
defendant
officers
and
directors
violated
Section
15
of
the
Securities
Act
and
that
thedefendant
officers
violated
Section
20(a)
of
the
Exchange
Act.
For
additional
information,
see
Item
3,
Legal Proceedings .
While
we
believe
that
we
havesubstantial
legal
and
factual
defenses
to
the
claims
in
the
class
action
and
intend
to
vigorously
defend
the
case,
this
lawsuit
could
divert
our
management's
andboard's
attention
from
other
business
matters,
the
outcome
of
the
pending
litigation
is
difficult
to
predict
and
quantify,
and
the
defense
against
the
underlying
claimswill
likely
be
costly.
The
ultimate
resolution
of
this
matter
could
result
in
payments
of
monetary
damages
or
other
costs,
materially
and
adversely
affect
ourbusiness,
financial
condition,
results
of
operations
and
cash
flows,
or
adversely
affect
our
reputation,
and
consequently,
could
negatively
impact
the
price
of
ourcommon
stock.













We
have
insurance
policies
related
to
the
risks
associated
with
our
business,
including
directors'
and
officers'
liability
insurance
policies.
However,
there
isno
assurance
that
our
insurance
coverage
will
be
sufficient
or
that
our
insurance
carriers
will
cover
all
claims
in
that
litigation.
If
we
are
not
successful
in
ourdefense
of
the
claims
asserted
in
the
putative
action
and
those
claims
are
not
covered
by
insurance
or
exceed
our
insurance
coverage,
we
may
have
to
pay
damageawards,
indemnify
our
officers
from
damage
awards
that
may
be
entered
against
them
and
pay
the
costs
and
expenses
incurred
in
defense
of,
or
in
any
settlementof,
such
claims.













In
addition,
there
is
the
potential
for
additional
shareholder
litigation
against
us,
and
we
could
be
materially
and
adversely
affected
by
such
matters.Future
issuances
of
our
common
stock
will
dilute
the
ownership
interest
of
our
existing
shareholders
and
such
issuances,
or
the
possibility
of
such
issuances,could
adversely
affect
prevailing
market
prices
for
our
common
stock
or
our
future
ability
to
raise
capital
through
an
offering
of
equity
securities.













Our
Articles
of
Incorporation
currently
authorize
us
to
issue
up
to
500
million
common
shares.
As
of
December
31,
2016,
we
had
62.0
million
shares
ofcommon
stock
outstanding.
To
the
extent
that
we
issue
additional
common
stock
in
connection
with
any
offerings
of
securities,
strategic
transactions,
or
otherwise,such
funding
may
significantly
dilute
existing
shareholders.
In
addition,
as
of
December
31,
2016,
7.2
million
shares
of
our
common
stock
are
potentially
issuableunder
outstanding
restricted
stock
units
and
stock
options
to
our
employees,
officers,
directors
and
consultants.
The
conversion
or
exercise
of
some
or
all
of
ourrestricted
stock
units
and
options
will
similarly
dilute
the
ownership
interests
of
existing
shareholders.
In
addition,
sales
in
the
public
market
of
newly
issued,
or59Table
of
Contentseven
the
possibility
of
such
sales,
could
adversely
affect
prevailing
market
prices
of
our
common
stock
or
our
future
ability
to
raise
capital
through
an
equityoffering.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:·The
ability
to
issue
preferred
stock
with
rights
senior
to
those
of
the
common
stock
without
any
further
vote
or
action
by
the
holders
of
the
commonstock.
The
issuance
of
preferred
stock
could
decrease
the
amount
of
earnings
and
assets
available
for
distribution
to
the
holders
of
common
stock
orcould
adversely
affect
the
rights
and
powers,
including
voting
rights,
of
the
holders
of
the
common
stock.
In
certain
circumstances,
such
issuancecould
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;·The
requirement
that
shareholders
provide
advance
notice
when
nominating
director
candidates
to
serve
on
our
Board
of
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
prohibition
against
entering
into
a
business
combination
with
the
beneficial
owner
of
10%
or
more
of
our
outstanding
voting
stock
for
a
periodof
three
years
after
the
10%
or
greater
owner
first
reached
that
level
of
stock
ownership,
unless
we
meet
certain
criteria.













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.Other
Risks
Related
to
our
BusinessCorporate
governance
and
public
disclosure
requirements
increase
our
costs
of
compliance,
and
our
inability
to
satisfy
these
requirements
could
materiallyharm
our
business.













Laws,
regulations
and
standards
relating
to
accounting,
corporate
governance
and
public
disclosure,
including
the
Sarbanes-Oxley
Act
of
2002,
other
SECregulations,
and
the
Nasdaq
Global
Select
Market
rules
have
high
costs
of
compliance,
and
our
failure
to
comply
with
such
laws,
regulations
and
standards
may
bedetrimental
to
our
business.
In
particular,
our
efforts
to
comply
with
Section
404
of
the
Sarbanes-Oxley
Act
of
2002,
to
furnish
a
report
by
management
on,
amongother
things,
the
effectiveness
and
the
related
regulations
regarding
our
required
assessment
of
our
internal
controls
over
financial
reporting
and
our
externalauditors'
audit
of
our
internal
control
over
financial
reporting
requires
the
commitment
of
significant
financial
and
managerial
resources.
The
inability
ofmanagement
and
our
independent
auditor
to
provide
us
with
an
unqualified
report
as
to
the
effectiveness
of
our
internal
controls
over
financial
reporting
for
futureyear
ends
could
result
in
adverse
consequences
to
us,
including,
but
not
limited
to,
a
loss
of
investor
confidence
in
the
reliability60Table
of
Contentsof
our
financial
statements,
which
could
cause
the
market
price
of
our
stock
to
decline,
and
substantial
costs
and
resources
to
rectify
any
internal
controldeficiencies.
For
example,
in
connection
with
our
review
of
internal
control
over
financial
reporting
as
of
December
31,
2012,
we
determined
that
we
did
notadequately
implement
certain
controls
over
the
administration,
accounting
and
oversight
of
our
2000
Stock
Incentive
Plan,
and
we
concluded
that
a
materialweakness
in
our
internal
control
over
financial
reporting
existed
as
of
December
31,
2012.
Any
material
weaknesses
may
materially
adversely
affect
our
ability
toreport
accurately
our
financial
condition
and
results
of
operations
in
a
timely
and
reliable
manner.
In
addition,
although
we
continually
review
and
evaluate
internalcontrol
systems
to
allow
management
to
report
on
the
sufficiency
of
our
internal
controls,
we
cannot
assure
you
that
we
will
not
discover
weaknesses
in
our
internalcontrol
over
financial
reporting.













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,
our
board
members,
chief
executive
officer
and
chief
financial
officercould
face
an
increased
risk
of
personal
liability
in
connection
with
their
performance
of
duties.
As
a
result,
we
may
face
difficulties
attracting
and
retainingqualified
board
members
and
executive
officers,
which
could
materially
harm
our
business.Our
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,
our
insurance
may
not
cover
all
claims,
continue
to
beavailable
on
reasonable
terms
or
be
sufficient
in
amount
to
cover
one
or
more
large
claims;
additionally,
the
insurer
may
disclaim
coverage
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
or
changes
in
our
insurance
policies,including
premium
increases
or
the
imposition
of
large
deductible
or
co-insurance
requirements,
could
have
a
material
adverse
effect
on
our
business,
results
ofoperations
and
financial
condition.61Table
of
ContentsWe
are
subject
to
the
US
Foreign
Corrupt
Practices
Act,
the
UK
Bribery
Act
and
other
anti-corruption
laws
and
trade
control
laws,
as
well
as
other
lawsgoverning
our
operations.
If
we
fail
to
comply
with
these
laws,
we
could
be
subject
to
negative
publicity,
civil
or
criminal
penalties,
other
remedial
measures,and
legal
expenses,
which
could
adversely
affect
our
business,
financial
condition,
results
of
operations
and
the
price
of
our
common
stock.













Our
operations
are
subject
to
anti-corruption
laws,
including
the
US
Foreign
Corrupt
Practices
Act
(FCPA),
the
UK
Bribery
Act
and
other
anti-corruptionlaws
that
apply
in
countries
where
we
do
business.
The
FCPA,
UK
Bribery
Act
and
these
other
laws
generally
prohibit
us,
our
employees
and
our
intermediariesfrom
making
prohibited
payments
to
government
officials
or
other
persons
to
obtain
or
retain
business
or
gain
some
other
business
advantage.
We
are
conductingthe
CONVERT
study
at
more
than
125
sites
in
18
countries
around
the
world,
and
certain
of
these
jurisdictions
in
which
we
operate
pose
a
risk
of
potential
FCPAviolations,
and
we
participate
in
joint
ventures
and
relationships
with
third
parties
whose
actions
could
potentially
subject
us
to
liability
under
the
FCPA
or
localanti-corruption
laws.
In
addition,
we
cannot
predict
the
nature,
scope
or
effect
of
future
regulatory
requirements
to
which
our
international
operations
might
besubject
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-US
government
entities,including
applicable
export
control
regulations,
economic
sanctions
on
countries
and
persons,
customs
requirements,
currency
exchange
regulations
and
transferpricing
regulations
(collectively,
Trade
Control
laws).













We
may
not
be
effective
in
ensuring
our
compliance
with
all
applicable
anticorruption
laws,
including
the
FCPA
or
other
legal
requirements,
includingTrade
Control
laws.
If
we
are
not
in
compliance
with
the
FCPA
and
other
anti-corruption
laws
or
Trade
Control
laws,
we
may
be
subject
to
criminal
and
civilpenalties,
disgorgement
and
other
sanctions
and
remedial
measures,
and
legal
expenses,
which
could
have
an
adverse
impact
on
our
business,
financial
condition,results
of
operations,
and
the
price
of
our
common
stock.
Likewise,
even
an
investigation
by
US
or
foreign
authorities
of
potential
violations
of
the
FCPA
otheranti-corruption
laws
or
Trade
Control
laws
could
have
an
adverse
impact
on
our
reputation,
business,
financial
condition,
results
of
operations
and
the
price
of
ourcommon
stock.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
July
2016,
we
signed
an
operating
lease
for
13,274square
feet
of
additional
laboratory
space
located
in
Bridgewater,
NJ
for
which
the
initial
lease
term
expires
in
September
2021.
We
also
lease
office
space
inIreland
and
the
Netherlands.62Table
of
ContentsITEM
3.



LEGAL
PROCEEDINGS













On
July
15,
2016,
a
lawsuit
captioned
Hoey
v.
Insmed
Incorporated,
et
al,
No.
3:16-cv-04323-FLW-TJB
(D.N.J.
July
15,
2016)
was
filed
in
the
US
DistrictCourt
for
the
District
of
New
Jersey
on
behalf
of
a
putative
class
of
investors
who
purchased
our
common
stock
from
March
18,
2013
through
June
8,
2016.
Thecomplaint
alleged
that
the
Company
and
certain
of
its
executives
violated
Sections
10(b)
and
20(a)
of
the
Exchange
Act
by
misrepresenting
and/or
omitting
thelikelihood
of
the
EMA
approving
our
European
MAA
for
use
of
ARIKAYCE
in
the
treatment
of
NTM
lung
disease
and
the
likelihood
of
commercialization
ofARIKAYCE
in
Europe.













On
October
25,
2016,
the
Court
issued
an
order
appointing
Bucks
County
Employees
Retirement
Fund
as
lead
plaintiff
for
the
putative
class.
OnDecember
15,
2016,
lead
plaintiff
filed
an
amended
complaint
that
shortens
the
putative
class
period
for
the
Exchange
Act
claims
to
March
26,
2014
throughJune
8,
2016
and
adds
claims
under
Sections
11,
12,
and
15
of
the
Securities
Act
on
behalf
of
a
putative
class
of
investors
who
purchased
common
stock
in
ortraceable
to
our
March
31,
2015
public
offering.
The
amended
complaint
names
as
defendants
in
the
Securities
Act
claims
the
Company,
certain
directors
andofficers,
and
the
investment
banks
who
served
as
underwriters
in
connection
with
the
secondary
offering.
The
amended
complaint
alleges
defendants
violated
theSecurities
Act
by
using
a
purportedly
misleading
definition
of
"culture
conversion"
and
supposedly
failing
to
disclose
in
the
offering
materials
purported
flaws
inthe
Phase
2
study
that
made
the
secondary
offering
risky
or
speculative.
The
amended
complaint
seeks
damages
in
an
unspecified
amount.
Our
response
to
theamended
complaint,
which
we
intend
to
move
to
dismiss,
is
due
by
March
1,
2017.
We
believe
that
the
allegations
in
the
complaints
are
without
merit
and
intend
todefend
the
lawsuit
vigorously;
however,
there
can
be
no
assurance
regarding
the
ultimate
outcome
of
the
lawsuit.













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.ITEM
4.



MINE
SAFETY
DISCLOSURES













Not
applicable.63Table
of
ContentsPART
IIITEM
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
2016
and
2015.















On
February
1,
2017,
the
last
reported
sale
price
for
our
common
stock
on
the
Nasdaq
Global
Select
Market
was
$15.11
per
share.
As
of
February
1,
2017,there
were
138
holders
of
record
of
our
common
stock.













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
at
that
time.64Fiscal
Year
2016
High
Low
Fourth
Quarter
$15.49
$10.21
Third
Quarter
$15.35
$9.75
Second
Quarter
$14.53
$9.02
First
Quarter
$18.60
$10.53
Fiscal
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
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
12/31/11
in
stock
or
index,
including
reinvestment
of
dividends.
Fiscal
year
ending
December
31.
Copyright©
2017
Standard
&
Poor's,
a
division
of
S&P
Global.
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,
2016,
2015,
2014,
2013
and
2012.
The
data
below
should
be
read
in
conjunction
with,
and
is
qualified
by
reference
to,
Management's Discussion andAnalysis of Financial Condition and Results of Operations and
our65Table
of
Contentsconsolidated
financial
statements
and
notes
thereto
contained
elsewhere
in
this
Annual
Report
on
Form
10-K.66


Year
Ended
December
31,



2016
2015
2014
2013
2012



(in
thousands,
except
per
share
data)

Historical
Statement
of
OperationsData:















Revenues
$-


$-


$-


$11,500
$-


Operating
expenses:















Research
and
development

122,721

74,277

56,292

44,279

29,781
General
and
administrative

50,679

43,216

31,073

22,236

12,657
Total
operating
expenses

173,400

117,493

87,365

66,515

42,438
Operating
loss

(173,400)
(117,493)
(87,365)
(55,015)
(42,438)Investment
income

604

261

58

166

1,822
Interest
expense

(3,498)
(2,889)
(2,415)
(2,412)
(763)Other
income
(expense),
net

119

(33)
141

(33)
5
Loss
before
income
taxes

(176,175)
(120,154)
(89,581)
(57,294)
(41,374)Income
tax
provision
(benefit)

98

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


Net
loss
$(176,273)$(118,183)$(79,159)$(56,073)$(41,374)Basic
and
diluted
net
loss
per
share
$(2.85)$(2.02)$(1.84)$(1.60)$(1.56)Weighted
average
basic
and
dilutedcommon
shares
outstanding

61,892

58,633

43,095

34,980

26,545
Historical
Balance
Sheet
Data:















Cash,
cash
equivalents
and
short-terminvestments
$162,591
$282,876
$159,226
$113,894
$90,782
Certificate
of
deposit
$-


$-


$-


$-


$2,153
Total
assets
$237,956
$356,556
$230,864
$176,498
$153,561
Current
portion
of
long-term
debt
$-


$3,113
$-


$3,283
$3,007
Debt,
long-term
$54,791
$22,027
$24,856
$16,338
$16,221
Total
shareholders'
equity
$154,483
$311,698
$186,237
$143,324
$120,882
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 contained elsewhere in thisAnnual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as thoseset forth under the section entitled Risk Factors, Cautionary Note Regarding Forward-Looking Statements and elsewhere herein, our actual results may differmaterially from those anticipated in these forward-looking statements.EXECUTIVE
OVERVIEW













Insmed
is
a
global
biopharmaceutical
company
focused
on
the
unmet
needs
of
patients
with
rare
diseases.
We
were
incorporated
in
the
Commonwealth
ofVirginia
on
November
29,
1999.
On
December
1,
2010,
we
completed
a
business
combination
with
Transave,
Inc.,
a
privately
held,
New
Jersey-basedpharmaceutical
company
focused
on
the
development
of
differentiated
and
innovative
inhaled
pharmaceuticals
for
the
site-specific
treatment
of
serious
lungdiseases.
Our
continuing
operations
are
based
on
the
technology
and
products
historically
developed
by
Transave.
During
2015
we
formed
subsidiaries
in
a
numberof
countries
in
Europe
in
preparation
for
the
commercialization
of
ARIKAYCE,
upon
approval
in
the
European
Union,
and
to
support
our
global
tax
structure.
TheCompany
has
legal
entities
in
the
US,
Ireland,
Germany,
France,
the
United
Kingdom
(UK)
and
the
Netherlands.













We
have
not
generated
material
revenue
to
date,
except
for
in
2013,
and
through
December
31,
2016,
we
had
an
accumulated
deficit
of
$765.2
million.
Wehave
financed
our
operations
primarily
through
the
public
offerings
of
our
equity
securities
and
debt
financings.
Although
it
is
difficult
to
predict
our
future
fundingrequirements,
based
upon
our
current
operating
plan,
we
anticipate
that
our
cash
and
cash
equivalents
as
of
December
31,
2016
will
enable
us
to
fund
ouroperations
for
at
least
the
next
12
months.













We
expect
that
over
the
next
several
years
we
will
continue
to
incur
losses
from
operations
as
we
increase
our
expenditures
in
research
and
development
inconnection
with
our
ongoing
clinical
trials,
and
for
expenses
related
to
the
preparation
for
the
commercial
launch
of
ARIKAYCE
globally,
if
approved.
If
adequatefunds
are
not
available
to
us
on
a
timely
basis,
or
at
all,
we
may
be
required
to
terminate
or
delay
certain
development
activities,
or
delay
our
investment
in
salesand
marketing
capabilities
or
other
activities
that
may
be
necessary
to
commercialize
ARIKAYCE,
if
we
obtain
marketing
approval.PIPELINE
PROGRESSARIKAYCE













Our
lead
product
candidate
is
ARIKAYCE,
or
liposomal
amikacin
for
inhalation
(LAI),
which
is
in
late-stage
development
for
adult
patients
withtreatment
refractory
nontuberculous
mycobacteria
(NTM)
lung
disease
caused
by
Mycobacterium avium complex
(MAC),
a
rare
and
often
chronic
infection
that
iscapable
of
causing
irreversible
lung
damage
and
which
can
be
fatal.













In
the
fourth
quarter
of
2016,
we
completed
enrollment
in
our
global
phase
3
clinical
study
of
ARIKAYCE
(the
212
or
CONVERT
study)
in
adult
patientswith
treatment
refractory
NTM
lung
disease
caused
by
MAC,
which
is
the
predominant
infective
species
in
NTM
lung
disease
in
the
United
States
(US),
Europe,and
Japan.
We
expect
to
report
top-line
results
for
the
Month
6
primary
endpoint67Table
of
Contentsin
the
second
half
of
2017.
If
the
CONVERT
study
meets
its
primary
endpoint,
we
intend
to
seek
accelerated
marketing
approval
for
ARIKAYCE
in
the
US.













CONVERT
study
subjects
who
are
non-converters
by
Month
6
may
be
eligible
to
enter
a
separate
12-month
open-label
study
(the
312
study).
The
primaryobjective
of
the
312
study
is
to
evaluate
the
long-term
safety
and
tolerability
of
ARIKAYCE
in
combination
with
a
standard
multi-drug
regimen.













In
the
fourth
quarter
of
2014,
we
filed
an
MAA
with
the
European
Medicines
Agency
(EMA)
for
ARIKAYCE
as
a
treatment
for
NTM
lung
disease
inadult
patients
and
for
cystic
fibrosis
(CF)
patients
with
Pseudomonas lung
infections.
The
filing
was
based
on
data
from
our
phase
3
study
in
CF
patients
withPseudomonas and
our
phase
2
study
in
patients
with
NTM.
In
February
2015,
the
EMA
validated
our
MAA
as
complete
for
review.
The
EMA
subsequentlyrequested
additional
information
with
respect
to
the
CF
indication
regarding
the
similarity
of
ARIKAYCE
to
another
product
that
has
an
orphan
designation
for
thesame
Pseudomonas indication.
In
the
third
quarter
of
2015,
the
EMA
adopted
our
request
to
withdraw
the
Pseudomonas indication
from
our
MAA.
In
April
2016,we
submitted
our
written
responses
to
the
EMA's
180-day
list
of
outstanding
issues
(LOI).
In
May
2016,
we
participated
in
an
oral
explanation
meeting
with
theCHMP
for
the
NTM
indication
to
address
the
LOI.
After
the
oral
explanation
meeting,
the
CHMP
concluded
that
the
data
submitted
did
not
provide
enoughevidence
to
support
an
approval.
In
June
2016,
we
withdrew
our
MAA.
We
intend
to
seek
marketing
approval
for
ARIKAYCE
in
the
EU,
Japan
and
certain
othercountries
outside
the
US
when
sufficient
data
are
available.INS1007













INS1007
is
a
novel
oral
reversible
inhibitor
of
dipeptidyl
peptidase
1
(DPP1),
an
enzyme
responsible
for
activating
neutrophil
serine
proteases,
which
areimplicated
in
the
pathology
of
chronic
inflammatory
lung
diseases,
such
as
non-cystic
fibrosis
(non-CF)
bronchiectasis.
In
October
2016,
we
acquired
the
exclusiveglobal
rights
to
INS1007
(formerly
known
as
AZD7986)
from
AstraZeneca
and
we
are
finalizing
our
plans
for
a
phase
2
study
in
our
lead
indication,
non-CFbronchiectasis.
In
a
phase
1
study
of
healthy
volunteers,
AZD7986
was
well
tolerated
and
demonstrated
inhibition
of
the
activity
of
the
neutrophil
serine
proteaseneutrophil
elastase
in
a
dose
and
concentration
dependent
manner.
In
preclinical
studies,
INS1007
was
shown
to
reversibly
inhibit
DPP1
and
the
activation
ofneutrophil
serine
proteases
within
maturing
neutrophils.













We
are
defining
our
regulatory
strategies
to
potentially
secure
US
and
EU
orphan
drug
designations
and
expedite
the
development
and
regulatory
reviewof
INS1007
through
programs
such
as
US
fast
track
designation
and
breakthrough
therapy.
We
plan
to
submit
an
Investigational
New
Drug
(IND)
application
to
theUS
Food
and
Drug
Administration
(FDA)
for
non-CF
bronchiectasis
and
subsequently
commence
a
phase
2
clinical
study
of
INS1007.
The
study
is
expected
tobegin
in
2017.
In
addition,
we
are
evaluating
INS1007
in
other
potential
indications.INS1009













INS1009
is
our
inhaled
nanoparticle
formulation
of
a
treprostinil
prodrug
that
may
offer
a
differentiated
product
profile
for
rare
pulmonary
disorders,including
pulmonary
arterial
hypertension
(PAH).
We
have
completed
a
phase
1
study
of
INS1009
in
healthy
subjects
and
the
results
were
presented
at
theEuropean
Respiratory
Society
international
congress
in
September
2016.
This
first-in-human
study
of
INS1009
determined
the
maximum-tolerated
dose
of
a
singledose
of
INS1009
and
characterized
a
pharmacokinetic
profile
that
supports
once-
or
twice-daily
dosing.
The
longer68Table
of
Contentshalf-life
of
treprostinil
associated
with
INS1009
was
likely
due
to
a
sustained
pulmonary
release.
We
are
currently
evaluating
our
options
to
advance
itsdevelopment.Other
Development
Activities













Our
earlier-stage
pipeline
includes
preclinical
compounds
that
we
are
evaluating
in
multiple
rare
diseases
of
unmet
medical
need,
including
methicillin-resistant
staph
aureus
(MRSA)
and
NTM.
To
complement
our
internal
research
and
development,
we
actively
evaluate
in-licensing
and
acquisition
opportunitiesfor
a
broad
range
of
rare
diseases.KEY
COMPONENTS
OF
OUR
RESULTS
OF
OPERATIONSResearch
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.
In
addition,
our
research
and
developmentexpenses
include
payments
to
third
parties
for
the
license
rights
to
products
in
development
(prior
to
marketing
approval),
such
as
for
INS1007.
Our
expensesrelated
to
manufacturing
our
drug
candidate
for
clinical
study
are
primarily
related
to
activities
at
contract
manufacturing
organizations
(CMOs)
that
manufactureARIKAYCE
for
our
use.
Our
expenses
related
to
clinical
trials
are
primarily
related
to
activities
at
contract
research
organizations
that
conduct
and
manage
clinicaltrials
on
our
behalf.













Since
2011,
we
have
focused
our
development
activities
principally
on
our
proprietary,
advanced
liposomal
technology
designed
specifically
for
inhalationlung
delivery.
In
2015,
we
commenced
the
CONVERT
study
for
ARIKAYCE
for
adult
patients
with
treatment
refractory
NTM
lung
disease.
In
2015,
we
alsocompleted
an
open-label
extension
study
in
which
CF
patients
that
completed
our
phase
3
trial
received
ARIKAYCE
for
a
period
of
two
years.
The
majority
of
ourresearch
and
development
expenses
have
been
for
our
ARIKAYCE
development
programs.
Our
development
efforts
in
2016
principally
related
to
the
developmentof
ARIKAYCE
in
the
NTM
lung
disease
indication
described
above.General
and
Administrative
Expenses













General
and
administrative
expenses
consist
primarily
of
salaries,
benefits
and
other
related
costs,
including
stock-based
compensation,
for
our
non-management
directors
and
personnel
serving
in
our
executive,
finance
and
accounting,
legal,
pre-commercial,
corporate
development,
information
technology,program
management
and
human
resource
functions.
General
and
administrative
expenses
also
include
professional
fees
for
legal,
including
patent-relatedexpenses,
consulting,
insurance,
board
of
director
fees,
tax
and
accounting
services.Investment
Income
and
Interest
Expense













Investment
income
consists
of
interest
and
dividend
income
earned
on
our
cash
and
cash
equivalents.
Interest
expense
consists
primarily
of
interest
costsand
amortization
of
debt
issuance
costs
related
to
our
debt
obligations.69Table
of
ContentsDebt
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
other
third
party
costs.
Unamortized
debt
issuance
costs
associated
with
extinguished
debt
are
expensed
in
the
periodof
the
extinguishment.RESULTS
OF
OPERATIONSComparison
of
the
Years
Ended
December
31,
2016
and
2015Net
Loss













Net
loss
for
the
year
ended
December
31,
2016
was
$176.3
million,
or
$2.85
per
common
share—basic
and
diluted,
compared
with
a
net
loss
of$118.2
million,
or
$2.02
per
common
share—basic
and
diluted,
for
the
year
ended
December
31,
2015.
The
$58.1
million
increase
in
our
net
loss
for
the
year
endedDecember
31,
2016
as
compared
to
the
same
period
in
2015
was
due
to:·Increased
research
and
development
expenses
of
$48.4
million
primarily
resulting
from
a
$30.0
million
upfront
payment
for
the
license
agreemententered
into
with
AstraZeneca
AB
(AstraZeneca)
for
exclusive
global
rights
to
INS1007
in
October
2016
(AZ
License
Agreement),
an
increase
inclinical
trial
expenses
related
to
the
CONVERT
study
and
higher
compensation
and
related
expenses
due
to
an
increase
in
headcount;
and·Increased
general
and
administrative
expenses
of
$7.5
million
resulting
from
an
increase
in
pre-commercial
planning
activities,
legal
and
consultingexpenses
and
higher
compensation
and
related
expenses,
including
an
increase
in
noncash
stock-based
compensation,
related
to
an
increase
inheadcount.













In
addition,
there
was
a
$2.1
million
decrease
in
the
income
tax
benefit
resulting
from
the
sale
of
a
portion
of
our
New
Jersey
State
net
operating
losses(NOLs)
under
the
State
of
New
Jersey's
Technology
Business
Tax
Certificate
Transfer
Program
(the
Program)
for
cash
of
$2.0
million
in
2015.70Table
of
ContentsResearch
and
Development
Expenses













Research
and
development
expenses
for
the
years
ended
December
31,
2016
and
2015
were
comprised
of
the
following:













Research
and
development
expenses
increased
to
$122.7
million
during
the
year
ended
December
31,
2016
from
$74.3
million
in
the
same
period
in
2015.The
$48.4
million
increase
was
due
to
a
$30.0
million
upfront
payment
under
the
AZ
License
Agreement
related
to
INS1007
in
October
2016,
a
$10.3
millionincrease
in
external
clinical
development
expenses
primarily
related
to
the
CONVERT
study
and
a
$9.8
million
increase
in
compensation
and
related
expenses,including
stock-based
compensation,
due
to
an
increase
in
headcount.
These
increases
were
partially
offset
by
a
$4.0
million
decrease
in
manufacturing
expensesprimarily
due
to
the
completion
of
the
build-out
of
our
production
area
at
Therapure's
facility
in
2015.General
and
Administrative
Expenses













General
and
administrative
expenses
for
the
year
ended
December
31,
2016
and
2015
were
comprised
of
the
following:71


Years
Ended
December
31,
Increase
(decrease)



2016
2015
$
%
External
Expenses












Clinical
development
&
research
$35,620
$25,274
$10,346

40.9%INS1007
license
payment

30,000

-



30,000

nm
Manufacturing

17,298

21,279

(3,981)
(18.7)%Regulatory
and
quality
assurance

2,510

3,051

(541)
(17.7)%Subtotal—external
expenses
$85,428
$49,604
$35,824

72.2%Internal
Expenses












Compensation
and
related
expenses
$28,514
$18,666
$9,848

52.8%Other
internal
operating
expenses

8,779

6,007

2,772

46.1%Subtotal—internal
expenses
$37,293
$24,673
$12,620

51.1%Total
$122,721
$74,277
$48,444

65.2%


Year
Ended
December
31,
Increase
(decrease)



2016
2015
$
%
General
&
administrative
$35,291
$30,614
$4,677

15.3%Pre-commercial
expenses

15,388

12,602

2,786

22.1%Total
general
&
administrativeexpenses
$50,679
$43,216
$7,463

17.3%Table
of
Contents













General
and
administrative
expenses
increased
to
$50.7
million
during
the
year
ended
December
31,
2016
from
$43.2
million
in
the
same
period
in
2015.The
$7.5
million
increase
was
primarily
due
to
an
increase
of
$3.7
million
in
consulting
fees
relating
to
pre-commercial
planning
activities,
legal
and
consultingexpenses
and
an
increase
of
$3.7
million
due
to
higher
compensation
costs,
including
stock-based
compensation,
related
to
an
increase
in
headcount.Interest
Expense













Interest
expense
was
$3.5
million
during
the
year
ended
December
31,
2016
as
compared
to
$2.9
million
in
the
same
period
in
2015.
The
$0.6
millionincrease
in
interest
expense
in
2016
relates
primarily
to
an
increase
in
our
borrowings
from
Hercules
in
September
and
October
of
2016.
We
entered
into
anAmended
and
Restated
Loan
Agreement
(A&R
Loan
Agreement)
with
Hercules
which
increased
our
borrowing
capacity
by
an
additional
$30.0
million
to
anaggregate
total
of
$55.0
million.
The
increase
in
borrowings
under
the
A&R
Loan
Agreement
was
used
to
fund
the
upfront
payment
owed
under
the
AZ
LicenseAgreement
for
the
exclusive
global
rights
to
INS1007.Income
tax
provision
(benefit)













The
income
tax
provision
(benefit)
was
$0.1
million
and
$(2.0)
million
for
the
years
ended
December
31,
2016
and
2015,
respectively.
The
income
taxprovision
for
the
year
ended
December
31,
2016
reflects
current
income
tax
expense
recorded
as
a
result
of
taxable
income
in
certain
our
subsidiaries
in
Europe.The
income
tax
benefit
recorded
for
the
year
ended
December
31,
2015
primarily
reflects
the
reversal
of
a
valuation
allowance
previously
recorded
against
ourNew
Jersey
State
NOLs
that
resulted
from
the
sale
of
a
portion
of
our
New
Jersey
State
NOLs
under
the
Program
for
cash
of
$2.0
million,
net
of
commissions.
TheProgram
allows
qualified
technology
and
biotechnology
businesses
in
New
Jersey
to
sell
unused
amounts
of
NOLs
and
defined
research
and
development
taxcredits
for
cash.
In
2015,
we
reached
the
lifetime
maximum
cap
of
NOLs
that
can
be
sold
to
the
State
of
New
Jersey.
Therefore,
we
received
no
cash
proceeds
fromthe
Program
in
2016
and
will
not
receive
cash
proceeds
from
the
Program
in
the
future.Comparison
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
theCONVERT
study
and
expenses
related
to
research
activities
for
INS1009,
and
an
increase
in
manufacturing
expenses
due
to
production
related
toour
clinical
and
research
programs;
and·Increased
general
and
administrative
expenses
of
$12.1
million
resulting
from
an
increase
in
compensation
expenses,
including
an
increase
inheadcount,
noncash
stock-based
compensation
related
to
the
vesting
of
certain
performance-based
stock
options,
an
increase
in
pre-commercialexpenses
in
Europe
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
income
tax
benefit
resulting
from
the
sale
of
a
portion
of
our
New
Jersey
State
NOLs
under
theProgram
for
cash
of
$2.0
million
and72Table
of
Contents$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
2014and
one
in
December
2014.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
CONVERT
studyand
expenses
related
to
research
activities
for
INS1009.
In
addition,
manufacturing
expenses
increased
$5.0
million
primarily
due
to
an
increase
in
productionrelated
to
our
clinical
and
research
programs.General
and
Administrative
Expenses













General
and
administrative
expenses
for
the
year
ended
December
31,
2015
and
2014
were
comprised
of
the
following:73


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%


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
Contents













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
the
vesting
of
certain
performance
based
stock
options
as
the
recognitioncriteria
was
met
upon
the
MAA
for
ARIKAYCE
being
accepted
for
filing
by
the
EMA
in
February
2015,
and
fees
and
expenses
related
to
the
build-out
of
ourEuropean
operations
and
global
tax
infrastructure.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.Income
tax
benefit













The
income
tax
benefit
was
$2.0
million
and
$10.4
million
for
the
years
ended
December
31,
2015
and
2014,
respectively.
The
income
tax
benefitrecorded
for
the
year
ended
December
31,
2014
primarily
reflects
the
reversal
of
a
valuation
allowance
previously
recorded
against
our
New
Jersey
State
NOLs
thatresulted
from
the
sale
of
a
portion
of
our
New
Jersey
State
NOLs
under
the
Program
for
cash
of
$10.4
million,
net
of
commissions.
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.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.
In
recent
years,
we
have
funded
our
operations
through
public
offerings
of
equity
securities
and
debt
financings.
We
expect
to
continue
to
incurlosses
both
in
our
US
and
certain
international
entities,
as
we
plan
to
fund
research
and
development
activities
and
commercial
launch
activities.













We
will
need
to
raise
additional
capital
to
fund
our
operations,
to
develop
and
commercialize
ARIKAYCE,
to
develop
INS1007
and
INS1009,
and
todevelop,
acquire,
in-license
or
co-promote
other
products
that
address
orphan
or
rare
diseases.
We
believe
we
currently
have
sufficient
funds
to
meet
our
financialneeds
for
at
least
the
next
12
months.
We
will
opportunistically
raise
additional
capital
and
may
do
so
through
equity
or
debt
financing(s),
strategic
transactions
orotherwise.
Such
additional
funding
will
be
necessary
to
continue
to
develop
our
potential
product
candidates,
to
pursue
the
license
or
purchase
of
othertechnologies,
to
commercialize
our
product
candidates
or
to
purchase
other
products.
We
cannot
assure
you
that
adequate
capital
will
be
available
on
favorableterms,
or
at
all,
when
needed.
If
we
are
unable
to
obtain
sufficient
additional
funds
when
required,
we
may
be
forced
to
delay,
restrict
or
eliminate
all
or
a
portion
ofour
research
or
development
programs,
dispose
of
assets
or
technology
or
cease
operations.
During
2017,
we
plan
to
continue
to
fund
further
clinical
developmentof
ARIKAYCE
and
INS1007,
support
efforts
to
obtain
regulatory
approvals,
and
prepare
for
commercialization
of
ARIKAYCE.
Our
cash
requirements
in
2017will
be
impacted
by
a
number
of
factors,
the
most
significant
of
which,
are
expenses
related
to
the
CONVERT
study
and74Table
of
Contentspre-commercialization
efforts
for
ARIKAYCE,
and
to
a
lesser
extent,
research
and
clinical
expenses
related
to
INS1007.













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,
2016,
we
had
total
cash
and
cash
equivalents
of
$162.6
million,
as
compared
with
$282.9
million
as
of
December
31,
2015.
The$120.3
million
decrease
was
due
primarily
to
the
use
of
cash
in
operating
activities.
Our
working
capital
was
$140.4
million
as
of
December
31,
2016
as
comparedwith
$265.9
million
as
of
December
31,
2015.













Net
cash
used
in
operating
activities
was
$146.7
million
and
$100.7
million
for
the
years
ended
December
31,
2016
and
2015,
respectively.
The
net
cashused
in
operating
activities
during
2016
and
2015
was
primarily
for
the
clinical,
regulatory
and
pre-commercial
activities
related
to
ARIKAYCE.
In
addition,
in
thefourth
quarter
of
2016,
we
made
a
payment
of
$30
million
to
AstraZeneca
under
the
AZ
License
Agreement
for
INS1007.













Net
cash
used
in
investing
activities
was
$4.2
million
and
$3.5
million
for
the
years
ended
December
31,
2016
and
2015,
respectively.
The
net
cash
used
ininvesting
activities
during
2016
was
primarily
related
to
payments
for
the
build
out
of
our
headquarters
and
lab
facility
in
Bridgewater,
New
Jersey.













Net
cash
provided
by
financing
activities
was
$30.7
million
and
$227.8
million
for
the
years
ended
December
31,
2016
and
2015,
respectively.
Net
cashprovided
by
financing
activities
during
2016
included
net
proceeds
of
$29.6
million
from
the
issuance
of
debt
as
a
result
of
the
A&R
Loan
Agreement
withHercules
and
proceeds
of
$1.1
million
received
from
stock
option
exercises.
Net
cash
provided
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
and
proceeds
of
$5.1
million
received
from
stock
option
exercises.Contractual
Obligations













On
June
29,
2012,
we
and
our
domestic
subsidiaries,
as
co-borrowers,
entered
into
a
Loan
and
Security
Agreement
with
Hercules
Technology
GrowthCapital,
Inc.
(as
subsequently
amended,
the
Prior
Loan
Agreement)
under
which
we
borrowed
an
aggregate
of
$25.0
million
at
an
interest
rate
of
9.25%.
We
paidan
"end
of
term"
charge
of
$390,000
in
January
of
2016,
which
was
charged
to
interest
expense
(and
accreted
to
the
debt)
using
the
effective
interest
method
overthe
life
of
the
Prior
Loan
Agreement.













On
September
30,
2016,
we
and
our
domestic
subsidiaries,
as
co-borrowers,
entered
into
the
A&R
Loan
Agreement
with
Hercules.
The
A&R
LoanAgreement
included
a
total
commitment
from
Hercules
of
up
to
$55.0
million,
of
which
$25.0
million
was
previously
outstanding.
The
amount
of
borrowings
wasinitially
increased
by
$10.0
million
to
an
aggregate
total
of
$35.0
million
on
September
30,
2016.
An
additional
$20.0
million
was
available
at
our
option
throughJune
30,
2017
subject
to
certain
conditions,
including
the
payment
of
a
facility
fee
of
0.375%.
We
exercised
this
option
in
early
October
2016
and
borrowed
anadditional
$20.0
million
in
connection
with
the
upfront75Table
of
Contentspayment
obligation
under
the
AZ
License
Agreement.
The
interest
rate
for
the
term
is
floating
and
is
defined
as
the
greater
of
(i)
9.25%
or
(ii)
9.25%
plus
the
sumof
the
US
prime
rate
minus
4.50%,
along
with
a
backend
fee
of
4.15%
of
the
aggregate
principal
amount
outstanding
and
an
aggregate
facility
fee
of
$337,500.
Theinterest-only
period
extends
through
November
1,
2018,
but
can
be
extended
up
to
six
months
under
certain
conditions.
The
maturity
date
of
the
loan
facility
wasalso
extended
to
October
1,
2020.
Pursuant
to
the
A&R
Loan
Agreement,
we
are
required
to
have
a
consolidated
minimum
cash
liquidity
in
an
amount
no
less
than$25.0
million.
Such
requirement
terminates
upon
the
earlier
of
the
date
by
which
we
complete
an
equity
financing
with
at
least
$75.0
million
in
proceeds
or
the
datewe
generate
and
announce
data
from
the
CONVERT
study
in
a
manner
that
could
support
an
NDA
filing.
In
addition,
pursuant
to
the
A&R
Loan
Agreement,Hercules
has
the
right
to
participate,
in
an
aggregate
amount
of
up
to
$2.0
million,
in
a
subsequent
private
financing
that
involves
the
issuance
of
our
equitysecurities.













In
connection
with
the
A&R
Loan
Agreement,
we
granted
the
lender
a
first
position
lien
on
all
of
our
assets,
excluding
intellectual
property.
Prepayment
ofthe
loans
made
pursuant
to
the
A&R
Loan
Agreement
is
subject
to
penalty.
The
backend
fee
of
4.15%
on
the
aggregate
outstanding
principal
balance
will
becharged
to
interest
expense
(and
accreted
to
the
debt)
using
the
effective
interest
method
over
the
original
life
of
the
A&R
Loan
Agreement.
Debt
issuance
fees
paidto
the
lender
were
recorded
as
a
discount
on
the
debt
and
are
being
amortized
to
interest
expense
using
the
effective
interest
method
over
the
life
of
the
A&R
LoanAgreement.













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
$3.0
million.
In
July
2016,
we
signed
an
operating
lease
for
additionallaboratory
space
located
in
Bridgewater,
NJ
for
which
the
initial
lease
term
expires
in
September
2021.
Future
minimum
rental
payments
under
this
lease
are$2.1
million.













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
was
effective
as
of
January
1,
2015,
and
had
an
initial
term
that
was
to
end
on
December
31,
2017.
In
2016,
we
signed
an
extension
of
the
agreementthrough
December
31,
2019
and
it
may
be
extended
for
additional
two
year
periods
upon
mutual
written
agreement
of
the
Company
and
Althea
at
least
one
yearprior
to
the
expiration
of
its
then-current
term.76Table
of
Contents













As
of
December
31,
2016,
future
payments
under
our
long-term
debt
agreements,
minimum
future
payments
under
non-cancellable
operating
leases
andminimum
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
LAI.
The
PARI
Agreement
has
an
initial
term
of
fifteen
years
from
the
first
commercial
sale
of
ARIKAYCE
pursuant
tothe
licensing
agreement
(the
Initial
Term).
The
term
of
the
PARI
Agreement
may
be
extended
by
us
for
an
additional
five
years
by
providing
written
notice
toPARI
at
least
one
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
patients
with
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
commercializeddrug
in
the
US.
Furthermore,
if
certain
global
sales
milestones
are
met
within
five
years
of
the
drug
commercialization,
we
would
owe
an
additional
$3.9
million
inadditional
payments.
Since
there
is
significant
development
and
regulatory
risk
associated
with
ARIKAYCE,
including
with
respect
to
the
CF
indication,
we
havenot
accrued
these
obligations.77





As
of
December
31,
2016
Payments
Due
By
Period



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



(In
thousands)

Debt
obligations















Debt
maturities
$55,000
$-


$24,024
$30,976
$-


Contractual
interest

18,332

5,158

9,118

4,056

-


Operating
leases

5,219

1,445

2,870

904

-


Purchase
obligations

8,100

2,700

5,400

-



-


Total
contractual
obligations
$86,651
$9,303
$41,412
$35,936
$-


Table
of
Contents













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
Canada.
The
agreement
has
an
initial
term
of
five
years
from
the
first
date
on
which
Therapure
delivers
ARIKAYCEto
us
after
we
obtain
permits
related
to
the
manufacture
of
ARIKAYCE.
Under
the
agreement,
we
are
obligated
to
pay
certain
minimum
amounts
for
the
batches
ofARIKAYCE
produced
each
calendar
year.













In
December
2014,
we
entered
into
a
services
agreement
with
SynteractHCR,
Inc.
(Synteract)
pursuant
to
which
we
retained
Synteract
to
performimplementation
and
management
services
in
connection
with
the
212
study.
We
anticipate
that
aggregate
costs
relating
to
all
work
orders
for
the
212
study
will
beapproximately
$45
million
over
the
period
of
the
study.
In
April
2015,
we
entered
into
a
work
order
with
Synteract
to
perform
implementation
and
managementservices
for
the
312
study.
We
anticipate
that
aggregate
costs
relating
to
all
work
orders
for
the
312
study
will
be
approximately
$25
million
over
the
period
of
thestudy.













In
October
2016,
we
entered
into
the
AZ
License
Agreement.
Pursuant
to
the
terms
of
the
AZ
License
Agreement,
AstraZeneca
granted
to
us
exclusiveglobal
rights
for
the
purpose
of
developing
and
commercializing
AZD7986
(which
we
renamed
INS1007).
In
consideration
of
the
licenses
and
other
rights
grantedby
AstraZeneca,
we
made
an
upfront
payment
of
$30.0
million,
which
was
included
as
research
and
development
expense
in
the
fourth
quarter
of
2016.
We
areobligated
to
make
a
series
of
contingent
milestone
payments
totaling
up
to
an
additional
$85.0
million
upon
the
achievement
of
clinical
development
and
regulatoryfiling
milestones.
If
we
elect
to
develop
INS1007
for
a
second
indication,
we
will
be
obligated
to
make
an
additional
series
of
contingent
milestone
paymentstotaling
up
to
$42.5
million.
No
additional
milestone
payments
are
due
for
any
indications
beyond
the
first
and
second
indications.
In
addition,
we
will
payAstraZeneca
tiered
royalties
ranging
from
a
high
single-digit
to
mid-teen
on
net
sales
of
any
approved
product
based
on
INS1007
and
one
additional
payment
of$35.0
million
upon
the
first
achievement
of
$1
billion
in
annual
net
sales.
The
AZ
License
Agreement
provides
AstraZeneca
with
the
option
to
negotiate
a
futureagreement
with
us
for
commercialization
of
INS1007
in
chronic
obstructive
pulmonary
disease
or
asthma.Future
Funding
Requirements













To
date,
we
have
not
generated
material
revenue
from
ARIKAYCE,
and
we
do
not
know
when,
or
if,
we
will
generate
such
revenue.
We
do
not
expect
togenerate
such
revenue
unless
or
until
we
obtain
marketing
approval
of,
secure
reimbursement
for,
and
commercialize,
ARIKAYCE.
We
will
need
to
raiseadditional
capital
to
fund
our
operations,
to
develop
and
commercialize
ARIKAYCE,
to
develop
INS1007
and
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;·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,
defending,
and
enforcing
patent
claims;·the
timing
and
cost
of
our
anticipated
clinical
trials,
including
INS1007
and
the
related
milestone
payments
due
to
AstraZeneca;78Table
of
Contents·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.
On
September
30,
2016,
the
totalcommitted
amount
under
the
A&R
Loan
Agreement
with
Hercules
was
increased
to
$55.0
million,
$25.0
million
of
which
was
previously
outstanding.
During
thefourth
quarter
of
2016,
we
drew
down
the
remaining
commitment.
We
believe
we
currently
have
sufficient
funds
to
meet
our
financial
needs
for
the
next12
months.
However,
our
business
strategy
will
require
us
to
raise
additional
capital
at
any
time
through
equity
or
debt
financing(s),
strategic
transactions
orotherwise.
Such
additional
funding
will
be
necessary
to
continue
to
develop
our
potential
product
candidates,
to
pursue
the
license
or
purchase
of
complementarytechnologies,
to
commercialize
our
product
candidates
or
to
purchase
other
products.
If
we
are
unable
to
obtain
additional
financing,
we
may
be
required
to
reducethe
scope
of
our
planned
product
development
and
commercialization
or
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
and
availability
of
any
future
financing
will
depend
principally
upon
equity
and
debt
marketconditions,
interest
rates
and,
more
specifically,
our
continued
progress
in
our
regulatory,
development
and
commercial
activities.
We
cannot
assure
you
that
suchcapital
funding
will
be
available
on
favorable
terms
or
at
all.
If
we
are
unable
to
obtain
sufficient
additional
funds
when
required,
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
cease
operations.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,
stock-based
compensation,
identifiable
intangibleassets,
and
accrued
expenses.
The
accounting
policies
discussed
below
are
considered
critical
to
an
understanding
of
our
consolidated
financial
statements
becausetheir
application
places
the
most
significant
demands
on
our
judgment.
Actual
results
could
differ
from
our
estimates.
For
additional
accounting
policies,
see
Note
2to
our
Consolidated
Financial
Statements—
Summary of Significant Accounting Policies.79Table
of
ContentsResearch
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,
includingthe
medical
devices
for
drug
delivery,
the
cost
of
conducting
clinical
studies,
and
the
cost
of
conducting
preclinical
and
research
activities.
In
addition,
research
anddevelopment
expenses
include
payments
to
third
parties
for
the
license
rights
to
products
in
development
(prior
to
marketing
approval).
Our
expenses
related
tomanufacturing
our
drug
candidate
and
medical
devices
for
clinical
study
are
primarily
related
to
activities
at
contract
manufacturing
organizations
that
manufactureARIKAYCE,
and
to
a
lesser
extent,
our
other
clinical
product
requirements.
Our
expenses
related
to
clinical
trials
are
primarily
related
to
activities
at
contractresearch
organizations
that
conduct
and
manage
clinical
trials
on
our
behalf.
These
contracts
set
forth
the
scope
of
work
to
be
completed
at
a
fixed
fee
or
amountper
patient
enrolled.
Payments
under
these
contracts
depend
on
performance
criteria
such
as
the
successful
enrollment
of
patients
or
the
completion
of
clinical
trialmilestones
as
well
as
time-based
fees.
Expenses
are
accrued
based
on
contracted
amounts
applied
to
the
level
of
patient
enrollment
and
to
activity
according
to
theclinical
trial
protocol.
Nonrefundable
advance
payments
for
goods
or
services
that
will
be
used
or
rendered
for
future
research
and
development
activities
aredeferred
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
orservices
are
no
longer
expected
to
be
provided.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.













The
following
table
summarizes
the
assumptions
used
in
determining
the
fair
value
of
stock
options
granted
during
the
years
ended
December
31,
2016,2015
and
2014:













For
the
years
ended
December
31,
2016,
2015
and
2014,
the
volatility
factor
was
based
on
our
historical
volatility
since
the
closing
of
our
merger
withTransave,
Inc.
in
December
2010.
The
expected
life
was
determined
using
the
simplified
method
as
described
in
Accounting
Standards
Codification
Topic
718,Accounting for Stock Compensation ,
which
is
the
midpoint
between
the
vesting
date
and
the
end
of
the
contractual
term.
The
risk-free
interest
rate
is
based
on
theUS
Treasury
yield
in
effect
at
the
date
of
grant.
Forfeitures
are
based
on
actual
percentage
of
option
forfeitures
since
the
closing
of
the
merger
in
December
2010and
are
the
basis
for
future
forfeiture
expectations.80


2016
2015
2014Volatility
74%
-
77%
78%
-
82%
83%
-
86%Risk-free
interest
rate
1.00%
-
1.90%
1.31%
-
1.75%
1.46%
-
1.83%Dividend
yield
0.0%
0.0%
0.0%Expected
option
term
(in
years)
6.25
6.25
6.25Table
of
ContentsIdentifiable
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.New
Accounting
Pronouncements—Adopted













In
August
2014,
the
Financial
Accounting
Standards
Board
(FASB)
issued
Accounting
Standards
Update
(ASU)
No.
2014-15,
Presentation of FinancialStatements—Going Concern: Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern, which
requires
management
to
evaluatewhether
there
is
substantial
doubt
about
the
entity's
ability
to
continue
as
a
going
concern
and,
if
so,
provide
certain
footnote
disclosures.
This
ASU
was
effectivefor
the
annual
period
ended
December
31,
2016,
and
interim
reporting
periods
thereafter.
The
adoption
of
this
standard
did
not
have
an
impact
on
our
consolidatedfinancial
statements
and
related
footnote
disclosures.81Table
of
Contents













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
amendmentsin
this
update
are
effective
for
financial
statements
issued
for
annual
periods
beginning
after
December
15,
2016
and
interim
periods
within
those
annual
periods.Earlier
application
was
permitted
and
we
adopted
the
update
effective
with
our
annual
reporting
period
ended
December
31,
2015.
The
adoption
of
this
update
didnot
have
a
significant
impact
on
our
consolidated
financial
statements.Recent
Accounting
Pronouncements—Not
Yet
Adopted













In
May
2014,
the
FASB
issued
ASU
2014-09,
Revenue from Contracts with Customers (Topic 606) which
amended
the
existing
accounting
standards
forrevenue
recognition.
ASU
2014-09
establishes
principles
for
recognizing
revenue
upon
the
transfer
of
promised
goods
or
services
to
customers,
in
an
amount
thatreflects
the
expected
consideration
received
in
exchange
for
those
goods
or
services.
In
July
2015,
the
FASB
deferred
the
effective
date
for
annual
reporting
periodsbeginning
after
December
15,
2017.
We
expect
to
adopt
ASU
2014-09
in
the
first
quarter
of
2018
and
the
impact
of
adoption
will
not
be
material
to
ourconsolidated
financial
statements.













In
February
2016,
the
FASB
issued
ASU
2016-02,
Leases (Topic 842) in
order
to
increase
transparency
and
comparability
among
organizations
byrecognizing
lease
assets
and
lease
liabilities
on
the
balance
sheet
for
those
leases
classified
as
operating
leases
under
previous
GAAP.
ASU
2016-02
requires
that
alessee
should
recognize
a
liability
to
make
lease
payments
(the
lease
liability)
and
a
right-of-use
asset
representing
its
right
to
use
the
underlying
asset
for
the
leaseterm
on
the
balance
sheet.
ASU
2016-02
is
effective
for
fiscal
years
beginning
after
December
15,
2018
(including
interim
periods
within
those
periods)
using
amodified
retrospective
approach
and
early
adoption
is
permitted.
We
expect
to
adopt
ASU
2016-02
in
the
first
quarter
of
2019
and
are
in
the
process
of
evaluatingthe
impact
of
adoption
on
our
consolidated
financial
statements.













In
March
2016,
the
FASB
issued
ASU
2016-09,
Improvements to Employee Share-Based Payment Accounting ,
which
amends
ASC
Topic
718,Compensation—Stock Compensation .
ASU
2016-09
simplifies
several
aspects
of
the
accounting
for
share-based
payment
transactions,
including
the
income
taxconsequences,
classification
of
awards
as
either
equity
or
liabilities,
and
classification
on
the
statement
of
cash
flows.
ASU
2016-09
is
effective
for
fiscal
yearsbeginning
after
December
15,
2016,
and
interim
periods
within
those
fiscal
years.
We
will
adopt
ASU
2016-09
in
the
first
quarter
of
2017
and
we
are
in
the
processof
evaluating
the
impact
of
adoption
on
our
consolidated
financial
statements.ITEM
7A.



QUANTITATIVE
AND
QUALITATIVE
DISCLOSURES
ABOUT
MARKET
RISK













As
of
December
31,
2016,
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,
2016,
we
had
$55.0
million
of
fixed
rate
borrowings
bearing
interest
at
9.25%
outstanding
under
the
A&R
Loan
Agreement
withHercules.
If
a
10%
change
in
interest
rates
was
to
have
occurred
on
December
31,
2016,
this
change
would
not
have
had
a
material
effect
on
the
fair
value
of
ourdebt
as
of
that
date,
nor
would
it
have
had
a
material
effect
on
our
future
earnings
or
cash
flows.82Table
of
Contents













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
2016,
2015
and
2014,
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.ITEM
9A.



CONTROLS
AND
PROCEDURESEvaluation
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,
2016.
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,
2016,
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.83Table
of
Contents













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,
2016,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,
2016.













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
IIIITEM
10.



DIRECTORS,
EXECUTIVE
OFFICERS
AND
CORPORATE
GOVERNANCE













The
information
required
by
Item
10
of
Form
10-K
is
incorporated
by
reference
from
the
discussion
responsive
thereto
under
the
captions
Election ofDirectors, Corporate Governance and
Section 16(a) Beneficial Ownership Reporting Compliance in
our
definitive
proxy
statement
for
our
2017
annual
meeting
ofshareholders
to
be
filed
with
the
SEC
no
later
than
120
days
after
the
close
of
the
fiscal
year
covered
by
this
Annual
Report.ITEM
11.



EXECUTIVE
COMPENSATION













The
information
required
by
Item
11
of
Form
10-K
is
incorporated
by
reference
from
the
discussion
responsive
thereto
under
the
captions
CompensationDiscussion and Analysis ,
Compensation Committee Report ,
Compensation Committee Interlocks and Insider Participation and
Director Compensation in
ourdefinitive
proxy
statement
for
our
2017
annual
meeting
of
shareholders
to
be
filed
with
the
SEC
no
later
than
120
days
after
the
close
of
the
fiscal
year
covered
bythis
Annual
Report.ITEM
12.



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













The
information
required
by
Item
12
of
Form
10-K
is
incorporated
by
reference
from
the
discussion
responsive
thereto
under
the
captions
CompensationDiscussion and Analysis ,
Security Ownership of Certain Beneficial Owners, Directors and Management in
our
definitive
proxy
statement
for
our
2017
annualmeeting
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.84Table
of
ContentsITEM
13.



CERTAIN
RELATIONSHIPS
AND
RELATED
TRANSACTIONS
AND
DIRECTOR
INDEPENDENCE













The
information
required
by
Item
13
of
Form
10-K
is
incorporated
by
reference
from
the
discussion
responsive
thereto
under
the
captions
Election ofClass II Directors and
Certain Relationships and Related Transactions in
our
definitive
proxy
statement
for
our
2017
annual
meeting
of
shareholders
to
be
filedwith
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













The
information
required
by
Item
14
of
Form
10-K
is
incorporated
by
reference
from
the
discussion
responsive
thereto
under
the
caption
CorporateGovernance and
Ratification of Independent Registered Public Accounting Firm in
our
definitive
proxy
statement
for
our
2017
annual
meeting
of
shareholders
tobe
filed
with
the
SEC
no
later
than
120
days
after
the
close
of
the
fiscal
year
covered
by
this
Annual
Report.PART
IVITEM
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
89:
(i)Reports
of
Independent
Registered
Public
Accounting
Firm
(ii)Consolidated
Balance
Sheets
as
of
December
31,
2016
and
2015
(iii)Consolidated
Statements
of
Comprehensive
Loss
for
the
Years
Ended
December
31,
2016,
2015
and
2014
(iv)Consolidated
Statements
of
Shareholders'
Equity
for
the
Years
Ended
December
31,
2016,
2015
and
2014
(v)Consolidated
Statements
of
Cash
Flows
for
the
Years
Ended
December
31,
2016,
2015
and
2014
(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.ITEM
16.



FORM
10-K
SUMMARY













Not
applicable.85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
23,
2017.













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
23,
2017.86

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
Shareholders
of
Insmed
Incorporated













We
have
audited
the
accompanying
consolidated
balance
sheets
of
Insmed
Incorporated
as
of
December
31,
2016
and
2015,
and
the
related
consolidatedstatements
of
comprehensive
loss,
shareholders'
equity
and
cash
flows
for
each
of
the
three
years
in
the
period
ended
December
31,
2016.
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,
2016
and
2015,
and
the
consolidated
results
of
its
operations
and
its
cash
flows
for
each
of
the
three
years
in
the
period
ended
December
31,
2016,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,
2016,
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
23,
2017
expressed
an
unqualified
opinion
thereon.Iselin,
New
Jersey
February
23,
201787

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













We
have
audited
Insmed
Incorporated's
internal
control
over
financial
reporting
as
of
December
31,
2016,
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,
2016,
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,
2016
and
2015,
and
the
related
consolidated
statements
of
comprehensive
loss,
shareholders'
equity
and
cashflows
for
each
of
the
three
years
in
the
period
ended
December
31,
2016
and
our
report
dated
February
23,
2017
expressed
an
unqualified
opinion
thereon.Iselin,
New
Jersey
February
23,
201788

/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 statements89


As
of
December
31,



2016
2015
Assets






Current
assets:






Cash
and
cash
equivalents
$162,591
$282,876
Prepaid
expenses
and
other
current
assets

5,816

5,242
Total
current
assets

168,407

288,118
In-process
research
and
development

58,200

58,200
Fixed
assets,
net

10,020

8,092
Other
assets

1,329

2,146
Total
assets
$237,956
$356,556
Liabilities
and
shareholders'
equity






Current
liabilities:






Accounts
payable
$10,439
$7,468
Accrued
expenses

16,822

10,995
Other
current
liabilities

728

683
Current
portion
of
long-term
debt

-



3,113
Total
current
liabilities

27,989

22,259
Long-term
liabilities:






Other
long-term
liabilities

693

572
Debt,
long-term

54,791

22,027
Total
liabilities

83,473

44,858
Common
stock,
$0.01
par
value;
500,000,000
authorized
shares,
62,019,889
and61,813,995
issued
and
outstanding
shares
at
December
31,
2016
and
December
31,2015,
respectively

620

618
Additional
paid-in
capital

919,164

900,043
Accumulated
deficit

(765,236)
(588,963)Accumulated
other
comprehensive
loss

(65)
-


Total
shareholders'
equity

154,483

311,698
Total
liabilities
and
shareholders'
equity
$237,956
$356,556
Table
of
ContentsINSMED
INCORPORATED
Consolidated
Statements
of
Comprehensive
Loss
(in
thousands,
except
per
share
data)



See accompanying notes to audited consolidated financial statements90


Years
ended
December
31,



2016
2015
2014
Revenues
$-


$-


$-


Operating
expenses:









Research
and
development

122,721

74,277

56,292
General
and
administrative

50,679

43,216

31,073
Total
operating
expenses

173,400

117,493

87,365
Operating
loss

(173,400)
(117,493)
(87,365)Investment
income

604

261

58
Interest
expense

(3,498)
(2,889)
(2,415)Other
income
(expense),
net

119

(33)
141
Loss
before
income
taxes

(176,175)
(120,154)
(89,581)Income
tax
provision
(benefit)

98

(1,971)
(10,422)Net
loss
$(176,273)$(118,183)$(79,159)Basic
and
diluted
net
loss
per
share
$(2.85)$(2.02)$(1.84)Weighted
average
basic
and
diluted
common
shares
outstanding

61,892

58,633

43,095
Net
loss
$(176,273)$(118,183)$(79,159)Other
comprehensive
loss:









Foreign
currency
translation
loss

(65)
-



-


Total
comprehensive
loss
$(176,338)$(118,183)$(79,159)Table
of
ContentsINSMED
INCORPORATED
Consolidated
Statements
of
Shareholders'
Equity
(in
thousands)



See accompanying notes to audited consolidated financial statements91


Common
Stock






Accumulated
Other
Comprehensive
Loss






Additional
Paid-in
Capital
Accumulated
Deficit






Shares
Amount
Total
Balance
at
January
1,
2014

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
Comprehensive
loss:


















Net
loss










(176,273)



(176,273)Other
comprehensive
loss













(65)
(65)Exercise
of
stock
options

162

2

1,082







1,084
Issuance
of
common
stock
for
vesting
ofRSUs

44













-


Stock
compensation
expense







18,039







18,039
Balance
at
December
31,
2016

62,020
$620
$919,164
$(765,236)$(65)$154,483
Table
of
ContentsINSMED
INCORPORATED
Consolidated
Statements
of
Cash
Flows
(in
thousands)



See accompanying notes to audited consolidated financial statements92


Years
ended
December
31,



2016
2015
2014
Operating
activities









Net
loss
$(176,273)$(118,183)$(79,159)Adjustments
to
reconcile
net
loss
to
net
cash
used
in
operatingactivities:









Depreciation
and
amortization

2,438

1,982

1,073
Stock
based
compensation
expense

18,039

15,590

11,328
Loss
on
sale
of
assets,
net

-



-



9
Amortization
of
debt
issuance
costs

281

458

390
Accrual
of
the
end
of
term
charge
on
the
debt















171

76

110
Changes
in
operating
assets
and
liabilities:























Prepaid
expenses
and
other
assets

191

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

2,767

(1,781)
3,312
Accrued
expenses
and
other

5,678

2,642

1,493
Net
cash
used
in
operating
activities

(146,708)
(100,700)
(64,416)Investing
activities









Purchase
of
fixed
assets

(4,200)
(3,454)
(5,351)Proceeds
from
sale
of
asset

-



-



10
Net
cash
used
in
investing
activities

(4,200)
(3,454)
(5,341)Financing
activities









Payments
on
capital
lease
obligations

-



-



(64)Proceeds
from
issuance
of
debt

30,000

-



5,000
Proceeds
from
issuance
of
common
stock















-



222,942

109,013
Proceeds
from
exercise
of
stock
options

1,084

5,112

1,390
Payment
of
debt
issuance
costs

(411)
(250)
(250)Net
cash
provided
by
financing
activities















30,673

227,804

115,089
Effect
of
exchange
rates
on
cash
and
cash
equivalents

(50)
-



-


Net
(decrease)
increase
in
cash
and
cash
equivalents

(120,285)
123,650

45,332
Cash
and
cash
equivalents
at
beginning
of
period

282,876

159,226

113,894
Cash
and
cash
equivalents
at
end
of
period
$162,591
$282,876
$159,226
Supplemental
disclosures
of
cash
flow
information:









Cash
paid
for
interest
$3,608
$2,948
$1,803
Cash
(paid)
received
for
taxes,
net
$(85)$3,008
$9,429
Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS1.







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
adult
patients
with
treatment
refractorynontuberculous
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
clinical-stage
pipeline
includes
INS1007,
a
novel
oral
reversible
inhibitor
of
dipeptidyl
peptidase
1,
and
INS1009,
an
inhaled
treprostinilprodrug
nanoparticle
formulation.













The
Company
has
funded
its
operations,
in
recent
years,
through
public
offerings
of
equity
securities
and
debt
financings.
The
Company
expects
tocontinue
to
incur
losses
in
order
to
fund
research
and
development
activities
for
its
clinical
programs
and
commercial
launch
activities
for
ARIKAYCE.
TheCompany
will
need
to
raise
additional
capital
to
fund
operations,
to
develop
and
commercialize
ARIKAYCE,
to
develop
INS1007
and
INS1009,
and
to
develop,acquire,
in-license
or
co-promote
other
products
that
address
orphan
or
rare
diseases.
The
Company
believes
it
currently
has
sufficient
funds
to
meet
its
financialneeds
for
at
least
the
next
12
months.













The
Company
was
incorporated
in
the
Commonwealth
of
Virginia
on
November
29,
1999
and
its
principal
executive
offices
are
located
in
Bridgewater,New
Jersey.
The
Company
has
legal
entities
in
the
United
States
(US),
Ireland,
Germany,
France,
the
United
Kingdom
(UK)
and
the
Netherlands.













Basis
of
Presentation
—The
consolidated
financial
statements
include
the
accounts
of
the
Company
and
its
wholly-owned
subsidiaries,
Insmed
Limited,Celtrix
Pharmaceuticals,
Inc.,
Insmed
Holdings
Limited,
Insmed
Ireland
Limited,
Insmed
France
SAS,
Insmed
Germany
GmbH
and
Insmed
Netherlands
B.V.
Allintercompany
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
affected
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
and
cashequivalents.
Interest
expense
consists
primarily
of
interest
costs
related
to
the
Company'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
for93Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)2.







Summary
of
Significant
Accounting
Policies
(Continued)computer
equipment.
Estimated
useful
lives
of
seven
years
are
used
for
laboratory
equipment,
office
equipment,
manufacturing
equipment
and
furniture
andfixtures.
Leasehold
improvements
are
amortized
over
the
shorter
of
the
lease
term
or
the
estimated
useful
life
of
the
asset.
Long-lived
assets
are
reviewed
forimpairment
whenever
events
or
changes
in
circumstances
indicate
that
the
carrying
amount
of
an
asset
may
not
be
recoverable.
Recoverability
of
assets
to
be
heldand
used
is
measured
by
a
comparison
of
the
carrying
amount
of
an
asset
to
estimated
undiscounted
future
cash
flows
expected
to
be
generated
by
the
asset.
If
thecarrying
amount
of
an
asset
exceeds
its
estimated
future
cash
flows,
then
an
impairment
charge
is
recognized
for
the
amount
by
which
the
carrying
value
of
theasset
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.
This
approachrequires
significant
management
judgment
with
respect
to
unobservable
inputs
such
as
future
volume,
revenue
and
expense
growth
rates,
changes
in
workingcapital
use,
appropriate
discount
rates
and
other
assumptions
and
estimates.
The
estimates
and
assumptions
used
are
consistent
with
the
Company's
business
plans.A
market
based
valuation
approach
was
not
considered
given
a
lack
of
revenues
and
profits
for
the
Company.













Debt
Issuance
Costs
—Debt
issuance
costs
are
amortized
to
interest
expense
using
the
effective
interest
rate
method
over
the
term
of
the
debt.
Debtissuance
costs
paid
to
the
lender
and
third
parties
are
reflected
as
a
discount
to
the
debt
in
the
consolidated
balance
sheets.
Unamortized
debt
issuance
costsassociated
with
extinguished
debt
are
expensed
in
the
period
of
the
extinguishment.













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
are94Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)2.







Summary
of
Significant
Accounting
Policies
(Continued)directly
related
to
the
amount
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.·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
is
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,
2016
and
December
31,
2015
were
its
cash
and
cashequivalents
of
$162.6
million
and
$282.9
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
2016
and
2015.













As
of
December
31,
2016
and
2015,
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
US,
Ireland,
Germany,
France,
the
UK
and
the
Netherlands.
The
results
of
its
non-US
dollarbased
functional
currency
operations
are
translated
to
US
dollars
at
the
average
exchange
rates
during
the
period.
Assets
and
liabilities
are
translated
at
theexchange
rate
prevailing
at
the
balance
sheet
date.
Equity
is
translated
at
the95Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)2.







Summary
of
Significant
Accounting
Policies
(Continued)prevailing
exchange
rate
at
the
date
of
the
equity
transaction.
Translation
adjustments
are
included
in
shareholders'
equity,
as
a
component
of
other
comprehensiveloss.













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
income
(expense),
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.
The
inability
of
the
suppliers
or
manufacturers
to
fulfill
supply
requirements
of
theCompany
could
materially
impact
future
operating
results.
A
change
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
TemporaryAuthorizations
for
Use
(Autorisation
Temporaire
d'Utilisation
or
ATU).
Pursuant
to
this
program,
the
Company
shipped
product
to
pharmacies
after
receivingrequests
from
physicians
for
patients
in
France.
For
the
years
ended
December
31,
2016
and
2015,
the
revenue
recorded
was
immaterial
and
is
included
as
acomponent
of
other
income
(expense),
net.
The
Company
is
initiating
expanded
access
programs
(EAPs)
in
other
select
territories
in
Europe,
some
of
which
may
befully
reimbursed.
EAPs
are
intended
to
make
products
available
on
a
named
patient
basis
before
they
are
commercially
available
in
accordance
with
localregulations.
The
Company
did
not
recognize
any
revenue
in
2014.













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.













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.
In
addition,
research
and
development
expenses
include
payments
to
third
parties
for
the
license
rights
to
products
in
development
(prior
tomarketing
approval).
The
Company's
expenses
related
to
manufacturing
its
drug
candidate
and
medical
devices
for
clinical
study
are
primarily
related
to
activitiesat
contract
manufacturing
organizations
that
manufacture
ARIKAYCE,
INS1007,
and
INS1009
and
the
medical
devices
for
the
Company's
use.
The
Company'sexpenses
related
to
clinical
trials
are
primarily
related
to
activities
at
contract
research
organizations
that
conduct
and
manage
clinical
trials
on
the
Company'sbehalf.
These
contracts
set
forth
the
scope
of
work
to
be
completed
at
a
fixed
fee
or
amount
per
patient
enrolled.
Payments
under
these
contracts
primarily
dependon
performance
criteria96Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)2.







Summary
of
Significant
Accounting
Policies
(Continued)such
as
the
successful
enrollment
of
patients
or
the
completion
of
clinical
trial
milestones
as
well
as
time-based
fees.
Expenses
are
accrued
based
on
contractedamounts
applied
to
the
level
of
patient
enrollment
and
to
activity
according
to
the
clinical
trial
protocol.
Nonrefundable
advance
payments
for
goods
or
services
thatwill
be
used
or
rendered
for
future
research
and
development
activities
are
deferred
and
capitalized.
Such
amounts
are
then
recognized
as
an
expense
as
the
relatedgoods
are
delivered
or
the
services
are
performed,
or
when
the
goods
or
services
are
no
longer
expected
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.













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
the
tax
benefit
from
an
uncertain
tax
position
only
if
it
is
more
likely
than
not
that
the
tax
position
will
be
sustained
onexamination
by
taxing
authorities,
based
solely
on
the
technical
merits
of
the
position.
The
tax
benefits
recognized
in
the
financial
statements
from
such
a
positionshould
be
measured
based
on
the
largest
benefit
that
has
a
greater
than
50%
likelihood
to
be
sustained
upon
ultimate
settlement.
The
Company
had
no
uncertain
taxpositions
as
of
December
31,
2016
and
2015
that
qualified
for
either
recognition
or
disclosure
in
the
consolidated
financial
statements.97Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)2.







Summary
of
Significant
Accounting
Policies
(Continued)













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
taxprovision
(benefit)
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
shareholders
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
and
restricted
stock
unitswould
be
antidilutive
as
the
Company
incurred
a
net
loss
in
all
periods
presented.
Potentially
dilutive
common
shares
resulting
from
the
assumed
exercise
ofoutstanding
stock
options
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,
2016,
2015
and
2014.













The
following
potentially
dilutive
securities
have
been
excluded
from
the
computations
of
diluted
weighted-average
common
shares
outstanding
as
ofDecember
31,
2016,
2015
and
2014
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
therapies
forpatients
with
rare
diseases.
A
single
management
team
that
reports
to
the
Chief
Executive
Officer
comprehensively
manages
the
entire
business.
The98


Years
Ended
December
31,



2016
2015
2014



(in
thousands,
except
per
share
amounts)

Numerator:









Net
loss
$(176,273)$(118,183)$(79,159)Denominator:









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

61,892

58,633

43,095
Effect
of
dilutive
securities:









Common
stock
options

-



-



-


Restricted
stock
and
restricted
stock
units











-



-



-


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

61,892

58,633

43,095
Net
loss
per
share:









Basic
and
Diluted
$(2.85)$(2.02)$(1.84)


2016
2015
2014
Stock
options
to
purchase
common
stock

7,117

5,274

4,400
Restricted
stock
and
restricted
stock
units

89

44

21
Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)2.







Summary
of
Significant
Accounting
Policies
(Continued)Company
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
(Adopted)
—In
August
2014,
the
Financial
Accounting
Standards
Board
(FASB)
issued
Accounting
Standards
Update(ASU)
No.
2014-15,
Presentation of Financial Statements—Going Concern: Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern,which
requires
management
to
evaluate
whether
there
is
substantial
doubt
about
the
entity's
ability
to
continue
as
a
going
concern
and,
if
so,
provide
certainfootnote
disclosures.
This
ASU
was
effective
for
the
annual
period
ended
December
31,
2016,
and
interim
reporting
periods
thereafter.
The
adoption
of
thisstandard
did
not
have
an
impact
on
the
Company's
consolidated
financial
statements
and
related
footnote
disclosures.













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
amendmentsin
this
update
are
effective
for
financial
statements
issued
for
annual
periods
beginning
after
December
15,
2016
and
interim
periods
within
those
annual
periods.Earlier
application
was
permitted
and
the
Company
adopted
the
update
effective
with
its
annual
reporting
period
ended
December
31,
2015.
The
adoption
of
thisupdate
did
not
have
a
significant
impact
on
the
Company's
consolidated
financial
statements.













New
Accounting
Pronouncements
(Not
Yet
Adopted)
—In
May
2014,
the
FASB
issued
ASU
2014-09,
Revenue from Contracts with Customers (Topic606) which
amended
the
existing
accounting
standards
for
revenue
recognition.
ASU
2014-09
establishes
principles
for
recognizing
revenue
upon
the
transfer
ofpromised
goods
or
services
to
customers,
in
an
amount
that
reflects
the
expected
consideration
received
in
exchange
for
those
goods
or
services.
In
July
2015,
theFASB
deferred
the
effective
date
for
annual
reporting
periods
beginning
after
December
15,
2017.
The
Company
expects
to
adopt
ASU
2014-09
in
the
first
quarterof
2018
and
the
impact
of
adoption
will
not
be
material
to
its
consolidated
financial
statements.













In
February
2016,
the
FASB
issued
ASU
2016-02,
Leases (Topic 842) in
order
to
increase
transparency
and
comparability
among
organizations
byrecognizing
lease
assets
and
lease
liabilities
on
the
balance
sheet
for
those
leases
classified
as
operating
leases
under
previous
GAAP.
ASU
2016-02
requires
that
alessee
should
recognize
a
liability
to
make
lease
payments
(the
lease
liability)
and
a
right-of-use
asset
representing
its
right
to
use
the
underlying
asset
for
the
leaseterm
on
the
balance
sheet.
ASU
2016-02
is
effective
for
fiscal
years
beginning
after
December
15,
2018
(including
interim
periods
within
those
periods)
using
amodified
retrospective
approach
and
early
adoption
is
permitted.
The
Company
expects
to
adopt
ASU
2016-02
in
the
first
quarter
of
2019
and
is
in
the
process
ofevaluating
the
impact
of
adoption
on
its
consolidated
financial
statements.













In
March
2016,
the
FASB
issued
ASU
2016-09,
Improvements to Employee Share-Based Payment Accounting ,
which
amends
ASC
Topic
718,Compensation—Stock Compensation .
ASU
2016-09
simplifies99Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)2.







Summary
of
Significant
Accounting
Policies
(Continued)several
aspects
of
the
accounting
for
share-based
payment
transactions,
including
the
income
tax
consequences,
classification
of
awards
as
either
equity
orliabilities,
and
classification
on
the
statement
of
cash
flows.
ASU
2016-09
is
effective
for
fiscal
years
beginning
after
December
15,
2016,
and
interim
periodswithin
those
fiscal
years.
The
Company
will
adopt
ASU
2016-09
in
the
first
quarter
of
2017
and
is
in
the
process
of
evaluating
the
impact
of
adoption
on
itsconsolidated
financial
statements.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,
2016
and2015.
The
total
intangible
IPRD
asset
was
$58.2
million
as
of
December
31,
2016
and
2015,
which
resulted
from
the
initial
amount
recorded
at
the
time
of
theCompany's
merger
with
Transave
in
2010
and
subsequent
adjustments
in
the
value.
The
Company
uses
the
income
approach
to
derive
the
fair
value
of
in-processresearch
and
development
assets.
This
approach
calculates
fair
value
by
estimating
future
cash
flows
attributable
to
the
assets
and
then
discounting
these
cash
flowsto
a
present
value
using
a
risk-adjusted
discount
rate.
Identifiable
intangible
assets
are
measured
at
their
respective
fair
values
and
will
not
be
amortized
untilcommercialization.
If
commercialization
occurs,
intangible
assets
will
be
amortized
over
their
estimated
useful
lives.
As
of
December
31,
2016,
the
Company
didnot
identify
any
indicators
of
impairment
of
its
in-process
research
and
development
intangible
assets
and
the
implied
value
of
the
intangible
assets
was
more
than100%
greater
than
the
book
value.100


As
of
December
31,



2016
2015



(in
thousands)

Accrued
clinical
trial
expenses
$7,071
$4,331
Accrued
compensation

6,937

4,302
Accrued
professional
fees

1,604

1,202
Accrued
technical
operation
expenses

591

702
Accrued
interest
payable

438

199
Other
accrued
expenses

181

259

$16,822
$10,995
Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)5.







Fixed
Assets,
net













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













Depreciation
expense
was
$2.4
million,
$2.0
million
and
$1.1
million
for
the
years
ended
December
31,
2016,
2015
and
2014,
respectively.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.
(as
subsequently
amended,
the
Prior
Loan
Agreement)
under
which
the
Company
borrowed
an
aggregate
of
$25.0
million
at
an
interest
rate
of9.25%.
The
Company
was
required
to
pay
an
"end
of
term"
charge
of
$390,000
in
January
of
2016,
which
was
charged
to
interest
expense
(and
accreted
to
thedebt)
using
the
effective
interest
method
over
the
life
of
the
Prior
Loan
Agreement.













On
September
30,
2016,
the
Company
and
its
domestic
subsidiaries,
as
co-borrowers,
entered
into
an
Amended
and
Restated
Loan
and
SecurityAgreement
(the
A&R
Loan
Agreement)
with
Hercules
Capital,
Inc.
(Hercules).
The
A&R
Loan
Agreement
included
a
total
commitment
from
Hercules
of
up
to$55.0
million,
of
which
$25.0
million
was
previously
outstanding.
The
amount
of
borrowings
was
increased
by
$10.0
million
to
an
aggregate
total
of
$35.0
millionon
September
30,
2016.
An
additional
$20.0
million
was
available
at
the
Company's
option
through
June
30,
2017
subject
to
certain
conditions,
including
thepayment
of
a
facility
fee
of
0.375%.
The
Company
exercised
this
option
in
early
October
2016
and
borrowed
an
additional
$20.0
million
in
connection
with
itsupfront
payment
obligation
under
the
License
Agreement
with
AstraZeneca
(see
Note 10 ).
The
interest
rate
for
the
term
is
floating
and
is
defined
as
the
greater
of(i)
9.25%
or
(ii)
9.25%
plus
the
sum
of
the
US
prime
rate
minus
4.50%,
along
with
a
backend
fee
of
4.15%
of
the
aggregate
principal
amount
outstanding
and
anaggregate
facility
fee
of
$337,500.
The
interest-only
period
extends
through101





As
of
December
31,



Estimated
Useful
Life
(years)
Asset
Description
2016
2015






(in
thousands)

Lab
equipment
7
$5,662
$3,957
Furniture
and
fixtures
7

1,903

1,127
Computer
hardware
and
software
3
-
5

2,251

1,969
Office
equipment
7

65

65
Manufacturing
equipment
7

1,148

980
Leasehold
improvements
lease
term

6,735

5,300




17,764

13,398
Less
accumulated
depreciation



(7,744)
(5,306)Fixed
assets,
net


$10,020
$8,092
Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)6.







Debt
(Continued)November
1,
2018,
but
can
be
extended
up
to
six
months
under
certain
conditions.
The
maturity
date
of
the
loan
facility
was
also
extended
to
October
1,
2020.Pursuant
to
the
A&R
Loan
Agreement,
the
Company
is
required
to
have
consolidated
minimum
cash
liquidity
in
an
amount
no
less
than
$25.0
million.
Suchrequirement
terminates
upon
the
earlier
of
the
date
by
which
the
Company
completes
an
equity
financing
with
at
least
$75.0
million
in
proceeds
or
the
date
theCompany
generates
and
announces
data
from
the
CONVERT
study
in
a
manner
that
could
support
an
NDA
filing.
In
addition,
pursuant
to
the
A&R
LoanAgreement,
Hercules
has
the
right
to
participate,
in
an
aggregate
amount
of
up
to
$2.0
million,
in
a
subsequent
private
financing
that
involves
the
issuance
of
ourequity
securities.













In
connection
with
the
A&R
Loan
Agreement,
the
Company
granted
Hercules
a
first
position
lien
on
all
of
the
Company's
assets,
excluding
intellectualproperty.
Prepayment
of
the
loans
made
pursuant
to
the
A&R
Loan
Agreement
is
subject
to
penalty.
The
backend
fee
of
4.15%
on
the
aggregate
outstandingprincipal
balance
will
be
charged
to
interest
expense
(and
accreted
to
the
debt)
using
the
effective
interest
method
over
the
original
life
of
the
A&R
LoanAgreement.
Debt
issuance
fees
paid
to
Hercules
were
recorded
as
a
discount
on
the
debt
and
are
being
amortized
to
interest
expense
using
the
effective
interestmethod
over
the
life
of
the
A&R
Loan
Agreement.













The
A&R
Loan
Agreement
also
contains
representations
and
warranties
by
the
Company
and
the
lender
and
indemnification
provisions
in
favor
of
thelender
and
customary
covenants
(including
limitations
on
other
indebtedness,
liens,
acquisitions,
investments
and
dividends,
and
a
minimum
liquidity
covenant),and
events
of
default
(including
payment
defaults,
breaches
of
covenants
following
any
applicable
cure
period,
a
material
impairment
in
the
perfection
or
priority
ofthe
lender's
security
interest
or
in
the
collateral,
and
events
relating
to
bankruptcy
or
insolvency).
Upon
the
occurrence
of
an
event
of
default,
a
default
interest
rateof
an
additional
5%
may
be
applied
to
the
outstanding
loan
balances,
and
the
lender
may
terminate
its
lending
commitment,
declare
all
outstanding
obligationsimmediately
due
and
payable,
and
take
such
other
actions
as
set
forth
in
the
A&R
Loan
Agreement.













The
following
table
presents
the
components
of
the
Company's
debt
balance
as
of
December
31,
2016
(in
thousands):102Debt:



Note
payable
under
A&R
Loan
Agreement
$55,000
Accretion
of
end
of
term
charge

171
Issuance
fees
paid
to
lender

(380)Current
portion
of
long-term
debt

-


Long-term
debt
$54,791
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,
2016
and
2015,
the
fair
value
of
theCompany's
debt
approximates
the
carrying
amount.7.







Shareholders'
Equity













Common
Stock
—As
of
December
31,
2016,
the
Company
had
500,000,000
shares
of
common
stock
authorized
with
a
par
value
of
$0.01
and
62,019,889shares
of
common
stock
issued
and
outstanding.
In
addition,
as
of
December
31,
2016,
the
Company
had
reserved
7,116,706
shares
of
common
stock
for
issuanceupon
the
exercise
of
outstanding
common
stock
options
and
89,194
shares
of
common
stock
for
issuance
upon
the
vesting
of
restricted
stock
units.













In
April
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.













In
August
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.













In
December
2014,
in
connection
with
the
Third
Amendment
to
the
Prior
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
Securities
Act)
and
may
not
be
offered
or
sold
in
the
US
in
theabsence
of
an
effective
registration
statement
or
exemption
from
the
registration
requirements
under
the
Securities
Act.
The
issuance
of
the
securities
in
thistransaction
were
exempt
from
registration
under
Section
4(2)
of
the
Securities
Act.103





Year
Ending
in
December
31:



2017
$-


2018

3,271
2019

20,753
2020

30,976

$55,000
Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)7.







Shareholders'
Equity
(Continued)













Preferred
Stock
—As
of
December
31,
2016
and
2015,
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.8.







Stock-Based
Compensation













The
Company's
current
equity
compensation
plan,
the
2015
Incentive
Plan,
was
approved
by
shareholders
at
the
Company's
2015
Annual
Meeting
ofShareholders.
The
2015
Incentive
Plan
is
administered
by
the
Compensation
Committee
and
the
Board
of
Directors
of
the
Company.
Under
the
terms
of
the
2015Incentive
Plan,
the
Company
is
authorized
to
grant
a
variety
of
incentive
awards
based
on
its
common
stock,
including
stock
options
(both
incentive
stock
optionsand
non-qualified
stock
options),
performance
options/shares
and
other
stock
awards,
as
well
as
the
payment
of
incentive
bonuses
to
all
employees
and
non-employee
directors.
The
Company
has
5,000,000
shares
of
common
stock
authorized
for
issuance
under
the
2015
Incentive
Plan
and,
as
of
December
31,
2016,there
were
2,266,465
shares
remaining
for
future
grants
(or
issuances)
of
stock
options,
stock
appreciation
rights,
restricted
stock,
restricted
stock
units
andincentive
bonuses
thereunder.
The
2015
Incentive
Plan
will
terminate
on
April
9,
2025
unless
it
is
extended
or
terminated
earlier
pursuant
to
its
terms.
In
addition,from
time
to
time,
the
Company
makes
inducement
grants
of
stock
options.
These
awards
are
made
pursuant
to
the
NASDAQ
inducement
grant
exception
as
acomponent
of
new
hires'
employment
compensation.
Inducement
stock
options
granted
to
new
employees
during
the
years
ended
December
31,
2016
and
2015were
88,060
and
227,000,
respectively.













Stock
Options
—The
Company
calculates
the
fair
value
of
stock
options
granted
using
the
Black-Scholes
valuation
model.
The
following
tablesummarizes
the
grant
date
fair
value
and
assumptions
used
in
determining
the
fair
value
of
all
stock
options
granted,
including
grants
of
inducement
options,
duringthe
years
ended
December
31,
2016,
2015
and
2014.













For
the
years
ended
December
31,
2016,
2015
and
2014,
the
volatility
factor
was
based
on
the
Company's
historical
volatility
since
the
closing
of
themerger
with
Transave
in
December
2010.
The
expected
option
term
was
determined
using
the
simplified
method
as
described
in
ASC
Topic
718,
Accounting forStock Compensation ,
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
Treasuryyield
in
effect
at
the
date
of
grant.
Forfeitures
are
based
on
actual
percentage
of
option
forfeitures
since
the
closing
of
the
merger,
and
this
is
the
basis
for
futureforfeiture
expectations.104


2016
2015
2014Volatility
74%
-
77%
78%
-
82%
83%
-
86%Risk-free
interest
rate
1.00%
-
1.90%
1.31%
-
1.75%
1.46%
-
1.83%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
$8.77
$14.20
$11.74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
a
result
of
the
MarketingAuthorization
Application
(MAA)
acceptance
for
ARIKAYCE,
which
was
received
from
the
European
Medicines
Agency
(EMA)
in
February
2015,
the
vesting
ofperformance
options
totaling
$1.5
million
were
recorded
as
non-cash
compensation
expense
in
the
first
quarter
of
2015.
As
of
December
31,
2016,
the
Companyhad
performance
options
totaling
158,334
shares
outstanding.













The
following
table
summarizes
stock
option
activity
for
stock
options
granted
for
the
years
ended
December
31,
2016,
2015
and
2014
as
follows:105


Number
of
Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life
in
Years
Aggregate
Intrinsic
Value
(in
'000)
Options
outstanding
at
January
1,
2014

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






Vested
and
expected
to
vest
at
December
31,
2015

5,059,645

13.46






Exercisable
at
December
31,
2015

1,991,141

8.70






Options
outstanding
at
December
31,
2015

5,273,722
$13.64






Granted

2,532,675

12.96






Exercised

(162,340)
6.68






Forfeited
and
expired

(527,351)
17.08






Options
outstanding
at
December
31,
2016

7,116,706
$13.30

7.71
$16,293
Vested
and
expected
to
vest
at
December
31,
2016

6,850,658
$13.25

7.67
$16,009
Exercisable
at
December
31,
2016

3,113,998
$11.28

6.58
$12,368
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,
2016,
2015
and
2014
was
$1.0
million,
$4.7
million
and$2.5
million,
respectively.













As
of
December
31,
2016,
there
was
$26.8
million
of
unrecognized
compensation
expense
related
to
unvested
stock
options,
which
is
expected
to
berecognized
over
a
weighted
average
period
of
2.7
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,
2016:













Restricted
Stock
and
Restricted
Stock
Units
—The
Company
may
grant
Restricted
Stock
(RS)
and
Restricted
Stock
Units
(RSUs)
to
employees
and
non-employee
directors.
Each
share
of
RS
vests
upon
and
each
RSU
represents
a
right
to
receive
one
share
of
the
Company's
common
stock
upon
the
completion
of
aspecific
period
of
continued
service
or
achievement
of
a
certain
milestone.
RS
and
RSU
awards
granted
are
valued
at
the
market
price
of
the
Company's
commonstock
on
the
date
of
grant.
The
Company
recognizes
noncash
compensation
expense
for
the
fair
values
of
these
RS
and
RSUs
on
a
straight-line
basis
over
therequisite
service
period
of
these
awards.106Outstanding
as
of
December
31,
2016
Exercisable
as
of
December
31,
2016
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
$3.03

124,482

4.94
$3.03

124,482
$3.03
$3.29
$3.40

718,214

5.68
$3.40

718,214
$3.40
$3.60
$6.90

519,003

5.91
$5.94

444,282
$5.78
$6.96
$10.85

1,193,996

9.27
$10.75

16,863
$7.44
$11.14
$12.44

779,695

7.19
$12.01

413,477
$12.08
$12.45
$14.24

842,127

7.47
$13.27

481,611
$13.35
$14.32
$16.09

598,364

8.06
$15.68

214,516
$15.82
$16.16
$16.16

739,150

8.98
$16.16

-



-


$16.19
$20.92

727,250

7.56
$19.42

368,638
$19.56
$21.20
$27.38

874,425

8.24
$22.82

331,915
$22.83
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,
2016,
2015
and
2014:













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,
2016,
2015
and
2014:9.







Income
Taxes













The
income
tax
provision
(benefit)
was
$0.1
million,
$(2.0)
million
and
$(10.4)
million
and
the
effective
rates
were
approximately
0%,
2%
and
12%
forthe
years
ended
December
31,
2016,
2015
and
2014,
respectively.
The
income
tax
provision
for
the
year
ended
December
31,
2016
reflected
current
income
taxexpense
recorded
as
a
result
of
the
taxable
income
in
certain
of
the
Company's
subsidiaries107


Number
of
RSUs
Weighted
Average
Grant
Price
Outstanding
at
January
1,
2014

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
Granted

89,194

10.85
Released

(43,554)
16.07
Forfeited

-



-


Outstanding
at
December
31,
2016

89,194
$10.85






2016
2015
2014






(in
millions)

Research
and
development
expenses


$6.2
$4.0
$4.5
General
and
administrative
expenses



11.8

11.6

6.8

Total(1)
$18.0
$15.6
$11.3
(1)Includes
$1.7
million,
$2.3
million
and
$2.4
million
for
the
years
ended
December
31,
2016,
2015
and
2014,
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)in
Europe.
The
income
tax
benefit
recorded
and
the
effective
tax
rates
for
the
years
ended
December
31,
2015
and
2014
primarily
reflected
the
reversal
of
valuationallowances
previously
recorded
against
the
Company's
New
Jersey
State
net
operating
losses
(NOLs)
that
resulted
from
the
Company's
sale
of
$24.3
million
and$110.5
million
of
its
New
Jersey
State
NOLs
under
the
State
of
New
Jersey's
Technology
Business
Tax
Certificate
Transfer
Program
(the
Program)
for
cash
of$2.0
million
and
$10.4
million,
respectively,
net
of
commissions.
The
Program
allows
qualified
technology
and
biotechnology
businesses
in
New
Jersey
to
sellunused
amounts
of
NOLs
and
defined
research
and
development
tax
credits
for
cash.
In
2015,
the
Company
reached
the
lifetime
maximum
cap
of
NOLs
that
can
besold
to
the
State
of
New
Jersey.
Therefore,
the
Company
did
not
receive
any
cash
proceeds
from
the
Program
in
2016
and
will
no
longer
receive
cash
proceedsfrom
the
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
2013
and
later,
and
is
generally
open
for
certain
states
for
the
years
2012
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,
2016
and
2015,
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
not
anticipate
any
material
changes
in
the
amount
of
unrecognized
taxpositions
over
the
next
12
months.













For
the
years
ended
December
31,
2016
and
2015,
the
Company
was
also
subject
to
foreign
income
taxes
as
a
result
of
legal
entities
established
foractivities
in
Europe.
The
Company's
loss
before
income
taxes
in
the
US
and
globally
was
as
follows
(in
thousands):108


Years
ended
December
31,



2016
2015
2014
US
$(140,354)$(100,278)$(89,581)Foreign

(35,821)
(19,876)
-


Total
$(176,175)$(120,154)$(89,581)Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)9.







Income
Taxes
(Continued)













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













The
reconciliation
between
the
federal
statutory
tax
rate
of
34%
and
the
Company's
effective
tax
rate
is
as
follows:109


Years
ended
December
31,



2016
2015
2014
Current:









Federal
$-


$-


$-


State

3

(2,015)
(10,422)Foreign

95

44

-




98

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









Federal

-



-



-


State

-



-



-


Foreign

-



-



-




-



-



-


Total
$98
$(1,971)$(10,422)


Years
Ended
December
31,



2016
2015
2014
Statutory
federal
tax
rate

34%
34%
34%Permanent
items

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

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

8%
12%
5%Foreign
income
taxes

(4)%
(1)%
0%Change
in
state
tax
rate

0%
0%
0%Change
in
valuation
allowance

(39)%
(43)%
(17)%Other

0%
0%
0%Effective
tax
rate

0%
2%
12%Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)9.







Income
Taxes
(Continued)













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
$284.6
million
and
$216.2
million
at
December
31,
2016
and
2015,
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
$68.4
million
and
$52.3
million
in
2016
and
2015,
respectively,
as
it
wasmore
likely
than
not
that
such
tax
benefits
will
not
be
realized.













At
December
31,
2016,
the
Company
had
federal
net
operating
loss
carryforwards
for
income
tax
purposes
of
approximately
$619.0
million.
Due
to
thelimitation
on
NOLs
as
more
fully
discussed
below,
$440.7
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
$193.1
million
of
New
Jersey
NOLsavailable
to
offset
against
future
taxable
income.
The
Company
also
has
California
and
Virginia
NOLs
that
are
entirely
limited
due
to
Section
382
(as
discussedbelow),
in
addition
to
changing
state
apportionment
allocations,
as
the
Company
is
now
100%
resident
in
New
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
were
subject
to
substantial
limitations
under
Section
382
due
to
ownershipchanges
that
occurred
at110


As
of
December
31,



2016
2015



(in
thousands)

Deferred
tax
assets:






Net
operating
loss
carryforwards
$228,729
$195,052
General
business
credits

50,648

33,360
Product
license

11,783

-


Alternative
minimum
tax
(AMT)
credit

418

418
Other

16,265

10,569
Gross
deferred
tax
assets
$307,843
$239,399
Deferred
tax
liabilities:






In-process
research
and
development
$(23,245)$(23,245)Deferred
tax
liabilities
$(23,245)$(23,245)Net
deferred
tax
assets
$284,598
$216,154
Valuation
allowance

(284,598)
(216,154)Net
deferred
tax
assets
$-


$-


Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)9.







Income
Taxes
(Continued)various
points
from
the
Company's
original
organization
through
December
2010.
In
general,
an
ownership
change,
as
defined
by
Section
382,
results
fromtransactions
increasing
the
ownership
of
shareholders
that
own,
directly
or
indirectly,
5%
or
more
of
a
corporation's
stock,
in
the
stock
of
a
corporation
by
morethan
50
percentage
points
over
a
three-year
period.
Since
the
Company's
formation,
it
has
raised
capital
through
the
issuance
of
common
stock
on
several
occasionswhich,
combined
with
the
purchasing
shareholders'
subsequent
disposition
of
those
shares,
resulted
in
multiple
changes
in
ownership,
as
defined
by
Section
382since
the
Company's
formation
in
1999.
These
ownership
changes
resulted
in
substantial
limitations
on
the
use
of
the
Company's
NOLs
and
general
business
taxcredit
carryforwards
up
to
and
including
December
2010.
The
Company
continues
to
track
all
of
its
NOLs
and
tax
credit
carryforwards
but
has
provided
a
fullvaluation
allowance
to
offset
those
amounts.10.







License
and
Other
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
optimized
eFlowNebulizer
System
for
delivery
of
ARIKAYCE
in
treating
patients
with
NTM
infections,
CF
and
bronchiectasis.
The
Company
has
rights
to
several
US
and
foreignissued
patents
and
patent
applications
involving
improvements
to
the
optimized
eFlow
Nebulizer
System,
to
exploit
such
system
with
ARIKAYCE
for
thetreatment
of
such
indications,
but
the
Company
cannot
manufacture
such
nebulizers
except
as
permitted
under
the
Commercialization
Agreement
with
PARI.Under
the
licensing
agreement,
the
Company
paid
PARI
an
upfront
license
fee
and
PARI
is
entitled
to
receive
payments
up
to
an
aggregate
of
€4.3
million
either
incash,
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
oncommercial
net
sales
of
ARIKAYCE,
subject
to
certain
specified
annual
minimum
royalties.
See
below
for
information
related
to
the
commercialization
agreementwith
PARI.              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.Other 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
ofARIKAYCE.
If
ARIKAYCE
becomes
an
approved
product
for
CF
in
the
US,
the111Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)10.







License
and
Other
Agreements
(Continued)Company
will
owe
payments
totaling
up
to
$13.4
million
to
CFFT
that
would
be
payable
over
a
three-year
period
after
approval
as
a
commercialized
drug
in
theUS.
Furthermore,
if
certain
global
sales
milestones
are
met
within
five
years
of
the
drug
commercialization,
the
Company
would
owe
an
additional
payment
of$3.9
million.
Since
there
is
significant
development
and
regulatory
risk
associated
with
ARIKAYCE,
including
with
respect
to
the
CF
indication,
the
Company
hasnot
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
ARIKAYCE.
Pursuant
to
the
agreement,
the
Company
and
Therapure
collaborated
to
construct
a
production
area
for
themanufacture
of
ARIKAYCE
in
Therapure's
existing
manufacturing
facility
in
Mississauga,
Ontario,
Canada.
Therapure
manufactures
ARIKAYCE
for
theCompany
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
LAI.
The
Commercialization
Agreement
envisages
that
PARI
will
undertake
themanufacturing
of
the
Device
except
in
the
case
of
certain
defined
supply
failures,
when
the
Company
will
have
the
right
to
make
the
Device
and
have
it
made
bythird
parties
(but
not
certain
third
parties
deemed
under
the
Commercialization
Agreement
to
compete
with
PARI).
The
agreement
has
an
initial
term
of
fifteenyears
from
the
first
commercial
sale
of
ARIKAYCE
pursuant
to
the
licensing
agreement
(the
Initial
Term).
The
term
of
the
agreement
may
be
extended
by
theCompany
for
an
additional
five
years
by
providing
written
notice
to
PARI
at
the
least
one
year
prior
to
the
expiration
of
the
Initial
Term.
Notwithstanding
theforegoing,
the
parties
have
certain
rights
and
obligations
under
the
agreement
prior
to
the
commencement
of
the
Initial
Term.
The
agreement
allows
for
terminationby
either
party
upon
the
occurrence
of
certain
events,
including
(i)
the
material
breach
by
the
other
party
of
any
provision
of
the
agreement,
(ii)
the
default
orbankruptcy
of
the
other
party,
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
a
services
agreement
with
SynteractHCR,
Inc.
(Synteract)
pursuant
to
which
theCompany
retained
Synteract
to
perform
implementation
and
management
services
in
connection
with
the
212
study.
In
April
2015,
the112Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)10.







License
and
Other
Agreements
(Continued)Company
entered
into
a
work
order
with
Synteract
to
perform
implementation
and
management
services
for
the
312
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
by
Althea
each
calendar
year
duringthe
term
of
the
Fill/Finish
Agreement.
The
Fill/Finish
Agreement
became
effective
as
of
January
1,
2015,
with
an
initial
term
that
was
to
end
on
December
31,2017.
In
2016,
the
term
was
extended
for
an
additional
two
years
through
December
31,
2019,
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.
The
Company
has
spent
more
than
the
requiredminimum
for
batches
of
ARIKAYCE
in
each
year
of
the
contract.              AstraZeneca —In
October
2016,
the
Company
entered
into
a
license
agreement
(License
Agreement)
with
AstraZeneca
AB,
a
Swedish
corporation(AstraZeneca).
Pursuant
to
the
terms
of
the
License
Agreement,
AstraZeneca
granted
the
Company
exclusive
global
rights
for
the
purpose
of
developing
andcommercializing
AZD7986
(renamed
INS
1007).
In
consideration
of
the
licenses
and
other
rights
granted
by
AstraZeneca,
the
Company
made
an
upfront
paymentof
$30.0
million,
which
was
included
as
research
and
development
expense
in
the
fourth
quarter
of
2016.
The
Company
is
also
obligated
to
make
a
series
ofcontingent
milestone
payments
totaling
up
to
an
additional
$85.0
million
upon
the
achievement
of
clinical
development
and
regulatory
filing
milestones.
If
theCompany
elects
to
develop
INS1007
for
a
second
indication,
the
Company
will
be
obligated
to
make
an
additional
series
of
contingent
milestone
payments
totalingup
to
$42.5
million.
No
additional
milestone
payments
are
due
for
any
indications
beyond
the
first
and
second
indications.
In
addition,
the
Company
will
payAstraZeneca
tiered
royalties
ranging
from
a
high
single-digit
to
mid-teen
on
net
sales
of
any
approved
product
based
on
INS1007
and
one
additional
payment
of$35.0
million
upon
the
first
achievement
of
$1
billion
in
annual
net
sales.
The
License
Agreement
provides
AstraZeneca
with
the
option
to
negotiate
a
futureagreement
with
the
Company
for
commercialization
of
INS1007
in
chronic
obstructive
pulmonary
disease
or
asthma.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
$3.0
million.
In
July
2016,
the
Company
signed
an
operating
lease
for
additional
laboratory
space
located
inBridgewater,
NJ
for
which
the
initial
lease
term
expires
in
September
2021.
Future
minimum
rental
payments
under
this
lease
are
$2.1
million.













Rent
expense
charged
to
operations
was
$1.2
million,
$0.8
million,
and
$1.3
million
for
the
years
ended
December
31,
2016,
2015
and
2014,
respectively.Rent
expense
is
recorded
on
a113Table
of
ContentsINSMED
INCORPORATEDNOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)11.







Commitments
and
Contingencies
(Continued)straight-line
basis
over
the
term
of
the
applicable
leases.
Future
minimum
rental
cash
payments
required
under
the
Company's
operating
leases
as
of
December
31,2016
are
as
follows
(in
thousands):Legal
Proceedings













On
July
15,
2016,
a
lawsuit
captioned
Hoey
v.
Insmed
Incorporated,
et
al,
No.
3:16-cv-04323-FLW-TJB
(D.N.J.
July
15,
2016)
was
filed
in
the
US
DistrictCourt
for
the
District
of
New
Jersey
on
behalf
of
a
putative
class
of
investors
who
purchased
the
Company's
common
stock
from
March
18,
2013
through
June
8,2016.
The
complaint
alleged
that
the
Company
and
certain
of
its
executives
violated
Sections
10(b)
and
20(a)
of
the
Securities
Exchange
Act
of
1934
(ExchangeAct)
by
misrepresenting
and/or
omitting
the
likelihood
of
the
EMA
approving
the
Company's
European
MAA
for
use
of
ARIKAYCE
in
the
treatment
of
NTM
lungdisease
and
the
likelihood
of
commercialization
of
ARIKAYCE
in
Europe.













On
October
25,
2016,
the
Court
issued
an
order
appointing
Bucks
County
Employees
Retirement
Fund
as
lead
plaintiff
for
the
putative
class.
OnDecember
15,
2016,
lead
plaintiff
filed
an
amended
complaint
that
shortens
the
putative
class
period
for
the
Exchange
Act
claims
to
March
26,
2014
throughJune
8,
2016
and
adds
claims
under
Sections
11,
12,
and
15
of
the
Securities
Act
on
behalf
of
a
putative
class
of
investors
who
purchased
common
stock
in
ortraceable
to
the
Company's
March
31,
2015
public
offering.
The
amended
complaint
names
as
defendants
in
the
Securities
Act
claims
the
Company,
certaindirectors
and
officers,
and
the
investment
banks
who
served
as
underwriters
in
connection
with
the
secondary
offering.
The
amended
complaint
alleges
defendantsviolated
the
Securities
Act
by
using
a
purportedly
misleading
definition
of
"culture
conversion"
and
supposedly
failing
to
disclose
in
the
offering
materialspurported
flaws
in
the
Phase
2
study
that
made
the
secondary
offering
risky
or
speculative.
The
amended
complaint
seeks
damages
in
an
unspecified
amount.
TheCompany's
response
to
the
amended
complaint,
which
it
intends
to
move
to
dismiss,
is
due
by
March
1,
2017.
The
Company
believes
that
the
allegations
in
thecomplaints
are
without
merit
and
intends
to
defend
the
lawsuit
vigorously;
however,
there
can
be
no
assurance
regarding
the
ultimate
outcome
of
the
lawsuit.













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.114Year
Ending
in
December
31:



2017
$1,445
2018

1,482
2019

1,388
2020

443
2021

461

$5,219
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,
2016
and
2015
(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
matched
100%
of
eligible
employee
contributions
on
the
first
3%
of
employee
salary
(up
to
theIRS
maximum).
Employer
contributions
for
the
year
ended
December
31,
2016
and
2015
were
$0.6
and
$0.4
million,
respectively.115


2016



First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter*
Total*
Revenues
$-
$-
$-
$-
$-
Operating
loss
$(33,067)$(36,133)$(37,149)$(67,051)$(173,400)Net
loss
$(33,532)$(36,579)$(37,760)$(68,402)$(176,273)Basic
and
diluted
net
loss
per
share
$(0.54)$(0.59)$(0.61)$(1.10)$(2.85)


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)*Includes
a
$30.0
million
upfront
payment
to
AstraZeneca
under
the
AZ
License
Agreement
related
to
INS1007,
which
was
included
as
acomponent
of
research
and
development
expense.Table
of
ContentsEXHIBIT
INDEX
116
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,
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).Table
of
Contents117
10.9**
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).
10.10
Amended
and
Restated
Loan
and
Security
Agreement,
dated
as
of
September
30,
2016,
by
and
between
InsmedIncorporated,
Celtrix
Pharmaceuticals,
the
subsidiaries
joined
thereto,
the
lenders
party
thereto
and
HerculesCapital,
Inc.,
as
agent
(incorporated
by
reference
from
Exhibit
10.1
to
Insmed
Incorporated's
Quarterly
Report
onForm
10-Q
filed
on
November
3,
2016).
10.11
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)).
10.12
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).
10.12.1
Amendment
No.
5
to
License
Agreement
between
Transave,
Inc.
and
PARI
Pharma
GmbH,
effective
as
ofOctober
5,
2015
(incorporated
by
reference
from
Exhibit
10.14.1
to
Insmed
Incorporated's
Annual
Report
onForm
10-K
filed
on
February
25,
2016).
10.12.2
Amendment
No.
6
to
License
Agreement
between
Transave,
Inc.
and
PARI
Pharma
GmbH,
effective
as
ofOctober
9,
2015
(incorporated
by
reference
from
Exhibit
10.14.2
to
Insmed
Incorporated's
Annual
Report
onForm
10-K
filed
on
February
25,
2016).
10.13**
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).
10.14**
Insmed
Incorporated
Senior
Executive
Bonus
Plan
(incorporated
by
reference
from
Exhibit
10.2
to
InsmedIncorporated's
Form
10-Q
filed
on
November
5,
2013).
10.15
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).
10.15.1
First
Amendment
to
Lease,
dated
April
29,
2014,
between
Denver
Road,
LLC
and
Insmed
Incorporated(incorporated
by
reference
from
Exhibit
10.17.1
to
Insmed
Incorporated's
Annual
Report
on
Form
10-K
filed
onFebruary
25,
2016).
10.15.2
Second
Amendment
to
Lease,
dated
November
20,
2015,
between
Denver
Road,
LLC
and
Insmed
Incorporated(incorporated
by
reference
from
Exhibit
10.17.2
to
Insmed
Incorporated's
Annual
Report
on
Form
10-K
filed
onFebruary
25,
2016).
10.16
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).Table
of
Contents118
10.17
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).
10.18
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).
10.19
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).
10.20
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).
10.21
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).
10.22
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).
10.23
Change
in
Scope
1
to
Work
Order
1,
dated
as
of
May
27,
2016,
by
and
between
Insmed
Incorporated
andSynteractHCR,
Inc.
(incorporated
by
reference
from
Exhibit
10.2
to
Insmed
Incorporated's
Form
10-Q
filedAugust
4,
2016).
10.24**
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).
10.25**
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).
10.26
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).
10.27
Lease
Agreement,
effective
as
of
July
1,
2016,
by
and
between
Insmed
Incorporated
and
CIP
II/AR
BridgewaterHoldings,
LLC
(incorporated
by
reference
from
Exhibit
10.1
to
Insmed
Incorporated's
Form
10-Q
filed
August
4,2016).
10.28**
Employment
Agreement,
effective
as
of
September
27,
2016,
between
Insmed
Incorporated
and
Roger
Adsett(incorporated
by
reference
from
Exhibit
10.2
to
Insmed
Incorporated's
Form
10-Q
filed
November
3,
2016).
10.29*
License
Agreement,
dated
October
4,
2016,
between
Insmed
Incorporated
and
AstraZeneca
AB
(filed
herewith).Table
of
Contents119
10.30
Extension
of
Commercial
Fill/Finish
Services
Agreement
between
Insmed
Incorporated
and
Ajinomoto
Althea,
Inc.,dated
as
of
November
30,
2016
(filed
herewith).
10.31
Amendment
to
Employment
Agreement,
effective
as
of
September
26,
2016,
between
Insmed
Incorporated
andChristine
Pellizzari
(filed
herewith).
10.32
Amendment
to
Employment
Agreement,
effective
as
of
September
26,
2016,
between
Insmed
Incorporated
and
S.Nicole
Schaeffer
(filed
herewith).
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*Confidential
treatment
has
been
requested
for
certain
portions
of
this
exhibit.
The
confidential
portions
of
this
exhibit
have
been
omittedand
filed
separately
with
the
Securities
and
Exchange
Commission.
**Management
contract
or
compensatory
plan
or
arrangement
of
the
Company
required
to
be
filed
as
an
exhibit.Exhibit 10.29 CONFIDENTIALEXECUTION VERSION
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT.  EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH ASTERISKS (***), HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
LICENSE AGREEMENT
between
ASTRAZENECA AB
and
INSMED INCORPORATED
Dated as of October 4, 2016

TABLE OF CONTENTS



ARTICLE
1DEFINITIONS1


ARTICLE
2GRANT
OF
RIGHTS18


2.1Grants
to
Insmed18


2.2Grants
to
AstraZeneca18


2.3Sublicenses18


2.4Retention
of
Rights;
Limitations
Applicable
to
License
Grants19


2.5AstraZeneca’s
Right
of
First
Negotiation20


2.6Exclusivity21


2.7Insmed’s
Right
of
Negotiation
for
AstraZeneca
Respiratory
IMED
Bronchiectasis
Compounds22


ARTICLE
3ASTRAZENECA
SUPPLY
AND
MANUFACTURING
KNOW-HOW
TRANSFER
ACTIVITIES23


3.1Supply
of
Licensed
Products23


3.2Manufacturing
Know-How
Transfer23


3.3Subsequent
Manufacturing
Know-How
Transfer24


ARTICLE
4DEVELOPMENT,
REGULATORY
AND
COMMERCIALIZATION
ACTIVITIES24


4.1Development24


4.2Regulatory
Activities26


4.3Commercialization27


4.4Statements
and
Compliance
with
Applicable
Law28


4.5Supply
of
Licensed
Compound28


4.6Subcontracting29


ARTICLE
5ASTRAZENECA’S
GRANT
BACK
RIGHTS29


5.1First
Option29
i
5.2Second
Option30


5.3AstraZeneca
Option
Notice
Requirements31


5.4Restrictions
on
Insmed
in
COPD
and
Asthma31


ARTICLE
6ALLIANCE
MANAGERS;
JOINT
STEERING
COMMITTEE32


6.1Alliance
Managers32


6.2Joint
Steering
Committee32


6.3General
Provisions
Applicable
to
the
JSC33


ARTICLE
7PAYMENTS
AND
RECORDS34


7.1Upfront
Payment34


7.2Milestones34


7.3Royalties36


7.4Reductions37


7.5Maximum
Amount
of
Reductions38


7.6Royalty
Payments
and
Reports38


7.7Mode
of
Payment;
Offsets39


7.8Taxes39


7.9Interest
on
Late
Payments40


7.10Financial
Records40


7.11Audit40


7.12Audit
Dispute41


ARTICLE
8INTELLECTUAL
PROPERTY41


8.1Ownership
of
Intellectual
Property41


8.2Maintenance
and
Prosecution
of
Patents42


8.3Enforcement
of
Patents45


8.4Infringement
Claims
by
Third
Parties46
ii
8.5Invalidity
or
Unenforceability
Defenses
or
Actions47


8.6Third
Party
IP
Rights48


8.7Product
Trademarks48


8.8Corporate
Names49


ARTICLE
9CONFIDENTIALITY
AND
NON-DISCLOSURE50


9.1Confidentiality
Obligations50


9.2Permitted
Disclosures51


9.3Use
of
Name52


9.4Public
Announcements52


9.5Publications53


9.6Return
of
Confidential
Information53


9.7Privileged
Communications54


ARTICLE
10REPRESENTATIONS
AND
WARRANTIES55


10.1Mutual
Representations
and
Warranties55


10.2Additional
Representations
and
Warranties
of
AstraZeneca55


10.3DISCLAIMER
OF
WARRANTIES56


10.4ADDITIONAL
WAIVER56


10.5Anti-Bribery
and
Anti-Corruption
Compliance56


ARTICLE
11INDEMNITY59


11.1Indemnification
of
AstraZeneca59


11.2Indemnification
of
Insmed59


11.3Indemnification
Procedures59


11.4Special,
Indirect
and
Other
Losses62


11.5Insurance62


ARTICLE
12TERM
AND
TERMINATION62
iii
12.1Term
and
Expiration62


12.2Termination62


12.3Rights
in
Bankruptcy63


12.4Consequences
of
Termination64


12.5Remedies68


12.6Accrued
Rights;
Surviving
Obligations68


ARTICLE
13MISCELLANEOUS69


13.1Force
Majeure69


13.2Export
Control69


13.3Assignment70


13.4Severability70


13.5Dispute
Resolution71


13.6Governing
Law,
Jurisdiction
and
Service72


13.7Notices72


13.8Entire
Agreement;
Amendments73


13.9English
Language74


13.10Equitable
Relief74


13.11Waiver
and
Non-Exclusion
of
Remedies74


13.12No
Benefit
to
Third
Parties74


13.13Further
Assurance75


13.14Relationship
of
the
Parties75


13.15References75


13.16Construction75


13.17Counterparts75
iv
SCHEDULES
Schedule
1.5(ii)Insmed
Anti-Corruption
Rules
and
Policies

Schedule
1.12AstraZeneca
Know-How

Schedule
1.14AstraZeneca
Regulatory
Documentation

Schedule
1.52Existing
Patents

Schedule
1.72In-License
Agreements

Schedule
3.1Material
Terms
of
Supply
Agreement

Schedule
4.1.2Development
Plan

Schedule
4.2.1(ii)Assigned
Regulatory
Documentation

Schedule
9.4Press
Release

Schedule
9.5.2Pending
and
Planned
Publications
v LICENSE AGREEMENT
This
License
Agreement
(the
“
Agreement ”)
is
made
and
entered
into
effective
as
of
October
4,
2016
(the
“
Effective Date ”),
by
and
betweenAstraZeneca
AB,
a
company
incorporated
in
Sweden
under
no.
556011-7482
with
its
registered
office
at
SE-151
85
Södertälje,
Sweden
and
with
offices
at
SE-43183
Mölndal,
Sweden
(“
AstraZeneca ”)
and
Insmed
Incorporated,
a
Virginia
corporation
with
offices
at
10
Finderne
Ave.,
Building
10,
Bridgewater,
NJ
08807-3365
U.S.A.
(“
Insmed ”).

AstraZeneca
and
Insmed
are
sometimes
referred
to
herein
individually
as
a
“
Party ”
and
collectively
as
the
“
Parties .”
Recitals
WHEREAS ,
AstraZeneca
owns
and
controls
certain
intellectual
property
rights
with
respect
to
the
Licensed
Compound
(as
defined
herein)
andLicensed
Products
(as
defined
herein)
in
the
Territory
(as
defined
herein);
and
WHEREAS ,
AstraZeneca
wishes
to
grant
a
license
to
Insmed,
and
Insmed
wishes
to
take,
a
license
under
such
intellectual
property
rights
todevelop
and
commercialize
Licensed
Products
in
the
Territory,
in
each
case
in
accordance
with
the
terms
and
conditions
set
forth
below.
NOW, THEREFORE ,
in
consideration
of
the
premises
and
the
mutual
promises
and
conditions
set
forth
herein
and
other
good
and
valuableconsideration,
the
receipt
and
sufficiency
of
which
are
hereby
acknowledged,
the
Parties,
intending
to
be
legally
bound,
do
hereby
agree
as
follows:
ARTICLE 1 DEFINITIONS
Unless
otherwise
specifically
provided
herein,
the
following
terms
shall
have
the
following
meanings:
1.1. 


























“
Affiliate ”
means,
with
respect
to
a
Party,
any
Person
that,
as
of
the
Effective
Date,
directly
or
indirectly,
through
one
(1)
or
moreintermediaries,
controls,
is
controlled
by
or
is
under
common
control
with
such
Party.

For
purposes
of
this
definition,
“control”
and,
with
correlative
meanings,
theterms
“controlled
by”
and
“under
common
control
with”
means:
(i)
the
possession,
directly
or
indirectly,
of
the
power
to
direct
the
management
or
policies
of
abusiness
entity,
whether
through
the
ownership
of
voting
securities,
by
contract
relating
to
voting
rights
or
corporate
governance
or
otherwise;
or
(ii)
the
ownership,directly
or
indirectly,
of
fifty
percent
(50%)
or
more
of
the
voting
securities
or
other
ownership
interest
of
a
business
entity
(or,
with
respect
to
a
limited
partnershipor
other
similar
entity,
its
general
partner
or
controlling
entity).

For
the
avoidance
of
doubt,
with
respect
to
a
Party,
no
Person
that,
after
the
Effective
Date,
directlyor
indirectly,
through
one
(1)
or
more
intermediaries,
controls,
is
controlled
by
or
is
under
common
control
with
such
Party,
but
is
not
an
Affiliate
on
or
prior
to
theEffective
Date,
shall
be
deemed
an
Affiliate
of
such
Party
for
purposes
of
this
Agreement.
1.2. 


























“
Agreement ”
has
the
meaning
set
forth
in
the
preamble
hereto.

1.3. 


























“
Anti-Corruption Laws ”
means
the
U.S.
Foreign
Corrupt
Practices
Act,
as
amended,
and
the
UK
Bribery
Act
2010,
as
amended,
andany
other
applicable
anti-corruption
laws.
1.4. 


























“
Alliance Manager ”
has
the
meaning
set
forth
in
Section
6.1.
1.5. 


























“Anti-Corruption Rules and Policies ”
means,
(i)
with
respect
to
AstraZeneca,
the
key
principles
regarding
anti-bribery
and
anti-corruption
from
AstraZeneca’s
Code
of
Conduct
available
on
(https://www.astrazeneca.com/sustainability/ethical-business-practices.html)
as
the
same
may
beamended,
modified
or
supplemented
from
time
to
time
by
AstraZeneca;
and
(ii)
with
respect
to
Insmed,
the
Insmed
Anti-Corruption
Policy,
attached
as
Schedule1.5(ii)

to
this
Agreement,
as
the
same
may
be
amended,
modified
or
supplemented
from
time
to
time
as
notified
by
Insmed
to
AstraZeneca.
1.6. 


























“
Applicable Law ”
means
any
and
all
applicable
laws,
rules
and
regulations,
including
any
rules,
regulations,
requirements
orguidelines
of
the
Regulatory
Authorities
that
may
be
in
effect
from
time
to
time,
including
the
FFDCA
and
the
Anti-Corruption
Laws.
1.7. 


























“
Arbitration Notice ”
has
the
meaning
set
forth
in
Section
13.5.2.
1.8. 


























“
Arbitrators ”
has
the
meaning
set
forth
in
Section
13.5.2.
1.9. 


























“
Asthma ”
means
a
specific
disease
characterized
by
chronic
airway
inflammation,
as
described
by
the
Global
Initiative
for
Asthma(http://ginasthma.org/).

The
diagnosis
of
asthma
is
complex
and
involves
considerations
of
the
various
clinical
features
of
the
disease,
which
include
respiratorysymptoms
such
as
wheeze,
shortness
of
breath,
chest
tightness
and
cough
that
vary
over
time
and
in
intensity,
together
with
variable
expiratory
airflow
limitation.
1.10. 



















“
Assigned Regulatory Documentation ”
has
the
meaning
set
forth
in
Section
4.2.1(ii).
1.11. 



















“
AstraZeneca ”
has
the
meaning
set
forth
in
the
preamble
hereto.
1.12. 



















“
AstraZeneca Know-How ”
means
the
Information
contained
in
the
documents
listed
on
Schedule
1.12
and
which
is
Controlled
byAstraZeneca
or
any
of
its
Affiliates
as
of
the
Effective
Date
or
that
is
developed
by
AstraZeneca
or
any
of
its
Affiliates
at
any
time
during
the
Term
that
is
(i)
notgenerally
known
and
(ii)
necessary
or
reasonably
useful
for
the
Exploitation
of
the
Licensed
Compound
or
a
Licensed
Product,
but
excluding
any
Information
tothe
extent
covered
or
claimed
by
published
AstraZeneca
Patents
or
Joint
Patents
or
any
Joint
Know-How.
1.13. 



















“
AstraZeneca Patents ”
means
all
of
the
Patents
Controlled
by
AstraZeneca
or
any
of
its
Affiliates
as
of
the
Effective
Date
or
that
aremade
or
conceived
by
AstraZeneca
or
any
of
its
Affiliates
at
any
time
during
the
Term
that
are
necessary
or
reasonably
useful
(or,
with
respect
to
Patentapplications,
would
be
necessary
or
reasonably
useful
if
such
2
Patent
applications
were
to
issue
as
Patents)
for
the
Exploitation
of
the
Licensed
Compound
or
a
Licensed
Product,
but
excluding
any
Joint
Patents.

TheAstraZeneca
Patents
include
the
Existing
Patents
and
any
Patents
that
claim
or
cover,
or
otherwise
are
based
upon,
AstraZeneca
Know-How
as
filed
for
by
Insmedin
AstraZeneca’s
name
in
accordance
with
Section
8.2.1
to
the
extent
Controlled
by
AstraZeneca
during
the
Term.
1.14. 



















“
AstraZeneca Regulatory Documentation ”
means
the
Regulatory
Documentation
listed
on
Schedule
1.14
and
all
other
RegulatoryDocumentation
Controlled
by
AstraZeneca
or
any
of
its
Affiliates
directly
relating
to
the
Licensed
Compound
in
the
Field
in
the
Territory,
other
than
the
AssignedRegulatory
Documentation
1.15. 



















“
Audit ”
has
the
meaning
set
forth
in
Section
10.5.6.
1.16. 



















“
Auditor ”
has
the
meaning
set
forth
in
Section
7.12.
1.17. 



















“
Authorized Generic Version ”
means:
(i)





































in
the
United
States,
with
respect
to
a
pharmaceutical
product
that
has
been
approved
under
Section
505(c)
of
theFFDCA
(i.e.,
a
“full”
application
under
505(b)(1)
or
an
application
under
505(b)(2)),
any
other
pharmaceutical
product
that
is
sold
under
the
Drug
ApprovalApplication
for
the
first
product
or
any
supplement
or
amendment
to
such
Drug
Approval
Application,
and
that
is
marketed,
sold
or
distributed
directly
or
indirectlyto
retail
class
of
trade
with
labeling,
packaging
(other
than
repackaging
as
the
listed
drug
in
blister
packs,
unit
doses
or
similar
packaging
for
use
in
institutions),product
code,
labeler
code,
trade
name
or Trademark
that
differs
from
that
of
the
listed
pharmaceutical
product;
or
(ii)


































with
respect
to
a
pharmaceutical
product
sold
outside
the
United
States,
any
other
pharmaceutical
product
that
isidentical
in
terms
of
the
qualitative
and
quantitative
composition
of
the
active
substance(s)
and
the
pharmaceutical
form
to
the
first
product
and
that
is
sold
underthe
Drug
Approval
Application
for
the
first
product
or
any
supplement
or
amendment
to
such
Drug
Approval
Application,
and
that
is
marketed,
sold
or
distributeddirectly
or
indirectly
to
retail
class
of
trade
with
labeling,
packaging,
product
code,
labeler
code,
trade
name
or Trademark
that
differs
from
that
of
the
listedpharmaceutical
product.
1.18. 



















“
Breaching Party ”
has
the
meaning
set
forth
in
Section
12.2.1.
1.19. 



















“
Bronch CD ”
has
the
meaning
set
forth
in
Section
2.7.1.
1.20. 



















“
Bronch CD Negotiation Period ”
has
the
meaning
set
forth
in
Section
2.7.2.
1.21. 



















“
Bronch CD Notice ”
has
the
meaning
set
forth
in
Section
2.7.1
1.22. 



















“Bronch CD Notice Period ”
has
the
meaning
set
forth
in
Section
2.7.2.
1.23. 



















“
Bronchiectasis ”
means
a
specific
lung
disease
characterized
by
permanent
dilatation
of
one
or
more
bronchi.

Patients
withbronchiectasis
often
manifest
clinical
3
symptoms
of
chronic
cough
and
sputum
production
and
may
experience
recurrent
chest
infections.
1.24. 



















“
Business Day ”
means
a
day
other
than
a
Saturday
or
Sunday
or
a
day
on
which
banking
institutions
in
New
York,
New
York,U.S.A.,
Stockholm,
Sweden
or
London,
England
are
permitted
or
required
to
be
closed.
1.25. 



















“
Calendar Quarter ”
means
each
successive
period
of
three
(3)
calendar
months
commencing
on
January
1,
April
1,
July
1
andOctober
1,
except
that
the
first
Calendar
Quarter
of
the
Term
shall
commence
on
the
Effective
Date
and
end
on
the
day
immediately
prior
to
the
first
to
occur
ofJanuary
1,
April
1,
July
1
or
October
1
after
the
Effective
Date,
and
the
last
Calendar
Quarter
of
the
Term
shall
end
on
the
last
day
of
the
Term.
1.26. 



















“
Calendar Year ”
means
each
successive
period
of
twelve
(12)
calendar
months
commencing
on
January
1
and
ending
onDecember
31,
except
that
the
first
Calendar
Year
of
the
Term
shall
commence
on
the
Effective
Date
and
end
on
December
31
of
the
year
in
which
the
EffectiveDate
occurs,
and
the
last
Calendar
Year
of
the
Term
shall
commence
on
January
1
of
the
year
in
which
the
Term
ends
and
end
on
the
last
day
of
the
Term.
1.27. 



















“
Candidate Drug ”
has
the
meaning
set
forth
in
Section
2.7.1.
1.28. 



















“Change of Control” means,
with
respect
to
a
Party,
the
occurrence
of
any
of
the
following
events:
1.28.1. 










any
Person
(or
a
group
of
Persons
acting
in
concert)
becomes
the
beneficial
owner
(within
the
meaning
of
Rule
13d-3promulgated
under
the
U.S.
Securities
Exchange
Act
of
1934,
as
amended)
of
such
Party’s
equity
securities,
including
any
options,
warrants
or
other
rights
for
thepurchase
of
such
equity
securities,
representing
(i)
fifty
percent
(50%)
or
more
of
the
combined
voting
power
of
such
Party’s
then
outstanding
equity
securities,
or(ii)
fifty
percent
(50%)
or
more
of
such
Party’s
then
outstanding
voting
equity
securities
and
non-voting
equity
securities
taken
together;
1.28.2. 










any
merger,
consolidation,
share
exchange,
corporate
reorganization
or
similar
transaction
or
series
of
related
transactions
inwhich
the
equity
holders
of
such
Party
(in
the
aggregate)
immediately
prior
to
such
merger,
consolidation,
share
exchange,
corporate
reorganization
or
similartransaction
or
series
of
related
transactions,
own
less
than
fifty
percent
(50%),
directly
or
indirectly,
of
such
Party’s
then
outstanding
equity
securities
of
thesurviving
entity
immediately
after
such
merger,
consolidation,
share
exchange,
corporate
reorganization
or
similar
transaction
or
series
of
related
transactions;
1.28.3. 










any
transaction
or
series
of
related
transactions
in
which
an
excess
of
(i)
fifty
percent
(50%)
of
such
Party’s
then
outstandingequity
securities,
including
any
options,
warrants
or
other
rights
for
the
purchase
of
such
equity
securities,
is
transferred,
or
(ii)
fifty
percent
(50%)
of
such
Party’sthen
outstanding
voting
equity
securities
and
non-voting
equity
securities,
taken
together,
is
transferred;
4
1.28.4. 










a
sale,
lease
or
other
disposition
(in
one
transaction
or
a
series
of
related
transactions)
of
all
or
substantially
all
of
the
assets
ofsuch
Party;
1.28.5. 










any
Person
or
group
of
Persons
becoming
entitled
to
elect
a
majority
of
the
board
of
directors
(or
any
successor
governingbody)
of
such
Party;
or
1.28.6. 










the
ultimate
parent
of
a
Party
on
the
Effective
Date
(or
any
one
or
more
subsidiaries
through
which
such
ultimate
parentindirectly
holds
its
ownership
interest
in
such
Party)
enters
into
a
merger,
consolidation,
share
exchange,
corporate
reorganization
or
similar
transaction
or
series
ofrelated
transactions
with
a
Person
or
group
of
Persons,
and
as
a
result
of
such
merger,
consolidation,
share
exchange,
corporate
reorganization
or
similar
transactionor
series
of
related
transactions,
such
ultimate
parent
(or
such
subsidiaries)
that
beneficially
owned
(within
the
meaning
of
Rule
13d-3
promulgated
under
the
U.S.Securities
Exchange
Act
of
1934,
as
amended)
shares
of
voting
equity
securities,
including
any
options,
warrants
or
other
rights
for
the
purchase
of
such
equitysecurities,
of
such
Party
immediately
prior
to
such
transaction
shall
have
ceased
to
so
beneficially
own
shares
of
such
voting
equity
securities
representing
at
least
amajority
of
the
total
voting
power
of
all
outstanding
classes
of
such
voting
equity
securities
in
substantially
the
same
proportions
as
its
or
their
ownership
of
suchvoting
equity
securities
immediately
prior
to
such
transaction.
1.29. 



















“
Chronic Obstructive Pulmonary Disease ”
or
“
COPD ”
means
a
specific
disease
characterized
by
persistent
airflow
limitation,
asdescribed
by
the
Global
Initiative
for
Chronic
Obstructive
Lung
Disease
(http://goldcopd.org/).

The
disease
is
usually
progressive
and
associated
with
an
enhancedchronic
inflammatory
response
in
the
airways
and
the
lung
to
noxious
particles
or
gases.
1.30. 



















“
Clinical Trial ”
means
any
of
a
Phase
1
Clinical
Trial,
Phase
2
Clinical
Trial,
Phase
3
Clinical
Trial
or
a
clinical
trial
conducted
afterthe
obtaining
of
Regulatory
Approval.
1.31. 



















“
Clinical Trial Application ”
or
“
CTA ”
means
an
application
to
a
Regulatory
Authority
for
purposes
of
requesting
the
ability
to
startor
continue
a
clinical
trial
and
any
amendments
or
supplements
to
such
application.
1.32. 



















“
Combination Product ”
means
a
Licensed
Product
that
comprises
or
contains
the
Licensed
Compound
as
an
active
ingredienttogether
with
one
(1)
or
more
other
active
ingredients
and
is
sold
either
as
a
fixed
dose
or
as
separate
doses
in
a
single
package.
1.33. 



















“
Commercialization ”
means
any
and
all
activities
directed
to
the
preparation
for
sale
of,
offering
for
sale
of
or
sale
of
a
LicensedProduct,
including
activities
related
to
marketing,
promoting,
distributing
and
importing
such
Licensed
Product
and
interacting
with
Regulatory
Authoritiesregarding
any
of
the
foregoing.

When
used
as
a
verb,
“
to Commercialize ”
and
“
Commercializing ”
means
to
engage
in
Commercialization
and
“Commercialized ”
has
a
corresponding
meaning.
1.34. 



















“
Commercially Reasonable Efforts ”
means,
with
respect
to
the
performance
of
Development,
Commercialization
or
Manufacturingactivities
with
respect
to
the
5
Licensed
Compound
or
a
Licensed
Product
by
a
Party,
the
carrying
out
of
such
activities
using
efforts
and
resources
that
such
Party
would
typically
devote
tocompounds
or
products
of
similar
market
potential
at
a
similar
stage
in
development
or
product
life
of
similar
market
potential
at
a
similar
stage
in
development
orproduct
life,
taking
into
account
all
scientific,
commercial
and
other
factors
that
the
Party
would
take
into
account,
including
issues
of
safety
and
efficacy,
expectedand
actual
cost
and
time
to
develop,
expected
and
actual
profitability
(including
royalties
and
other
payments
required
hereunder),
expected
and
actualcompetitiveness
of
alternative
Third
Party
products
(including
Generic
Products)
in
the
marketplace,
the
nature
and
extent
of
expected
and
actual
marketexclusivity
(including
patent
coverage
and
regulatory
exclusivity),
the
expected
likelihood
of
regulatory
approval,
the
expected
and
actual
labeling,
the
expectedand
actual
reimbursability
and
pricing
and
the
expected
and
actual
amounts
of
marketing
and
promotional
expenditures
required
and
such
Party’s
product
portfolio.
1.35. 



















“
Common Interest Information ”
has
the
meaning
set
forth
in
Section
9.7.1.
1.36. 



















“
Confidential Information ”
has
the
meaning
set
forth
in
Section
9.1.
1.37. 



















“
Control ”
means,
with
respect
to
any
item
of
Information,
Regulatory
Documentation,
material,
Patent
or
other
intellectual
propertyright,
possession
of
the
right,
whether
directly
or
indirectly
and
whether
by
ownership,
license
or
otherwise
(other
than
by
operation
of
the
license
and
other
grantsin
Section
2.1,
2.2
or
5.1.1),
to
grant
a
license,
sublicense
or
other
right
(including
the
right
to
reference
Regulatory
Documentation)
to
or
under
such
Information,Regulatory
Documentation,
material,
Patent
or
other
intellectual
property
right
as
provided
for
herein
without
violating
the
terms
of
any
agreement
with
any
ThirdParty.
1.38. 



















“
Controlling Party ”
has
the
meaning
set
forth
in
Section
8.5.
1.39. 



















“
COPD/Asthma Commercial License ”
has
the
meaning
set
forth
in
Section
5.2.3.
1.40. 



















“
COPD/Asthma Negotiation Period ”
has
the
meaning
set
for
the
in
Section
5.2.3
1.41. 



















“
Corporate Names ”
means
the
Trademarks,
names
and
logos
as
each
Party
may
designate
in
writing
from
time
to
time.
1.42. 



















“
DPP1 Compound ”
means
any
pharmacologically
active
compound
with
a
molecular
weight
of
[***]
whose
primary
biologicalactivity
is
the
inhibition
of
dipeptidyl
peptidase
1,
which
is
also
known
as
cathepsin
C
(“
DPP1 ”),
and
such
inhibition
is
measured
by
[***]
against
DPP1
in
[***].
***
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.
6
1.43. 



















“
Development ”
means
all
activities
related
to
research,
pre-clinical
and
other
non-clinical
testing,
test
method
development
andstability
testing,
toxicology,
formulation,
process
development,
manufacturing
scale-up,
qualification
and
validation,
quality
assurance/quality
control,
clinicalstudies,
including
Manufacturing
in
support
thereof,
statistical
analysis
and
report
writing,
the
preparation
and
submission
of
Drug
Approval
Applications,regulatory
affairs
with
respect
to
the
foregoing
and
all
other
activities
necessary
or
reasonably
useful
or
otherwise
requested
or
required
by
a
Regulatory
Authorityas
a
condition
or
in
support
of
obtaining
or
maintaining
a
Regulatory
Approval.

When
used
as
a
verb,
“
Develop ”
means
to
engage
in
Development.
1.44. 



















“
Development Plan ”
has
the
meaning
set
forth
in
Section
4.1.2.
1.45. 



















“
Dispute ”
has
the
meaning
set
forth
in
Section
13.5.1.
1.46. 



















“
Dollars ”
or
“
$ ”
means
United
States
Dollars.
1.47. 



















“
Drug Approval Application ”
means
a
New
Drug
Application
as
defined
in
the
FFDCA
(an
“
NDA ”)
or
any
corresponding
foreignapplication
in
the
Territory,
including,
with
respect
to
the
European
Union,
a
Marketing
Authorization
Application
filed
with
the
EMA
pursuant
to
the
centralizedapproval
procedure
or
with
the
applicable
Regulatory
Authority
of
a
country
in
Europe
with
respect
to
the
decentralized
or
mutual
recognition
or
any
other
nationalapproval.
1.48. 



















“
Effective Date ”
has
the
meaning
set
forth
in
the
preamble
hereto.
1.49. 



















“
EMA ”
means
the
European
Medicines
Agency
and
any
successor
agency
thereto.
1.50. 



















“
Enforcing Party ”
has
the
meaning
set
forth
in
Section
8.3.2.
1.51. 



















“
European Union ”
means
the
economic,
scientific
and
political
organization
of
member
states
as
it
may
be
constituted
from
time
totime,
which
as
of
the
Effective
Date
consists
of
Austria,
Belgium,
Bulgaria,
Croatia,
Czech
Republic,
Denmark,
Estonia,
Finland,
France,
Germany,
Greece,Hungary,
Ireland,
Italy,
Latvia,
Lithuania,
Luxembourg,
Malta,
The
Netherlands,
Poland,
Portugal,
Romania,
Slovakia,
Slovenia,
Spain,
Sweden
and
the
UnitedKingdom
of
Great
Britain
and
Northern
Ireland
and
that
certain
portion
of
the
Republic
of
Cyprus
included
in
such
organization.
1.52. 



















“
Existing Patents ”
means
the
Patents
listed
on
Schedule
1.52
.
1.53. 



















“
Exploit ”
means
to
Develop,
Commercialize,
register,
Manufacture,
have
Manufactured,
hold
or
keep
(whether
for
disposal
orotherwise),
have
used,
export,
transport,
distribute,
promote,
market
or
have
sold
or
otherwise
dispose
of.
1.54. 



















“
Exploitation ”
means
the
act
of
Exploiting
a
compound,
product
or
process.
7
1.55. 



















“
FDA ”
means
the
United
States
Food
and
Drug
Administration
and
any
successor
agency
thereto.
1.56. 



















“
FFDCA ”
means
the
United
States
Federal
Food,
Drug,
and
Cosmetic
Act,
as
amended
from
time
to
time,
together
with
any
rules,regulations
and
requirements
promulgated
thereunder
(including
all
additions,
supplements,
extensions
and
modifications
thereto).
1.57. 



















“
Field ”
means
all
uses,
including
the
diagnosis,
cure,
mitigation,
treatment
or
prevention
of
disease.
1.58. 



















“
First Commercial Sale ”
means,
with
respect
to
a
Licensed
Product
and
a
country,
the
first
sale
for
monetary
value
for
use
orconsumption
by
the
end
user
of
such
Licensed
Product
in
such
country
after
Regulatory
Approval
for
such
Licensed
Product
has
been
obtained
in
such
country.
Sales
for
clinical
trial
purposes
and
sales
prior
to
receipt
of
Regulatory
Approval
for
such
Licensed
Product,
such
as
so-called
“treatment
IND
sales,”
“namedpatient
sales”
and
“compassionate
use
sales,”
shall
not
be
construed
as
a
First
Commercial
Sale.
1.59. 



















“
First Option ”
has
the
meaning
set
forth
in
Section
5.1.
1.60. 



















“
First Option Period ”
has
the
meaning
set
forth
in
Section
5.1.
1.61. 



















“
GAAP ”
means,
with
respect
to
a
Party
or
its
Affiliates
or
its
or
their
sublicensees,
United
States’
generally
accepted
accountingprinciples,
International
Financial
Reporting
Standards
or
such
other
similar
national
standards
as
such
Party,
Affiliates
or
its
or
their
sublicense
adopts,
in
eachcase,
consistently
applied.
1.62. 



















“
Generic Product ”
means,
with
respect
to
a
particular
mode
of
administration
and
dosage
strength
of
a
Licensed
Product,
any
otherprescription
pharmaceutical
product
that
(i)
contains
the
same
active
ingredient(s)
as
such
Licensed
Product,
(ii)
has
the
same
mode
of
administration
and
dosagestrength
as
such
Licensed
Product
and
(ii)
is
“therapeutically
equivalent”
as
evaluated
by
the
FDA,
applying
the
definition
of
“therapeutically
equivalent”
set
forthin
the
preface
to
the
FDA’s
Orange Book: Approved Drug Products with Therapeutic Equivalence Evaluations (the
“
Orange Book ”)
(or,
with
respect
to
anycountry
in
the
Territory
outside
the
United
States,
is
similarly
substitutable
under
equivalent
Applicable
Law
in
such
country)
to
such
Licensed
Product.
1.63. 



















“
Government Official ”
means
(i)
any
Person
employed
by
or
acting
on
behalf
of
a
government,
government-controlled
agency
orentity
or
public
international
organization,
(ii)
any
political
party,
party
official
or
candidate,
(iii)
any
Person
who
holds
or
performs
the
duties
of
an
appointment,office
or
position
created
by
custom
or
convention,
or
(iv)
any
Person
who
holds
himself
out
to
be
the
authorized
intermediary
of
any
of
the
foregoing.
1.64. 



















“
Hatch-Waxman Act ”
means
the
U.S.
“Drug
Price
Competition
and
Patent
Term
Restoration
Act”
of
1984,
as
set
forth
at
21
U.S.C.§355(b)(2)(A)(iv)
and
(j)(2)(A)(vii)(IV).
8
1.65. 



















“
Improvement ”
means
any
invention,
discovery,
development
or
modification
with
respect
to
the
Licensed
Compound
or
a
LicensedProduct
or
relating
to
the
Exploitation
thereof,
whether
or
not
patented
or
patentable,
including
any
enhancement
in
the
efficiency,
operation,
Manufacture,ingredients,
preparation,
presentation,
formulation,
means
of
delivery
or
dosage
of
such
Licensed
Compound
or
Licensed
Product,
any
discovery
or
development
ofany
new
Indication
or
expansion
of
an
Indication
for
such
Licensed
Compound
or
Licensed
Product,
or
any
discovery
or
development
that
improves
the
stability,safety
or
efficacy
of
such
Licensed
Compound
or
Licensed
Product.
1.66. 



















“
IND ”
means
(i)
an
investigational
new
drug
application
filed
with
the
FDA,
and
its
equivalent
in
other
countries
or
regulatoryjurisdictions,
for
authorization
to
commence
clinical
studies
and
(ii)
all
supplements
and
amendments
that
may
be
filed
with
respect
to
the
foregoing.
1.67. 



















“
Indemnification Claim Notice ”
has
the
meaning
set
forth
in
Section
11.3.1.
1.68. 



















“
Indemnified Party ”
has
the
meaning
set
forth
in
Section
11.3.1.
1.69. 



















“
Indication ”
means
a
primary
sickness
or
medical
condition
or
any
interruption,
cessation
or
disorder
of
a
particular
bodily
function,system
or
organ
(each
a
“disease”)
requiring
a
separate
Phase
3
Clinical
Trial
to
obtain
Regulatory
Approval
to
market
and
sell
a
product
for
such
disease,
and
shallinclude
sub-types
of
the
same
disease
and
pediatric
populations
of
the
same
disease
(i.e.,
such
sub-types
and
pediatric
populations
shall
be
part
of
the
Indication
andshall
not
be
treated
as
separate
Indications).
1.70. 



















“
Information ”
means
all
technical,
scientific
and
other
know-how
and
information,
trade
secrets,
knowledge,
technology,
means,methods,
processes,
practices,
formulae,
instructions,
skills,
techniques,
procedures,
experiences,
ideas,
technical
assistance,
designs,
drawings,
assemblyprocedures,
computer
programs,
apparatuses,
specifications,
data,
results
and
other
material,
including:
biological,
chemical,
pharmacological,
toxicological,pharmaceutical,
physical
and
analytical,
pre-clinical,
clinical,
safety,
manufacturing
and
quality
control
data
and
information,
including
study
designs
andprotocols,
assays
and
biological
methodology,
in
each
case
(whether
or
not
confidential,
proprietary,
patented
or
patentable)
in
written,
electronic
or
any
other
formnow
known
or
hereafter
developed.
1.71. 



















“
Infringement ”
has
the
meaning
set
forth
in
Section
8.3.1.
1.72. 



















“
In-License Agreement ”
means
any
license
or
other
agreement
listed
in
Schedule
1.72
,
as
such
license
or
other
agreement
may
beamended
from
time
to
time
during
the
Term.
1.73. 



















“
Insmed ”
has
the
meaning
set
forth
in
the
preamble
hereto.
1.74. 



















“
Insmed Know-How ”
means
all
Information
Controlled
by
Insmed
or
any
of
its
Affiliates
or
its
or
their
Sublicensees
as
of
theEffective
Date
or
that
is
developed
by
Insmed
or
any
of
its
Affiliates
or
its
or
their
Sublicensees
at
any
time
during
the
Term
that
is
9
(i)
not
generally
known
and
(ii)
necessary
or
reasonably
useful
for
the
Exploitation
of
the
Licensed
Compound
or
a
Licensed
Product
or
any
Improvement
thereto,but
excluding
any
Information
to
the
extent
covered
or
claimed
by
published
Insmed
Patents
or
Joint
Patents
or
any
Joint
Know-How.
1.75. 



















“
Insmed Patents ”
means
all
of
the
Patents
Controlled
by
Insmed
or
any
of
its
Affiliates
or
its
or
their
Sublicensees
as
of
the
EffectiveDate
or
that
are
made
or
conceived
by
Insmed
or
any
of
its
Affiliates
or
its
or
their
Sublicensees
at
any
time
during
the
Term
that
are
necessary
or
reasonably
useful(or,
with
respect
to
Patent
applications,
would
be
necessary
or
reasonably
useful
if
such
Patent
applications
were
to
issue
as
Patents)
for
the
Exploitation
of
theLicensed
Compound
or
a
Licensed
Product
or
any
Improvement
thereto,
but
excluding
any
Joint
Patents.
1.76. 



















“
Insmed Regulatory Documentation ”
means
all
Regulatory
Documentation
Controlled
by
Insmed
or
any
of
its
Affiliates
directlyrelating
to
the
Licensed
Compound
or
a
Licensed
Product
in
the
Field
in
the
Territory.
1.77. 



















“
Invalidity Claim ”
has
the
meaning
set
forth
in
Section
8.5.
1.78. 



















“
Invoiced Sales ”
has
the
meaning
set
forth
in
Section
1.93.
1.79. 



















“
Insolvency Event ”
has
the
meaning
set
forth
in
Section
12.2.3.
1.80. 



















“
Joint Intellectual Property Rights ”
has
the
meaning
set
forth
in
Section
8.1.2.
1.81. 



















“
Joint Know-How ”
has
the
meaning
set
forth
in
Section
8.1.2.
1.82. 



















“
Joint Patents ”
has
the
meaning
set
forth
in
Section
8.1.2.
1.83. 



















“
Joint Steering Committee ”
or
“
JSC ”
has
the
meaning
set
forth
in
Section
6.2.
1.84. 



















“
Knowledge ”
means
actual
knowledge,
but
without
any
duty
to
conduct
any
investigation
with
respect
to
such
facts
and
information.
1.85. 



















“
Licensed Compound ”
means
the
pharmaceutical
compound
known
as
AZD7986
and
any
active
metabolite,
salt,
ester,
hydrate,solvate,
isomer,
enantiomer,
free
acid
form,
free
base
form,
crystalline
form,
co-crystalline
form,
amorphous
form,
pro-drug
form,
racemate,
polymorph,
chelate,stereoisomer,
tautomer
or
optically
active
form
of
any
of
the
foregoing.
1.86. 



















“
Licensed Product ”
means
any
product
that
comprises
or
contains
the
Licensed
Compound,
alone
or
in
combination
with
one
(1)
ormore
other
active
ingredients,
in
any
and
all
forms,
presentations,
dosages
and
formulations.
1.87. 



















“
Licensed Product Agreement ”
means,
with
respect
to
a
Licensed
Product
or
any
Improvement,
any
agreement
entered
into
by
andbetween
Insmed
or
any
of
its
10
Affiliates
or
its
or
their
Sublicensees,
on
the
one
hand
and
one
(1)
or
more
Third
Parties,
on
the
other
hand,
that
is
necessary
or
reasonably
useful
for
theExploitation
of
such
Licensed
Product
in
the
Field
in
the
Territory,
including
(i)
any
agreement
pursuant
to
which
Insmed,
its
Affiliates
or
its
or
their
Sublicenseesreceives
any
license
or
other
rights
to
Exploit
such
Licensed
Product,
(ii)
supply
agreements
pursuant
to
which
Insmed,
its
Affiliates
or
its
or
their
Sublicenseesobtain
or
will
obtain
quantities
of
such
Licensed
Product,
(iii)
clinical
trial
agreements,
(iv)
contract
research
organization
agreements
and
(v)
service
agreements.
1.88. 



















“
Losses ”
has
the
meaning
set
forth
in
Section
11.1.
1.89. 



















“
Major Market ”
means
(i)
[***],
(ii)
one
or
more
of
[***]
or
(iii)
one
or
more
of
[***].

With
respect
to
AstraZeneca’s
obligationsunder
this
Agreement,
in
addition
to
the
foregoing,
[***]
is
a
fourth
Major
Market.
1.90. 



















“
Manufacture ”
and
“
Manufacturing ”
means
all
activities
related
to
the
production,
manufacture,
processing,
filling,
finishing,packaging,
labeling,
shipping
and
holding
of
a
product
or
any
intermediate
thereof,
including
process
development,
process
qualification
and
validation,
scale-up,pre-clinical,
clinical
and
commercial
manufacture
and
analytic
development,
product
characterization,
stability
testing,
quality
assurance
and
quality
control.
1.91. 



















“
Manufacturing Process ”
has
the
meaning
set
forth
in
Section
3.2.
1.92. 



















“
Negotiation Period ”
has
the
meaning
set
for
the
in
Section
2.5.1.
1.93. 



















“
Net Sales ”
means,
with
respect
to
a
Licensed
Product
for
any
period,
the
gross
amount
billed
or
invoiced
by
Insmed,
its
Affiliates
orits
or
their
Sublicensees
(including
distributors
of
Authorized
Generic
Versions
of
Licensed
Product(s))
to
Third
Parties
for
the
sale
of
a
Licensed
Product,
on
acountry-by-country
basis
(the
“
Invoiced Sales ”),
less
deductions
for:
1.93.1. 










normal
and
customary
trade,
quantity
and
prompt
settlement
discounts
(including
chargebacks
and
allowances)
actuallyallowed;
1.93.2. 










amounts
repaid
or
credited
by
reason
of
rejection,
return
or
recall
of
goods,
rebates
or
bona
fide
price
reductions;
1.93.3. 










freight,
postage,
shipping
and
insurance
expenses
to
the
extent
that
such
items
are
included
in
the
gross
amount
invoiced;
1.93.4. 










customs
and
excise
duties
and
other
taxes
or
duties
related
to
the
sales
to
the
extent
that
such
items
are
included
in
the
grossamount
invoiced;
***
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.
11
1.93.5. 










rebates
and
similar
payments
made
with
respect
to
sales
paid
for
by
any
governmental
or
regulatory
authority
such
as,
by
wayof
illustration
and
not
in
limitation
of
the
Parties’
rights
hereunder,
U.S.
Federal
or
state
Medicaid,
Medicare
or
similar
state
program
or
equivalent
foreigngovernmental
program;
1.93.6. 










the
portion
of
administrative
fees
paid
during
the
relevant
time
period
to
group
purchasing
organizations
or
pharmaceuticalbenefit
managers
relating
to
such
Licensed
Product;
1.93.7. 










any
invoiced
amounts
that
are
not
collected
by
Insmed,
its
Affiliates
or
it
or
their
Sublicensees,
including
bad
debts;
1.93.8. 










that
portion
of
the
annual
fee
on
prescription
drug
manufacturers
imposed
by
the
U.S.
Patient
Protection
and
Affordable
CareAct,
Pub.
L.
No.
111-148
(as
amended)
that
Insmed,
its
Affiliate
or
its
or
their
Sublicensees,
as
applicable,
allocates
to
sales
of
the
Licensed
Products
in
accordancewith
Insmed’s,
its
Affiliates’
or
its
or
their
Sublicensees’
standard
policies
and
procedures
consistently
applied
across
its
products,
as
applicable;
and
1.93.9. 










any
other
similar
and
customary
deductions
that
are
consistent
with
GAAP.
Any
of
the
deductions
listed
above
that
involves
a
payment
by
Insmed,
its
Affiliates
or
its
or
their
Sublicensees
shall
be
taken
as
a
deduction
in
the
CalendarQuarter
in
which
the
payment
is
accrued
by
such
entity.

For
purposes
of
determining
Net
Sales,
a
Licensed
Product
shall
be
deemed
to
be
sold
when
invoiced
anda
“sale”
shall
not
include
transfers
or
dispositions
of
such
Licensed
Product
for
pre-clinical
or
clinical
purposes
or
as
samples,
in
each
case,
without
charge.
Insmed’s,
its
Affiliates’
or
its
or
their
Sublicensees’
transfer
of
any
Licensed
Product
to
an
Affiliate
or
Sublicensee
shall
not
result
in
any
Net
Sales,
unless
suchLicensed
Product
is
consumed
or
administered
by
such
Affiliate
or
Sublicensee
in
the
course
of
its
commercial
activities.

With
respect
to
any
Licensed
Productthat
is
consumed
or
administered
by
Insmed
or
its
Affiliates
or
its
or
their
Sublicensees,
Net
Sales
shall
include
any
amount
billed
or
invoiced
with
respect
to
suchconsumption
or
administration,
including
any
services
provided
in
connection
therewith.
In
the
event
that
a
Licensed
Product
is
sold
in
any
country
in
the
form
of
a
Combination
Product,
Net
Sales
of
such
Combination
Product
shall
be
adjusted
bymultiplying
actual
Net
Sales
of
such
Combination
Product
in
such
country
calculated
pursuant
to
the
foregoing
definition
of
“Net
Sales”
by
the
fraction
A/(A+B),where
A
is
the
average
invoice
price
in
such
country
of
any
Licensed
Product
that
contains
the
same
Licensed
Compound(s)
as
such
Combination
Product
as
itssole
active
ingredient(s),
if
sold
separately
in
such
country,
and
B
is
the
average
invoice
price
in
such
country
of
each
product
that
contains
activeingredient(s)
other
than
the
Licensed
Compound(s)
contained
in
such
Combination
Product
as
its
sole
active
ingredient(s),
if
sold
separately
in
such
country;provided that
the
invoice
price
in
a
country
for
each
Licensed
Product
that
contains
only
the
Licensed
Compound(s)
and
each
product
that
contains
solely
activeingredient(s)
other
than
the
Licensed
Compound(s)
included
in
the
Combination
Product
shall
be
for
a
quantity
comparable
to
that
used
in
such
CombinationProduct
and
of
substantially
the
same
class,
purity
and
potency.

If
either
such
Licensed
Product
that
contains
the
Licensed
12
Compound(s)
as
its
sole
active
ingredient
or
a
product
that
contains
an
active
ingredient
(other
than
the
Licensed
Product)
in
the
Combination
Product
as
its
soleactive
ingredient(s)
is
not
sold
separately
in
a
particular
country,
the
Parties
shall
negotiate
in
good
faith
a
reasonable
adjustment
to
Net
Sales
in
such
country
thattakes
into
account
the
medical
contribution
to
the
Combination
Product
of
and
all
other
factors
reasonably
relevant
to
the
relative
value
of,
the
LicensedCompound(s),
on
the
one
hand
and
all
of
the
other
active
ingredient(s),
collectively,
on
the
other
hand.
In
the
case
of
pharmacy
incentive
programs,
hospital
performance
incentive
programs,
chargebacks,
disease
management
programs,
similar
programs
or
discountson
portfolio
product
offerings,
all
rebates,
discounts
and
other
forms
of
reimbursements
shall
be
allocated
among
products
on
the
basis
on
which
such
rebates,discounts
and
other
forms
of
reimbursements
were
actually
granted
or,
if
such
basis
cannot
be
determined,
in
accordance
with
Insmed’s,
its
Affiliates’
or
its
or
theirSublicensees’
existing
allocation
method;
provided that
any
such
allocation
to
a
Licensed
Product
shall
be
(i)
done
in
accordance
with
Applicable
Law,
includingany
price
reporting
laws,
rules
and
regulations,
and
(ii)
subject
to
clause
(i),
in
no
event
no
greater
than
a
pro
rata
allocation,
such
that
the
portion
of
each
of
theforegoing
rebates,
discounts
and
other
forms
of
reimbursements
shall
not
be
included
as
deductions
from
Invoiced
Sales
hereunder
in
any
amount
greater
than
theproportion
of
the
undiscounted
Dollar
value
of
such
Licensed
Product
sold
by
Insmed,
its
Affiliates
or
its
or
their
Sublicensees
to
Third
Parties
hereunder
comparedto
the
undiscounted
Dollar
value
of
all
the
products
sold
by
Insmed,
such
Affiliates
and
such
Sublicensees
to
Third
Parties
to
which
such
foregoing
rebate,
discountor
other
form
of
reimbursement,
as
applicable,
are
granted.
Subject
to
the
above,
Net
Sales
shall
be
calculated
in
accordance
with
the
standard
internal
policies
and
procedures
of
Insmed,
its
Affiliates
or
its
or
theirSublicensees,
which
must
be
in
accordance
with
GAAP.
1.94. 



















“
Non-Breaching Party ”
has
the
meaning
set
forth
in
Section
12.2.1.
1.95. 



















“
Notice Period ”
has
the
meaning
set
forth
in
Section
12.2.1.
1.96. 



















“
Party ”
and
“
Parties ”
has
the
meaning
set
forth
in
the
preamble
hereto.
1.97. 



















“
Patents ”
means:

(i)
all
national,
regional
and
international
patents
and
patent
applications,
including
provisional
patent
applications;(ii)
all
patent
applications
filed
either
from
such
patents,
patent
applications
or
provisional
applications
or
from
an
application
claiming
priority
from
either
of
theforegoing,
including
divisionals,
continuations,
continuations-in-part,
provisionals,
converted
provisionals
and
continued
prosecution
applications;
(iii)
any
and
allpatents
that
have
issued
or
in
the
future
issue
from
the
foregoing
patent
applications
((i)
and
(ii)),
including
utility
models,
petty
patents,
innovation
patents
anddesign
patents
and
certificates
of
invention;
(iv)
any
and
all
extensions
or
restorations
by
existing
or
future
extension
or
restoration
mechanisms,
includingrevalidations,
reissues,
re-examinations
and
extensions
(including
any
supplementary
protection
certificates
and
the
like)
of
the
foregoing
patents
or
patentapplications
((i),
(ii)
and
(iii));
and
(v)
any
similar
rights,
including
so-called
pipeline
protection
or
any
importation,
revalidation,
confirmation
or
introductionpatent
or
registration
patent
or
patent
of
additions
to
any
of
such
foregoing
patent
applications
and
patents.
13
1.98. 



















“
Payment ”
has
the
meaning
set
forth
in
Section
7.8.1.
1.99. 



















“
Person ”
means
an
individual,
sole
proprietorship,
partnership,
limited
partnership,
limited
liability
partnership,
corporation,
limitedliability
company,
business
trust,
joint
stock
company,
trust,
unincorporated
association,
joint
venture
or
other
similar
entity
or
organization,
including
agovernment
or
political
subdivision,
department
or
agency
of
a
government.
1.100. 












“
Phase 1 Clinical Trial ”
has
the
meaning
set
forth
at
U.S.
21
C.F.R.
Part
312.21(a),
including,
without
limitation,
as
to
a
specificLicensed
Product,
a
first
clinical
study
conducted
in
humans.

For
the
avoidance
of
doubt,
the
dose
escalation
and
dose
expansion
parts
of
a
Phase
1a/1b
clinicaltrial
shall
be
considered
part
of
the
same
Phase
1
Clinical
Trial.
1.101. 












“
Phase 2 Clinical Trial ”
has
the
meaning
set
forth
at
U.S.
21
C.F.R.
Part
312.21(b),
including,
without
limitation,
as
to
a
specificLicensed
Product
for
a
specific
Indication,
a
clinical
study
in
patients
conducted
in
accordance
with
Applicable
Laws
(including,
without
limitation,
cGCP)
whichmay
use
a
variety
of
study
designs
and
is
intended
to
evaluate
safety
and
efficacy
in
target
populations,
and/or
inform
the
design
or
endpoints
for
a
subsequent
trial,as
described
in
ICH
Guideline
E8,
General
Considerations
for
Clinical
Trials.
1.102. 












“
Phase 2b Clinical Trial ”
means
a
further
Phase
2
Clinical
Trial
for
a
Licensed
Product
for
the
same
Indication
that
is
intended
toidentify
the
definite
dose
range
for
efficacy
at
the
primary
endpoint
for
that
Indication.
1.103. 












“
Phase 3 Clinical Trial ”
has
the
meaning
set
forth
at
U.S.
21
C.F.R.
Part
312.21(c),
including,
without
limitation,
as
to
a
specificLicensed
Product
for
a
specific
Indication,
a
clinical
study
conducted
in
humans
in
accordance
with
Applicable
Laws
(including,
without
limitation,
cGCP)
todemonstrate
or
confirm
the
therapeutic
benefit
of
the
Licensed
Product
in
such
Indication
and
to
provide
an
adequate
basis
for
obtaining
Regulatory
Approval,
asdescribed
in
ICH
Guideline
E8,
General
Considerations
for
Clinical
Trials.
1.104. 












“
Product Trademarks ”
means
the
Trademark(s)
used
or
to
be
used
by
Insmed
or
its
Affiliates
or
its
or
their
Sublicensees
for
theCommercialization
of
Licensed
Products
in
the
Territory
and
any
registrations
thereof
or
any
pending
applications
relating
thereto
in
the
Territory,
including
anyunregistered
Trademark
rights
related
to
the
Licensed
Products
as
may
exist
through
use
(excluding,
in
any
event,
any
Corporate
Names
and
any
Trademarks
thatconsist
of
or
include
any
corporate
name
or
corporate
logo
of
the
Parties
or
their
Affiliates
or
its
or
their
(sub)licensees
(or
Sublicensees),
as
applicable).
1.105. 












“
Prosecuting Party ”
has
the
meaning
set
forth
in
Section
8.2.1.
1.106. 












“
Quality Agreement ”
has
the
meaning
set
forth
in
Section
3.1.
1.107. 












“
Regulatory Approval ”
means,
with
respect
to
a
country
in
the
Territory,
any
and
all
approvals
(including
Drug
ApprovalApplications),
licenses,
registrations
or
authorizations
of
any
Regulatory
Authority
necessary
to
commercially
distribute,
sell
or
market
a
Licensed
Product
or
anyImprovement
thereto
in
such
country,
including,
where
applicable,
14
(i)
pricing
or
reimbursement
approval
in
such
country,
(ii)
pre-
and
post-approval
marketing
authorizations
(including
any
prerequisite
Manufacturing
approval
orauthorization
related
thereto)
and
(iii)
labeling
approval.
1.108. 












“
Regulatory Authority ”
means
any
applicable
supra-national,
federal,
national,
regional,
state,
provincial
or
local
regulatoryagencies,
departments,
bureaus,
commissions,
councils
or
other
government
entities
regulating
or
otherwise
exercising
authority
with
respect
to
the
Exploitation
ofLicensed
Compound
or
Licensed
Products
or
any
Improvement
thereto
in
the
Territory,
including
the
FDA
in
the
United
States
and
the
EMA
in
the
EuropeanUnion.
1.109. 












“
Regulatory Documentation ”
means:

all
(i)
applications
(including
all
INDs
and
Drug
Approval
Applications),
registrations,licenses,
authorizations
and
approvals
(including
Regulatory
Approvals);
(ii)
correspondence
and
reports
submitted
to
or
received
from
Regulatory
Authorities(including
minutes
and
official
contact
reports
relating
to
any
communications
with
any
Regulatory
Authority)
and
all
supporting
documents
with
respect
thereto,including
all
adverse
event
files
and
complaint
files;
and
(iii)
clinical
and
non-clinical
and
other
data
contained
or
relied
upon
in
any
of
the
foregoing;
in
each
case((i),
(ii)
and
(iii))
relating
to
the
Licensed
Compound
or
a
Licensed
Product
or
any
Improvement
thereto.
1.110. 












“
Regulatory Exclusivity Period ”
means,
with
respect
to
each
Licensed
Product
in
any
country
in
the
Territory,
any
period
of
data,market
or
other
regulatory
exclusivity
(other
than
Patent
exclusivity)
granted
or
afforded
by
Applicable
Law
or
by
a
Regulatory
Authority
in
such
country
thatconfers
exclusive
marketing
rights
with
respect
to
such
Licensed
Product
in
such
country
or
prevents
another
party
from
using
or
otherwise
relying
on
any
datasupporting
the
approval
of
the
Drug
Approval
Application
for
such
Licensed
Product
without
the
prior
written
consent
of
the
holder
of
the
Regulatory
Approval.
Such
data,
market
or
other
regulatory
exclusivity
may
include
new
chemical
entity
exclusivity,
new
use
or
indication
exclusivity,
new
formulation
exclusivity,orphan
drug
exclusivity,
non-patent
related
pediatric
exclusivity
or
any
other
applicable
marketing
or
data
exclusivity,
including
any
such
periods
listed
in
theOrange
Book
or
any
such
periods
under
national
implementations
in
the
EU
of
Article
10
of
Directive
2001/83/ED,
Article
14(11)
of
Parliament
and
CouncilRegulation
(EC)
No.
726/2004,
Parliament
and
Council
Regulation
(ED)
No.
141/2000
on
orphan
medicines,
Parliament
and
Council
Regulation
(ED)No.
1901/2006
on
medicinal
products
for
pediatric
use
and
all
international
equivalents
of
any
of
the
foregoing.
1.111. 












“
Representatives ”
has
the
meaning
set
forth
in
Section
10.5.1.
1.112. 












“Residual Knowledge” means
any
ideas,
concepts,
know-how
and
techniques
generally
relating
to
the
treatment,
diagnosis,
cure,mitigation
or
prevention
of
any
Indication
within
the
Field
which
are
not
specifically
related
to
the
Licensed
Product
or
the
Licensed
Compound,
and
that
arecontained
in
or
derived
from
Confidential
Information
that
is
acquired
and
retained
solely
in,
and
Insmed
first
reduces
to
tangible
form
solely
from,
the
unaidedmemories
of
Insmed
or
its
Affiliates
or
its
or
their
Sublicensees
who
have
had
access
to
AstraZeneca’s
Confidential
Information
under
this
Agreement.

Anindividual’s
unaided
memory
will
be
considered
to
be
unaided
if
the
individual
has
not
intentionally
memorized
the
Confidential
Information
for
the
purpose
ofretaining
and
subsequently
using
or
disclosing
it.
15
1.113. 












“
Respiratory IMED ”
has
the
meaning
set
forth
in
Section
2.7.1.
1.114. 












“
ROFN Period ”
has
the
meaning
set
forth
in
Section
2.5.1.
1.115. 












“
Royalty Term ”
means,
with
respect
to
each
Licensed
Product
and
each
country
in
the
Territory,
the
period
beginning
on
the
date
ofthe
First
Commercial
Sale
of
such
Licensed
Product
in
such
country
and
ending
on
the
latest
to
occur
of:

(i)
the
expiration
of
the
last-to-expire
AstraZeneca
Patentor
Joint
Patent
in
such
country
that
contains
a
Valid
Claim
with
respect
to
such
Licensed
Product
in
such
country;
(ii)
the
expiration
of
Regulatory
ExclusivityPeriod
in
such
country
for
such
Licensed
Product;
and
(iii)
the
[***]
anniversary
of
the
First
Commercial
Sale
of
such
Licensed
Product
in
such
country.
1.116. 












“
Second Option ”
has
the
meaning
set
forth
in
Section
5.2.1.
1.117. 












“
Second Option Period ”
has
the
meaning
set
forth
in
Section
5.2.1.
1.118. 












“
Senior Officer ”
means,
with
respect
to
AstraZeneca,
its
Head
of
the
Respiratory
IMED
and,
with
respect
to
Insmed,
its
ChiefExecutive
Officer.
1.119. 












“
Sublicensee ”
means
a
Person,
other
than
an
Affiliate,
that
is
granted
a
sublicense
by
Insmed
or
its
Affiliate
under
the
grants
inSection
2.1,
as
provided
in
Section
2.3,
including
any
distributors
of
Authorized
Generic
Versions
of
a
Licensed
Product,
irrespective
of
whether
such
distributor
isgranted
a
sublicense
hereunder.
1.120. 












“
Supply Agreement ”
has
the
meaning
set
forth
in
Section
3.1.
1.121. 












“
Term ”
has
the
meaning
set
forth
in
Section
12.1.
1.122. 












“
Terminated Territory ”
means
each
country
with
respect
to
which
this
Agreement
is
terminated
by
AstraZeneca
pursuant
toSection
12.2.1
or
by
Insmed
pursuant
to
Section
12.2.2
or,
if
this
Agreement
is
terminated
in
its
entirety,
the
entire
Territory.
1.123. 












“
Termination Notice ”
has
the
meaning
set
forth
in
Section
12.2.1.
1.124. 












“
Territory ”
means
the
entire
world,
other
than
the
Terminated
Territory.
1.125. 












“
Third Party ”
means
any
Person
other
than
AstraZeneca,
Insmed
and
their
respective
Affiliates.
1.126. 












“
Third Party Claims ”
has
the
meaning
set
forth
in
Section
11.1.
***
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.
16
1.127. 












“
Third Party Distributor(s) ”
means
any
Third
Party
which
Insmed
has
authorized
to
distribute
or
resell
any
Licensed
Product
(otherthan
an
Authorized
Generic
Version
of
a
Licensed
Product)
in
any
jurisdiction
within
the
Territory,
but
which
Third
Party
does
not
require
a
sublicense
of
any
ofthe
rights
granted
under
Section
2.1
(except
for
Trademarks)
in
order
to
make
such
distribution
or
resale.

For
the
avoidance
of
doubt,
a
Third
Party
authorized
todistribute
an
Authorized
Generic
Version
of
a
Licensed
Product
shall
be
deemed
a
Sublicensee
and
not
a
Third
Party
Distributor
under
this
Agreement.
1.128. 












“
Third Party Infringement Claim ”
has
the
meaning
set
forth
in
Section
8.4.
1.129. 












“
Third Party IP Right ”
has
the
meaning
set
forth
in
Section
8.6.
1.130. 












“
Third Party Representative ”
has
the
meaning
set
forth
in
Section
10.5.4.
1.131. 












“
Trademark ”
means
any
word,
name,
symbol,
color,
shape,
designation
or
any
combination
thereof,
including
any
trademark,
servicemark,
trade
name,
brand
name,
sub-brand
name,
trade
dress,
product
configuration
rights,
program
name,
delivery
form
name,
certification
mark,
collective
mark,logo,
tagline,
slogan,
design
or
business
symbol,
that
functions
as
an
identifier
of
source,
origin
or
quality,
whether
or
not
registered,
and
all
statutory
and
commonlaw
rights
therein
and
all
registrations
and
applications
therefor,
together
with
all
goodwill
associated
with,
or
symbolized
by,
any
of
the
foregoing.
1.132. 












“
United States ”
or
“
U.S. ”
means
the
United
States
of
America
and
its
territories
and
possessions
(including
the
District
of
Columbiaand
Puerto
Rico).
1.133. 












“Valid Claim ”
means
(i)
a
composition
of
matter
or
method
of
use
claim
of
any
issued
and
unexpired
Patent
whose
validity,enforceability
or
patentability
has
not
been
affected
by
(a)
irretrievable
lapse,
abandonment,
revocation,
dedication
to
the
public
or
disclaimer
or
(b)
a
holding,finding
or
decision
of
invalidity,
unenforceability
or
non-patentability
by
a
court,
governmental
agency,
national
or
regional
patent
office
or
other
appropriate
bodythat
has
competent
jurisdiction,
such
holding,
finding
or
decision
being
final
and
unappealable
or
unappealed
within
the
time
allowed
for
appeal
or
(ii)
acomposition
of
matter
or
method
of
use
claim
of
a
pending
Patent
application
that
was
filed
and
is
being
prosecuted
in
good
faith
and
has
not
been
abandoned
orfinally
disallowed
without
the
possibility
of
appeal
or
re-filing
of
the
application;
provided that
such
prosecution
has
not
been
ongoing
for
more
than
[***].
1.134. 












“
VAT ”
has
the
meaning
set
forth
in
Section
7.8.2.
***
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.
17
ARTICLE 2 GRANT OF RIGHTS
2.1. 


























Grants to Insmed.  Subject
to
Sections
2.3,
2.4,
2.5,
5.4
and
the
other
terms
and
conditions
of
this
Agreement,
AstraZeneca
herebygrants
to
Insmed:
2.1.1. 

















an
exclusive
license
(or
sublicense),
with
the
right
to
grant
sublicenses
in
accordance
with
Section
2.3,
under
the
AstraZenecaPatents,
the
AstraZeneca
Know-How
and
AstraZeneca’s
interests
in
the
Joint
Patents
and
the
Joint
Know-How,
to
Exploit
the
Licensed
Compound
and
LicensedProducts
and
any
Improvements
thereto
in
the
Field
in
the
Territory;
provided, however ,
that
Insmed
may,
at
any
time
during
the
Term
and
in
its
sole
discretion,opt
out
of
licensing
any
AstraZeneca
Patent
or
AstraZeneca’s
interest
in
a
Joint
Patent,
in
which
case,
upon
written
notice
from
Insmed
to
AstraZeneca,
such
Patentwill
automatically
be
excluded
from
this
license
grant
and
shall
no
longer
be
treated
as
an
AstraZeneca
Patent
or
Joint
Patent
(as
applicable)
for
any
purpose
underthis
Agreement;
and
2.1.2. 

















an
exclusive
license
and
right
of
reference,
with
the
right
to
grant
sublicenses
and
further
rights
of
reference
in
accordancewith
Section
2.3,
under
the
AstraZeneca
Regulatory
Documentation
as
necessary
or
reasonably
useful
for
purposes
of
Exploiting
the
Licensed
Compound
andLicensed
Products
in
the
Field
in
the
Territory.
2.2. 


























Grants to AstraZeneca.  Insmed
hereby
grants
to
AstraZeneca
a
non-exclusive,
royalty-free
license,
with
the
right
to
grantsublicenses,
under
the
Insmed
Patents,
the
Insmed
Know-How
and
Insmed’s
interests
in
the
Joint
Patents
and
the
Joint
Know-How,
to
Exploit
the
LicensedCompound
and
Licensed
Products
and
any
Improvements
thereto
for
purposes
of
AstraZeneca,
its
Affiliates
and
its
and
their
contractors
to
perform
AstraZeneca’sobligations
under
this
Agreement
and
under
the
Supply
Agreement
and
the
Quality
Agreement.
2.3. 


























Sublicenses.
2.3.1. 

















Subject
to
Sections
2.5
and
5.4,
Insmed
shall
have
the
right
to
grant
to
its
Affiliates
and
other
Persons
sublicenses
(or
furtherrights
of
reference),
through
multiple
tiers
of
sublicenses,
under
the
licenses
and
rights
of
reference
granted
in
Section
2.1;
provided that
any
such
sublicenses
shallbe
subject
to
AstraZeneca’s
prior
written
consent,
such
consent
not
to
be
unreasonably
withheld,
conditioned
or
delayed.

Notwithstanding
the
foregoing
in
thisSection
2.3.1,
Insmed
may,
with
prior
written
notice
to,
and
without
the
prior
written
consent
of,
AstraZeneca:
(i)


















sublicense
such
rights
in
whole
or
in
part
to
Affiliates,
as
reasonably
required
for
Insmed
to
perform
its
obligationsunder
this
Agreement
in
connection
with
the
Development
and
Commercialization
of
Licensed
Products
throughout
the
Territory,
which
sublicense
shallautomatically
terminate
when
such
Affiliate
ceases
to
be
an
Affiliate
of
Insmed;
and
(ii)















sublicense
such
rights
in
whole
or
in
part
to
Third
Party
contract
research
organizations
and
contract
manufacturingorganizations,
as
required
for
Insmed
to
perform
its
obligations
under
this
Agreement
in
connection
with
the
Development
and
Commercialization
of
LicensedProducts
throughout
the
Territory,
which
sublicense
shall
be
further
sublicenseable
in
multiple
tiers
solely
to
the
extent
reasonably
required
in
connectiontherewith.
18
Any
sublicenses
granted
by
Insmed
under
this
Section
2.3
shall
be
consistent
with,
and
expressly
made
subject
to,
the
terms
and
conditions
of
this
Agreement. 2.3.2. 

















Insmed
shall
cause
each
Sublicensee
to
comply
with
the
applicable
terms
and
conditions
of
this
Agreement
as
if
suchSublicensee
were
a
Party
to
this
Agreement.

Insmed
hereby
(x)
guarantees
the
performance
of
its
Affiliates
and
permitted
Sublicensees
that
are
sublicensed
aspermitted
herein,
and
the
grant
of
any
such
sublicense
shall
not
relieve
Insmed
of
its
obligations
under
this
Agreement,
except
to
the
extent
they
are
satisfactorilyperformed
by
such
Sublicensee
and
(y)
waives
any
requirement
that
AstraZeneca
exhaust
any
right,
power
or
remedy,
or
proceed
against
any
Sublicensee
for
anyobligation
or
performance
under
this
Agreement
prior
to
proceeding
directly
against
Insmed.

A
copy
of
any
draft
sublicense
agreement
shall
be
provided
toAstraZeneca
prior
to
its
execution,
and
a
copy
of
any
sublicense
agreement
executed
by
Insmed
shall
be
provided
to
AstraZeneca
within
[***]
after
its
execution;provided that
in
each
case
the
financial
terms
of
any
such
sublicense
agreement
to
the
extent
not
pertinent
to
an
understanding
of
a
Party’s
obligations
or
benefitsunder
this
Agreement
may
be
redacted.

Insmed
shall
provide
AstraZeneca
with
any
additional
materials
reasonably
requested
by
AstraZeneca
in
order
forAstraZeneca
to
verify
that
such
sublicense
is
in
compliance
with
the
terms
and
conditions
of
this
Agreement.
2.4. 


























Retention of Rights; Limitations Applicable to License Grants.
2.4.1. 

















Retained Rights of AstraZeneca.  Notwithstanding
anything
to
the
contrary
in
this
Agreement
and
without
limitation
of
anyrights
granted
or
reserved
to
AstraZeneca
pursuant
to
any
other
term
or
condition
of
this
Agreement,
AstraZeneca
hereby
expressly
retains,
on
behalf
of
itself
andits
Affiliates
(and
on
behalf
of
its
licensors
and
contractors)
all
right,
title
and
interest
in
and
to
the
(a)
AstraZeneca
Patents,
(b)
the
AstraZeneca
Know-How,(c)
AstraZeneca’s
interests
in
and
to
Joint
Patents
and
Joint
Know-How,
(d)
AstraZeneca
Regulatory
Documentation,
and
(e)
AstraZeneca’s
Corporate
Names,
ineach
case,
for
purposes
of
AstraZeneca,
its
Affiliates
and
its
and
their
contractors
to:
(i)





































perform
AstraZeneca’s
obligations
under
this
Agreement,
the
Supply
Agreement
and
the
Quality
Agreement;
and
(ii)


































develop,
obtain
and
maintain
regulatory
approvals
for
and
to
Manufacture,
commercialize
and
otherwise
Exploit
anycompound
or
product,
other
than
the
Licensed
Compound
or
Licensed
Products
in
any
field
anywhere
in
the
Territory.
***
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.
19
2.4.2. 

















In-License Agreements. 

The
licenses
granted
by
AstraZeneca
in
Section
2.1
include
sublicenses
under
the
applicablelicense
rights
granted
to
AstraZeneca
by
Third
Parties
under
the
In-License
Agreements,
subject
to
this
Section
2.4.2.

Any
sublicense
with
respect
to
Informationor
intellectual
property
rights
of
a
Third
Party
hereunder
and
any
right
of
Insmed
(if
any)
to
grant
a
further
sublicense
thereunder,
shall
be
subject
and
subordinateto
the
terms
and
conditions
of
the
In-License
Agreement
under
which
such
sublicense
is
granted
and
shall
be
effective
solely
to
the
extent
permitted
under
the
termsof
such
agreement.

Without
limitation
of
the
foregoing,
in
the
event
and
to
the
extent
that
any
In-License
Agreement
requires
that
particular
terms
or
conditions
ofsuch
In-License
Agreement
be
contained
or
incorporated
in
any
agreement
granting
a
sublicense
thereunder,
such
terms
and
conditions
are
hereby
deemed
to
beincorporated
herein
by
reference
and
made
applicable
to
the
sublicense
granted
herein
under
such
In-License
Agreement.
2.4.3. 

















No Other Rights Granted by AstraZeneca. 

Except
as
expressly
provided
in
this
Agreement,
AstraZeneca
grants
no
otherright
or
license,
including
any
rights
or
licenses
to
any
other
Patent,
Trademark
or
other
intellectual
property
rights
not
otherwise
expressly
granted
herein.
2.4.4. 

















No Other Rights Granted by Insmed. 

Except
as
expressly
provided
in
this
Agreement,
Insmed
grants
no
other
right
orlicense,
including
any
rights
or
licenses
to
any
other
Patent,
Trademark
or
other
intellectual
property
rights
not
otherwise
expressly
granted
herein.
2.5. 


























AstraZeneca’s Right of First Negotiation.
2.5.1. 

















Before
Insmed
or
any
of
its
Affiliates
commences
any
confidential
discussions
with
any
Third
Party
pursuant
to
a
confidentialdisclosure
agreement
regarding
a
transaction
to
sell,
assign,
license,
sublicense
or
otherwise
dispose
of
Insmed’s
right
to
Develop
or
Commercialize
any
LicensedProduct
in
the
Field
in
any
part
of
the
Territory
to
any
Third
Party
to
permit
such
Third
Party
to
Develop
or
Commercialize
such
Licensed
Product
in
the
Field
insuch
part
of
the
Territory,
or
if
Insmed
receives
an
unsolicited
offer
for
such
a
transaction,
then
prior
to
negotiating
with
or
entertaining
further
offers
from
anyThird
Party
to
acquire
such
right,
Insmed
first
shall
notify
AstraZeneca
of
its
intent
or
receipt
of
offer
(as
applicable),
and
provide
to
AstraZeneca
a
copy
of
anyadditional
data
with
respect
to
the
Development
and
Commercialization
of
the
Licensed
Products
in
the
Field
not
previously
provided
to
AstraZeneca.

AstraZenecashall
have
[***],
or,
in
the
case
of
Insmed’s
receipt
of
an
unsolicited
offer,
[***],
after
receipt
of
such
notification
and
additional
data
(the
“
ROFN Period ”)
toelect
to
enter
into
exclusive
negotiations
for
the
right
to
Develop
or
Commercialize
such
Licensed
Product
in
the
applicable
part
of
the
Territory.

During
the
ROFNPeriod,
Insmed
***
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.
20
and
its
Affiliates
shall
not
negotiate
with
or
grant
any
rights
to
Develop
or
Commercialize
Licensed
Products
to
any
Third
Party.

If
AstraZeneca
elects
to
enter
intoexclusive
negotiations
during
the
ROFN
Period,
Insmed
shall
negotiate
exclusively
and
in
good
faith
with
AstraZeneca
for
a
period
commencing
upon
the
dateInsmed
receives
notice
of
such
election
from
AstraZeneca
and
expiring
[***]
thereafter
(the
“
Negotiation Period ”)
with
respect
to
commercially
reasonableterms
for
the
acquisition
by
AstraZeneca,
by
license
or
otherwise,
of
the
right
to
Develop
or
Commercialize
the
Licensed
Product
in
the
Field
in
such
part
of
theTerritory.

Notwithstanding
the
foregoing
in
this
Section
2.5.1,
each
Party
shall
retain
all
discretion
to
determine,
among
other
things,
whether
any
proposed
termsfor
AstraZeneca’s
right
to
Develop
or
Commercialize
any
Licensed
Product
in
the
Field
in
any
part
of
the
Territory
during
the
Negotiation
Period
are
acceptable
tosuch
Party,
and
no
Party
shall
be
deemed
to
have
acted
without
good
faith
solely
because
such
Party
does
not
agree
to
some
or
all
of
the
other
Party’s
proposedterms,
or
if
the
Parties
cannot
come
to
an
agreement
on
mutually
acceptable
terms
within
the
Negotiation
Period.

For
the
avoidance
of
doubt,
(i)
nothing
in
thisSection
2.5.1
shall
limit
Insmed’s
right
to
sublicense
any
rights
in
whole
or
in
part
to
any
Affiliate,
Third
Party
contract
research
organizations
and/or
Third
Partycontract
manufacturing
organizations,
as
set
forth
in
Section
2.3,
or
to
engage
a
Third
Party
Distributor
to
the
extent
reasonably
necessary
or
useful
for
theCommercialization
of
Licensed
Products
in
the
Territory,
and
(ii)
no
Change
of
Control
of
Insmed
or
its
Affiliates
or
Sublicensees
shall
trigger
AstraZeneca’srights
under
this
Section
2.5.1.
2.5.2. 

















If
the
Parties
enter
into
a
written
agreement
for
such
Development
or
Commercialization
right
within
the
Negotiation
Period,then
except
as
set
forth
in
any
such
written
agreement,
the
exclusive
licenses
granted
to
Insmed
under
this
Agreement
which
are
the
subject
of
such
writtenagreement
shall
terminate.

For
clarity,
the
terms
and
conditions
relating
to
the
Development
and
Commercialization
of
Licensed
Products
(including
all
financialobligations
between
the
Parties
related
thereto)
shall
be
governed
by
the
terms
of
any
such
written
agreement,
and
the
effects
of
termination
set
forth
inSection
12.4
shall
not
apply
with
respect
to
such
termination.
2.5.3. 

















If,
after
good
faith
negotiations,
the
Parties
do
not
enter
into
a
written
agreement
within
the
Negotiation
Period,
Insmed
shallbe
free
to
negotiate
with
a
Third
Party
to
dispose
of,
by
license
or
otherwise,
Insmed’s
Development
or
Commercialization
rights
in
the
part
of
the
Territory
thatwas
the
subject
of
negotiations
between
the
Parties.
2.6. 


























Exclusivity. 

During
the
period
beginning
on
the
Effective
Date
and
continuing
until
[***],
AstraZeneca
shall
not
conduct
a
researchprogram,
either
alone
or
in
collaboration
with
any
Third
Party,
the
primary
goal
of
which
is
to
Develop
or
Commercialize
any
DPP1
Compound,
except
for
anyLicensed
Compound
being
Developed
or
Commercialized
by
AstraZeneca
pursuant
to
the
terms
of
this
Agreement
or
another
agreement
between
Insmed
andAstraZeneca
or
any
of
their
respective
Affiliates.
***
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.
21
2.7. 


























Insmed’s Right of Negotiation for AstraZeneca Respiratory IMED Bronchiectasis Compounds.
2.7.1. 

















During
the
period
beginning
on
the
Effective
Date
and
continuing
until
[***],
if
AstraZeneca’s
Innovative
Medicines
andEarly
Development
unit
with
responsibility
for
respiratory
pharmaceutical
products
(the
“
Respiratory IMED ”)
develops
a
compound
with
a
molecular
weight
of[***]
and
plans
for
the
primary
Indication
to
be
Bronchiectasis,
AstraZeneca
shall
notify
Insmed.

For
clarity,
such
notice
requirement
shall
be
triggered
if
suchcompound
is
determined
by
the
Respiratory
IMED
to
be
a
“
Candidate Drug ,”
meaning
it
is
eligible
for
initiation
of
a
Phase
1
Clinical
Trial,
and
the
written
planfor
development
in
connection
with
such
compound’s
designation
as
a
“Candidate
Drug”
is
for
the
first
Phase
2
Clinical
Trial
to
be
for
patients
with
an
Indicationof
Bronchiectasis.

If
the
Respiratory
IMED’s
initial
written
plan
for
development
of
such
compound
is
for
the
first
Phase
2
Clinical
Trial
to
be
for
patients
with
anIndication
other
than
Bronchiectasis,
such
notice
requirement
shall
not
be
triggered
upon
the
designation
of
the
compound
as
a
Candidate
Drug,
provided that
ifdevelopment
of
the
compound
thereafter
ceases
for
all
Indications
except
that
it
is
ongoing
or
planned
for
Bronchiectasis,
then
such
notice
requirement
shall
betriggered
on
the
basis
that
Bronchiectasis
has
become
the
primary
Indication
for
such
compound.

A
notice
provided
under
this
Section
2.7.1
shall
be
a
“
BronchCD Notice ”
and
the
compound
referred
to
therein
shall
be
a
“
Bronch CD .”
2.7.2. 

















Insmed
shall
have
[***]
after
receipt
of
a
Bronch
CD
Notice
(the
“
Bronch CD Notice Period ”)
to
elect
to
enter
intoexclusive
negotiations
for
the
right
to
develop
or
commercialize
such
Bronch
CD.

During
the
Bronch
CD
Notice
Period,
AstraZeneca
and
its
Affiliates
shall
notnegotiate
with
or
grant
any
rights
to
develop
or
commercialize
the
Bronch
CD
to
any
Third
Party.

If
Insmed
elects
to
enter
into
exclusive
negotiations
during
theBronch
CD
Notice
Period,
AstraZeneca
shall
negotiate
exclusively
and
in
good
faith
with
Insmed
for
a
period
commencing
upon
the
date
AstraZeneca
receivesnotice
of
such
election
from
Insmed
and
expiring
[***]
thereafter
(the
“
Bronch CD Negotiation Period ”)
with
respect
to
commercially
reasonable
terms
for
theacquisition
by
Insmed,
by
license
or
otherwise,
of
the
right
to
develop
or
commercialize
the
Bronch
CD.

Notwithstanding
the
foregoing
in
this
Section
2.7.2,
eachParty
shall
retain
all
discretion
to
determine,
among
other
things,
whether
any
proposed
terms
for
Insmed’s
right
to
develop
or
commercialize
any
Bronch
CDduring
the
Bronch
CD
Negotiation
Period
are
acceptable
to
such
Party,
and
no
Party
shall
be
deemed
to
have
acted
without
good
faith
solely
because
such
Partydoes
not
agree
to
some
or
all
of
the
other
Party’s
proposed
terms,
or
if
the
Parties
cannot
come
to
an
agreement
on
mutually
acceptable
terms
within
the
Bronch
CDNegotiation
Period.
***
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.
22
2.7.3. 

















If,
after
good
faith
negotiations,
the
Parties
do
not
enter
into
a
written
agreement
within
the
Bronch
CD
Negotiation
Period,AstraZeneca
shall
be
free
to
develop
and
commercialize
such
Bronch
CD
on
its
own
or
in
collaboration
with
any
Third
Party
and
to
dispose
of,
by
license
orotherwise,
AstraZeneca’s
development
or
commercialization
rights
for
such
Bronch
CD
without
further
obligation
to
Insmed. ARTICLE 3 ASTRAZENECA SUPPLY AND MANUFACTURING KNOW-HOW TRANSFER ACTIVITIES
3.1. 


























Supply of Licensed Products. 

No
later
than
[***]
after
the
Effective
Date,
or
except
as
otherwise
mutually
agreed
by
the
Parties,
theParties
shall
enter
into
a
supply
agreement
pursuant
to
which
AstraZeneca
shall
supply
to
Insmed
specified
quantities
and
dosage
strengths
of
the
LicensedCompound
and
Licensed
Products
to
be
used
by
Insmed
for
the
conduct
of
the
initial
Phase
2
Clinical
Trial
under
the
Development
Plan
(the
“
Supply Agreement”).

The
Parties
agree
that,
except
as
may
otherwise
be
mutually
agreed,
the
Supply
Agreement
shall
comply
in
all
material
respects
with
the
draft
terms
set
forth
inSchedule
3.1
hereof,
which
provide,
without
limitation,
that
Insmed
shall
pay
[***]
to
Manufacture
such
Licensed
Compound
and
Licensed
Products
in
accordancewith
the
payment
terms
and
procedures
to
be
set
forth
in
the
Supply
Agreement.

Such
Supply
Agreement
shall
be
negotiated
and
agreed
by
the
Parties
in
goodfaith.

No
later
than
the
earlier
of
[***]
after
the
Effective
Date
and
first
scheduled
delivery
by
AstraZeneca
to
Insmed
of
Licensed
Product
pursuant
to
the
SupplyAgreement,
AstraZeneca
and
Insmed
shall
enter
into
a
reasonable
and
customary
quality
assurance
agreement
(the
“
Quality Agreement ”)
that
shall
set
forth
theterms
and
conditions
upon
which
each
Party
will
conduct
its
respective
quality
activities
in
connection
with
the
Supply
Agreement.

Such
Quality
Agreement
shallbe
negotiated
and
agreed
by
the
Parties
in
good
faith.

Each
Party
shall
duly
and
punctually
perform
all
of
its
obligations
under
the
Supply
Agreement
and
theQuality
Agreement.

AstraZeneca
shall
Manufacture
(or
have
Manufactured)
all
such
Licensed
Compound
and
Licensed
Product
in
accordance
with
ApplicableLaw.

Except
as
otherwise
set
forth
in
this
Section
3.1,
Insmed
shall
have
the
sole
right,
at
its
expense,
to
Manufacture
(or
have
Manufactured)
and
supply
theLicensed
Compound
and
Licensed
Products
for
Exploitation
in
or
for
the
Territory
by
Insmed
and
its
Affiliates
and
its
or
their
Sublicensees.
3.2. 


























Manufacturing Know-How Transfer. 

Commencing
on
the
Effective
Date
and
for
a
period
ending
[***]
thereafter,
AstraZenecashall,
when
and
as
reasonably
requested
by
Insmed,
(i)
transfer
to
Insmed
or
its
designee
(which
designee
may
be
an
Affiliate,
Sublicensee
or
a
Third
Partymanufacturer),
[***]
the
AstraZeneca
Know-How
relating
to
the
Manufacture
of
the
Licensed
Compound
and
the
Licensed
Products
specified
on
Schedule
1.12
,including,
for
clarity,
the
***
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.
23
then-current
process
for
the
Manufacture
of
the
Licensed
Compound
and
Licensed
Products,
as
well
as
any
improvements
or
enhancements
to
such
processes
(the“Manufacturing
Process”)
and
(ii)
assist
Insmed
or
its
designee
to
contact
any
of
AstraZeneca’s
Third
Party
manufacturers
for
purposes
of
Insmed
or
its
designeeentering
into
agreements
for
Manufacture
of
the
Licensed
Compound
and
the
Licensed
Products.

AstraZeneca
also
shall,
when
and
as
reasonably
requested
byInsmed,
respond
to
requests
for
additional
information
as
may
be
necessary
to
Insmed
or
its
designee
to
understand
the
Manufacturing
Process.
3.3. 


























Subsequent Manufacturing Know-How Transfer. 

Without
limiting
the
foregoing
in
Section
3.2,
in
the
event
that
AstraZeneca
orany
of
its
Affiliates
makes
any
invention,
discovery
or
Improvement
relating
to,
or
that
is
otherwise
necessary
for,
the
Manufacture
of
the
Licensed
Compound
or
aLicensed
Product
during
the
Term,
AstraZeneca
shall
promptly
disclose
such
invention,
discovery
or
Improvement
to
Insmed
and
shall,
at
Insmed’s
request,respond
to
requests
for
additional
information
with
respect
to
such
invention,
discovery
or
Improvement
as
may
be
necessary
to
Insmed
or
its
designee
tounderstand
the
invention,
discovery
or
Improvement.
ARTICLE 4 DEVELOPMENT, REGULATORY AND COMMERCIALIZATION ACTIVITIES
4.1. 


























Development.
4.1.1. 

















Diligence. 

After
the
Effective
Date,
subject
to
AstraZeneca’s
specifically
designated
Manufacturing
activities
expressly
setforth
in
Article
3
and
the
Supply
Agreement
and
the
Quality
Agreement,
as
between
the
Parties,
Insmed
shall
be
solely
responsible
for
all
aspects
of
theDevelopment
of
the
Licensed
Compound
and
Licensed
Products
in
the
Field
in
the
Territory.

Insmed
shall
use
Commercially
Reasonable
Efforts
to
Develop,
andobtain
and
maintain
Regulatory
Approvals
for
[***]
in
the
Field
in
each
of
the
Major
Markets.

Insmed
shall
perform
or
cause
to
be
performed
its
Developmentactivities
hereunder
in
good
scientific
manner
and
in
compliance
with
all
Applicable
Law.
4.1.2. 

















Development Plan.
(i)


















Attached
hereto
as
Schedule
4.1.2
is
the
initial
plan
for
the
Development
of
the
initial
Licensed
Product
in
the
Fieldin
the
Major
Markets
(the
“
Development Plan ”).

Insmed
shall
review
and
revise
the
Development
Plan
periodically
(at
least
annually)
for
the
purpose
ofconsidering
appropriate
amendments
thereto.

In
addition,
Insmed
may
amend
any
Development
Plan
at
any
time.

Upon
the
earlier
of
the
end
of
the
Royalty
Termfor
each
Licensed
Product
in
each
Major
Market
the
obligation
to
maintain
Development
Plans
shall
be
terminated.
***
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.
24
(ii)


































Without
limitation
of
Section
4.1.1,
Insmed
shall
use
Commercially
Reasonable
Efforts
to
perform
theDevelopment
activities
under
the
applicable
Development
Plan
and
to
do
so
in
accordance
with
the
timelines
set
forth
in
the
Development
Plan.

Insmed
shallperform
or
cause
to
be
performed
its
Development
activities
hereunder
in
good
scientific
manner
and
in
compliance
with
all
Applicable
Law
by
allocatingsufficient
time,
effort,
equipment,
and
skilled
personnel
to
complete
such
Development
activities
in
accordance
with
the
Development
Plan
and
the
timelines
setforth
therein.
4.1.3. 

















Development Costs. 

In
addition
to
the
payment
for
[***]
pursuant
to
Article
3
and
the
Supply
Agreement,
Insmed
shall
beresponsible
for
all
of
its
costs
and
expenses
in
connection
with
the
Development
of,
and
obtaining
and
maintaining
Regulatory
Approvals
for,
the
LicensedProducts
in
the
Field
in
the
Territory.
4.1.4. 

















Development Records. 

Insmed
shall,
and
shall
cause
its
Affiliates
and
its
and
their
Sublicensees
to,
maintain,
in
goodscientific
manner,
complete
and
accurate
books
and
records
pertaining
to
Development
of
Licensed
Products
hereunder,
in
sufficient
detail
to
verify
compliancewith
its
obligations
under
this
Agreement.

Such
books
and
records
shall
be
kept
in
accordance
with
Insmed’s
customary
business
practices
and
be
in
compliancewith
Applicable
Law
and
shall
be
retained
by
Insmed
for
at
least
[***]
after
the
expiration
or
termination
of
this
Agreement
in
its
entirety
or
for
such
longer
periodas
may
be
required
by
Applicable
Law.

AstraZeneca
shall
have
the
right,
on
a
[***]
basis,
during
normal
business
hours
and
upon
reasonable
advance
notice
toInsmed,
to
inspect
and
copy
all
such
books
and
records
maintained
pursuant
to
this
Section
4.1.4;
provided that
AstraZeneca
shall
maintain
such
records
andinformation
disclosed
therein
in
confidence
in
accordance
with
Article
9.
4.1.5. 

















Development Reports. 

Without
limiting
Section
4.1.4,
within
[***]
following
[***]
during
which
Insmed
is
conductingDevelopment
activities
hereunder,
Insmed
shall
provide
AstraZeneca
with
written
reports
summarizing
all
material
(i)
Development
activities
it
has
performed,
orcaused
to
be
performed,
since
the
preceding
report,
(ii)
Development
activities
in
process
and
(iii)
future
activities
it
expects
to
initiate
during
the
following
[***]period.

Each
such
report
shall
contain
sufficient
detail
to
enable
AstraZeneca
to
assess
Insmed’s
compliance
with
its
obligations
set
forth
in
Sections
4.1.1
and4.1.2(ii),
including
Insmed’s,
or
its
Affiliates’
or
its
or
their
Sublicensees’
activities
with
respect
to
achieving
Regulatory
Approvals
of
Licensed
Products
in
theTerritory
and
clinical
study
results
and
results
of
other
Development
activities.

Insmed
also
shall,
when
and
as
reasonably
requested
by
AstraZeneca,
respond
torequests
for
additional
information
as
may
be
necessary
to
AstraZeneca
to
understand
Insmed’s
Development
activities
hereunder.
***
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.
25
4.2. 


























Regulatory Activities.
4.2.1. 

















Regulatory Approvals; Assigned Regulatory Documentation.
(i)


















Subject
to
Article
5
and
except
as
otherwise
set
forth
in
this
Section
4.2,
Insmed
shall
have
the
sole
right
to
prepare,obtain
and
maintain
Drug
Approval
Applications
(including
the
setting
of
the
overall
regulatory
strategy
therefor),
other
Regulatory
Approvals
and
othersubmissions
(including
INDs
and
CTAs),
and
to
conduct
communications
with
the
Regulatory
Authorities,
for
Licensed
Products
in
the
Field
in
the
Territory
in
itsname.
(ii)















Except
to
the
extent
prohibited
by
Applicable
Law,
AstraZeneca
hereby
assigns
the
Regulatory
Documentationlisted
on
Schedule
4.2.1(ii)

to
Insmed
(the
“
Assigned Regulatory Documentation ”).
(iii)












In
accordance
with
Section
9.4,
Insmed
shall
provide
AstraZeneca
with
a
written
notice
prior
to
releasing
an
officialpublic
statement
that
it
intends
to
file
an
NDA
for
a
Licensed
Product,
or,
in
the
event
no
official
public
statement
will
be
made,
Insmed
shall
provide
AstraZenecawith
a
written
notice
promptly
after
its
responsible
management
body
determines
to
file
an
NDA
for
a
Licensed
Product.
4.2.2. 

















Communications and Filings with Regulatory Authorities. 

With
respect
to
each
Licensed
Product,
Insmed
shall
promptlyprovide
AstraZeneca
with:

(i)
copies
of
all
pre-clinical
and
clinical
data
compiled
in
support
of
regulatory
filings;
(ii)
copies
of
all
regulatory
correspondence
to
orfrom
the
Regulatory
Authorities;
(iii)
final
draft
copies
of
material,
non-recurring
submissions
and
filings
reasonably
in
advance
of
submission
or
filing
(
e.g.,
INDs,
CTAs,
Drug
Approval
Applications,
major
supplements
or
amendments
to
the
foregoing,
material
labeling
supplements,
Regulatory
Authority
meetingrequests
and
core
data
sheets
and
filings
related
to
new
Indications
and
proposed
labeling)
to
the
Regulatory
Authorities;
(iv)
notices
of
any
revocations
ofRegulatory
Approvals
with
respect
to
any
such
Licensed
Product
and
any
Licensed
Product
recalls
or
withdrawals
in
the
Territory;
and
(v)
reasonable
responses
toinquiries
by
AstraZeneca
regarding
the
Regulatory
Approval
and
Commercialization
processes
for
any
Licensed
Product,
including
reasonable
access
to
Insmed’spersonnel
in
connection
with
such
inquiries.

Insmed
shall
promptly
provide
AstraZeneca
with
copies
of
all
other
documents
and
correspondence
pertaining
to
eachLicensed
Product
after
they
have
been
submitted
to,
or
received
from,
the
Regulatory
Authorities.

Insmed
shall
use
Commercially
Reasonable
Efforts
to
implementprocedures
reasonably
designed
to
avoid
any
failure
to
provide
any
material
required
to
be
provided
to
AstraZeneca
under
this
Section
4.2.2
and
to
cure
any
suchfailure
promptly
after
its
discovery.
4.2.3. 

















Recalls, Suspensions or Withdrawals. 

Insmed
shall
notify
AstraZeneca
promptly
(but
in
no
event
later
than
[***])following
its
determination
that
any
event,
incident
or
circumstance
has
occurred
that
is
reasonably
likely
to
result
in
the
need
for
a
recall,
market
suspension
ormarket
withdrawal
of
a
Licensed
Product
in
the
Field
in
the
Territory
and
shall
include
in
such
notice
the
reasoning
behind
such
determination
and
any
supportingfacts.

As
between
the
Parties,
Insmed
shall
have
the
right
to
make
the
final
determination
whether
to
voluntarily
implement
any
such
recall,
market
suspension
ormarket
***
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.
26
withdrawal
in
the
Field
in
the
Territory;
provided that
prior
to
any
implementation
of
such
a
recall,
market
suspension
or
market
withdrawal,
Insmed
shall
consultwith
AstraZeneca
and
shall
consider
AstraZeneca’s
comments
in
good
faith.

If
a
recall,
market
suspension
or
market
withdrawal
is
mandated
by
a
RegulatoryAuthority
in
the
Territory,
as
between
the
Parties,
Insmed
shall
initiate
such
a
recall,
market
suspension
or
market
withdrawal
in
compliance
with
Applicable
Law.
For
all
recalls,
market
suspensions
or
market
withdrawals
undertaken
pursuant
to
this
Section
4.2.3,
as
between
the
Parties,
Insmed
shall
be
solely
responsible
forthe
execution
thereof.

Subject
to
Article
11,
Insmed
shall
be
responsible
for
all
costs
of
any
such
recall,
market
suspension
or
market
withdrawal.
4.2.4. 

















Global Safety Database. 

Insmed
shall
establish,
hold
and
maintain
(at
Insmed’s
sole
cost
and
expense)
the
global
safetydatabase
for
Licensed
Products.

AstraZeneca
shall
provide
Insmed
with
information
in
the
possession
and
Control
of
AstraZeneca
as
necessary
for
Insmed
tocomply
with
its
pharmacovigilance
responsibilities
in
the
Territory,
including,
as
applicable,
any
adverse
drug
experiences
(including
those
events
or
experiencesthat
are
required
to
be
reported
to
the
FDA
under
21
C.F.R.
sections
312.32
or
314.80
or
to
foreign
Regulatory
Authorities
under
corresponding
Applicable
Lawoutside
the
United
States),
from
pre-clinical
or
clinical
laboratory,
animal
toxicology
and
pharmacology
studies,
clinical
studies
and
commercial
experiences
with
aLicensed
Product,
in
each
case,
in
the
form
reasonably
requested
by
Insmed
and
an
agreed
upon
timeframe.

Each
Party
will
provide
the
other
Party
with
neededinformation
for
any
aggregate
reporting
requirements.
4.3. 


























Commercialization.
4.3.1. 

















Diligence. 

As
between
the
Parties,
Insmed
shall
be
solely
responsible
for
Commercialization
of
the
Licensed
Products
in
theField
throughout
the
Territory
at
Insmed’s
own
cost
and
expense.

Without
limitation
of
Section
4.3.2,
Insmed
shall
use
Commercially
Reasonable
Efforts
toCommercialize
[***]
in
the
Field
in
each
of
the
Major
Markets.
4.3.2. 

















Commercialization Costs; Booking of Sales; Distribution. 

Insmed
shall
be
responsible
for
all
of
its
costs
and
expenses
inconnection
with
the
Commercialization
of
the
Licensed
Products
in
the
Field
in
the
Territory.

Insmed
shall
invoice
and
book
sales,
establish
all
terms
of
sale(including
pricing
and
discounts)
and
warehouse
and
distribute
the
Licensed
Products
in
the
Field
in
the
Territory
and
perform
or
cause
to
be
performed
all
relatedservices.

Subject
to
Section
4.2.3,
Insmed
shall
handle
all
returns,
recalls
or
withdrawals,
order
processing,
invoicing,
collection,
distribution
and
inventorymanagement
with
respect
to
the
Licensed
Products
in
the
Territory.
4.3.3. 

















Commercialization Records. 

Without
limitation
of
Section
7.10,
Insmed
shall
maintain
complete
and
accurate
books
andrecords
pertaining
to
Commercialization
of
Licensed
Products
hereunder
in
sufficient
detail
to
verify
compliance
with
its
obligations
under
this
Agreement,
andwhich
shall
be
in
compliance
with
Applicable
Law
and
properly
***
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.
27
reflect
all
work
done
and
results
achieved
in
the
performance
of
its
Commercialization
activities.

Such
books
and
records
shall
be
retained
by
Insmed
for
at
least[***]
after
the
expiration
or
termination
of
this
Agreement
in
its
entirety
or
for
such
longer
period
as
may
be
required
by
Applicable
Law.

AstraZeneca
shall
havethe
right,
[***],
during
normal
business
hours
and
upon
reasonable
advance
notice,
to
inspect
and
copy
all
such
books
and
records
maintained
pursuant
to
thisSection
4.3.3;
provided that
AstraZeneca
shall
maintain
such
records
and
information
disclosed
therein
in
confidence
in
accordance
with
Article
9.
4.3.4. 

















Commercialization Reports. 

Without
limiting
Section
4.3.3,
within
[***]
following
[***],
commencing
upon
the
FirstCommercial
Sale
of
a
Licensed
Product
and
thereafter,
Insmed
shall
provide
to
AstraZeneca
with
written
reports
summarizing
all
material
(i)
Commercializationactivities
it
has
performed,
or
caused
to
be
performed,
since
the
preceding
report
and
(ii)
future
activities
it
expects
to
initiate
during
the
following
[***]
period.
Each
such
report
shall
contain
sufficient
detail
to
enable
AstraZeneca
to
assess
Insmed’s
compliance
with
its
obligations
set
forth
in
Section
4.3.1.

Insmed
alsoshall,
when
and
as
reasonably
requested
by
AstraZeneca,
respond
to
requests
for
additional
information
as
may
be
necessary
to
AstraZeneca
to
understand
Insmed’sCommercialization
activities
hereunder.
4.4. 



























Statements and Compliance with Applicable Law. 

Insmed
shall,
and
shall
cause
its
Affiliates
to,
comply
with
all
Applicable
Lawwith
respect
to
the
Exploitation
of
Licensed
Products.

Insmed
shall
use
Commercially
Reasonable
Efforts
to
avoid,
and
shall
use
Commercially
Reasonable
Effortsto
cause
its
Affiliates
and
its
and
their
Sublicensees,
Third
Party
Distributors,
employees,
representatives,
and
agents
to
avoid,
taking
or
failing
to
take
any
actionsthat
Insmed
knows
or
reasonably
should
know
would
jeopardize
the
goodwill
or
reputation
of
AstraZeneca
or
the
Licensed
Products
or
any
Trademark
associatedtherewith.

Without
limitation
to
the
foregoing
in
this
Section
4.4,
Insmed
shall
in
all
material
respects
conform
its
practices
and
procedures
relating
to
theCommercialization
of
the
Licensed
Products
and
educating
the
medical
community
in
the
Territory
with
respect
to
the
Licensed
Products
to
any
applicable
industryassociation
regulations,
policies
and
guidelines,
as
the
same
may
be
amended
from
time
to
time,
and
Applicable
Law.

AstraZeneca
shall
use
CommerciallyReasonable
Efforts
to
avoid,
and
shall
use
Commercially
Reasonable
Efforts
to
cause
its
Affiliates
and
its
and
their
employees,
representatives
and
agents
to
avoid,taking
or
failing
to
take
any
actions
that
AstraZeneca
knows
or
reasonably
should
know
would
jeopardize
the
goodwill
or
reputation
of
Insmed
or
the
LicensedProducts
or
any
Trademark
associated
therewith.
4.5. 



























Supply of Licensed Compound. 

Except
as
expressly
set
forth
in
Section
3.1
and
the
Supply
Agreement
and
the
Quality
Agreement,as
between
the
Parties,
Insmed
shall
have
the
sole
responsibility
for,
at
its
expense,
Manufacturing
(or
having
Manufactured)
and
supplying
the
LicensedCompound
and
Licensed
Products
for
its
Development
and
Commercialization
activities
in
the
Territory.
***
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.
28
4.6. 



























Subcontracting. 

Subject
to
Sections
2.3
and
2.5,
Insmed
may
subcontract
with
a
Third
Party
to
perform
any
or
all
of
its
obligationshereunder
(including
by
appointing
one
or
more
Third
Party
Distributors);
provided that
(i)
no
such
permitted
subcontracting
shall
relieve
Insmed
of
any
obligationhereunder
(except
to
the
extent
satisfactorily
performed
by
such
subcontractor)
or
any
liability,
and
Insmed
shall
be
and
remain
fully
responsible
and
liable
thereforand
(ii)
the
agreement
pursuant
to
which
Insmed
engages
any
Third
Party
subcontractor
must
(a)
be
consistent
in
all
material
respects
with
this
Agreement,(b)
contain
terms
obligating
such
subcontractor
to
comply
with
the
confidentiality,
intellectual
property
and
all
other
relevant
provisions
of
this
Agreement
and(c)
contain
terms
allowing
Insmed
to
inspect,
access
and
audit
substantially
similar
to
those
provided
to
AstraZeneca
in
this
Agreement
and
share
any
results
ofsuch
an
inspection
and
audit
with
AstraZeneca.

Upon
the
reasonable
request
by
AstraZeneca,
Insmed
shall
perform
such
an
inspection
and
audit
of
the
relevantSubcontractor
and
share
the
results
thereof
with
AstraZeneca.

Insmed
shall
ensure
that
each
subcontractor
accepts
and
complies
with
all
of
the
applicable
termsand
conditions
of
this
Agreement
as
if
such
permitted
subcontractor
were
a
Party
to
this
Agreement.

Insmed
hereby
waives
any
requirement
that
AstraZenecaexhaust
any
right,
power
or
remedy,
or
proceed
against
any
Subcontractor
for
any
obligation
or
performance
under
this
Agreement
prior
to
proceeding
directlyagainst
Insmed.
ARTICLE 5 ASTRAZENECA’S GRANT BACK RIGHTS
5.1. 



























First Option. 

During
the
period
from
the
Effective
Date
until
the
[***]
anniversary
of
the
Effective
Date
(the
“
First Option Period”),
AstraZeneca
shall
have
an
exclusive
option
exercisable
by
written
notice
to
Insmed
to
Develop
the
Licensed
Compound
and
Licensed
Products
in
theIndications
of
COPD
or
Asthma
up
to
and
including
Phase
2b
Clinical
Trials
(the
“
First Option ”).
5.1.1. 

















Subject
to
AstraZeneca
timely
exercising
the
First
Option
in
accordance
with
Section
5.1,
Insmed
hereby
grants
toAstraZeneca:
(i)


















an
exclusive
royalty-free
license
(or
sublicense),
with
the
right
to
grant
sublicenses,
under
the
AstraZeneca
Patents,the
AstraZeneca
Know-How,
the
Joint
Patents,
the
Joint
Know-How,
the
Insmed
Patents
and
the
Insmed
Know-How
to
Develop
up
to
and
including
Phase
2bClinical
Trials
the
Licensed
Compound
and
Licensed
Products
in
the
Indications
of
COPD
and
Asthma
in
the
Territory;
and
(ii)















an
exclusive
royalty-free
license
(or
sublicense)
and
right
of
reference,
with
the
right
to
grant
sublicenses
and
furtherrights
of
reference,
under
the
Assigned
Regulatory
Documentation,
the
AstraZeneca
Regulatory
Documentation
and
the
Insmed
Regulatory
Documentation
asnecessary
or
reasonably
useful
for
purposes
of
Developing
up
to
and
including
Phase
2b
Clinical
Trials
the
Licensed
Compound
and
Licensed
Products
in
theIndications
of
COPD
and
Asthma
in
the
Territory.
***
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.
29
5.1.2. 

















In
accordance
with
Section
6.2,
upon
AstraZeneca’s
exercise
of
the
First
Option,
the
Parties
shall
establish
a
Joint
SteeringCommittee
for
purposes
of
coordination
and
information
exchange
to
facilitate
the
Parties’
respective
Development
and
Commercialization
efforts
involving
theLicensed
Compound
and
the
Licensed
Products,
including
reasonable
exchange
of
clinical
data,
safety
data
and
other
data
needed
for
Regulatory
Documentation.
5.1.3. 

















If
AstraZeneca
exercises
the
First
Option,
subject
to
any
of
Insmed’s
Manufacturing
obligations
that
may
be
agreed
betweenthe
Parties,
as
between
the
Parties,
AstraZeneca
shall
be
solely
responsible
for
all
aspects
of
the
Development
up
to
and
including
Phase
2b
Clinical
Trials
of
theLicensed
Compound
and
Licensed
Products
in
the
Indications
of
COPD
or
Asthma
in
the
Territory.

If
AstraZeneca
exercises
the
First
Option,
AstraZeneca
shalluse
Commercially
Reasonable
Efforts
to
Develop
at
least
one
Licensed
Product
in
at
least
one
Indication
of
COPD
or
Asthma
through
a
Phase
2
Clinical
Trial.
AstraZeneca
shall
perform
or
cause
to
be
performed
its
Development
activities
hereunder
in
good
scientific
manner
and
in
compliance
with
all
Applicable
Law.
5.2. 


























Second Option.
5.2.1. 

















If
AstraZeneca
exercises
the
First
Option
prior
to
the
expiration
of
the
First
Option
Period
and
Develops
the
LicensedCompound
and
Licensed
Products
in
the
Indications
of
COPD
or
Asthma,
then,
during
the
period
from
the
exercise
of
the
First
Option
until
the
earlier
of
(i)
the[***]
anniversary
of
AstraZeneca’s
issuance
of
the
final
study
report
for
the
first
(1
)
Phase
2b
Clinical
Study
in
the
Indications
of
COPD
or
Asthma
or
(ii)
the[***]
anniversary
of
the
exercise
date
of
the
First
Option
(the
“
Second Option Period ”),
AstraZeneca
shall
have
an
exclusive
option
exercisable
by
written
noticeto
Insmed
for
an
exclusive
license
under
the
AstraZeneca
Patents,
the
AstraZeneca
Know-How,
the
Joint
Patents,
the
Joint
Know-How,
the
Insmed
Patents,
theInsmed
Know-How,
the
Assigned
Regulatory
Documentation,
the
AstraZeneca
Regulatory
Documentation
and
the
Insmed
Regulatory
Documentation
to
the
extentnecessary
or
reasonably
useful
to
enable
AstraZeneca
(x)
to
Develop
the
Licensed
Compound
and
Licensed
Products
in
the
Indications
of
COPD
or
Asthma,including
activities
beyond
Phase
2b
Clinical
Trials,
in
the
Territory,
and
(y)
to
Commercialize
the
Licensed
Compound
and
Licensed
Products
in
the
Indications
ofCOPD
and
Asthma
in
the
Territory
(the
“
Second Option ”).

For
the
avoidance
of
doubt,
this
Section
5.2.1
does
not
obligate
AstraZeneca
to
initiate
or
completeany
Phase
2b
Clinical
Trials
for
the
Licensed
Compound
or
the
Licensed
Products
prior
to
exercise
of
the
Second
Option.
5.2.2. 

















If
AstraZeneca
exercises
the
Second
Option
prior
to
the
expiration
of
the
Second
Option
Period,
Insmed
and
AstraZenecashall
negotiate
in
good
faith
commercially
reasonable
terms,
including
financial
terms,
for
AstraZeneca’s
further
Development
and
Commercialization
of
theLicense
Compound
and
Licensed
Products
in
the
Indications
of
COPD
and
Asthma.

Such
agreement
would
include
(i)
diligence
obligations
for
AstraZeneca
to
use
***
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.
30st

Commercially
Reasonable
Efforts
to
Develop
and
Commercialize
at
least
one
(1)
Licensed
Product
in
at
least
one
(1)
Indication
(either
COPD
or
Asthma)
in
eachof
the
Major
Markets,
(ii)
provisions
for
Insmed
to
supply
API
of
the
Licensed
Compound
[***]
to
AstraZeneca
or
an
appropriate
grant
of
rights
to
fully
enableManufacturing
of
the
Licensed
Compound
and
Licensed
Products
for
AstraZeneca’s
permitted
Development
and
Commercialization
activities,
and
(iii)
provisionspermitting
AstraZeneca
to
terminate
such
agreement
at
will,
at
any
time,
in
its
entirety
or
on
a
Licensed
Product-by-Licensed
Product
or
country-by-country
basis,upon
[***]
prior
written
notice
to
Insmed.

Furthermore,
in
connection
with
such
exercise
of
the
Second
Option,
the
Parties
shall
discuss
potential
co-Developmentand
co-Commercialization
of
the
Licensed
Compound
and
Licensed
Products
in
the
Field.
5.2.3. 

















The
Parties
shall
have
a
period
of
[***]
from
the
date
AstraZeneca
exercises
the
Second
Option
(the
“
COPD/AsthmaNegotiation Period ”)
to
negotiate
and
execute
a
definitive
agreement
for
AstraZeneca’s
further
Development
and
Commercialization
of
the
Licensed
Compoundand
Licensed
Products
in
the
Indications
of
COPD
and
Asthma
(a
“
COPD/Asthma Commercial License ”).

Each
Party
shall
retain
all
discretion
to
determine,among
other
things,
whether
any
proposed
terms
for
a
COPD/Asthma
Commercial
License
are
acceptable
to
such
Party,
and
no
Party
shall
be
deemed
to
have
actedwithout
good
faith
solely
because
such
Party
does
not
agree
to
some
or
all
of
the
other
Party’s
proposed
terms,
or
if
the
Parties
cannot
come
to
an
agreement
onmutually
acceptable
terms.

In
the
event
the
Parties
are
unable
to
execute
a
mutually
agreeable
COPD/Asthma
Commercial
License
within
the
COPD/AsthmaNegotiation
Period,
all
terms
of
this
Agreement
shall
remain
in
full
force
and
effect.
5.3. 


























AstraZeneca Option Notice Requirements. 

If
AstraZeneca
exercises
the
First
Option
or
the
Second
Option,
in
each
such
exercisenotice
AstraZeneca
shall
provide
information
relating
to
AstraZeneca’s
intended
product
presentation
and
the
intended
differentiation
from
the
presentation
of
theLicensed
Products
being
Developed
by
Insmed.
5.4. 



























Restrictions on Insmed in COPD and Asthma. 

For
the
sake
of
clarity,
Insmed
shall
have
no
rights
to
Develop
or
Commercialize
theLicensed
Compound
or
Licensed
Products
in
the
Indications
of
COPD
or
Asthma
unless:
5.4.1. 

















AstraZeneca
has
not
exercised
the
First
Option
within
the
First
Option
Period;
5.4.2. 

















AstraZeneca
has
exercised
the
First
Option
during
the
First
Option
Period,
but
has
not
exercised
the
Second
Option
within
theSecond
Option
Period;
5.4.3. 

















AstraZeneca
has
timely
exercised
each
of
the
First
Option
and
the
Second
Option,
but
the
Parties
are
unable
to
execute
aCOPD/Asthma
Commercial
License
within
the
COPD/Asthma
Negotiation
Period;
or
***
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.
31
5.4.4. 

















AstraZeneca’s
rights
under
Sections
5.1
and
5.2
are
terminated
pursuant
to
Section
12.4.3(ii)
or
Section
13.3,
and in
any
such
case
(i.e.,
any
of
clause
5.4.1,
5.4.2,
5.4.3
or
5.4.4)
the
Parties
have
further
agreed
on
economic
terms
for
Insmed’s
rights
to
Develop
andCommercialize
the
Licensed
Compound
or
Licensed
Products
in
such
Indications.
ARTICLE 6 ALLIANCE MANAGERS; JOINT STEERING COMMITTEE
6.1. 


























Alliance Managers. 

As
of
the
Effective
Date,
each
Party
shall
appoint
a
person
who
shall
oversee
contact
between
the
Parties
for
allmatters
and
shall
have
such
other
responsibilities
as
the
Parties
may
agree
in
writing
after
the
Effective
Date
(“
Alliance Manager ”),
which
person
may
bereplaced
at
any
time
by
notice
in
writing
to
the
other
Party.

[***]
shall
be
the
initial
Alliance
Manager
on
behalf
of
AstraZeneca.

[***]
shall
be
the
initial
AllianceManager
on
behalf
of
Insmed.

The
Alliance
Managers
shall
work
together
to
manage
and
facilitate
the
communication
between
the
Parties
under
this
Agreement,including
the
resolution
(in
accordance
with
the
terms
of
this
Agreement)
of
issues
between
the
Parties
that
arise
in
connection
with
this
Agreement.

The
AllianceManagers
shall
not
have
final
decision-making
authority
with
respect
to
any
matter
under
this
Agreement.

In
the
event
the
Parties
establish
a
Joint
SteeringCommittee
pursuant
to
Section
6.2,
the
Alliance
Managers
shall
oversee
contact
between
the
Parties
for
all
matters
between
meetings
of
the
JSC.
6.2. 


























Joint Steering Committee. 

In
the
event
AstraZeneca
shall
undertake
any
Development
or
Commercialization
of
Licensed
Productspursuant
to
exercise
of
its
option
rights
under
Article
5
or
pursuant
to
an
agreement
entered
into
by
the
Parties
under
Section
2.5,
then
the
Parties
promptly
shallestablish
a
joint
steering
committee
(the
“
Joint Steering Committee ”
or
“
JSC ”),
which
shall
consist
of
representatives
from
each
of
the
Parties,
each
with
therequisite
experience
and
seniority
to
enable
such
person
to
make
decisions
on
behalf
of
the
Parties
with
respect
to
the
issues
falling
within
the
jurisdiction
of
theJSC.

From
time
to
time,
each
Party
may
substitute
one
or
more
of
its
representatives
to
the
JSC
on
written
notice
to
the
other
Party.

Insmed
shall
select
from
itsrepresentatives
the
chairperson
for
the
JSC,
which
chairperson
may
be
changed
from
time
to
time,
on
written
notice
to
AstraZeneca.

The
JSC
shall:
6.2.1. 

















serve
as
a
forum
for
discussing
and
supervising
Development
of
the
Licensed
Compound
and
Licensed
Products
in
the
Fieldin
the
Territory,
including
by
overseeing
the
conduct
of
the
Development
activities
and
reviewing
Development
Plans
and
Development
reports
as
provided
inSection
4.1.5,
and
by
coordinating
the
reasonable
exchange
of
clinical
data,
safety
data
and
other
data
needed
by
each
Party
for
its
Regulatory
Documentation;
***
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.
32
6.2.2. 

















serve
as
a
forum
for
discussing
and
supervising
the
Commercialization
of
Licensed
Products
in
the
Field
in
the
Territory
asprovided
in
Section
4.3,
including
by
reviewing
the
Commercialization
Plans
and
overseeing
the
conduct
of
the
Commercialization
activities;
and 6.2.3. 

















perform
such
other
functions
as
are
set
forth
herein
or
as
the
Parties
may
mutually
agree
in
writing,
except
where
in
conflictwith
any
provision
of
this
Agreement.
6.3. 


























General Provisions Applicable to the JSC.
6.3.1. 

















Meetings and Minutes. 

The
JSC
shall
meet
as
reasonably
necessary
to
advance
the
Development
of
Licensed
Products
asmutually
agreed
by
Parties’
respective
representatives
to
the
JSC.

The
location
of
such
meetings
shall
alternate
between
locations
designated
by
Insmed
andlocations
designated
by
AstraZeneca.

The
chairperson
of
the
JSC
shall
be
responsible
for
calling
meetings
on
no
less
than
[***]
notice,
unless
exigentcircumstances
require
shorter
notice.

Each
Party
shall
make
all
proposals
for
agenda
items
at
least
[***]
in
advance
of
the
applicable
meeting
and
shall
provide
allappropriate
information
with
respect
to
such
proposed
items
at
least
[***]
in
advance
of
the
applicable
meeting;
provided that
under
exigent
circumstancesrequiring
input
by
the
JSC,
a
Party
may
provide
its
agenda
items
to
the
other
Party
within
a
shorter
period
of
time
in
advance
of
the
meeting
or
may
propose
thatthere
not
be
a
specific
agenda
for
a
particular
meeting,
so
long
as
the
other
Party
consents
to
such
later
addition
of
such
agenda
items
or
the
absence
of
a
specificagenda
for
such
meeting.

The
chairperson
of
the
JSC
shall
prepare
and
circulate
for
review
and
approval
of
the
Parties
minutes
of
each
meeting
within
[***]
afterthe
meeting.

The
Parties
shall
agree
on
the
minutes
of
each
meeting
promptly,
but
in
no
event
later
than
the
next
meeting
of
the
JSC.
6.3.2. 

















Procedural Rules. 

The
JSC
shall
have
the
right
to
adopt
such
standing
rules
as
shall
be
necessary
for
its
work,
to
the
extentthat
such
rules
are
not
inconsistent
with
this
Agreement.

A
quorum
of
the
JSC
shall
exist
whenever
there
is
present
at
a
meeting
at
least
one
(1)
representativeappointed
by
each
Party.

Representatives
of
the
Parties
on
the
JSC
may
attend
a
meeting
either
in
person
or
by
telephone,
video
conference
or
similar
means
inwhich
each
participant
can
hear
what
is
said
by,
and
be
heard
by,
the
other
participants.

Representation
by
proxy
shall
be
allowed.

Subject
to
Section
6.3.3,
theJSC
shall
take
action
by
consensus
of
the
representatives
present
at
a
meeting
at
which
a
quorum
exists,
with
each
Party
having
a
single
vote
irrespective
of
thenumber
of
representatives
of
such
Party
in
attendance
or
by
a
written
resolution
signed
by
at
least
one
(1)
representative
appointed
by
each
Party.

Employees
orconsultants
of
a
Party
who
are
not
representatives
of
the
Parties
on
the
JSC
may
attend
meetings
of
the
JSC;
provided, however ,
that
such
attendees
(i)
shall
notvote
or
otherwise
participate
in
the
decision-making
process
of
the
JSC
and
(ii)
are
bound
by
obligations
of
confidentiality
and
non-disclosure
at
least
as
protectiveof
the
other
Party
as
those
set
forth
in
Article
9.
***
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.
33
6.3.3. 

















Decision-Making. 

Except
for
matters
outside
the
jurisdiction
and
authority
of
the
JSC
(including
as
set
forth
inSection
6.3.4),
if
the
JSC
cannot,
or
does
not,
reach
consensus
on
an
issue,
then
such
issue
shall
be
resolved
pursuant
to
Section
13.5.
6.3.4. 

















Limitations on Authority. 

Without
limitation
to
the
foregoing,
the
Parties
hereby
agree
that
matters
explicitly
reserved
tothe
consent,
approval
or
other
decision-making
authority
of
one
or
both
Parties,
as
expressly
provided
in
this
Agreement,
are
outside
the
jurisdiction
and
authorityof
the
JSC,
including
(i)
amendment,
modification
or
waiver
of
compliance
with
this
Agreement
(which
may
only
be
amended
or
modified
as
provided
inSection
13.8
or
compliance
with
which
may
only
be
waived
as
provided
in
Section
13.11),
and
(ii)
such
other
matters
as
are
reserved
to
the
consent,
approval,agreement
or
other
decision-making
authority
of
either
or
both
Parties
in
this
Agreement
that
are
not
required
by
this
Agreement
to
be
considered
by
the
JSC
priorto
the
exercise
of
such
consent,
approval
or
other
decision-making
authority.
6.3.5. 

















Discontinuation; Disbandment; Annual Reports .

The
JSC
shall
continue
to
exist
until
the
first
to
occur
of:
(i)
the
Partiesmutually
agreeing
to
disband
the
JSC;
and
(ii)
AstraZeneca
discontinuing
any
Development
or
Commercialization
activities
with
respect
to
Licensed
Products,
atwhich
time
AstraZeneca
shall
provide
to
Insmed
written
notice
of
its
intention
to
disband
the
JSC.

Upon
the
occurrence
of
either
of
the
foregoing,
(x)
the
JSC
shalldisband,
have
no
further
responsibilities
or
authority
under
this
Agreement
and
will
be
considered
dissolved
by
the
Parties
and
(y)
any
requirement
of
a
Party
toprovide
Information
or
other
materials
to
the
JSC
shall
be
deemed
a
requirement
to
provide
such
Information
or
other
materials
to
the
other
Party
and
afterconsultation
with
AstraZeneca
and
taking
AstraZeneca’s
comments,
if
any,
into
consideration
in
good
faith,
Insmed
shall
have
the
right
to
decide
all
matters
thatare
subject
to
the
review
or
approval
by
the
JSC
hereunder,
with
any
Disputes
to
be
resolved
pursuant
to
Section
13.5.
ARTICLE 7 PAYMENTS AND RECORDS
7.1. 


























Upfront Payment. 

In
partial
consideration
of
the
rights
granted
by
AstraZeneca
to
Insmed
hereunder,
no
later
than
thirty
(30)
daysfollowing
the
Effective
Date,
Insmed
shall
pay
AstraZeneca
a
nonrefundable
and
noncreditable
upfront
amount
equal
to
thirty
million
Dollars
($30,000,000).
7.2. 


























Milestones.
7.2.1. 

















Development and Regulatory Milestones. 

In
partial
consideration
of
the
rights
granted
by
AstraZeneca
to
Insmedhereunder,
Insmed
shall
pay
to
AstraZeneca
the
following
payments
within
[***]
of
the
achievement
of
each
of
the
following
***
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.
34
milestone
events,
which
payments
shall
be
nonrefundable,
noncreditable
and
fully
earned
upon
the
achievement
of
the
applicable
milestone
event:
No. Milestone Event Milestone Payment1.
The
first
dosing
of
the
first
human
subject
in
the
first
Phase
3
Clinical
Trial
of
a
Licensed
Product
$[***]2.
The
earlier
of
(i)
Insmed’s
notification
to
AstraZeneca
that
Insmed
intends
to
file
an
NDA
for
a
LicensedProduct
provided
in
accordance
with
Section
4.2.1(iii),
and
(ii)
Insmed’s
release
of
an
official
public
statementthat
it
intends
to
file
an
NDA
for
a
Licensed
Product
$[***]3.
Regulatory
Approval
by
the
applicable
Regulatory
Authority
of
the
Drug
Approval
Application
for
a
LicensedProduct
in
or
for
[***]
$[***]4.
Regulatory
Approval
by
the
applicable
Regulatory
Authority
of
the
Drug
Approval
Application
for
a
LicensedProduct
in
or
for
any
of
[***]
$[***]5.
Regulatory
Approval
by
the
applicable
Regulatory
Authority
of
the
Drug
Approval
Application
for
a
LicensedProduct
in
or
for
any
of
[***]
$[***]
Each
milestone
payment
in
this
Section
7.2.1
shall
be
payable
at
the
full
amount
above
for
the
achievement
of
the
associated
milestone
event
for
the
first
Indication,and
at
half
of
the
above
amount
for
a
second
Indication;
provided, however ,
that
in
accordance
with
Section
5.4,
the
above
milestone
payments
will
not
apply
withrespect
to
Development
for
the
Indications
of
COPD
and
Asthma,
which
shall
be
negotiated
by
the
Parties
in
the
event
Insmed
shall
pursue
such
Indications.
For
the
avoidance
of
doubt,
and
subject
to
the
milestone
payments
for
achievement
of
milestone
events
for
a
second
Indication,
each
milestone
payment
shall
bepayable
one
time
only,
regardless
of
the
number
of
Licensed
Products
Developed
or
Commercialized
and
regardless
of
the
number
of
times
any
of
the
applicablemilestone
events
occurs
with
respect
to
any
Licensed
Product.
***
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.
35
If,
at
any
time,
the
achievement
of
an
approval
milestone
described
in
Section
7.2.1
for
a
first
Indication
or
second
Indication
has
occurred
with
respect
to
which
apayment
is
due
hereunder
and
any
of
the
preceding
Clinical
Trial
milestones
in
this
Section
7.2.1
corresponding
to
such
approval
have
not
been
due
or
been
paid,then
each
such
skipped
Clinical
Trial
milestone
payment
shall
become
due
and
payable
concurrently
with
the
milestone
payment
for
the
first
approval
milestonewith
respect
to
which
payment
is
due.
7.2.2. 

















Commercial Milestone. 

In
partial
consideration
of
the
rights
granted
by
AstraZeneca
to
Insmed
hereunder,
Insmed
shall
payto
AstraZeneca
the
following
payment
within
[***]
after
the
achievement
the
following
milestone
event,
which
shall
be
nonrefundable,
noncreditable
and
fullyearned
upon
the
achievement
of
the
milestone
event:
Milestone Event Milestone PaymentThe
first
time
that
the
aggregate
of
all
Net
Sales
in
the
Territory
of
a
Licensed
Product
made
by
Insmed
or
any
of
its
Affiliates
orits
or
their
Sublicensees
in
a
given
Calendar
Year
exceeds
one
billion
Dollars
($1,000,000,000)
for
such
Calendar
Year
$35,000,000
The
milestone
payment
in
this
Section
7.2.2
shall
be
payable
only
upon
the
first
achievement
of
such
milestone
in
a
given
Calendar
Year
and
no
amounts
shall
bedue
for
subsequent
or
repeated
achievements
of
such
milestone
event
in
subsequent
Calendar
Years,
whether
for
the
same
or
a
different
Licensed
Product.
7.2.3. 

















Determination that Milestones Have Occurred. 

Insmed
shall
notify
AstraZeneca
promptly
of
the
achievement
of
each
ofthe
events
identified
as
a
milestone
in
Section
7.2.1
or
Section
7.2.2.

In
the
event
that,
notwithstanding
the
fact
that
Insmed
has
not
provided
AstraZeneca
such
anotice,
AstraZeneca
believes
that
any
such
milestone
has
been
achieved,
it
shall
so
notify
Insmed
in
writing
and
the
Parties
shall
promptly
meet
and
discuss
in
goodfaith
whether
such
milestone
has
been
achieved.

Any
dispute
under
this
Section
7.2.3
regarding
whether
or
not
such
a
milestone
has
been
achieved
shall
be
subjectto
resolution
in
accordance
with
Section
13.5.
7.3. 


























Royalties.
7.3.1. 

















Royalty Rates. 

As
further
consideration
for
the
rights
granted
to
Insmed
hereunder,
commencing
upon
the
First
CommercialSale
of
a
Licensed
Product
in
the
Territory,
on
a
Licensed
Product-by-Licensed
Product
basis,
Insmed
shall
pay
to
AstraZeneca
a
royalty
on
Net
Sales
of
eachLicensed
Product
in
the
Territory
during
each
Calendar
Year
at
the
following
rates:
***
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.
36
(i)





































for
that
portion
of
aggregate
Net
Sales
of
such
Licensed
Product
in
the
Territory
during
a
Calendar
Year
less
thanor
equal
to
[***]
Dollars
($[***]),
a
royalty
rate
of
[***]
percent
([***]%);
(ii)


































for
that
portion
of
aggregate
Net
Sales
of
such
Licensed
Product
in
the
Territory
during
a
Calendar
Year
greaterthan
[***]
Dollars
($[***])
but
less
than
or
equal
to
[***]
Dollars
($[***]),
a
royalty
rate
of
[***]
percent
([***]%);
and
(iii)































for
that
portion
of
aggregate
Net
Sales
of
such
Licensed
Product
in
the
Territory
during
a
Calendar
Year
greaterthan
[***]
Dollars
($[***]),
a
royalty
rate
of
[***]
percent
([***]%);
provided, however ,
that
in
accordance
with
Section
5.4,
the
above
royalty
rates
will
not
apply
with
respect
to
Commercialization
for
the
Indications
of
COPD
andAsthma,
which
shall
be
negotiated
by
the
Parties
in
the
event
Insmed
shall
pursue
such
Indications.
7.3.2. 

















Blended Royalty. 

Insmed
acknowledges
that
(i)
the
AstraZeneca
Know-How
and
the
Information
included
in
theAstraZeneca
Regulatory
Documentation
licensed
to
Insmed
is
proprietary
and
valuable
and
that,
without
the
AstraZeneca
Know-How
and
suchInformation,
Insmed
would
not
be
able
to
obtain
and
maintain
Regulatory
Approvals
with
respect
to
the
Licensed
Products,
(ii)
access
to
the
AstraZeneca
Know-How
and
the
rights
with
respect
to
the
AstraZeneca
Regulatory
Documentation
has
provided
Insmed
with
a
competitive
advantage
in
the
marketplace
beyond
theexclusivity
afforded
by
the
AstraZeneca
Patents
and
the
regulatory
exclusivity
and
(iii)
the
milestone
payments
and
royalties
set
forth
in
Sections
7.2.1
and
7.2.2and
Section
7.3.1,
respectively,
are,
in
part,
intended
to
compensate
AstraZeneca
for
such
exclusivity
and
such
competitive
advantage.

The
Parties
agree
that
theroyalty
rates
set
forth
in
Section
7.3.1
reflect
an
efficient
and
reasonable
blended
allocation
of
the
value
provided
by
AstraZeneca
to
Insmed.
7.3.3. 

















Royalty Term. 

Insmed
shall
have
no
obligation
to
pay
any
royalty
with
respect
to
Net
Sales
of
any
Licensed
Product
in
anycountry
after
the
Royalty
Term
for
such
Licensed
Product
in
such
country
has
expired.

Upon
expiration
of
the
Royalty
Term
with
respect
to
a
Licensed
Product
inany
country,
the
license
grants
to
Insmed
in
Section
2.1,
as
applicable,
with
respect
to
such
Licensed
Product
shall
become
non-exclusive,
fully-paid,
royalty-free,perpetual
and
irrevocable
for
such
Licensed
Product
in
such
country,
subject
to
any
agreement
entered
into
between
the
Parties
pursuant
to
Section
2.5
orSection
5.2.
7.4. 


























Reductions. 

In
the
event
that:
7.4.1. 

















in
any
country
in
the
Territory
during
the
Royalty
Term
for
a
Licensed
Product,
one
or
more
Generic
Products
are
sold
by
anyPerson
other
than
Insmed,
its
Affiliates,
or
its
or
their
Sublicensees,
and
such
Generic
Products
have
sales
in
such
country
resulting
in
a
reduction
of
the
number
ofunit
sales
of
the
corresponding
Licensed
Product
in
***
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.
37
such
country
in
a
Calendar
Quarter
of
[***]
percent
([***]%)
or
more
as
compared
to
[***]
of
such
Licensed
Product
in
such
country
for
[***]
immediatelypreceding
the
first
sale
of
the
first
Generic
Product
in
such
country,
then,
commencing
upon
the
first
day
of
the
following
Calendar
Quarter
and
for
the
remainder
ofthe
Royalty
Term
for
such
Licensed
Product
in
such
country
thereafter,
each
royalty
rate
for
such
Licensed
Product
set
forth
in
Section
7.3.1
with
respect
to
suchcountry
shall
be
reduced
by
[***]
percent
([***]%)
[***];
and
7.4.2. 

















pursuant
to
Section
8.6,
Insmed
enters
into
an
agreement
with
a
Third
Party
in
order
to
obtain
a
license
to
a
Patent
Right
orother
intellectual
property
right
that
relates
to
the
Licensed
Compound,
a
Licensed
Product
or
any
AstraZeneca
Patent
or
AstraZeneca
Know-How
and
isreasonably
necessary
to
Exploit
the
Licensed
Compound
in
the
Field
in
a
country
in
the
Territory
or
otherwise
use
AstraZeneca
Patents
or
AstraZeneca
Know-Howin
such
country,
Insmed
shall
be
entitled
to
deduct
from
milestone
payments
and
royalties
payable
hereunder
in
a
given
Calendar
Year
with
respect
to
suchLicensed
Product
in
such
country
[***]
percent
([***]%)
of
any
fees,
milestone
payments
or
royalties
paid
to
such
Third
Party
in
such
Calendar
Year
under
suchagreement,
solely
to
the
extent
that
such
fees,
milestone
payments
or
royalties
paid
to
such
Third
Party
are
triggered
by
activities
involving
a
Licensed
Product
thatwould,
absent
such
agreement,
infringe
a
Patent
Right
or
otherwise
misappropriate
an
intellectual
property
right
of
such
Third
Party
that
is
licensed
under
suchagreement.
7.5. 


























Maximum Amount of Reductions. 

In
no
event
shall
the
amounts
payable
to
AstraZeneca
under
Sections
7.2
and
7.3
be
reduced
byoperation
of
Section
7.4
by
more
than
[***]
percent
([***]%)
of
what
would
otherwise
be
due
by
operation
of
Sections
7.2
and
7.3
without
regard
to
Section
7.4
inany
Calendar
Year
as
a
result
of
the
reductions
set
forth
in
Section
7.4.

Any
unused
reduction
may
be
carried
over
into
subsequent
Calendar
Years.

For
clarity,
tothe
extent
the
adjustments
in
Section
7.4
or
this
Section
7.5
cover
periods
in
which
payments
are
due
based
on
more
than
one
royalty
rate
described
inSection
7.3.1,
the
Net
Sales
to
which
such
adjustments
apply
shall
be
distributed
on
a
pro
rata
basis
among
the
applicable
royalty
rates
set
forth
in
Section
7.3.1.
7.6. 


























Royalty Payments and Reports. 

Insmed
shall
calculate
all
amounts
payable
to
AstraZeneca
pursuant
to
Section
7.3.1
at
the
end
ofeach
Calendar
Quarter,
which
amounts
shall
be
converted
to
Dollars,
in
accordance
with
Section
7.7.

Insmed
shall
pay
to
AstraZeneca
the
royalty
amounts
duewith
respect
to
a
given
Calendar
Quarter
within
[***]
after
the
end
of
such
Calendar
Quarter.

Each
payment
of
royalties
due
to
AstraZeneca
shall
be
accompaniedby
a
statement
specifying,
on
a
Licensed
Product-by-Licensed
Product
basis,
the
amount
of
Invoiced
Sales,
Net
Sales
and
deductions
taken
to
arrive
at
Net
Salesattributable
to
each
Licensed
Product
in
each
country
the
Territory
during
the
applicable
Calendar
Quarter
(including
such
amounts
expressed
in
local
currency
andas
converted
to
Dollars)
and
a
calculation
of
the
amount
of
royalty
payment
due
on
such
Net
Sales
for
such
Calendar
Quarter.

Without
limiting
the
generality
ofthe
foregoing,
Insmed
shall
require
its
Affiliates
and
Sublicensees
to
account
for
their
Net
Sales
and
to
provide
***
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.
38
such
reports
with
respect
thereto,
as
if
such
sales
were
made
by
Insmed.
7.7. 


























Mode of Payment; Offsets.  All
payments
to
AstraZeneca
under
this
Agreement
shall
be
made
by
deposit
of
Dollars
in
the
requisiteamount
to
such
bank
account
as
AstraZeneca
may
from
time
to
time
designate
by
notice
to
Insmed.

For
the
purpose
of
calculating
any
sums
due
under,
orotherwise
reimbursable
pursuant
to,
this
Agreement
(including
the
calculation
of
Net
Sales
expressed
in
currencies
other
than
Dollars),
Insmed
shall
convert
anyamount
expressed
in
a
foreign
currency
into
Dollar
equivalents
using
its,
its
Affiliates’
or
Sublicensees’,
as
applicable,
standard
conversion
methodology
consistentwith
GAAP.

Insmed
shall
have
no
right
to
offset,
set
off
or
deduct
any
amounts
from
or
against
the
amounts
due
to
AstraZeneca
hereunder.
7.8. 


























Taxes.
7.8.1. 

















General. 

The
milestone
payments
and
royalties
payable
by
Insmed
to
AstraZeneca
pursuant
to
this
Agreement
(each,
a
“Payment ”)
shall
be
paid
free
and
clear
of
any
and
all
taxes,
except
for
any
withholding
taxes
required
by
Applicable
Law.

Except
as
provided
in
this
Section
7.8,AstraZeneca
shall
be
solely
responsible
for
paying
any
and
all
taxes
(other
than
withholding
taxes
required
by
Applicable
Law
to
be
deducted
from
Payments
andremitted
by
Insmed)
levied
on
account
of,
or
measured
in
whole
or
in
part
by
reference
to,
any
Payments
it
receives.

Insmed
shall
deduct
or
withhold
from
thePayments
any
taxes
that
it
is
required
by
Applicable
Law
to
deduct
or
withhold.

Notwithstanding
the
foregoing,
if
AstraZeneca
is
entitled
under
any
applicable
taxtreaty
to
a
reduction
of
rate
of,
or
the
elimination
of,
applicable
withholding
tax,
it
may
deliver
to
Insmed
or
the
appropriate
governmental
authority
(with
theassistance
of
Insmed
to
the
extent
that
this
is
reasonably
required
and
is
requested
in
writing)
the
prescribed
forms
necessary
to
reduce
the
applicable
rate
ofwithholding
or
to
relieve
Insmed
of
its
obligation
to
withhold
such
tax
and
Insmed
shall
apply
the
reduced
rate
of
withholding
or
dispense
with
withholding,
as
thecase
may
be;
provided that
Insmed
has
received
evidence
of
AstraZeneca’s
delivery
of
all
applicable
forms
(and,
if
necessary,
its
receipt
of
appropriategovernmental
authorization)
at
least
[***]
prior
to
the
time
that
the
Payments
are
due.

If,
in
accordance
with
the
foregoing,
Insmed
withholds
any
amount,
it
shallpay
to
AstraZeneca
the
balance
when
due,
make
timely
payment
to
the
proper
taxing
authority
of
the
withheld
amount
and
send
to
AstraZeneca
proof
of
suchpayment
within
[***]
following
such
payment.

In
case
of
an
assignment
of
this
Agreement
in
accordance
with
Section
13.3,
and
if
an
assignee
under
ApplicableLaw
is
required
to
deduct
or
withhold
any
taxes
from
any
amount
payable
under
or
in
respect
of
this
Agreement,
and
the
amount
so
deducted
or
withheld
exceedsthe
amount
that
would
have
been
deducted
or
withheld
absent
an
assignment,
the
assignee
shall
increase
the
amount
payable
so
as
to
ensure
that,
after
suchdeduction
or
withholding
(together
with
any
increased
deduction
or
withholding
required
as
a
result
of
the
increase
in
the
amount
payable),
the
payee
receives
andretains
the
amount
that
it
would
have
received
and
retained
in
the
absence
of
an
assignment
(together
with
any
increased
deduction
or
withholding
required
as
aresult
of
the
increase
in
the
amount
payable).
***
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.
39
7.8.2. 

















Value Added Tax. 

Notwithstanding
anything
contained
in
Section
7.8.1,
this
Section
7.8.2
shall
apply
with
respect
to
valueadded
tax
(“
VAT ”).

All
Payments
are
exclusive
of
VAT.

If
any
VAT
is
chargeable
in
respect
of
any
Payments,
Insmed
shall
pay
VAT
at
the
applicable
rate
inrespect
of
any
such
Payments
following
the
receipt
of
a
VAT
invoice
in
the
appropriate
form
issued
by
AstraZeneca
in
respect
of
those
Payments,
such
VAT
to
bepayable
on
the
later
of
the
due
date
of
the
payment
of
the
Payments
to
which
such
VAT
relates
and
[***]
after
the
receipt
by
Insmed
of
the
applicable
invoicerelating
to
that
VAT
payment.
7.9. 


























Interest on Late Payments.  If
any
payment
due
to
either
Party
under
this
Agreement
is
not
paid
when
due,
then
such
paying
Partyshall
pay
interest
thereon
(before
and
after
any
judgment)
at
an
annual
rate
(but
with
interest
accruing
on
a
daily
basis)
of
[***]
([***])
basis
points
above
theLondon
Interbank
Offered
Rate
for
deposits
in
United
States
Dollars
having
a
maturity
of
one
(1)
month
published
by
the
British
Bankers’
Association,
as
adjustedfrom
time
to
time
on
the
first
London
business
day
of
each
month,
such
interest
to
run
from
the
date
on
which
payment
of
such
sum
became
due
until
paymentthereof
in
full
together
with
such
interest.
7.10. 



















Financial Records. 

Insmed
and
its
Affiliates
shall
and
shall
use
Commercially
Reasonable
Efforts
to
cause
its
and
their
Sublicenseesto,
keep
complete
and
accurate
financial
books
and
records
pertaining
to
the
Commercialization
of
Licensed
Products
hereunder,
including
books
and
records
ofInvoiced
Sales
and
Net
Sales
of
Licensed
Products,
in
sufficient
detail
to
calculate
and
verify
all
amounts
payable
hereunder.

Insmed
and
its
Affiliates
shall
andshall
use
Commercially
Reasonable
Efforts
to
cause
its
and
their
Sublicensees
to,
retain
such
books
and
records
until
the
later
of
(i)
[***]
after
the
end
of
the
periodto
which
such
books
and
records
pertain,
(ii)
the
expiration
of
the
applicable
tax
statute
of
limitations
(or
any
extensions
thereof)
and
(iii)
for
such
period
as
may
berequired
by
Applicable
Law.
7.11. 



















Audit. 

At
the
reasonable
request
of
AstraZeneca,
Insmed
and
its
Affiliates
shall
and
shall
use
Commercially
Reasonable
Efforts
tocause
its
and
their
Sublicensees
to
permit
AstraZeneca
or
an
independent
auditor
designated
by
AstraZeneca
and
reasonably
acceptable
to
Insmed,
at
reasonabletimes
and
upon
reasonable
notice,
to
audit
the
books
and
records
maintained
pursuant
to
Section
7.10
to
ensure
the
accuracy
of
all
reports
and
payments
madehereunder;
provided, however ,
that
AstraZeneca
shall
not
exercise
its
rights
under
this
Section
7.11
more
than
[***]
([***])
[***].

Except
as
provided
below,
thecost
of
this
audit
shall
be
borne
by
AstraZeneca,
unless
the
audit
reveals,
with
respect
to
a
period,
a
variance
of
more
than
[***]
percent
([***]%)
from
the
reportedamounts
for
such
period,
in
which
case
Insmed
shall
bear
the
cost
of
the
audit.

Unless
disputed
pursuant
to
Section
7.12
below,
if
such
audit
concludes
that(i)
additional
amounts
were
owed
by
Insmed,
Insmed
shall
pay
the
additional
amounts,
with
interest
from
the
date
originally
due
as
provided
in
Section
7.9
or(ii)
excess
payments
were
made
by
Insmed,
AstraZeneca
shall
reimburse
such
***
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.
40
excess
payments,
in
either
case
((i)
or
(ii)),
within
[***]
after
the
date
on
which
such
audit
is
completed
by
AstraZeneca.
7.12. 



















Audit Dispute. 

In
the
event
of
a
dispute
with
respect
to
any
audit
under
Section
7.11,
AstraZeneca
and
Insmed
shall
work
in
goodfaith
to
resolve
the
disagreement.

If
the
Parties
are
unable
to
reach
a
mutually
acceptable
resolution
of
any
such
dispute
within
[***],
the
dispute
shall
be
submittedfor
resolution
to
a
certified
public
accounting
firm
jointly
selected
by
each
Party’s
certified
public
accountants
or
to
such
other
Person
as
the
Parties
shall
mutuallyagree
(the
“
Auditor ”).

The
decision
of
the
Auditor
shall
be
final
and
the
costs
of
such
arbitration
as
well
as
the
initial
audit
shall
be
borne
between
the
Parties
insuch
manner
as
the
Auditor
shall
determine.

Not
later
than
[***]
after
such
decision
and
in
accordance
with
such
decision,
(i)
Insmed
shall
pay
the
additionalamounts,
with
interest
from
the
date
originally
due
as
provided
in
Section
7.9,
(ii)
AstraZeneca
shall
reimburse
the
excess
payments,
as
applicable.
ARTICLE 8 INTELLECTUAL PROPERTY
8.1. 


























Ownership of Intellectual Property.
8.1.1. 

















Ownership of Technology. 

Subject
to
Section
8.1.2,
as
between
the
Parties,
each
Party
shall
own
and
retain
all
right,
titleand
interest
in
and
to
any
and
all:
(i)
Information,
Improvements
and
other
inventions
that
are
conceived,
discovered,
developed
or
otherwise
made
by
or
on
behalfof
such
Party
or
its
Affiliates
or
its
or
their
(sub)licensees
(or
Sublicensees),
as
applicable,
under
or
in
connection
with
this
Agreement,
whether
or
not
patented
orpatentable
and
any
and
all
Patents
and
other
intellectual
property
rights
with
respect
thereto,
except
to
the
extent
that
any
such
Information
or
invention
or
anyPatent
or
intellectual
property
rights
with
respect
thereto,
is
Joint
Know-How
or
Joint
Patents;
and
(ii)
other
Information,
inventions,
Patents
and
other
intellectualproperty
rights
that
are
owned
or
otherwise
controlled
(other
than
pursuant
to
the
license
grants
set
forth
in
Sections
2.1
and
2.2)
by
such
Party
or
its
Affiliates
or
itsor
their
(sub)licensees
(or
Sublicensees)
(as
applicable)
outside
of
this
Agreement.
8.1.2. 

















Ownership of Joint Patents and Joint Know-How. 

As
between
the
Parties,
each
of
AstraZeneca
and
Insmed
shall
own
anequal,
undivided
interest
in
any
and
all:

(i)
Information,
Improvements
and
other
inventions
that
are
conceived,
discovered,
developed
or
otherwise
made
jointly
byor
on
behalf
of
AstraZeneca
or
its
Affiliates
or
its
or
their
(sub)licensees,
on
the
one
hand,
and
Insmed
or
its
Affiliates
or
its
or
their
Sublicensees,
on
the
otherhand,
in
connection
with
the
work
conducted
under
or
in
connection
with
this
Agreement,
whether
or
not
patented
or
patentable
(the
“
Joint Know-How ”);
and(ii)
Patents
(the
“
Joint Patents ”)
and
other
intellectual
property
rights
with
respect
to
the
Information,
***
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.
41
Improvements
and
other
inventions
described
in
clause
(i)
(together
with
Joint
Know-How
and
Joint
Patents,
the
“Joint
Intellectual
Property
Rights”).

Each
Partyshall
promptly
disclose
to
the
other
Party
in
writing
and
shall
cause
its
Affiliates
and
its
and
their
(sub)licensees
(or
Sublicensees)
to
so
disclose,
the
development,making,
conception
or
reduction
to
practice
of
any
Joint
Know-How
or
Joint
Patents.

Subject
to
the
licenses
and
rights
of
reference
granted
under
Sections
2.1
and2.2
and,
in
the
case
of
Insmed,
its
obligations
set
forth
in
Section
2.5
and
Article
5,
each
Party
shall
have
the
right
to
Exploit
the
Joint
Intellectual
Property
Rightswithout
a
duty
of
seeking
consent
or
accounting
to
the
other
Party.
8.1.3. 

















United States Law. 

The
determination
of
whether
Information,
Improvements
and
other
inventions
are
conceived,discovered,
developed
or
otherwise
made
by
a
Party
for
the
purpose
of
allocating
proprietary
rights
(including
Patent,
copyright
or
other
intellectual
propertyrights)
therein,
shall,
for
purposes
of
this
Agreement,
be
made
in
accordance
with
Applicable
Law
in
the
United
States
as
such
law
exists
as
of
the
Effective
Dateirrespective
of
where
or
when
such
conception,
discovery,
development
or
making
occurs.

Each
Party
shall,
and
does
hereby,
assign,
and
shall
cause
its
Affiliatesand
its
and
their
(sub)licensees
and
Sublicensees
to
so
assign,
to
the
other
Party,
without
additional
compensation,
such
right,
title
and
interest
in
and
to
anyInformation,
Improvements
and
other
inventions
as
well
as
any
intellectual
property
rights
with
respect
thereto,
as
is
necessary
to
fully
effect,
as
applicable,
(i)
thesole
ownership
provided
for
in
Section
8.1.1
and
(ii)
the
joint
ownership
provided
for
in
Section
8.1.2.
8.1.4. 

















Assignment Obligation. 

Each
Party
shall
cause
all
Persons
who
perform
Development
activities,
Manufacturing
activities
orregulatory
activities
for
such
Party
under
this
Agreement
or
who
conceive,
discover,
develop
or
otherwise
make
any
Information,
Improvement
or
other
inventionsby
or
on
behalf
of
either
Party
or
its
Affiliates
or
its
or
their
(sub)licensees
(or
Sublicensees)
under
or
in
connection
with
this
Agreement
to
be
under
an
obligationto
assign
(or,
if
such
Party
is
unable
to
cause
such
Person
to
agree
to
such
assignment
obligation
despite
such
Party’s
using
commercially
reasonable
efforts
tonegotiate
such
assignment
obligation,
then
to
grant
an
exclusive
license
under)
their
rights
in
any
Information,
Improvement
and
inventions
resulting
therefrom
tosuch
Party,
except
where
Applicable
Law
requires
otherwise
and
except
in
the
case
of
governmental,
not-for-profit
and
public
institutions
that
have
standardpolicies
against
such
an
assignment
(in
which
case,
a
suitable
license
or
right
to
obtain
such
a
license,
shall
be
obtained).
8.1.5. 

















Ownership of Product Trademarks. 

As
between
the
Parties,
Insmed
shall
own
all
right,
title
and
interest
to
the
ProductTrademarks
in
the
Territory.
8.1.6. 

















Ownership of Corporate Names. 

As
between
the
Parties,
each
Party
shall
retain
all
right,
title
and
interest
in
and
to
itsrespective
Corporate
Names.
8.2. 


























Maintenance and Prosecution of Patents.
8.2.1. 

















In General.
(i)





































As
between
the
Parties:
42
1.


































Insmed
shall
through
counsel
mutually
acceptable
to
each
Party,
have
the
right,
but
not
the
obligation,
toprepare,
file,
prosecute
and
maintain
AstraZeneca
Patents
and
Joint
Patents
that
are
necessary
for
the
Exploitation
of
the
of
Licensed
Compounds
or
LicensedProducts,
including
any
related
interference,
re-issuance
and
re-examination
proceedings
with
respect
thereto,
in
the
Territory,
in
each
case,
the
cost
and
expense
ofwhich
shall
be
borne
by
Insmed.

If
Insmed
identifies
patentable
inventions
necessary
for
the
Exploitation
of
the
Licensed
Compounds
or
Licensed
Products
withinthe
AstraZeneca
Know-How
in
the
course
of
reviewing
the
AstraZeneca
Know-How,
the
rights
under
this
Section
8.2.1
include
the
right
for
Insmed
to
file,prosecute
and
maintain
new
patent
applications
in
the
name
of
AstraZeneca
claiming
or
covering
such
patentable
inventions
at
Insmed’s
cost
and
expense;
2.


































AstraZeneca
shall,
through
counsel
mutually
acceptable
to
each
Party,
have
the
right,
but
not
the
obligation,to
prepare,
file,
prosecute
and
maintain
AstraZeneca
Patents
and
Joint
Patents
that
are
reasonably
useful
(but
not
necessary)
for
the
Exploitation
of
LicensedCompounds
or
Licensed
Products,
including
any
related
interference,
re-issuance
and
re-examination
proceedings
with
respect
thereto,
in
the
Territory,
in
eachcase,
the
cost
and
expense
of
which
shall
be
borne
by
AstraZeneca.

If
Insmed
identifies
patentable
inventions
reasonably
useful
(but
not
necessary)
for
theExploitation
of
the
of
Licensed
Compounds
or
Licensed
Products
within
the
AstraZeneca
Know-How
in
the
course
of
reviewing
the
AstraZeneca
Know-How,
therights
under
this
Section
8.2.1
include
the
right
of
AstraZeneca
to
file,
prosecute
and
maintain
new
patent
applications
in
the
name
of
AstraZeneca
claiming
orcovering
such
patentable
inventions
at
AstraZeneca’s
cost
and
expense;
and
3.


































Insmed
shall
have
the
right,
but
not
the
obligation,
to
prepare,
file,
prosecute
and
maintain
the
InsmedPatents,
including
any
related
interference,
re-issuance,
re-examination
and
opposition
proceedings
with
respect
thereto,
worldwide,
in
each
case,
at
its
sole
costand
expense
and
through
counsel
of
its
choice.
(ii)


































For
purposes
of
this
Section
8.2,
the
Party
prosecuting,
maintaining
or
undertaking
other
related
activitiespursuant
to
this
Agreement
with
respect
to
a
Patent
shall
be
the
“
Prosecuting Party .”

The
Prosecuting
Party
shall
periodically
inform
the
other
Party
of
allmaterial
steps
with
regard
to
the
preparation,
filing,
prosecution
and
maintenance
of
the
AstraZeneca
Patents,
Insmed
Patents
and
Joint
Patents,
as
applicable,
in
theTerritory,
including
by
providing
the
non-Prosecuting
Party
with
a
copy
of
material
communications
to
and
from
any
patent
authority
in
the
Territory
regardingsuch
Patents
and
by
providing
the
non-Prosecuting
Party
drafts
of
any
material
filings
or
responses
to
be
made
to
such
patent
authorities
in
the
Territory
sufficientlyin
advance
of
submitting
such
filings
or
responses
so
as
to
allow
for
a
reasonable
opportunity
for
the
non-Prosecuting
Party
to
review
and
comment
thereon.

TheProsecuting
Party
shall
consider
in
good
faith
the
requests
and
suggestions
of
the
non-Prosecuting
Party
with
respect
to
such
drafts
and
with
respect
to
strategies
forfiling
and
prosecuting
such
Patents
in
the
Territory.

If,
as
between
the
Parties,
the
Prosecuting
Party
decides
not
to
prepare,
file,
prosecute
or
maintain
anAstraZeneca
Patent,
an
Insmed
Patent
or
a
Joint
Patent
in
a
country
in
the
Territory,
the
Prosecuting
Party
shall
provide
reasonable
prior
written
notice
to
the
non-Prosecuting
Party
of
such
intention
and
the
non-Prosecuting
Party
shall
thereupon
have
the
right,
in
its
sole
discretion,
to
assume
the
control
and
direction
of
thepreparation,
filing,
prosecution
and
maintenance
of
such
AstraZeneca
Patent,
43
Insmed
Patent
or
Joint
Patent
at
its
sole
cost
and
expense
in
such
country,
whereupon
the
non-Prosecuting
Party
shall
be
deemed
the
Prosecuting
Party
with
respectto
such
Patent.
8.2.2. 

















Cooperation. 

The
non-Prosecuting
Party
shall,
and
shall
cause
its
Affiliates
to,
assist
and
cooperate
with
the
ProsecutingParty,
as
the
Prosecuting
Party
may
reasonably
request
from
time
to
time,
in
the
preparation,
filing,
prosecution
and
maintenance
of
the
AstraZeneca
Patents,
theInsmed
Patents
and
Joint
Patents
in
the
Territory
under
this
Agreement,
including
that
the
non-Prosecuting
Party
shall,
and
shall
ensure
that
its
Affiliates,
(i)
offerits
comments,
if
any,
promptly,
(ii)
provide
access
to
relevant
documents
and
other
evidence
and
make
its
employees
available
at
reasonable
business
hours
and(iii)
provide
the
Prosecuting
Party,
upon
its
request,
with
copies
of
any
patentability
search
reports
generated
by
its
patent
counsel
with
respect
to
the
AstraZenecaPatents,
the
Insmed
Patents
or
the
Joint
Patents
including
relevant
Third
Party
patents
and
patent
applications
located;
provided, however ,
that
neither
Party
shallbe
required
to
provide
legally
privileged
information
with
respect
to
such
intellectual
property
unless
and
until
procedures
reasonably
acceptable
to
such
Party
arein
place
to
protect
such
privilege;
and
provided, further ,
that
the
Prosecuting
Party
shall
reimburse
the
non-Prosecuting
Party
for
its
reasonable
and
verifiable
costsand
expenses
incurred
in
connection
therewith.
8.2.3. 

















Patent Term Extension and Supplementary Protection Certificate. 

As
between
the
Parties,
Insmed
shall
have
the
soleright
to
make
decisions
regarding
and
Insmed
shall
have
the
right
to
apply
for,
patent
term
extensions,
in
the
Territory,
including
in
the
United
States
with
respectto
extensions
pursuant
to
U.S.
35
U.S.C.
§156
et.
seq.
and
in
other
jurisdictions
pursuant
to
supplementary
protection
certificates,
and
in
all
jurisdictions
withrespect
to
any
other
extensions
that
are
now
or
become
available
in
the
future,
wherever
applicable,
for
the
AstraZeneca
Patents,
Joint
Patents
and
any
InsmedPatents
and
with
respect
to
the
Licensed
Compound
and
the
Licensed
Products,
in
each
case
including
whether
or
not
to
do
so;
provided that
Insmed
shall
consultwith
AstraZeneca
in
good
faith
to
determine
the
course
of
action
with
respect
to
such
filings.

AstraZeneca
shall
provide
prompt
and
reasonable
assistance,
asrequested
by
Insmed,
including
by
taking
such
action
as
patent
holder
as
is
required
under
any
Applicable
Law
to
obtain
such
extension
or
supplementaryprotection
certificate.
8.2.4. 

















Common Ownership under Joint Research Agreements. 

Notwithstanding
anything
to
the
contrary
in
this
Article
8,neither
Party
shall
have
the
right
to
make
an
election
under
35
U.S.C.
102(c)
when
exercising
its
rights
under
this
Article
8
without
the
prior
written
consent
of
theother
Party.

With
respect
to
any
such
permitted
election,
the
Parties
shall
coordinate
their
activities
with
respect
to
any
submissions,
filings
or
other
activities
insupport
thereof.

The
Parties
acknowledge
and
agree
that
this
Agreement
is
a
“joint
research
agreement”
as
defined
in
35
U.S.C.
100(h).
8.2.5. 

















Patent Listings. 

As
between
the
Parties,
Insmed
shall
have
the
right
and
responsibility
to
make
all
filings
with
RegulatoryAuthorities
in
the
Territory
with
respect
to
the
AstraZeneca
Patents,
Insmed
Patents
and
Joint
Patents,
including
as
required
or
allowed
(i)
in
the
United
States,
inthe
FDA’s
Orange
Book
and
(ii)
in
the
European
Union,
under
the
national
implementations
of
Article
10.1(a)(iii)
of
Directive
2001/EC/83
or
other
44
international
equivalents;
provided that
Insmed
shall
consult
with
AstraZeneca
to
determine
the
course
of
action
with
respect
to
such
filings.
8.3. 


























Enforcement of Patents.
8.3.1. 

















Notice. 

Each
Party
shall
promptly
notify
the
other
Party
in
writing
of
(i)
any
alleged
or
threatened
infringement
of
theAstraZeneca
Patents,
Insmed
Patents
or
Joint
Patents
in
any
jurisdiction
in
the
Territory,
or
(ii)
any
certification
filed
under
the
Hatch-Waxman
Act
claiming
thatany
AstraZeneca
Patents,
Insmed
Patents
or
Joint
Patents
are
invalid
or
unenforceable
or
claiming
that
any
AstraZeneca
Patents,
Insmed
Patents
or
Joint
Patentswould
not
be
infringed
by
the
making,
use,
offer
for
sale,
sale
or
import
of
a
product
for
which
an
application
under
the
Hatch-Waxman
Act
is
filed
or
anyequivalent
or
similar
certification
or
notice
in
any
other
jurisdiction,
in
each
case
((i)
and
(ii))
of
which
such
Party
becomes
aware
(an
“
Infringement ”).
8.3.2. 

















Enforcement of Patents. 

As
between
the
Parties,
Insmed
shall
have
the
first
right,
but
not
the
obligation,
to
prosecute
anyInfringement
with
respect
to
the
AstraZeneca
Patents,
Insmed
Patents
and
Joint
Patents,
including
as
a
defense
or
counterclaim
in
connection
with
any
Third
PartyInfringement
Claim,
at
Insmed’s
sole
cost
and
expense,
using
counsel
of
its
choice.

For
purposes
of
this
Section
8.3,
the
Party
prosecuting
any
Infringementpursuant
to
the
foregoing
sentence
with
respect
to
a
Patent
shall
be
the
“
Enforcing Party .”

In
the
event
Insmed
prosecutes
any
such
Infringement
in
the
Field
inthe
Territory,
AstraZeneca
shall
have
the
right
to
join
and
shall
join
if
it
is
a
necessary
party
to
such
claim,
suit
or
proceeding
and
participate
with
its
own
counsel
atits
sole
cost
and
expense;
provided that
Insmed
shall
retain
control
of
the
prosecution
of
such
claim,
suit
or
proceeding,
including
the
response
to
any
defense
ordefense
of
any
counterclaim
raised
in
connection
therewith.

In
the
event
AstraZeneca
prosecutes
any
such
Infringement
in
the
Field
in
the
Territory,
Insmed
shallhave
the
right
to
join
as
a
party
to
such
claim,
suit
or
proceeding
and
participate
with
its
own
counsel
at
its
sole
cost
and
expense;
provided that
AstraZeneca
shallretain
control
of
the
prosecution
of
such
claim,
suit
or
proceeding,
including
the
response
to
any
defense
or
defense
of
any
counterclaim
raised
in
connectiontherewith.

If
the
Enforcing
Party
or
its
designee
does
not
take
commercially
reasonable
steps
to
prosecute
an
Infringement
in
the
Field
(x)
within
[***]
followingthe
first
notice
provided
above
with
respect
to
such
Infringement
or
(y)

provided such
date
occurs
after
the
first
such
notice
of
such
Infringement
is
provided,
[***]before
the
time
limit,
if
any,
set
forth
in
appropriate
laws
and
regulations
for
filing
of
such
actions,
whichever
comes
first,
then
(1)
the
Enforcing
Party
shall
sonotify
the
non-Enforcing
Party
and
(2)
the
non-Enforcing
Party
shall,
at
its
sole
cost
and
expense,
have
the
right
in
its
sole
discretion
to

prosecute
such
alleged
orthreatened
infringement
in
the
Field
or
take
other
appropriate
action
in
the
name
of
either
Party
or
both
Parties,
whereupon
the
non-Enforcing
Party
shall
bedeemed
the
Enforcing
Party
with
respect
to
such
Infringement.
***
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.
45
8.3.3. 

















Cooperation. 

The
Parties
agree
to
cooperate
fully
in
any
Infringement
action
pursuant
to
this
Section
8.3,
including
bymaking
the
inventors,
applicable
records
and
documents
(including
laboratory
notebooks)
with
respect
to
the
relevant
Patents
available
to
the
Enforcing
Party
onthe
Enforcing
Party’s
request.

With
respect
to
an
action
controlled
by
the
applicable
Enforcing
Party,
the
other
Party
shall,
and
shall
cause
its
Affiliates
to,
assistand
cooperate
with
the
Enforcing
Party,
as
the
Enforcing
Party
may
reasonably
request
from
time
to
time,
in
connection
with
its
activities
set
forth
in
thisSection
8.3,
including
where
necessary,
furnishing
a
power
of
attorney
solely
for
such
purpose
or
joining
in,
or
being
named
as
a
necessary
party
to,
such
action,providing
access
to
relevant
documents
and
other
evidence
and
making
its
employees
available
at
reasonable
business
hours;
provided that,
the
Enforcing
Partyshall
reimburse
such
other
Party
for
its
reasonable
and
verifiable
costs
and
expenses
incurred
in
connection
therewith.

Unless
otherwise
set
forth
herein,
theEnforcing
Party
shall
have
the
right
to
settle
such
claim;
provided that
neither
Party
shall
have
the
right
to
settle
any
Infringement
litigation
under
this
Section
8.3in
a
manner
that
has
a
material
adverse
effect
on
the
rights
or
interest
of
the
other
Party
or
in
a
manner
that
imposes
any
costs
or
liability
on
or
involves
anyadmission
by,
the
other
Party,
without
the
express
written
consent
of
such
other
Party
(which
consent
shall
not
be
unreasonably
withheld,
conditioned
or
delayed).
In
connection
with
any
activities
with
respect
to
an
Infringement
action
prosecuted
by
the
applicable
Enforcing
Party
pursuant
to
this
Section
8.3
involving
PatentsControlled
by
or
licensed
under
Article
2
to
the
other
Party,
the
Enforcing
Party
shall
(i)
consult
with
the
other
Party
as
to
the
strategy
for
the
prosecution
of
suchclaim,
suit
or
proceeding,
(ii)
consider
in
good
faith
any
comments
from
the
other
Party
with
respect
thereto
and
(iii)
keep
the
other
Party
reasonably
informed
ofany
material
steps
taken
and
provide
copies
of
all
material
documents
filed,
in
connection
with
such
action.
8.3.4. 

















Recovery. 

Except
as
otherwise
agreed
by
the
Parties
in
connection
with
a
cost
sharing
arrangement,
any
recovery
realized
asa
result
of
such
litigation
described
above
in
this
Section
8.3
(whether
by
way
of
settlement
or
otherwise)
shall
be
first
allocated
to
reimburse
the
Parties
for
theircosts
and
expenses
in
making
such
recovery
(which
amounts
shall
be
allocated
pro
rata
if
insufficient
to
cover
the
totality
of
such
expenses).

Any
remainder
aftersuch
reimbursement
is
made
shall
be
retained
by
the
Enforcing
Party;
provided, however ,
that
to
the
extent
that
any
award
or
settlement
(whether
by
judgment
orotherwise)
with
respect
to
an
AstraZeneca
Patent,
Insmed
Patent
or
Joint
Patent
is
attributable
to
loss
of
sales
or
profits
with
respect
to
a
Licensed
Product,
theParties
shall
negotiate
in
good
faith
an
appropriate
allocation
of
such
remainder
to
reflect
the
economic
interests
of
the
Parties
under
this
Agreement
with
respect
tosuch
Licensed
Product.
8.4. 


























Infringement Claims by Third Parties. 

If
the
Exploitation
of
a
Licensed
Product
in
the
Territory
pursuant
to
this
Agreement
resultsin,
or
is
reasonably
expected
to
result
in,
any
claim,
suit
or
proceeding
by
a
Third
Party
alleging
infringement
by
Insmed
or
any
of
its
Affiliates
or
its
or
theirSublicensees
(a
“
Third Party Infringement Claim ”),
including
any
defense
or
counterclaim
in
connection
with
an
Infringement
action
initiated
pursuant
toSection
8.3,
the
Party
first
becoming
aware
of
such
alleged
infringement
shall
promptly
notify
the
other
Party
thereof
in
writing.

As
between
the
Parties,
Insmedshall
be
responsible
for
defending
any
such
claim,
suit
or
proceeding
at
its
sole
cost
and
expense,
using
counsel
of
its
choice.

AstraZeneca
shall
participate
asnecessary
in
any
such
claim,
suit
or
proceeding
at
46
Insmed’s
sole
cost
and
expense
unless
AstraZeneca
decides
to
engage
a
counsel
of
its
own,
other
than
the
counsel
engaged
by
Insmed,
at
AstraZeneca’s
sole
costand
expense;
provided that
Insmed
shall
retain
the
right
to
control
such
claim,
suit
or
proceeding.

AstraZeneca
shall,
and
shall
cause
its
Affiliates
to,
assist
andcooperate
with
Insmed,
as
Insmed
may
reasonably
request
from
time
to
time,
in
connection
with
its
activities
set
forth
in
this
Section
8.4,
including
wherenecessary,
furnishing
a
power
of
attorney
solely
for
such
purpose
or
joining
in,
or
being
named
as
a
necessary
party
to,
such
action,
providing
access
to
relevantdocuments
and
other
evidence
and
making
its
employees
available
at
reasonable
business
hours;
provided that
Insmed
shall
reimburse
AstraZeneca
for
itsreasonable
and
verifiable
actual,
out-of-pocket
costs
and
expenses
incurred
in
connection
therewith.

Insmed
shall
keep
AstraZeneca
reasonably
informed
of
allmaterial
developments
in
connection
with
any
such
claim,
suit
or
proceeding.

Insmed
agrees
to
provide
AstraZeneca
with
copies
of
all
material
pleadings
filed
insuch
action
and
to
allow
AstraZeneca
reasonable
opportunity
to
participate
in
the
defense
of
the
claims.

Any
damages,
or
awards,
including
royalties
incurred
orawarded
in
connection
with
any
Third
Party
Infringement
Claim
defended
under
this
Section
8.4
shall
be,
subject
to
Section
7.4.2,
borne
by
Insmed.
8.5. 


























Invalidity or Unenforceability Defenses or Actions. 

Each
Party
shall
promptly
notify
the
other
Party
in
writing
of
any
alleged
orthreatened
assertion
of
invalidity
or
unenforceability
of
any
of
the
AstraZeneca
Patents,
Insmed
Patents
or
Joint
Patents
by
a
Third
Party,
including,
withoutlimitation,
any
declaratory
judgment
proceeding,
inter partes review,
post-grant
review
or
other
opposition
proceeding
with
respect
thereto
(an
“
Invalidity Claim”)
of
which
such
Party
becomes
aware.

As
between
the
Parties,
(i)
Insmed
shall
have
the
first
right,
but
not
the
obligation,
to
defend
and
control
the
defense
of
thevalidity
and
enforceability
of
the
AstraZeneca
Patents,
the
Insmed
Patents
and
the
Joint
Patents
at
its
sole
cost
and
expense,
using
counsel
of
its
choice,
including,when
such
invalidity
or
unenforceability
is
raised
as
a
defense
or
counterclaim
in
connection
with
an
Infringement
action
initiated
pursuant
to
Section
8.3.

Forpurposes
of
this
Section
8.5,
the
Party
defending
the
Invalidity
Claim
pursuant
to
the
foregoing
sentence
with
respect
to
a
Patent
shall
be
the
“
Controlling Party.”

With
respect
to
any
such
claim,
suit
or
proceeding
in
the
Territory,
the
non-Controlling
Party
may
participate
in
such
claim,
suit
or
proceeding
with
counsel
ofits
choice
at
its
sole
cost
and
expense;
provided that
the
Controlling
Party
shall
retain
control
of
the
defense
in
such
claim,
suit
or
proceeding.

If
the
ControllingParty
or
its
designee
elects
not
to
defend
or
control
the
defense
of
the
applicable
Patents
in
a
suit
brought
in
the
Territory
or
otherwise
fails
to
initiate
and
maintainthe
defense
of
any
such
claim,
suit
or
proceeding,
then
the
non-Controlling
Party
may
conduct
and
control
the
defense
of
any
such
claim,
suit
or
proceeding
at
itssole
cost
and
expense.

The
non-Controlling
Party
in
such
an
action
shall,
and
shall
cause
its
Affiliates
to,
assist
and
cooperate
with
the
Controlling
Party,
as
suchControlling
Party
may
reasonably
request
from
time
to
time,
in
connection
with
its
activities
set
forth
in
this
Section
8.5,
including
where
necessary,
furnishing
apower
of
attorney
solely
for
such
purpose
or
joining
in,
or
being
named
as
a
necessary
party
to,
such
action,
providing
access
to
relevant
documents
and
otherevidence
and
making
its
employees
available
at
reasonable
business
hours;
provided that
the
Controlling
Party
shall
reimburse
the
non-Controlling
Party
for
itsreasonable
and
verifiable
costs
and
expenses
incurred
in
connection
therewith.

In
connection
with
any
activities
with
respect
to
a
defense,
claim
or
counterclaimrelating
to
the
AstraZeneca
Patents,
Insmed
Patents
or
Joint
Patents
pursuant
to
this
Section
8.5,
the
Controlling
Party
shall
(x)
consult
with
the
non-ControllingParty
as
to
the
strategy
for
such
activities,
(y)
consider
in
good
faith
any
comments
from
the
non-Controlling
47
Party
and
(z)
keep
the
non-Controlling
Party
reasonably
informed
of
any
material
steps
taken
and
provide
copies
of
all
material
documents
filed,
in
connectionwith
such
defense,
claim
or
counterclaim.
8.6. 


























Third Party IP Rights. 

If
in
the
reasonable
opinion
of
Insmed,
the
Exploitation
of
the
Licensed
Compound
or
Licensed
Product
inthe
Field
and
in
the
Territory
by
Insmed,
any
of
its
Affiliates
or
any
of
its
or
their
Sublicensees
infringes
or
is
reasonably
expected
to
infringe
any
Patent
orotherwise
misappropriate
the
intellectual
property
rights
of
a
Third
Party
in
any
country
in
the
Territory
(such
right,
a
“
Third Party IP Right ”),
then,
as
betweenthe
Parties,
Insmed
shall
have
the
right,
but
not
the
obligation,
to
negotiate
and
obtain
a
license
from
such
Third
Party
to
such
Third
Party
IP
Right
as
necessary
ordesirable
for
Insmed
or
its
Affiliates
or
its
or
their
Sublicensees
to
Exploit
the
Licensed
Compound
and
Licensed
Products
in
the
Field
in
such
country;
providedthat
(i)
as
between
the
Parties,
Insmed
shall
bear
all
expenses
incurred
in
connection
therewith,
including
any
royalties,
milestones
or
other
payments
incurredunder
any
such
license,
(ii)
any
such
license
shall
provide
for
the
unencumbered
right,
but
not
the
obligation,
to
transfer
such
license
to
AstraZeneca
or
any
of
itsAffiliates
upon
termination
or
expiration
of
this
Agreement
with
respect
to
the
applicable
country(ies)
and
(iii)
Insmed
shall
obtain
the
written
consent
ofAstraZeneca
prior
to
entering
into
any
such
license
(such
consent
not
to
be
unreasonably
withheld,
delayed
or
conditioned),
in
each
case
((i),
(ii)
and
(iii)),
subjectto
Section
7.4.2.
8.7. 


























Product Trademarks.
8.7.1. 

















Notice. 

Each
Party
shall
provide
to
the
other
Party
prompt
written
notice
of
any
actual
or
threatened
infringement
of
theProduct
Trademarks
in
the
Territory
and
of
any
actual
or
threatened
claim
that
the
use
of
the
Product
Trademarks
in
the
Territory
violates
the
rights
of
any
ThirdParty,
in
each
case,
of
which
such
Party
becomes
aware.
8.7.2. 

















Prosecution of Product Trademarks. 

Insmed
shall
be
responsible
for
the
registration,
prosecution
and
maintenance
of
theProduct
Trademarks
using
counsel
of
its
own
choice;
provided that
AstraZeneca
shall
have
the
right
to
provide
input
on
the
overall
strategy
for
such
registration,prosecution
and
maintenance
and
Insmed
shall
consider
such
input
in
good
faith.

All
costs
and
expenses
of
registering,
prosecuting
and
maintaining
the
ProductTrademarks
shall
be
borne
solely
by
Insmed.
8.7.3. 

















Enforcement of Product Trademarks. 

Insmed
shall
have
the
right
to
take
such
action
as
Insmed,
after
consultation
withAstraZeneca,
deems
necessary
against
a
Third
Party
based
on
any
alleged,
threatened
or
actual
infringement,
dilution,
misappropriation
or
other
violation
of
orunfair
trade
practices
or
any
other
like
offense
relating
to,
the
Product
Trademarks
by
a
Third
Party
in
the
Territory
at
its
sole
cost
and
expense
and
using
counsel
ofits
own
choice;
provided that
AstraZeneca
shall
have
the
right
to
provide
input
on
the
overall
strategy
for
such
action
and
Insmed
shall
consider
such
input
in
goodfaith.

Insmed
shall
retain
any
damages
or
other
amounts
collected
in
connection
therewith;
provided, however ,
that
to
the
extent
that
any
award
or
settlement(whether
by
judgment
or
otherwise)
with
respect
to
a
Product
Trademark
is
attributable
to
loss
of
sales
or
profits
with
respect
to
a
Licensed
Product,
the
Partiesshall
negotiate
in
good
faith
an
appropriate
allocation
of
such
remainder
to
reflect
the
economic
interests
of
the
Parties
under
this
Agreement
with
respect
to
suchLicensed
Product.

Subject
to
48
the
foregoing,
AstraZeneca
may
elect
at
its
sole
cost
and
expense
to
participate
in
the
enforcement
of
the
Product
Trademarks
in
the
Territory.
8.7.4. 

















Third Party Claims .

Insmed
shall
have
the
right
to
defend
against
and
settle
any
alleged,
threatened
or
actual
claim
by
aThird
Party
that
the
use
or
registration
of
the
Product
Trademarks
in
the
Territory
infringes,
dilutes,
misappropriates
or
otherwise
violates
any
Trademark
or
otherright
of
that
Third
Party
or
constitutes
unfair
trade
practices
or
any
other
like
offense
or
any
other
claims
as
may
be
brought
by
a
Third
Party
against
a
Party
inconnection
with
the
use
of
the
Product
Trademarks
with
respect
to
a
Licensed
Product
in
the
Territory
at
its
sole
cost
and
expense
and
using
counsel
of
its
choice;provided that
AstraZeneca
shall
have
the
right
to
provide
input
on
the
overall
strategy
for
such
defense
and
settlement
and
Insmed
shall
consider
such
input
in
goodfaith.

Any
damages,
or
awards,
including
royalties
incurred
or
awarded
in
connection
with
any
such
claim
defended
under
this
Section
8.7.4
shall
be
borne
byInsmed.
8.7.5. 

















Cooperation .

AstraZeneca
shall,
and
shall
cause
its
Affiliates
to,
assist
and
cooperate
with
Insmed,
as
Insmed
mayreasonably
request
from
time
to
time,
in
connection
with
its
activities
set
forth
in
this
Section,
including
where
necessary,
furnishing
a
power
of
attorney
solely
forsuch
purpose
or
joining
in,
or
being
named
as
a
necessary
party
to,
such
action,
providing
access
to
relevant
documents
and
other
evidence
and
making
itsemployees
available
at
reasonable
business
hours;
provided that
Insmed
shall
reimburse
AstraZeneca
for
its
and
its
Affiliates’
reasonable
and
verifiable
costs
andexpenses
incurred
in
connection
therewith.
8.8. 


























Corporate Names. 

Neither
Party
shall,
nor
shall
either
Party
permit
their
respective
Affiliates
(and
for
Insmed,
its
and
its
Affiliates’respective
Sublicensees)
to,
(i)
use
in
their
respective
businesses,
any
Trademark
that
is
confusingly
similar
to,
misleading
or
deceptive
with
respect
to
or
thatdilutes
any
(or
any
part)
of
the
Corporate
Names,
(ii)
do
any
act
that
endangers,
destroys
or
similarly
affects,
in
any
material
respect,
the
value
of
the
goodwillpertaining
to
the
Corporate
Names
or
(iii)
attack,
dispute
or
contest
the
validity
of
or
ownership
of
the
Corporate
Names
anywhere
in
the
Territory
or
anyregistrations
issued
or
issuing
with
respect
thereto
or
any
pending
registration
thereof.

Each
Party
agrees,
and
shall
cause
their
respective
Affiliates
(and
forInsmed,
its
and
its
Affiliates’
respective
Sublicensees),
to
conform
(x)
to
the
customary
industry
standards
for
the
protection
of
the
Trademarks
and
to
suchtrademark
usage
guidelines
as
the
Parties
may
furnish
from
time
to
time
with
respect
to
the
use
of
the
Corporate
Names
and
(y)
to
adhere
to
and
maintain
thehighest
quality
standards
of
AstraZeneca
with
respect
to
goods
sold
and
services
provided
under
the
Corporate
Names.
***
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.
49
ARTICLE 9 CONFIDENTIALITY AND NON-DISCLOSURE
9.1. 


























Confidentiality Obligations. 

At
all
times
during
the
Term
and
for
a
period
of
[***]
following
termination
or
expiration
hereof
in
itsentirety,
each
Party
shall
and
shall
cause
its
officers,
directors,
employees
and
agents
to,
keep
confidential
and
not
publish
or
otherwise
disclose
to
a
Third
Partyand
not
use,
directly
or
indirectly,
for
any
purpose,
any
Confidential
Information
furnished
or
otherwise
made
known
to
it,
directly
or
indirectly,
by
the
other
Party,except
to
the
extent
such
disclosure
or
use
is
expressly
permitted
by
the
terms
of
this
Agreement.

“
Confidential Information ”
means
any
technical,
business
orother
information
provided
by
or
on
behalf
of
one
Party
to
the
other
Party,
including
information
relating
to
the
terms
of
this
Agreement
(subject
to
Section
9.4
andSection
10.5.7),
information
relating
to
the
Licensed
Compound
or
any
Licensed
Product
(including
the
Regulatory
Documentation),
any
Development
orCommercialization
of
the
Licensed
Compound
or
any
Licensed
Product,
any
know-how
with
respect
thereto
developed
by
or
on
behalf
of
the
disclosing
Party
or
itsAffiliates
(including
Insmed
Know-How
and
AstraZeneca
Know-How,
as
applicable)
or
the
scientific,
regulatory
or
business
affairs
or
other
activities
of
eitherParty.

Notwithstanding
the
foregoing,
Joint
Know-How
and
the
terms
of
this
Agreement
shall
be
deemed
to
be
the
Confidential
Information
of
both
Parties
andboth
Parties
shall
be
deemed
to
be
the
receiving
Party
and
the
disclosing
Party
with
respect
thereto.

Notwithstanding
the
foregoing,
the
confidentiality
and
non-useobligations
under
this
Section
9.1
with
respect
to
any
Confidential
Information
shall
not
include
any
information
that:
9.1.1. 

















is
or
hereafter
becomes
part
of
the
public
domain
by
public
use,
publication,
general
knowledge
or
the
like
through
no
breachof
this
Agreement
by
the
receiving
Party;
9.1.2. 

















can
be
demonstrated
by
bona fide written
documentation
or
other
competent
proof
to
have
been
in
the
receiving
Party’spossession
prior
to
disclosure
by
the
disclosing
Party
without
any
obligation
of
confidentiality
with
respect
to
such
information;
provided that
the
foregoingexception
shall
not
apply
with
respect
to
Joint
Know-How;
9.1.3. 

















is
subsequently
received
by
the
receiving
Party
from
a
Third
Party
who
is
not
bound
by
any
obligation
of
confidentiality
withrespect
to
such
information;
9.1.4. 

















has
been
published
by
a
Third
Party
or
otherwise
enters
the
public
domain
through
no
fault
of
the
receiving
Party
in
breach
ofthis
Agreement;
or
9.1.5. 

















can
be
demonstrated
by
bona fide written
documentation
or
other
competent
evidence
to
have
been
independently
developedby
or
for
the
receiving
Party
without
reference
to
the
disclosing
Party’s
Confidential
Information;
provided that
the
foregoing
exception
shall
not
apply
with
respectto
Joint
Know-How.
***
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.
50
Specific
aspects
or
details
of
Confidential
Information
shall
not
be
deemed
to
be
within
the
public
domain
or
in
the
possession
of
the
receiving
Party
merelybecause
the
Confidential
Information
is
embraced
by
more
general
information
in
the
public
domain
or
in
the
possession
of
the
receiving
Party.

Further,
anycombination
of
Confidential
Information
shall
not
be
considered
in
the
public
domain
or
in
the
possession
of
the
receiving
Party
merely
because
individualelements
of
such
Confidential
Information
are
in
the
public
domain
or
in
the
possession
of
the
receiving
Party
unless
the
combination
and
its
principles
are
in
thepublic
domain
or
in
the
possession
of
the
receiving
Party.
9.2. 


























Permitted Disclosures.  Each
Party
may
disclose
Confidential
Information
to
the
extent
that
such
disclosure
is:
9.2.1. 

















made
in
response
to
a
valid
order
of
a
court
of
competent
jurisdiction
or
other
supra-national,
federal,
national,
regional,
state,provincial
and
local
governmental
or
regulatory
body
of
competent
jurisdiction
or,
if
in
the
reasonable
opinion
of
the
receiving
Party’s
legal
counsel,
suchdisclosure
is
otherwise
required
by
law,
including
by
reason
of
filing
with
securities
regulators;
provided, however ,
that
the
receiving
Party
shall
first
have
givennotice
to
the
disclosing
Party
and
given
the
disclosing
Party
a
reasonable
opportunity
to
quash
such
order
or
to
obtain
a
protective
order
or
confidential
treatmentrequiring
that
the
Confidential
Information
and
documents
that
are
the
subject
of
such
order
be
held
in
confidence
by
such
court
or
agency
or,
if
disclosed,
be
usedonly
for
the
purposes
for
which
the
order
was
issued;
and
provided, further ,
that
the
Confidential
Information
disclosed
in
response
to
such
court
or
governmentalorder
shall
be
limited
to
that
information
which
is
legally
required
to
be
disclosed
in
response
to
such
court
or
governmental
order;
9.2.2. 

















made
by
or
on
behalf
of
the
receiving
Party
to
the
Regulatory
Authorities
as
required
in
connection
with
any
filing,
applicationor
request
for
Regulatory
Approval;
provided, however ,
that
reasonable
measures
shall
be
taken
to
assure
confidential
treatment
of
such
information
to
the
extentpracticable
and
consistent
with
Applicable
Law;
9.2.3. 

















made
by
or
on
behalf
of
the
receiving
Party
to
a
patent
authority
as
may
be
reasonably
necessary
or
useful
for
purposes
ofobtaining
or
enforcing
a
Patent;
provided, however ,
that
reasonable
measures
shall
be
taken
to
assure
confidential
treatment
of
such
information,
to
the
extent
suchprotection
is
available;
or
9.2.4. 

















made
by
or
on
behalf
of
the
receiving
Party
to
potential
or
actual
investors,
acquirers,
licensees
or
sublicensees
as
may
benecessary
in
connection
with
their
evaluation
of
such
potential
or
actual
investment,
acquisition,
license
or
sublicense;
provided ,
however ,
that
such
persons
shallbe
subject
to
obligations
of
confidentiality
and
non-use
with
respect
to
such
Confidential
Information
substantially
similar
to
the
obligations
of
confidentiality
andnon-use
of
the
receiving
Party
pursuant
to
this
Article
9
(with
a
duration
of
confidentiality
and
non-use
obligations
as
appropriate
that
is
no
less
than
[***]
from
thedate
of
disclosure);
***
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.
51
provided, further ,
that
if
either
Party
seeks
to
disclose
the
terms
of
this
Agreement
to
potential
investors,
acquirers,
licensees
or
sublicensees,
the
Party
seeking
todisclose
this
Agreement
must
obtain
the
other
Party’s
prior
written
consent
before
disclosing
this
Agreement
(such
consent
not
to
be
unreasonably
withheld,delayed
or
conditioned).
9.3. 


























Use of Name. 

Except
as
expressly
provided
herein,
neither
Party
shall
mention
or
otherwise
use
the
name,
logo
or
Trademark
of
theother
Party
or
any
of
its
Affiliates
or
any
of
its
or
their
(sub)licensees
(or
Sublicensees)
(or
any
abbreviation
or
adaptation
thereof)
in
any
publication,
press
release,marketing
and
promotional
material
or
other
form
of
publicity
without
the
prior
written
approval
of
such
other
Party
in
each
instance.

The
restrictions
imposed
bythis
Section
9.3
shall
not
prohibit
(i)
either
Party
from
making
any
disclosure
identifying
the
other
Party
to
the
extent
required
in
connection
with
its
exercise
of
itsrights
or
obligations
under
this
Agreement
and
(ii)
either
Party
from
making
any
disclosure
identifying
the
other
Party
that
is
required
by
Applicable
Law
or
therules
of
a
stock
exchange
on
which
the
securities
of
the
disclosing
Party
are
listed
(or
to
which
an
application
for
listing
has
been
submitted).
9.4. 


























Public Announcements. The
Parties
have
agreed
upon
the
content
of
a
press
release
which
shall
be
issued
by
Insmed
substantially
inthe
form
attached
hereto
as
Schedule
9.4
,
the
release
of
which
the
Parties
shall
coordinate
in
order
to
accomplish
such
release
promptly
after
execution
of
thisAgreement.

Neither
Party
shall
issue
any
other
public
announcement,
press
release
or
other
public
disclosure
regarding
this
Agreement
or
its
subject
matterwithout
the
other
Party’s
prior
written
consent,
such
consent
not
to
be
unreasonably
conditioned,
withheld
or
delayed,
except
that
such
consent
shall
not
be
requiredfor
any
such
public
announcement,
press
release
or
other
disclosure
that
is
(i)
in
the
opinion
of
the
disclosing
Party’s
counsel,
required
by
Applicable
Law
or
madepursuant
to
any
rules
or
regulations
of
the
United
States
Securities
Exchange
Commission
or
any
securities
exchange
on
which
the
securities
of
the
disclosing
Partyor
any
of
its
Affiliates
are
listed
or
traded
(or
to
which
an
application
for
listing
has
been
submitted),
or
(ii)
issued
in
connection
with
routine
or
required
filingsmade
pursuant
to
any
rules
or
regulations
of
the
United
States
Securities
Exchange
Commission
or
any
securities
exchange
on
which
the
securities
of
the
disclosingParty
or
any
of
its
Affiliates
are
listed
or
traded
(or
to
which
an
application
for
listing
has
been
submitted)
(each
of
(i)
and
(ii),
a
“
Required Disclosure ”).

EachParty
shall
submit
any
proposed
disclosure
in
writing
to
the
other
Party
as
far
in
advance
as
reasonably
practicable
(and
in
no
event
less
than
[***]
prior
to
theanticipated
date
of
disclosure)
so
as
to
provide
a
reasonable
opportunity
to
comment
thereon,
except
that
neither
Party
shall
have
such
opportunity
to
comment
onany
Required
Disclosure
of
the
other
Party.

Neither
Party
shall
be
required
to
seek
the
permission
of
the
other
Party
to
repeat
any
information
regarding
the
termsof
this
Agreement
or
any
amendment
hereto
that
has
already
been
publicly
disclosed
by
such
Party
or
by
the
other
Party,
in
accordance
with
this
Section
9.4;provided that
such
information
remains
accurate
as
of
such
time
and
provided
the
frequency
and
form
of
such
disclosure
are
reasonable.***
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.
52
9.5. 


























Publications.
9.5.1. 

















The
Parties
recognize
the
desirability
of
publishing
and
publicly
disclosing
the
results
of
and
information
regarding,
activitiesunder
this
Agreement.

Accordingly,
each
Party
shall
be
free
to
publicly
disclose
the
results
of
and
information
regarding,
its
activities
under
this
Agreement,subject
to
prior
review
by
the
other
Party
of
any
disclosure
of
Confidential
Information
for
issues
of
patentability
and
protection
of
such
Confidential
Information,in
a
manner
consistent
with
Applicable
Law
and
industry
practices,
as
provided
in
this
Section
9.5.

Accordingly,
prior
to
publishing
or
disclosing
any
ConfidentialInformation,
the
publishing
Party
shall
provide
the
non-publishing
Party
with
drafts
of
proposed
abstracts,
manuscripts
or
summaries
of
presentations
that
coversuch
Confidential
Information.

The
non-publishing
Party
shall
respond
promptly
through
its
designated
representative
and
in
any
event
no
later
than
[***]
afterreceipt
of
such
proposed
publication
or
presentation
or
such
shorter
period
as
may
be
required
by
the
publication
or
presentation.

The
publishing
Party
agrees
toallow
a
reasonable
period
(not
to
exceed
[***])
to
permit
filings
for
patent
protection
and
to
otherwise
address
issues
of
Confidential
Information
or
relatedcompetitive
harm
to
the
reasonable
satisfaction
of
the
non-publishing
Party.

In
addition,
the
publishing
Party
shall
give
due
regard
to
comments
furnished
by
thenon-publishing
Party
and
such
comments
shall
not
be
unreasonably
rejected,
provided that
the
publishing
Party
retains
ultimate
discretion
to
determine
whether
andhow
to
incorporate
any
such
comments.
9.5.2. 

















Insmed
acknowledges
that,
as
of
the
Effective
Date,
AstraZeneca
has
certain
publications
or
presentations
relating
to
theAstraZeneca
Patents
and
the
AstraZeneca
Know-How
currently
under
review
pending
publication
and
currently
planned
for
publication
or
presentation,
as
morefully
described
on
Schedule
9.5.2
attached
hereto.

AstraZeneca
shall
have
the
right
to
publish
such
publications
and
make
such
presentations
without
Insmed’sprior
written
consent,
provided that
any
material
change
to
such
pending
or
planned
publications
or
presentations
shall
be
provided
to
Insmed
for
review
andcomment
in
accordance
with
the
provisions
of
Section
9.5.1.
9.6. 


























Return of Confidential Information. 

Upon
the
effective
date
of
the
expiration
or
termination
of
this
Agreement
for
any
reason,either
Party
may
request
in
writing
and
the
non-requesting
Party
shall
either,
with
respect
to
Confidential
Information
to
which
such
non-requesting
Party
does
notretain
rights
under
the
surviving
provisions
of
this
Agreement,
at
the
requesting
Party’s
election,
(i)
promptly
destroy
all
copies
of
such
Confidential
Information
inthe
possession
or
control
of
the
non-requesting
Party
and
confirm
such
destruction
in
writing
to
the
requesting
Party
or
(ii)
promptly
deliver
to
the
requesting
Party,at
the
non-requesting
Party’s
sole
cost
and
expense,
all
copies
of
such
Confidential
Information
in
the
possession
or
control
of
the
non-requesting
Party.
Notwithstanding
the
foregoing,
the
non-requesting
Party
shall
be
permitted
to
retain
such
Confidential
Information
(x)
to
the
extent
necessary
or
useful
for
purposesof
performing
any
continuing
obligations
or
exercising
any
ongoing
rights
hereunder
and,
in
any
***
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.
53
event,
a
single
copy
of
such
Confidential
Information
for
archival
purposes
and
(y)
any
computer
records
or
files
containing
such
Confidential
Information
thathave
been
created
solely
by
such
non-requesting
Party’s
automatic
archiving
and
back-up
procedures,
to
the
extent
created
and
retained
in
a
manner
consistent
withsuch
non-requesting
Party’s
standard
archiving
and
back-up
procedures,
but
not
for
any
other
uses
or
purposes.

All
Confidential
Information
shall
continue
to
besubject
to
the
terms
of
this
Agreement
for
the
period
set
forth
in
Section
9.1.
9.7. 


























Privileged Communications.
9.7.1. 

















In
furtherance
of
this
Agreement,
it
is
expected
that
the
Parties
may,
from
time
to
time,
disclose
to
one
anothercommunications
which
may
be
privileged,
protected,
or
otherwise
confidential
or
may
constitute
attorney
work
product,
including
opinions,
memoranda,
letters
andother
written,
electronic
and
verbal
communications,
related
to
the
subject
matter
of
this
Agreement
(“
Common Interest Information ”).

Common
InterestInformation
may
be
disclosed
orally
or
in
writing;
may
include
legal
and
factual
research
and
analysis,
mental
impressions,
strategy,
interview
memoranda,
drafts,reports,
databases,
or
records
of
meetings
in
person,
by
telephone
or
by
any
other
forms
of
communication
and
other
relevant
information.

The
Parties
intend
thatno
claim
of
work
product,
opinion
work
product,
attorney-client
privilege,
or
other
privilege
shall
be
waived
by
reason
of
the
disclosure
of
Common
InterestInformation
to,
by
or
between
(i)
representatives
and
administrative
staff
for
the
Parties
and
their
respective
Affiliates;
(ii)
attorneys,
legal
advisors,
paralegals,legal
secretaries
and
other
legal
staff
employed
by
the
Parties
and
their
respective
Affiliates;
(iii)
outside
counsel
and
their
partners,
associates
and
staff
retained
toadvise
or
represent
a
Party
with
respect
to
this
Agreement;
(iv)
other
employees
and
agents
of
the
Parties
and
their
respective
Affiliates
acting
under
the
control
anddirection
of
individuals
described
in
Paragraphs
(ii)
and
(iii)
above
who
have
need-to-know
for
the
purposes
described
in
this
Agreement
and
agree
to
be
bound
bythis
Agreement;
and
(v)
individuals
engaged
by
counsel
to
assist
in
the
performance
of
this
Agreement
who
shall
be
required
to
be
bound
in
writing
to
theconfidentiality
obligations
of
this
Agreement.

Disclosures
of
Common
Interest
Information
are
made
with
the
understanding
that
they
shall
remain
confidential
inaccordance
with
this
Article
9
and
that
they
are
made
in
connection
with
the
common
legal
interests
existing
between
AstraZeneca
and
Insmed,
including
thecommon
legal
interests
of
avoiding
infringement
of
any
valid,
enforceable
patents
of
Third
Parties
and
maintaining
the
validity
of
the
AstraZeneca
Patents,
InsmedPatents
and
Joint
Patents.

By
offering
or
accepting
any
Common
Interest
Information,
each
of
the
Parties
and
each
of
their
respective
counsel
represents
that
thecommon
legal
interests
of
the
Parties
are
continuing,
that
the
offering
and
accepting
of
such
Common
Interest
Information
is
covered
by
this
Agreement,
and
thatall
applicable
privileges
and
protections
remain
in
effect.

For
clarity,
no
provision
of
this
Agreement
shall
be
construed
to
defeat
the
attorney-client
privilegebetween
any
Party
and
its
counsel.
9.7.2. 

















In
the
event
of
any
litigation
(or
potential
litigation)
with
a
Third
Party
related
to
this
Agreement
or
the
subject
matter
hereof,the
Parties
shall,
upon
either
Party’s
request,
enter
into
a
reasonable
and
customary
joint
defense
agreement.

In
any
event,
each
Party
shall
consult
in
a
timelymanner
with
the
other
Party
before
engaging
in
any
conduct
(
e.g. ,
producing
information
or
documents)
in
connection
with
litigation
or
other
proceedings
thatcould
conceivably
implicate
privileges
maintained
by
the
other
Party.

Notwithstanding
anything
54
contained
in
this
Section
9.7,
nothing
in
this
Agreement
shall
prejudice
a
Party’s
ability
to
take
discovery
of
the
other
Party
in
disputes
between
them
relating
to
theAgreement
and
no
information
otherwise
admissible
or
discoverable
by
a
Party
shall
become
inadmissible
or
immune
from
discovery
solely
by
this
Section
9.7.
ARTICLE 10 REPRESENTATIONS AND WARRANTIES
10.1. 






Mutual Representations and Warranties. 

AstraZeneca
and
Insmed
each
represents
and
warrants
to
the
other,
as
of
the
EffectiveDate,
and
covenants,
that:
10.1.1. 



It
is
a
corporation
duly
organized,
validly
existing
and
in
good
standing
under
the
laws
of
the
jurisdiction
of
its
organizationand
has
all
requisite
power
and
authority,
corporate
or
otherwise,
to
execute,
deliver
and
perform
this
Agreement;
10.1.2. 



The
execution
and
delivery
of
this
Agreement
and
the
performance
by
it
of
the
transactions
contemplated
hereby
have
beenduly
authorized
by
all
necessary
corporate
action
and
do
not
violate:

(i)
such
Party’s
charter
documents,
bylaws
or
other
organizational
documents;
(ii)
in
anymaterial
respect,
any
agreement,
instrument
or
contractual
obligation
to
which
such
Party
is
bound;
(iii)
any
requirement
of
any
Applicable
Law;
or
(iv)
any
order,writ,
judgment,
injunction,
decree,
determination
or
award
of
any
court
or
governmental
agency
presently
in
effect
applicable
to
such
Party;
10.1.3. 



This
Agreement
is
a
legal,
valid
and
binding
obligation
of
such
Party
enforceable
against
it
in
accordance
with
its
terms
andconditions,
subject
to
the
effects
of
bankruptcy,
insolvency
or
other
laws
of
general
application
affecting
the
enforcement
of
creditor
rights,
judicial
principlesaffecting
the
availability
of
specific
performance
and
general
principles
of
equity
(whether
enforceability
is
considered
a
proceeding
at
law
or
equity);
10.1.4. 



It
is
not
under
any
obligation,
contractual
or
otherwise,
to
any
Person
that
conflicts
with
or
is
inconsistent
in
any
materialrespect
with
the
terms
of
this
Agreement
or
that
would
impede
the
diligent
and
complete
fulfillment
of
its
obligations
hereunder;
and
10.1.5. 



Neither
it
nor
any
of
its
Affiliates
has
been
debarred
or
is
subject
to
debarment
and
neither
it
nor
any
of
its
Affiliates
will
usein
any
capacity,
in
connection
with
the
services
to
be
performed
under
this
Agreement,
any
Person
who
has
been
debarred
pursuant
to
Section
306
of
the
FFDCA
orwho
is
the
subject
of
a
conviction
described
in
such
section.

It
will
inform
the
other
Party
in
writing
promptly
if
it
or
any
such
Person
who
is
performing
serviceshereunder
is
debarred
or
is
the
subject
of
a
conviction
described
in
Section
306
or
if
any
action,
suit,
claim,
investigation
or
legal
or
administrative
proceeding
ispending
or,
to
the
best
of
its
or
its
Affiliates’
Knowledge,
is
threatened,
relating
to
the
debarment
or
conviction
of
it
or
any
such
Person
performing
serviceshereunder.
10.2. 






Additional Representations and Warranties of AstraZeneca. 

AstraZeneca
further
represents
and
warrants
to
Insmed,
as
of
theEffective
Date,
that:

(i)
AstraZeneca
Controls
the
Existing
Patents
as
of
the
Effective
Date
and
has
the
right
to
grant
55
the
licenses
and
sublicenses
specified
herein;
and
(ii)
AstraZeneca
has
not
received
any
written
claim
alleging,
and
does
not
have
Knowledge
of
any
fact
orcircumstance
indicating
that
the
Existing
Patents
or
the
AstraZeneca
Know-How
are
invalid
or
unenforceable
as
they
exist
as
of
the
Effective
Date,
or
that
theDevelopment
or
Commercialization
of
the
Licensed
Products
as
contemplated
herein
infringes
any
Patent
owned
by
any
Third
Party.
10.3. 






DISCLAIMER OF WARRANTIES. 

EXCEPT
FOR
THE
EXPRESS
WARRANTIES
SET
FORTH
HEREIN,
NEITHER
PARTYMAKES
ANY
REPRESENTATIONS
OR
GRANTS
ANY
WARRANTIES,
EXPRESS
OR
IMPLIED,
EITHER
IN
FACT
OR
BY
OPERATION
OF
LAW,
BYSTATUTE
OR
OTHERWISE
AND
EACH
PARTY
SPECIFICALLY
DISCLAIMS
ANY
OTHER
WARRANTIES,
WHETHER
WRITTEN
OR
ORAL
OREXPRESS
OR
IMPLIED,
INCLUDING
ANY
WARRANTY
OF
QUALITY,
MERCHANTABILITY
OR
FITNESS
FOR
A
PARTICULAR
USE
OR
PURPOSEOR
ANY
WARRANTY
AS
TO
THE
VALIDITY
OF
ANY
PATENTS
OR
THE
NON-INFRINGEMENT
OF
ANY
INTELLECTUAL
PROPERTY
RIGHTS
OFTHIRD
PARTIES.
10.4. 






ADDITIONAL WAIVER. 

INSMED
AGREES
THAT:

(I)
THE
ASTRAZENECA
PATENTS
ARE
LICENSED
“AS
IS,”
“WITHALL
FAULTS,”
AND
“WITH
ALL
DEFECTS,”
AND
INSMED
EXPRESSLY
WAIVES
ALL
RIGHTS
TO
MAKE
ANY
CLAIM
WHATSOEVER
AGAINSTASTRAZENECA
FOR
MISREPRESENTATION
OR
FOR
BREACH
OF
PROMISE,
GUARANTEE
OR
WARRANTY
OF
ANY
KIND
RELATING
TO
THEASTRAZENECA
PATENTS;
(II)
INSMED
AGREES
THAT
ASTRAZENECA
WILL
HAVE
NO
LIABILITY
TO
INSMED
FOR
ANY
ACT
OR
OMISSION
INTHE
PREPARATION,
FILING,
PROSECUTION,
MAINTENANCE,
ENFORCEMENT,
DEFENCE
OR
OTHER
HANDLING
OF
THE
ASTRAZENECAPATENTS;
AND
(III)
INSMED
IS
SOLELY
RESPONSIBLE
FOR
DETERMINING
WHETHER
THE
ASTRAZENECA
PATENTS
HAVE
APPLICABILITYOR
UTILITY
IN
INSMED’S
CONTEMPLATED
EXPLOITATION
OF
THE
LICENSED
PRODUCTS
AND
INSMED
ASSUMES
ALL
RISK
AND
LIABILITYIN
CONNECTION
WITH
SUCH
DETERMINATION.
10.5. 






Anti-Bribery and Anti-Corruption Compliance.
10.5.1. 



Each
Party
agrees,
on
behalf
of
itself
and
its
Affiliates,
and
its
and
its
Affiliates’
respective
officers,
directors
and
employees(the
“
Representatives ”)
that
for
the
performance
of
its
obligations
hereunder:
(i)





Each
Party
and
its
respective
Representatives
shall
not
directly
or
indirectly
pay,
offer
or
promise
to
pay
or
authorizethe
payment
of
any
money
or
give,
offer
or
promise
to
give
or
authorize
the
giving
of
anything
else
of
value,
to:

(a)
any
Government
Official
in
order
toimproperly
influence
official
action;
(b)
any
Person
(whether
or
not
a
Government
Official)
(1)
to
improperly
influence
such
Person
to
act
in
breach
of
a
duty
ofgood
faith,
impartiality
or
trust
(“acting
improperly”),
(2)
to
reward
such
Person
for
acting
improperly
or
(3)
where
such
Person
would
be
acting
improperly
byreceiving
the
money
or
other
thing
of
value;
(c)
any
Person
(whether
or
not
a
Government
Official)
while
knowing
or
having
reason
to
know
that
all
or
any
portionof
the
money
or
other
thing
of
value
will
be
paid,
offered,
promised
or
given
to
or
will
otherwise
benefit,
a
Government
Official
in
order
to
improperly
influenceofficial
action
for
or
against
either
Party
in
connection
with
the
matters
that
56
are
the
subject
of
this
Agreement;
or
(d)
any
Person
(whether
or
not
a
Government
Official)
to
reward
that
Person
for
acting
improperly
or
to
induce
that
Person
toact
improperly.
(ii)




Each
Party
and
its
respective
Representatives
shall
not,
directly
or
indirectly,
solicit,
receive
or
agree
to
accept
anypayment
of
money
or
anything
else
of
value
in
violation
of
the
Anti-Corruption
Laws.
10.5.2. 



In
performance
of
its
obligations
hereunder,
each
Party
and
its
respective
Representatives
shall
comply
with
the
Anti-Corruption
Laws
and
shall
not
take
any
action
that
will,
or
would
reasonably
be
expected
to,
cause
AstraZeneca
or
its
Affiliates
or
Insmed
or
its
Affiliates,
as
thecase
may
be,
to
be
in
violation
of
any
such
laws.
10.5.3. 



Each
Party,
on
behalf
of
itself
and
its
respective
Representatives,
represents
and
warrants
to
the
other
Party
that:
(i)
allinformation
provided
by
one
Party
to
the
other
Party
in
any
anti-bribery
and
anti-corruption
due
diligence
checklist
or
similar
due
diligence
process
is
true,complete
and
correct
(excluding
any
immaterial
aspects)
at
the
date
it
was
provided
and
that
any
material
changes
in
circumstances
relevant
to
the
answersprovided
in
such
exercise
shall
be
immediately
disclosed
to
the
other
Party;
and
(ii)
to
the
best
of
each
Party’s
and
its
respective
Affiliates’
Knowledge,
noRepresentative
that
will
participate
or
support
such
Party’s
performance
of
its
obligations
hereunder
has,
directly
or
indirectly,
(a)
paid,
offered
or
promised
to
payor
authorized
the
payment
of
any
money,
(b)
given,
offered
or
promised
to
give
or
authorized
the
giving
of
anything
else
of
value
or
(c)
solicited,
received
oragreed
to
accept
any
payment
of
money
or
anything
else
of
value,
in
each
case
((a),
(b)
and
(c)),
in
violation
of
the
Anti-Corruption
Laws
during
the
three
(3)
yearspreceding
the
date
of
this
Agreement.
10.5.4. 



Each
Party
shall
convey
to
each
of
its
respective
agents,
representatives,
consultants
and
subcontractors
which
performservices
in
connection
with
the
subject
matter
of
this
Agreement,
and
which
interact
or
have
a
reasonable
expectation
of
interacting
with
Government
Officials
onbehalf
of
the
respective
Party
in
connection
with
the
subject
matter
of
this
Agreement
(each,
a
“
Third Party Representative ”),
in
a
manner
consistent
with
suchParty’s
Anti-Corruption
Rules
and
Policies,
the
importance
of
such
Third
Party
Representative’s
compliance
with
Anti-Corruption
Laws.

Each
Party
shall
usediligent
efforts
to
promote
compliance
with
Anti-Corruption
Laws
by
such
Third
Party
Representatives.
10.5.5. 



Each
Party
shall
promptly
provide
the
other
Party
with
written
notice
of
the
following
events:

(i)
upon
becoming
aware
ofany
breach
or
violation
by
such
Party
or
other
such
Party’s
Representative
of
any
representation,
warranty
or
undertaking
set
forth
in
Sections
10.5.1
through
10.5.3above;
or
(ii)
upon
receiving
a
formal
notification
that
such
Party
is
the
target
of
a
formal
investigation
by
a
governmental
authority
for
violation
of
any
Anti-Corruption
Law
in
connection
with
the
subject
matter
of
this
Agreement
or
upon
receipt
of
information
from
any
of
such
Party’s
Representatives
or
Third
PartyRepresentatives
connected
with
this
Agreement
that
any
of
them
is
the
target
of
a
formal
investigation
by
a
governmental
authority
for
a
violation
of
any
Anti-Corruption
Law.

Any
notice
provided
under
this
Section
10.5.5
shall
be
deemed
the
Confidential
Information
of
the
Party
providing
such
notice.
57
10.5.6. 



For
the
term
of
this
Agreement,
each
Party
shall,
for
the
purpose
of
auditing
and
monitoring
the
performance
of
itscompliance
with
this
Section
10.5,
permit
the
other
Party
and
any
of
its
auditors
and
any
governmental
authority
to
have
reasonable
access,
during
the
auditedParty’s
normal
business
hours,
to
any
premises
of
the
audited
Party
or
such
Party’s
Representatives
used
in
connection
with
this
Agreement,
together
with
a
right
toaccess
personnel
and
records
that
are
reasonably
related
to
this
Section
10.5,
except
where
such
access
would
constitute
a
violation
of
Applicable
Law
(“
Audit ”);provided, however ,
that
in
no
event
shall
either
Party
exercise
its
right
to
Audit
as
provided
in
this
Section
10.5.6
more
than
[***].
(i)





To
the
extent
that
any
Audit
requires
access
and
review
of
any
commercially
or
strategically
sensitive
information
oragreements
of
the
audited
Party
or
such
Party’s
Representatives
relating
to
the
business
of
such
Party
or
such
Party’s
Representatives
(including
information
aboutprices
and
pricing
policies,
cost
structures
and
business
strategies)
such
activity
shall
be
carried
out
by
a
third
party
professional
advisor
appointed
by
the
auditingParty
and
such
professional
advisors
shall
only
report
back
to
the
auditing
Party
such
information
as
is
directly
relevant
to
informing
the
auditing
Party
on
theaudited
Party’s
compliance
with
the
particular
provisions
of
this
Agreement
or
the
agreement
being
audited.
(ii)




Each
Party
shall,
and
shall
use
best
efforts
to
cause
each
Party’s
respective
Representatives
to,
provide
allcooperation
and
assistance
during
normal
working
hours
as
reasonably
requested
by
the
auditing
Party
for
the
purposes
of
an
Audit.

The
auditing
Party
shall
causeany
such
auditor
to
enter
into
a
confidentiality
agreement
substantially
consistent
with
the
applicable
requirements
of
Article
9
hereof.

The
auditing
Party
shallinstruct
any
Third
Party
auditor
or
other
Person
given
access
in
respect
of
an
Audit
to
cause
the
minimum
amount
of
disruption
to
the
business
of
the
audited
Partyand
the
audited
Party’s
Representatives
and
to
comply
with
relevant
building
and
security
regulations.
(iii)



The
costs
and
fees
of
any
inspection
Audit
shall
be
paid
by
the
auditing
Party,
except
that
if
an
inspection
or
Auditreveals
any
non-immaterial
breach
or
violation
by
the
audited
Party
(including
through
any
other
Representative
of
the
audited
Party)
of
any
representation,warranty
or
undertaking
set
forth
in
Sections
10.5.1
through
10.5.3
above,
the
costs
of
such
inspection
or
Audit
shall
be
paid
by
the
audited
Party.

The
auditedParty
shall
bear
its
own
costs
of
rendering
assistance
to
the
Audit.
10.5.7. 



Each
Party
may
disclose
the
terms
of
this
Agreement
or
any
action
taken
under
this
Section
10.5
to
prevent
a
potentialviolation
or
continuing
violation
of
applicable
Anti-Corruption
Laws,
including
the
identity
of
the
other
Party
or
such
Party’s
Representatives
and
the
paymentterms,
to
any
governmental
authority
if
the
disclosing
Party
reasonably
determines,
upon
advice
of
counsel,
that
such
disclosure
is
necessary.
***
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.
58
10.5.8. 



Each
Party
represents
and
warrants
that
(i)
it
has
reviewed
its
respective
internal
programs
in
relation
to
the
Anti-CorruptionLaws
and
the
ability
of
each
Party’s
respective
Representatives
to
adhere
to
such
Party’s
own
Anti-Corruption
Rules
and
Policies
in
performance
of
its
obligationshereunder
in
advance
of
the
signing
of
this
Agreement
and
(ii)
each
Party
and
its
respective
Representatives
can
and
will
continue
to
comply
with
such
Anti-Corruption
Laws
and
such
Party’s
own
Anti-Corruption
Rules
and
Policies
in
performance
of
its
respective
obligations
hereunder.
ARTICLE 11 INDEMNITY
11.1. 






Indemnification of AstraZeneca. 

Insmed
shall
indemnify
AstraZeneca,
its
Affiliates,
its
or
their
(sub)licensees
and
its
and
theirrespective
directors,
officers,
employees
and
agents
and
defend
and
save
each
of
them
harmless,
from
and
against
any
and
all
losses,
damages,
liabilities,
costs
andexpenses
(including
reasonable
attorneys’
fees
and
expenses)
(collectively,
“
Losses ”)
incurred
in
connection
with
any
and
all
suits,
investigations,
claims
ordemands
of
Third
Parties
(collectively,
“
Third Party Claims ”)
arising
from,
relating
to,
or
occurring
as
a
result
of:

(i)
the
breach
by
Insmed
of
this
Agreement,including
the
enforcement
of
AstraZeneca’s
rights
under
this
Section
11.1;
(ii)
the
gross
negligence
or
willful
misconduct
on
the
part
of
Insmed
or
its
Affiliates
orits
or
their
Sublicensees
or
its
or
their
distributors
or
contractors
or
its
or
their
respective
directors,
officers,
employees
or
agents
in
performing
its
or
theirobligations
under
this
Agreement;
or
(iii)
the
Exploitation
by
Insmed
or
any
of
its
Affiliates
or
its
or
their
Sublicensees
or
its
or
their
distributors
or
contractors
ofany
Licensed
Product
or
the
Licensed
Compound
in
or
for
the
Territory,
except,
in
each
case
((i),
(ii)
and
(iii)),
for
those
Losses
for
which
AstraZeneca
has
anobligation
to
indemnify
Insmed
pursuant
to
Section
11.2
hereof,
as
to
which
Losses
each
Party
shall
indemnify
the
other
to
the
extent
of
their
respective
liability.
11.2. 






Indemnification of Insmed. 

AstraZeneca
shall
indemnify
Insmed,
its
Affiliates
and
their
respective
directors,
officers,
employeesand
agents
and
defend
and
save
each
of
them
harmless,
from
and
against
any
and
all
Losses
incurred
in
connection
with
any
and
all
Third
Party
Claims
arisingfrom,
relating
to,
or
occurring
as
a
result
of:

(i)
the
breach
by
AstraZeneca
of
this
Agreement,
including
the
enforcement
of
Insmed’s
rights
under
this
Section
11.2;(ii)
the
gross
negligence
or
willful
misconduct
on
the
part
of
AstraZeneca
or
its
Affiliates
or
its
or
their
sublicensees
or
its
or
their
distributors
or
contractors
or
itsor
their
respective
directors,
officers,
employees
or
agents
in
performing
its
obligations
under
this
Agreement;
or
(iii)
the
Exploitation
of
the
Licensed
Compoundor
Licensed
Products
in
or
for
the
Terminated
Territory,
except,
in
each
case
((i),
(ii)
and
(iii)),
for
those
Losses
for
which
Insmed
has
an
obligation
to
indemnifyAstraZeneca
pursuant
to
Section
11.1
hereof,
as
to
which
Losses
each
Party
shall
indemnify
the
other
to
the
extent
of
their
respective
liability
for
the
Losses.
11.3. 






Indemnification Procedures.
11.3.1. 



Notice of Claim. 

All
indemnification
claims
in
respect
of
a
Party,
its
Affiliates
or
its
or
their
(sub)licensees
or
theirrespective
directors,
officers,
employees
and
agents
shall
be
made
solely
by
such
Party
to
this
Agreement
(the
“
Indemnified Party ”).

The
59
Indemnified
Party
shall
give
the
indemnifying
Party
prompt
written
notice
(an
“
Indemnification Claim Notice ”)
of
any
Losses
or
discovery
of
fact
upon
whichsuch
indemnified
Party
intends
to
base
a
request
for
indemnification
under
this
Article
11,
but
in
no
event
shall
the
indemnifying
Party
be
liable
for
any
Losses
thatresult
from
any
delay
in
providing
such
notice.

Each
Indemnification
Claim
Notice
must
contain
a
description
of
the
claim
and
the
nature
and
amount
of
such
Loss(to
the
extent
that
the
nature
and
amount
of
such
Loss
is
known
at
such
time).

The
Indemnified
Party
shall
furnish
promptly
to
the
indemnifying
Party
copies
of
allpapers
and
official
documents
received
in
respect
of
any
Losses
and
Third
Party
Claims.
11.3.2. 



Control of Defense. 

The
indemnifying
Party
shall
have
the
right
to
assume
the
defense
of
any
Third
Party
Claim
by
givingwritten
notice
to
the
Indemnified
Party
within
[***]
after
the
indemnifying
Party’s
receipt
of
an
Indemnification
Claim
Notice.

The
assumption
of
the
defense
of
aThird
Party
Claim
by
the
indemnifying
Party
shall
not
be
construed
as
an
acknowledgment
that
the
indemnifying
Party
is
liable
to
indemnify
the
Indemnified
Partyin
respect
of
the
Third
Party
Claim,
nor
shall
it
constitute
a
waiver
by
the
indemnifying
Party
of
any
defenses
it
may
assert
against
the
Indemnified
Party’s
claim
forindemnification.

Upon
assuming
the
defense
of
a
Third
Party
Claim,
the
indemnifying
Party
may
appoint
as
lead
counsel
in
the
defense
of
the
Third
Party
Claimany
legal
counsel
selected
by
the
indemnifying
Party;
provided that
it
obtains
the
prior
written
consent
of
the
Indemnified
Party
(which
consent
shall
not
beunreasonably
withheld,
conditioned
or
delayed).

In
the
event
the
indemnifying
Party
assumes
the
defense
of
a
Third
Party
Claim,
the
Indemnified
Party
shallpromptly,
but
in
no
event
more
than
[***],
deliver
to
the
indemnifying
Party
all
original
notices
and
documents
(including
court
papers)
received
by
theIndemnified
Party
in
connection
with
the
Third
Party
Claim.

Should
the
indemnifying
Party
assume
the
defense
of
a
Third
Party
Claim,
except
as
provided
inSection
11.3.3,
the
indemnifying
Party
shall
not
be
liable
to
the
Indemnified
Party
for
any
legal
expenses
subsequently
incurred
by
such
Indemnified
Party
inconnection
with
the
analysis,
defense
or
settlement
of
the
Third
Party
Claim
unless
specifically
requested
in
writing
by
the
indemnifying
Party.

In
the
event
that
itis
ultimately
determined
that
the
indemnifying
Party
is
not
obligated
to
indemnify,
defend
or
hold
harmless
the
Indemnified
Party
from
and
against
the
Third
PartyClaim,
the
Indemnified
Party
shall
reimburse
the
indemnifying
Party
for
any
and
all
reasonable
and
verifiable
actual,
out-of-pocket
costs
and
expenses
(includingattorneys’
fees
and
costs
of
suit)
and
any
Losses
incurred
by
the
indemnifying
Party
in
accordance
with
this
Article
11
in
its
defense
of
the
Third
Party
Claim.
11.3.3. 



Right to Participate in Defense. 

Any
Indemnified
Party
shall
be
entitled
to
participate
in
the
defense
of
such
Third
PartyClaim
and
to
employ
counsel
of
its
choice
for
such
purpose;
provided, however ,
that
such
employment
shall
be
at
the
Indemnified
Party’s
sole
cost
and
expenseunless
(i)
the
employment
thereof
has
been
specifically
authorized
in
writing
by
the
indemnifying
Party
in
writing
(in
which
case,
the
defense
shall
be
controlled
asprovided
in
Section
11.3.2),
(ii)
the
indemnifying
Party
has
failed
to
assume
the
defense
and
***
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.
60
employ
counsel
in
accordance
with
Section
11.3.2
(in
which
case
the
Indemnified
Party
shall
control
the
defense)
or
(iii)
the
interests
of
the
indemnitee
and
theindemnifying
Party
with
respect
to
such
Third
Party
Claim
are
sufficiently
adverse
to
prohibit
the
representation
by
the
same
counsel
of
both
Parties
underApplicable
Law,
ethical
rules
or
equitable
principles
(in
which
case,
the
Indemnified
Party
shall
control
its
defense).
11.3.4. 



Settlement. 

With
respect
to
any
Losses
relating
solely
to
the
payment
of
money
damages
in
connection
with
a
Third
PartyClaim
and
that
shall
not
result
in
the
applicable
indemnitee(s)
becoming
subject
to
injunctive
or
other
relief
or
otherwise
adversely
affecting
the
business
of
theIndemnified
Party
in
any
manner
and
as
to
which
the
indemnifying
Party
shall
have
acknowledged
in
writing
the
obligation
to
indemnify
the
applicable
indemniteehereunder,
the
indemnifying
Party
shall
have
the
sole
right
to
consent
to
the
entry
of
any
judgment,
enter
into
any
settlement
or
otherwise
dispose
of
such
Loss,
onsuch
terms
as
the
indemnifying
Party,
in
its
sole
discretion,
shall
deem
appropriate.

With
respect
to
all
other
Losses
in
connection
with
Third
Party
Claims,
wherethe
indemnifying
Party
has
assumed
the
defense
of
the
Third
Party
Claim
in
accordance
with
Section
11.3.2,
the
indemnifying
Party
shall
have
authority
to
consentto
the
entry
of
any
judgment,
enter
into
any
settlement
or
otherwise
dispose
of
such
Loss;
provided it
obtains
the
prior
written
consent
of
the
Indemnified
Party(which
consent
shall
not
be
unreasonably
withheld,
conditioned
or
delayed).

If
the
indemnifying
Party
does
not
assume
and
conduct
the
defense
of
a
Third
PartyClaim
as
provided
above,
the
Indemnified
Party
may
defend
against
such
Third
Party
Claim;
provided that
the
Indemnified
Party
shall
not
settle
any
Third
PartyClaim
without
the
prior
written
consent
of
the
indemnifying
Party
(which
consent
shall
not
be
unreasonably
withheld,
conditioned
or
delayed).
11.3.5. 



Cooperation. 

Regardless
of
whether
the
indemnifying
Party
chooses
to
defend
or
prosecute
any
Third
Party
Claim,
theIndemnified
Party
shall,
and
shall
cause
each
indemnitee
to,
cooperate
in
the
defense
or
prosecution
thereof
and
furnish
such
records,
information
and
testimony,provide
such
witnesses
and
attend
such
conferences,
discovery
proceedings,
hearings,
trials
and
appeals
as
may
be
reasonably
requested
in
connection
therewith.
Such
cooperation
shall
include
access
during
normal
business
hours
afforded
to
the
indemnifying
Party
to,
and
reasonable
retention
by
the
Indemnified
Party
of,records
and
information
that
are
reasonably
relevant
to
such
Third
Party
Claim
and
making
Indemnified
Parties
and
other
employees
and
agents
available
on
amutually
convenient
basis
to
provide
additional
information
and
explanation
of
any
material
provided
hereunder
and
the
indemnifying
Party
shall
reimburse
theIndemnified
Party
for
all
its,
its
Affiliates’
and
its
and
their
(sub)licensees’
or
their
respective
directors’,
officers’,
employees’
and
agents’,
as
applicable,
reasonableand
verifiable
out-of-pocket
expenses
in
connection
therewith.
11.3.6. 



Expenses. 

Except
as
provided
above,
the
costs
and
expenses,
including
fees
and
disbursements
of
counsel,
incurred
by
theIndemnified
Party
and
its
Affiliates
and
its
and
their
(sub)licensees
and
their
respective
directors,
officers,
employees
and
agents,
as
applicable,
in
connection
withany
claim
shall
be
reimbursed
by
the
indemnifying
Party,
without
prejudice
to
the
indemnifying
Party’s
right
to
contest
the
Indemnified
Party’s
right
toindemnification
and
subject
to
refund
in
the
event
the
indemnifying
Party
is
ultimately
held
not
to
be
obligated
to
indemnify
the
Indemnified
Party.
61
11.4. 






Special, Indirect and Other Losses. 

EXCEPT
(i)
IN
THE
EVENT
THE
WILLFUL
MISCONDUCT
OR
FRAUD
OF
A
PARTY
OROF
A
PARTY’S
BREACH
OF
ITS
OBLIGATIONS
UNDER
ARTICLE
9,
(ii)
AS
PROVIDED
UNDER
SECTION
13.10,
(iii)
TO
THE
EXTENT
ANY
SUCHDAMAGES
ARE
REQUIRED
TO
BE
PAID
TO
A
THIRD
PARTY
AS
PART
OF
A
CLAIM
FOR
WHICH
A
PARTY
PROVIDES
INDEMNIFICATIONUNDER
THIS
ARTICLE
11,
NEITHER
PARTY
NOR
ANY
OF
ITS
AFFILIATES
OR
(SUB)LICENSEES
SHALL
BE
LIABLE
IN
CONTRACT,
TORT,NEGLIGENCE,
BREACH
OF
STATUTORY
DUTY
OR
OTHERWISE
FOR
ANY
SPECIAL
OR
PUNITIVE
DAMAGES
OR
FOR
LOSS
OF
PROFITSSUFFERED
BY
THE
OTHER
PARTY.
11.5. 






Insurance. 

Insmed
shall
have
and
maintain
such
types
and
amounts
of
insurance
covering
its
Exploitation
of
the
Licensed
Compoundand
Licensed
Products
as
is
(i)
normal
and
customary
in
the
pharmaceutical
industry
generally
for
parties
similarly
situated
and
(ii)
otherwise
required
byApplicable
Law.

Upon
request
by
AstraZeneca,
Insmed
shall
provide
to
AstraZeneca
evidence
of
its
insurance
coverage.
ARTICLE 12 TERM AND TERMINATION
12.1. 






Term and Expiration. 

This
Agreement
shall
commence
on
the
Effective
Date
and,
unless
earlier
terminated
in
accordance
herewith,shall
continue
in
force
and
effect
until
the
date
of
expiration
of
the
last
Royalty
Term
for
the
last
Licensed
Product
(such
period,
the
“
Term ”).

Following
theexpiration
of
the
Royalty
Term
for
a
Licensed
Product
in
a
country,
the
grants
in
Section
2.1
shall
become
non-exclusive,
fully-paid,
royalty-free,
perpetual
andirrevocable
for
such
Licensed
Product
in
such
country,
subject
to
any
agreement
entered
into
between
the
Parties
pursuant
to
Section
2.5
or
Section
5.2.3.

Forclarity,
upon
the
expiration
of
the
Term,
the
grants
in
Section
2.1
shall
become
non-exclusive,
fully-paid,
royalty-free,
perpetual
and
irrevocable
in
their
entirety,subject
to
any
agreement
entered
into
between
the
Parties
pursuant
to
Section
2.5
or
Section
5.2.3.
12.2. 






Termination.
12.2.1. 



Material Breach. 

In
the
event
that
either
Party
(the
“
Breaching Party ”)
shall
be
in
material
breach
in
the
performance
ofany
of
its
obligations
under
this
Agreement,
in
addition
to
any
other
right
and
remedy
the
other
Party
(the
“
Non-Breaching Party ”)
may
have,
the
Non-BreachingParty
may
terminate
this
Agreement
by
providing
[***]
(the
“
Notice Period ”)
prior
written
notice
(the
“
Termination Notice ”)
to
the
Breaching
Party
andspecifying
the
breach
and
its
claim
of
right
to
terminate;
provided that
(i)
the
termination
shall
not
become
effective
at
the
end
of
the
Notice
Period
if
the
BreachingParty
cures
the
breach
specified
in
the
Termination
Notice
during
the
Notice
Period
(or,
if
such
default
cannot
be
cured
within
the
Notice
Period,
if
the
BreachingParty
commences
actions
to
cure
such
breach
within
the
Notice
Period
and
thereafter
diligently
continues
such
actions)
and
(ii)
with
respect
to
an
***
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.
62
uncured
material
breach
consisting
of
Insmed’s
diligence
obligations
under
Section
4.1.1
or
Section
4.3.1,
as
applicable,
with
respect
to
a
country
in
the
applicableMajor
Market,
AstraZeneca
shall
have
the
right
to
terminate
this
Agreement,
in
its
sole
discretion,
(a)
solely
with
respect
to
such
country,
or
(b)
solely
with
respectto
the
applicable
Major
Market,
or
(c)
in
its
entirety.
12.2.2. 



Termination by Insmed. 

Insmed
may
terminate
this
Agreement
(i)
in
its
entirety
immediately
upon
written
notice
toAstraZeneca
that
Insmed
in
good
faith
determines
that
it
is
not
advisable
for
Insmed
to
continue
to
Develop
or
Commercialize
the
Licensed
Products
due
to
safetyor
efficacy
concerns
or
(ii)
in
its
entirety,
on
a
Licensed
Product-by-Licensed
Product
basis
or
on
a
country-by-country
basis,
for
any
or
no
reason,
upon
[***]
priorwritten
notice
to
AstraZeneca.
12.2.3. 



Termination for Insolvency. 

In
the
event
that
either
Party
(i)
files
for
protection
under
bankruptcy
or
insolvency
laws,(ii)
makes
an
assignment
for
the
benefit
of
creditors,
(iii)
appoints
or
suffers
appointment
of
a
receiver
or
trustee
over
substantially
all
of
its
property
that
is
notdischarged
within
[***]
after
such
filing,
(iv)
proposes
a
written
agreement
of
composition
or
extension
of
its
debts,
(v)
proposes
or
is
a
party
to
any
dissolution
orliquidation,
(vi)
files
a
petition
under
any
bankruptcy
or
insolvency
act
or
has
any
such
petition
filed
against
that
is
not
discharged
within
[***]
of
the
filing
thereofor
(vii)
admits
in
writing
to
the
other
Party
or
publicly
admits
in
writing
its
inability
generally
to
meet
its
obligations
as
they
fall
due
in
the
general
course
and
suchwriting
is
not
rescinded
within
[***]
of
the
delivery
or
disclosure
thereof
(each
of
(i)
through
(vii),
an
“
Insolvency Event ”),
then
the
other
Party
may
terminatethis
Agreement
in
its
entirety
with
immediate
effect
upon
providing
written
notice
the
Party
to
which
the
Insolvency
Event
relates.
12.3. 






Rights in Bankruptcy. 

All
rights
and
licenses
granted
under
or
pursuant
to
this
Agreement
by
Insmed
or
AstraZeneca
are
and
shallotherwise
be
deemed
to
be,
for
purposes
of
Section
365(n)
of
the
U.S.
Bankruptcy
Code
or
any
analogous
provisions
in
any
other
country
or
jurisdiction,
licenses
ofright
to
“intellectual
property”
as
defined
under
Section
101
of
the
U.S.
Bankruptcy
Code.

The
Parties
agree
that
the
Parties,
as
licensees
of
such
rights
under
thisAgreement,
shall
retain
and
may
fully
exercise
all
of
their
rights
and
elections
under
the
U.S.
Bankruptcy
Code
or
any
analogous
provisions
in
any
other
country
orjurisdiction.

The
Parties
further
agree
that,
in
the
event
of
the
commencement
of
a
bankruptcy
proceeding
by
or
against
either
Party
under
the
U.S.
BankruptcyCode
or
any
analogous
provisions
in
any
other
country
or
jurisdiction,
the
Party
hereto
that
is
not
a
Party
to
such
proceeding
shall
be
entitled
to
a
completeduplicate
of
(or
complete
access
to,
as
appropriate)
any
such
intellectual
property
and
all
embodiments
of
such
intellectual
property,
which,
if
not
already
in
thenon-subject
Party’s
possession,
shall
be
promptly
delivered
to
it
(i)
upon
any
such
commencement
of
a
bankruptcy
proceeding
upon
the
non-subject
Party’s
writtenrequest
therefor,
unless
the
Party
subject
to
such
proceeding
elects
to
continue
to
perform
its
material
obligations
under
this
Agreement
or
(ii)
if
not
delivered
underclause
(i)
above,
following
the
rejection
of
this
Agreement
by
or
on
behalf
of
the
Party
subject
to
such
proceeding
upon
written
request
therefor
by
the
non-subjectParty.
***
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.
63
12.4. 






Consequences of Termination.
12.4.1. 



Termination in its Entirety for any Reason. 

In
the
event
of
a
termination
of
this
Agreement
in
its
entirety
for
any
reason:
(i)





all
rights
and
licenses
granted
by
AstraZeneca
hereunder
shall
immediately
terminate,
including,
for
clarity,
anysublicense
granted
by
Insmed
pursuant
to
Section
2.3;
(ii)




Insmed
shall
and
hereby
does,
and
shall
cause
its
Affiliates
and
its
and
their
Sublicensees
to,
when
and
as
requestedby
AstraZeneca,
assign
to
AstraZeneca
all
of
its
right,
title
and
interest
in
and
to
(a)
each
Product
Trademark
and
(b)
all
Regulatory
Documentation
(including
anyRegulatory
Approvals)
applicable
to
any
Licensed
Compound
or
Licensed
Products
or
any
Improvement
thereto
then
owned
or
Controlled
by
Insmed
or
any
of
itsAffiliates;
provided that
if
any
such
Regulatory
Documentation
or
Regulatory
Approval
is
not
immediately
transferable
in
a
country,
Insmed
shall
provideAstraZeneca
with
all
benefit
of
such
Regulatory
Documentation
or
Regulatory
Approval,
as
applicable,
and
such
assistance
and
cooperation
as
necessary
orreasonably
requested
by
AstraZeneca
to
timely
transfer
such
Regulatory
Documentation
or
Regulatory
Approval,
as
applicable,
to
AstraZeneca
or
its
designee
or,
atAstraZeneca’s
option,
to
enable
AstraZeneca
to
obtain
a
substitute
for
such
Regulatory
Documentation
or
Regulatory
Approval,
as
applicable,
without
disruption
toAstraZeneca’s
Exploitation
of
the
Licensed
Compound
or
applicable
Licensed
Product(s)
or
Improvement(s)
thereto;
(iii)



all
Confidential
Information
of
Insmed
relating
to
the
Licensed
Compound
or
any
Licensed
Product
shall
becomeConfidential
Information
of
AstraZeneca,
provided, however ,
that
Residual
Knowledge
shall
not
be
considered
Confidential
Information
for
purposes
of
thisSection
12.4.1;
(iv)



Insmed
shall
and
hereby
does,
and
shall
cause
its
Affiliates
and
its
and
their
Sublicensees
to,
effective
as
of
theeffective
date
of
termination,
grant
AstraZeneca:
1.












an
exclusive,
royalty-free
license
and
right
of
reference,
with
the
right
to
grant
multiple
tiers
of
sublicensesand
further
rights
of
reference,
in
and
to
(a)
Insmed’s
rights
in
and
to
the
Joint
Patents
and
Joint
Know-How
and
(b)
all
Regulatory
Documentation
(including
anyRegulatory
Approvals)
then
owned
or
Controlled
by
Insmed
or
any
of
its
Affiliates
or
its
or
their
Sublicensees
that
are
not
assigned
to
AstraZeneca
pursuant
toclause
(ii)
above,
in
each
case
((a)
and
(b)),
to
Exploit
in
the
entire
world
any
Licensed
Compound
or
Licensed
Product
and
any
Improvement
thereto;
and
2.












an
option
to
negotiate
a
royalty-bearing
license
and
right
of
reference
(either
exclusive
or
non-exclusive),with
the
right
to
grant
multiple
tiers
of
sublicenses
and
further
rights
of
reference
on
reasonable
commercial
terms,
in
and
to
(a)
Insmed
Patents
and
(b)
InsmedKnow-How
then
owned
or
Controlled
by
Insmed
or
any
of
its
Affiliates
or
its
or
their
Sublicensees
that
are
not
assigned
to
AstraZeneca
pursuant
to
clause(ii)
above,
in
each
case
((a)
and
(b)),
to
Exploit
in
the
entire
world
any
Licensed
Compound
or
Licensed
64
Product
and
any
Improvement
thereto.

Insmed
shall
negotiate
with
AstraZeneca
in
good
faith
to
determine
reasonable
commercial
terms
of
any
such
licenseagreement.

If,
after
good
faith
negotiations,
the
Parties
fail
to
execute
a
license
agreement
within
[***]
after
the
date
of
termination,
Insmed
shall
be
free
to
licensethe
Insmed
Patents
and
Insmed
Know-How
to
any
Third
Party;
(v)




unless
expressly
prohibited
by
any
Regulatory
Authority,
at
AstraZeneca’s
advance
written
request,
Insmed
shall
andhereby
does,
and
shall
cause
its
Affiliates
and
its
and
their
Sublicensees
to,
(a)
transfer
control
to
AstraZeneca
of
any
or
all
clinical
studies
involving
LicensedProducts
or
any
Improvements
thereto
being
conducted
by
or
on
behalf
of
Insmed,
an
Affiliate
or
a
Sublicensee
as
of
the
effective
date
of
termination
and(b)
continue
to
conduct
such
clinical
studies
[***]
for
up
to
[***]
to
enable
such
transfer
to
be
completed
without
interruption
of
any
such
clinical
study;
providedthat
(x)
AstraZeneca
shall
not
have
any
obligation
to
continue
any
clinical
study
unless
required
by
Applicable
Law
and
(y)
with
respect
to
each
clinical
study
forwhich
such
transfer
is
expressly
prohibited
by
the
applicable
Regulatory
Authority,
if
any,
Insmed
shall
continue
to
conduct
such
clinical
study
to
completion[***];
(vi)



at
AstraZeneca’s
advance
written
request,
Insmed
shall,
and
shall
use
best
efforts
to
cause
its
Affiliates
and
its
andtheir
Sublicensees
to,
assign
to
AstraZeneca
all
Licensed
Product
Agreements,
unless,
with
respect
to
any
such
Licensed
Product
Agreement,
such
LicensedProduct
Agreement
expressly
prohibits
such
assignment,
in
which
case
Insmed
(or
such
Affiliate
or
Sublicensee,
as
applicable)
shall
cooperate
with
AstraZeneca
inall
reasonable
respects
to
secure
the
consent
of
the
applicable
Third
Party
to
such
assignment
and
if
any
such
consent
cannot
be
obtained
with
respect
to
a
LicensedProduct
Agreement,
Insmed
shall,
and
cause
its
Affiliates
and
its
and
their
Sublicensees
to,
obtain
for
AstraZeneca
substantially
all
of
the
practical
benefit
andburden
under
such
Licensed
Product
Agreement;
and
(vii)


at
AstraZeneca’s
advance
written
request,
Insmed
shall
Manufacture
and
supply
to
AstraZeneca
Licensed
Compoundand
Licensed
Products
or
any
Improvements
thereto
in
accordance
with
the
manufacturing
plan
in
effect
as
of
the
effective
date
of
termination
(including
quantity,dosage
and
schedule)
[***]
until
such
date
as
AstraZeneca
notifies
Insmed
that
it
has
established
an
alternate,
validated
source,
but
in
no
event
later
than
[***]
afterthe
effective
date
of
termination
of
this
Agreement.
12.4.2. 



Termination in a Terminated Territory for Insmed’s Breach or for Insmed’s Convenience. 

In
the
event
of
atermination
of
this
Agreement
with
respect
to
a
Terminated
Territory
by
AstraZeneca
pursuant
to
Section
12.2.1
or
by
Insmed
pursuant
to
Section
12.2.2
(but
not
inthe
case
of
any
termination
of
this
Agreement
in
its
entirety):
***
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.
65
(i)





all
rights
and
licenses
granted
by
AstraZeneca
hereunder,
including,
for
clarity,
any
sublicense
granted
by
Insmedpursuant
to
Section
2.3,
(a)
shall
automatically
be
deemed
to
be
amended
to
exclude,
if
applicable,
the
right
to
market,
promote,
detail,
distribute,
import,
sell
forcommercial
use,
offer
for
commercial
sale,
file
any
Drug
Approval
Application
for
or
seek
any
Regulatory
Approval
for
Licensed
Products
in
such
TerminatedTerritory
and
(b)
shall
otherwise
survive
and
continue
in
effect
in
such
Terminated
Territory
solely
for
the
purpose
of
furthering
any
Commercialization
of
theLicensed
Products
in
the
Territory
or
any
Development
or
Manufacturing
in
support
thereof;
(ii)




Insmed
shall
and
hereby
does,
and
shall
cause
its
Affiliates
and
its
and
their
Sublicensees
to,
when
and
as
requestedby
AstraZeneca,
assign
to
AstraZeneca
all
of
its
right,
title
and
interest
in
and
to
(a)
each
Product
Trademark
in
such
Terminated
Territory
and
(b)
all
RegulatoryDocumentation
(including
any
Regulatory
Approvals)
applicable
to
the
Exploitation
of
the
Licensed
Compound
or
Licensed
Products
or
any
Improvement
theretosolely
in
the
Terminated
Territory
then
owned
or
Controlled
by
Insmed
or
any
of
its
Affiliates
or
its
or
their
Sublicensees;
provided that
if
any
such
RegulatoryDocumentation
or
Regulatory
Approval
is
not
immediately
transferable
in
a
country,
Insmed
shall
provide
AstraZeneca
with
all
benefit
of
such
RegulatoryDocumentation
or
Regulatory
Approval,
as
applicable,
and
such
assistance
and
cooperation
as
necessary
or
reasonably
requested
by
AstraZeneca
to
timely
transfersuch
Regulatory
Documentation
or
Regulatory
Approval,
as
applicable,
to
AstraZeneca
or
its
designee
or,
at
AstraZeneca’s
option,
to
enable
AstraZeneca
to
obtaina
substitute
for
such
Regulatory
Documentation
or
Regulatory
Approval,
as
applicable,
without
disruption
to
AstraZeneca’s
Exploitation
of
the
LicensedCompound
or
applicable
Licensed
Product(s)
or
Improvement(s)
thereto;
(iii)



all
Confidential
Information
of
Insmed
relating
to
the
Licensed
Compound
or
any
Licensed
Product
in
relation
to
theTerminated
Territory
shall
become
Confidential
Information
of
AstraZeneca,
provided ,
however,
that
Residual
Knowledge
shall
not
be
considered
ConfidentialInformation
for
purposes
of
this
Section
12.4.2;
(iv)



Insmed
shall
and
hereby
does,
and
shall
cause
its
Affiliates
and
its
and
their
Sublicensees
to,
effective
as
of
theeffective
date
of
termination,
grant
AstraZeneca:
1.












an
exclusive,
royalty-free
license
and
right
of
reference,
with
the
right
to
grant
multiple
tiers
of
sublicensesand
further
rights
of
reference,
in
and
to
(a)
Insmed’s
rights
in
and
to
the
Joint
Patents
and
Joint
Know-How
and
(b)
all
Regulatory
Documentation
(including
anyRegulatory
Approvals),
including,
for
clarity,
Regulatory
Documentation
outside
the
Terminated
Territory,
then
owned
or
Controlled
by
Insmed
or
any
of
itsAffiliates
or
its
or
their
Sublicensees
that
is
not
assigned
to
AstraZeneca
pursuant
to
clause
(ii)
above
that
is
necessary
or
reasonably
useful
for
AstraZeneca
or
anyof
its
Affiliates
or
(sub)licensees
to
Exploit
the
Licensed
Compound
or
any
Licensed
Product
and
any
Improvement
thereto,
in
each
case
((a)
and
(b)),
to
Exploitfor
commercial
use
in
the
Terminated
Territory
any
Licensed
Compound
or
Licensed
Product
and
any
Improvement
thereto,
including
the
right
to
Manufacture,Develop
and
otherwise
use
the
Licensed
Compound
and
the
Licensed
Products
in
the
Field
in
the
Territory
for
Exploitation
in
the
Terminated
Territory;
and
66
2.












an
option
to
negotiate
a
royalty-bearing
license
and
right
of
reference
(exclusive
or
non-exclusive),
with
theright
to
grant
multiple
tiers
of
sublicenses
and
further
rights
of
reference
on
reasonable
commercial
terms,
in
and
to
(a)
Insmed
Patents
and
(b)
Insmed
Know-Howthen
owned
or
Controlled
by
Insmed
or
any
of
its
Affiliates
or
its
or
their
Sublicensees
that
are
not
assigned
to
AstraZeneca
pursuant
to
clause
(ii)
above,
that
isnecessary
or
reasonably
useful
for
AstraZeneca
or
any
of
its
Affiliates
or
(sub)licensees
to
Exploit
the
Licensed
Compound
or
any
Licensed
Product
and
anyImprovement
thereto,
in
each
case
((a)
and
(b)),
to
Exploit
for
commercial
use
in
the
Terminated
Territory
any
Licensed
Compound
or
Licensed
Product
and
anyImprovement
thereto,
including
the
right
to
Manufacture,
Develop
and
otherwise
use
the
Licensed
Compound
and
the
Licensed
Products
in
the
Field
in
theTerritory
for
Exploitation
in
the
Terminated
Territory.

Insmed
shall
negotiate
with
AstraZeneca
in
good
faith
to
determine
reasonable
commercial
terms
of
anysuch
license
agreement.

If,
after
good
faith
negotiations,
the
Parties
fail
to
execute
a
license
agreement
within
[***]
after
the
date
of
termination,
Insmed
shall
befree
to
license
the
Insmed
Patents
and
Insmed
Know-How
to
any
Third
Party;
(v)




at
AstraZeneca’s
advance
written
request,
Insmed
shall,
and
shall
use
best
efforts
to
cause
its
Affiliates
and
its
andtheir
Sublicensees
to,
assign
to
AstraZeneca
or
its
designee
all
Licensed
Product
Agreements
relating
to
the
Terminated
Territory,
unless,
with
respect
to
any
suchLicensed
Product
Agreement,
such
Licensed
Product
Agreement
(a)
expressly
prohibits
such
assignment
(in
which
case,
Insmed,
or
its
Affiliate
or
Sublicensee,
asapplicable,
shall
cooperate
with
AstraZeneca
in
all
reasonable
respects
to
secure
the
consent
of
the
applicable
Third
Party
to
such
assignment,
(b)
relates
both
to(1)
the
Terminated
Territory
and
the
Territory
or
(2)
Licensed
Products
and
products
other
than
Licensed
Products
(which,
in
either
case
((1)
or
(2)),
atAstraZeneca’s
request,
Insmed,
or
its
Affiliate
or
Sublicensee,
as
applicable,
shall
cooperate
with
AstraZeneca
in
all
reasonable
respects
to
secure
the
writtenagreement
of
the
applicable
Third
Party
to
a
partial
assignment
of
the
applicable
Licensed
Product
Agreement
relating
to
the
Terminated
Territory
or
LicensedProducts,
as
applicable)
and,
in
either
case
((a)
or
(b))
if
any
such
consent
or
agreement,
as
applicable,
cannot
be
obtained
with
respect
to
a
Licensed
ProductAgreement,
Insmed
shall,
and
cause
its
Affiliates
and
its
and
their
Sublicensees
to,
reasonably
assist
AstraZeneca
in
obtaining
substantially
all
of
the
practicalbenefit
and
burden
under
such
Licensed
Product
Agreement
to
the
extent
applicable
to
the
Terminated
Territory
and
Licensed
Products,
as
applicable;
and
(vi)



unless
expressly
prohibited
by
any
Regulatory
Authority,
at
AstraZeneca’s
advance
written
request,
Insmed
shall,and
shall
cause
its
Affiliates
and
its
and
their
Sublicensees
to
(a)
transfer
control
to
AstraZeneca
of
any
or
all
clinical
studies
involving
Licensed
Products
or
anyImprovements
thereto
being
conducted
by
or
on
behalf
of
Insmed,
an
Affiliate
or
a
Sublicensee
as
of
the
effective
date
of
termination
in
or
for
the
TerminatedTerritory
and
(b)
continue
to
conduct
such
clinical
studies
[***]
for
up
to
[***]
to
enable
such
transfer
to
be
completed
without
interruption
of
any
such
clinicalstudy;
provided
***
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.
67
that
(x)
AstraZeneca
shall
not
have
any
obligation
to
continue
any
clinical
study
unless
required
by
Applicable
Law
and
(y)
with
respect
to
each
clinical
study
forwhich
such
transfer
is
expressly
prohibited
by
the
applicable
Regulatory
Authority,
if
any,
Insmed
shall
continue
to
conduct
such
clinical
study
to
completion[***];
and
(vii)


at
AstraZeneca’s
advance
written
request,
Insmed
shall
Manufacture
and
supply
to
AstraZeneca
Licensed
Compoundand
Licensed
Products
or
any
Improvements
thereto
in
accordance
with
the
manufacturing
plan
in
effect
as
of
the
effective
date
of
termination
(including
quantity,dosage
and
schedule)
at
Insmed’s
actual,
fully-burdened
cost
(excluding
costs
for
general
overhead)
until
such
date
as
AstraZeneca
notifies
Insmed
that
it
hasestablished
an
alternate,
validated
source,
but
in
no
event
later
than
[***]
after
the
effective
date
of
termination
of
this
Agreement
with
respect
to
the
TerminatedTerritory.
12.4.3. 



Termination for AstraZeneca’s Breach or AstraZeneca’s Insolvency.
(i)





In
the
event
Insmed
elects
to
terminate
this
Agreement
pursuant
to
Section
12.2.1
or
12.2.3,
notwithstandinganything
to
the
contrary
under
Section
12.4.1,
AstraZeneca
shall
compensate
Insmed
for
any
costs
or
expenses
incurred
by
Insmed
or
its
Affiliates
in
connectionwith
performing
any
of
the
activities
set
forth
in
Section
12.4.1.

In
addition,
AstraZeneca
shall,
and
shall
cause
its
Affiliates
to,
return
to
Insmed
all
relevantrecords
and
materials
in
AstraZeneca’s
possession
or
control
containing
Insmed’s
Confidential
Information,
provided that
AstraZeneca
may
keep
one
(1)
copy
ofsuch
Confidential
Information
for
archival
purposes
only.
(ii)




In
the
event
AstraZeneca
is
in
material
breach
in
the
performance
of
any
of
its
obligations
under
this
Agreement,
orAstraZeneca
undergoes
an
Insolvency
Event,
such
that
Insmed
has
the
right
to
terminate
this
Agreement
pursuant
to
Section
12.2.1
or
12.2.3,
Insmed
may,
as
analternative
to
terminating
the
Agreement,
provide
notice
to
AstraZeneca
of
its
intent
to
keep
the
Agreement
in
place,
notwithstanding
the
occurrence
of
thetermination
trigger.

In
such
event,
this
Agreement
shall
continue
in
full
force
and
effect,
provided that
the
provisions
of
Sections
2.5,
4.1,
4.3,
5.1,
5.2,
5.3,
6.2
and6.3,
shall
no
longer
apply
and
be
deemed
terminated
as
of
the
date
Insmed
provides
such
notice
to
AstraZeneca.
12.5. 






Remedies. 

Except
as
otherwise
expressly
provided
herein,
termination
of
this
Agreement
(either
in
its
entirety
or
with
respect
to
one(1)
or
more
country(ies))
in
accordance
with
the
provisions
hereof
shall
not
limit
remedies
that
may
otherwise
be
available
to
either
Party
in
law
or
equity.
12.6. 






Accrued Rights; Surviving Obligations. 

Termination
or
expiration
of
this
Agreement
(either
in
its
entirety
or
with
respect
to
one(1)
or
more
country(ies))
for
any
reason
shall
be
without
prejudice
to
any
rights
that
shall
have
accrued
to
the
benefit
of
a
Party
prior
to
such
termination
orexpiration.

Such
termination
or
expiration
shall
not
relieve
a
Party
***
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.
68
from
obligations
that
are
expressly
indicated
to
survive
the
termination
or
expiration
of
this
Agreement.

Without
limiting
the
foregoing,
Sections
4.1.4
(except
lastsentence),
4.3.3
(except
last
sentence),
7.10,
7.11,
7.12,
8.1.1,
8.1.2,
8.1.3,
8.1.4,
8.1.6,
9.1,
9.2,
9.3,
9.6,
12.1,
12.3,
12.4,
12.5
and
this
Section
12.6
and
Articles
1,11
and
13
of
this
Agreement
shall
survive
the
termination
or
expiration
of
this
Agreement
for
any
reason.

If
this
Agreement
is
terminated
with
respect
to
theTerminated
Territory
but
not
in
its
entirety,
then
following
such
termination
the
foregoing
provisions
of
this
Agreement
shall
remain
in
effect
with
respect
to
theTerminated
Territory
(to
the
extent
they
would
survive
and
apply
in
the
event
the
Agreement
expires
or
is
terminated
in
its
entirety
or
as
otherwise
necessary
forany
of
AstraZeneca
and
its
Affiliates
and
its
and
their
(sub)licensees
to
exercise
their
rights
in
the
Terminated
Territory)
and
all
provisions
not
surviving
inaccordance
with
the
foregoing
shall
terminate
upon
termination
of
this
Agreement
with
respect
to
the
Terminated
Territory
and
be
of
no
further
force
and
effect(and
for
the
avoidance
of
doubt
all
provisions
of
this
Agreement
shall
remain
in
effect
with
respect
to
all
countries
in
the
Territory
other
than
the
TerminatedTerritory).
ARTICLE 13 MISCELLANEOUS
13.1. 






Force Majeure. 

Neither
Party
shall
be
held
liable
or
responsible
to
the
other
Party
or
be
deemed
to
have
defaulted
under
or
breachedthis
Agreement
for
failure
or
delay
in
fulfilling
or
performing
any
term
of
this
Agreement
(other
than
an
obligation
to
make
payments)
when
such
failure
or
delay
iscaused
by
or
results
from
events
beyond
the
reasonable
control
of
the
non-performing
Party,
including
fires,
floods,
earthquakes,
hurricanes,
embargoes,
shortages,epidemics,
quarantines,
war,
acts
of
war
(whether
war
be
declared
or
not),
terrorist
acts,
insurrections,
riots,
strikes,
lockouts
or
other
labor
disturbances,
acts
ofGod
or
acts,
omissions
or
delays
in
acting
by
any
governmental
authority
(except
to
the
extent
such
delay
results
from
the
breach
by
the
non-performing
Party
orany
of
its
Affiliates
of
any
term
or
condition
of
this
Agreement).

The
non-performing
Party
shall
notify
the
other
Party
of
such
force
majeure
within
[***]
aftersuch
occurrence
by
giving
written
notice
to
the
other
Party
stating
the
nature
of
the
event,
its
anticipated
duration
and
any
action
being
taken
to
avoid
or
minimizeits
effect.

The
suspension
of
performance
shall
be
of
no
greater
scope
and
no
longer
duration
than
is
necessary
and
the
non-performing
Party
shall
usecommercially
reasonable
efforts
to
remedy
its
inability
to
perform.
13.2. 






Export Control. 

This
Agreement
is
made
subject
to
any
restrictions
concerning
the
export
of
products
or
technical
information
fromthe
United
States
or
other
countries
that
may
be
imposed
on
the
Parties
from
time
to
time.

Each
Party
agrees
that
it
will
not
export,
directly
or
indirectly,
anytechnical
information
acquired
from
the
other
Party
under
this
Agreement
or
any
products
using
such
technical
information
to
a
location
or
in
a
manner
that
at
thetime
of
export
requires
an
export
license
or
other
governmental
approval,
without
first
obtaining
the
written
consent
to
do
so
from
the
appropriate
agency
or
othergovernmental
entity
in
accordance
with
Applicable
Law.
***
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.
69
13.3. 






Assignment. 

Neither
Party
may
assign
its
rights
or,
except
as
provided
in
Section
4.6,
delegate
its
obligations
under
this
Agreement
inwhole
or
in
part
without
the
prior
written
consent
of
the
other
Party,
which
consent
shall
not
be
unreasonably
withheld,
conditioned
or
delayed,
except
that,
subjectto
Section
2.3,
either
Party
shall
have
the
right,
without
such
consent,
(i)
to
perform
any
or
all
of
its
obligations
and
exercise
any
or
all
of
its
rights
under
thisAgreement
through
any
of
their
respective
Affiliates,
(ii)
to
assign
any
or
all
of
its
rights
and
delegate
any
or
all
of
its
obligations
hereunder
to
any
of
theirrespective
Affiliates
that
are
Affiliates
as
of
the
Effective
Date
and
continue
to
be
Affiliates
up
to
and
including
date
of
assignment
of
this
Agreement
in
accordancewith
this
Section
13.3,
and
(iii)
to
assign
all
of
its
rights
and
delegate
all
of
its
obligations
hereunder
to
any
successor
in
interest
(whether
by
merger,
acquisition,asset
purchase
or
otherwise)
in
connection
with
a
Change
of
Control
of
such
Party;
provided that
each
Party
shall
provide
written
notice
to
the
other
Party
within[***]
after
such
assignment
or
delegation.

Any
permitted
successor
of
a
Party
or
any
permitted
assignee
of
all
of
a
Party’s
rights
under
this
Agreement
that
has
alsoassumed
all
of
such
Party’s
obligations
hereunder
in
writing
shall,
upon
any
such
succession
or
assignment
and
assumption,
be
deemed
to
be
a
party
to
thisAgreement
as
though
named
herein
in
substitution
for
the
assigning
Party,
whereupon
the
assigning
Party
shall
cease
to
be
a
party
to
this
Agreement
and
shall
ceaseto
have
any
rights
or
obligations
under
this
Agreement.

All
validly
assigned
rights
of
a
Party
shall
inure
to
the
benefit
of
and
be
enforceable
by,
and
all
validlydelegated
obligations
of
such
Party
shall
be
binding
on
and
be
enforceable
against,
the
permitted
successors
and
assigns
of
such
Party;
provided that
such
Party,
if
itsurvives,
shall
remain
jointly
and
severally
liable
for
the
performance
of
such
delegated
obligations
under
this
Agreement.

Notwithstanding
anything
to
thecontrary
herein,
in
the
event
of
a
Change
of
Control
of
AstraZeneca,
each
of
Sections
2.5,
5.1,
5.2
and
5.3
of
this
Agreement
shall
automatically
terminate
in
theirentirety
and
be
of
no
further
force
and
effect.

Any
attempted
assignment
or
delegation
in
violation
of
this
Section
13.3
shall
be
void
and
of
no
effect.
13.4. 






Severability. 

If
any
provision
of
this
Agreement
is
held
to
be
illegal,
invalid
or
unenforceable
under
any
present
or
future
law
and
ifthe
rights
or
obligations
of
either
Party
under
this
Agreement
will
not
be
materially
and
adversely
affected
thereby,
(i)
such
provision
shall
be
fully
severable,(ii)
this
Agreement
shall
be
construed
and
enforced
as
if
such
illegal,
invalid
or
unenforceable
provision
had
never
comprised
a
part
hereof,
(iii)
the
remainingprovisions
of
this
Agreement
shall
remain
in
full
force
and
effect
and
shall
not
be
affected
by
the
illegal,
invalid
or
unenforceable
provision
or
by
its
severanceherefrom
and
(iv)
in
lieu
of
such
illegal,
invalid
or
unenforceable
provision,
there
shall
be
added
automatically
as
a
part
of
this
Agreement
a
legal,
valid
andenforceable
provision
as
similar
in
terms
to
such
illegal,
invalid
or
unenforceable
provision
as
may
be
possible
and
reasonably
acceptable
to
the
Parties.

To
thefullest
extent
permitted
by
Applicable
Law,
each
Party
hereby
waives
any
provision
of
law
that
would
render
any
provision
hereof
illegal,
invalid
or
unenforceablein
any
respect.
***
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.
70
13.5. 






Dispute Resolution.
13.5.1. 



Except
as
provided
in
Section
7.12
or
13.10,
if
a
dispute
arises
between
the
Parties
in
connection
with
or
relating
to
thisAgreement
or
any
document
or
instrument
delivered
in
connection
herewith
(collectively,
(i)
and
(ii),
a
“
Dispute ”),
then
either
Party
shall
have
the
right
to
refersuch
Dispute
to
the
Senior
Officers
for
attempted
resolution
by
good
faith
negotiations
during
a
period
of
[***].

Any
final
decision
mutually
agreed
to
by
theExecutive
Officers
shall
be
conclusive
and
binding
on
the
Parties.
13.5.2. 



If
such
Executive
Officers
are
unable
to
resolve
any
such
Dispute
within
such
[***]
period,
either
Party
shall
be
free
toinstitute
binding
arbitration
in
accordance
with
this
Section
13.5.2
upon
written
notice
to
the
other
Party
(an
“
Arbitration Notice ”)
and
seek
such
remedies
asmay
be
available.

Upon
receipt
of
an
Arbitration
Notice
by
a
Party,
the
applicable
Dispute
shall
be
resolved
by
final
and
binding
arbitration
before
a
panel
of
three(3)
experts
with
relevant
industry
experience
(the
“
Arbitrators ”).

Each
of
Insmed
and
AstraZeneca
shall
promptly
select
one
(1)
Arbitrator,
which
selectionsshall
in
no
event
be
made
later
than
[***]
after
the
notice
of
initiation
of
arbitration.

The
third
Arbitrator
shall
be
chosen
promptly
by
mutual
agreement
of
theArbitrator
chosen
by
Insmed
and
the
Arbitrator
chosen
by
AstraZeneca,
but
in
no
event
later
than
[***]
after
the
date
that
the
last
of
such
Arbitrators
wasappointed.

The
Arbitrators
shall
determine
what
discovery
will
be
permitted,
consistent
with
the
goal
of
reasonably
controlling
the
cost
and
time
that
the
Partiesmust
expend
for
discovery;
provided that
the
Arbitrators
shall
permit
such
discovery
as
they
deem
necessary
to
permit
an
equitable
resolution
of
the
dispute.

Thearbitration
shall
be
administered
by
the
American
Arbitration
Association
(or
its
successor
entity)
in
accordance
with
the
then
current
Commercial
Rules
of
theAmerican
Arbitration
Association
including
the
Procedures
for
Large,
Complex
Commercial
Disputes
(including
the
Optional
Rules
for
Emergency
Measures
ofProtection),
except
as
modified
in
this
Agreement.

The
arbitration
shall
be
held
in
New
York,
New
York,
U.S.A.,
and
the
Parties
shall
use
reasonable
efforts
toexpedite
the
arbitration
if
requested
by
either
Party.

The
Arbitrators
shall,
within
[***]
after
the
conclusion
of
the
arbitration
hearing,
issue
a
written
award
andstatement
of
decision
describing
the
essential
findings
and
conclusions
on
which
the
award
is
based,
including
the
calculation
of
any
damages
awarded.

Thedecision
or
award
rendered
by
the
Arbitrators
shall
be
final
and
non-appealable,
and
judgment
may
be
entered
upon
it
in
accordance
with
Applicable
Law
in
theState
of
New
York
or
any
other
court
of
competent
jurisdiction.

The
Arbitrators
shall
be
authorized
to
award
compensatory
damages,
but
shall
not
be
authorized
toreform,
modify
or
materially
change
this
Agreement
or
any
other
agreements
contemplated
hereunder.
13.5.3. 



Each
Party
shall
bear
its
own
counsel
fees,
costs
and
disbursements
arising
out
of
the
dispute
resolution
procedures
describedin
this
Section
13.5,
and
shall
pay
an
equal
share
of
the
fees
and
costs
of
the
Arbitrators,
as
applicable,
and
all
other
general
fees
related
to
any
arbitration
describedin
Section
13.5.2;
provided, however ,
the
Arbitrators
shall
be
authorized
to
determine
whether
a
Party
is
the
prevailing
Party,
and
if
so,
to
award
to
that
prevailingParty
reimbursement
for
its
reasonable
counsel
fees,
costs
and
disbursements
***
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.
71
(including
expert
witness
fees
and
expenses,
photocopy
charges,
or
travel
expenses),
or
the
fees
and
costs
of
the
Arbitrators.

Unless
the
Parties
otherwise
agree
inwriting,
during
the
period
of
time
that
any
arbitration
proceeding
described
in
Section
13.5.2
is
pending
under
this
Agreement,
the
Parties
shall
continue
to
complywith
all
those
terms
and
provisions
of
this
Agreement
that
are
not
the
subject
of
such
pending
arbitration
proceeding.

Nothing
contained
in
this
Agreement
shalldeny
any
Party
the
right
to
seek
injunctive
or
other
equitable
relief
from
a
court
of
competent
jurisdiction
in
the
context
of
a
bona
fide
emergency
or
prospectiveirreparable
harm,
and
such
an
action
may
be
filed
and
maintained
notwithstanding
any
ongoing
arbitration
proceeding.

All
arbitration
proceedings
and
decisions
ofthe
Arbitrators
shall
be
deemed
Confidential
Information
of
both
Parties
under
Article
9.
13.6. 






Governing Law, Jurisdiction and Service.
13.6.1. 



Governing Law. 

This
Agreement
shall
be
governed
by
and
construed
in
accordance
with
the
laws
of
the
State
of
New
York,excluding
any
conflicts
or
choice
of
law
rule
or
principle
that
might
otherwise
refer
construction
or
interpretation
of
this
Agreement
to
the
substantive
law
ofanother
jurisdiction.

The
Parties
agree
to
exclude
the
application
to
this
Agreement
of
the
United
Nations
Convention
on
Contracts
for
the
International
Sale
ofGoods.
13.6.2. 



Jurisdiction. 

Subject
to
Section
13.5
and
Section
13.10,
the
Parties
hereby
irrevocably
and
unconditionally
consent
to
theexclusive
jurisdiction
of
state
and
federal
courts
for
the
State
of
New
York
for
any
action,
suit
or
proceeding
(other
than
appeals
therefrom)
arising
out
of
orrelating
to
this
Agreement
and
agree
not
to
commence
any
action,
suit
or
proceeding
(other
than
appeals
therefrom)
related
thereto
except
in
such
courts.

THEPARTIES
IRREVOCABLY
AND
UNCONDITIONALLY
WAIVE
THEIR
RIGHT
TO
A
JURY
TRIAL.
13.6.3. 



Venue. 

The
Parties
further
hereby
irrevocably
and
unconditionally
waive
any
objection
to
the
laying
of
venue
of
any
action,suit
or
proceeding
(other
than
appeals
therefrom)
arising
out
of
or
relating
to
this
Agreement
in
the
state
and
federal
courts
for
the
State
of
New
York
and
herebyfurther
irrevocably
and
unconditionally
waive
and
agree
not
to
plead
or
claim
in
any
such
court
that
any
such
action,
suit
or
proceeding
brought
in
any
such
courthas
been
brought
in
an
inconvenient
forum.
13.6.4. 



Service. 

Each
Party
further
agrees
that
service
of
any
process,
summons,
notice
or
document
by
registered
mail
to
its
addressset
forth
in
Section
13.7.2
shall
be
effective
service
of
process
for
any
action,
suit
or
proceeding
brought
against
it
under
this
Agreement
in
any
such
court.
13.7. 






Notices.
13.7.1. 



Notice Requirements. 

Any
notice,
request,
demand,
waiver,
consent,
approval
or
other
communication
permitted
orrequired
under
this
Agreement
shall
be
in
writing,
shall
refer
specifically
to
this
Agreement
and
shall
be
deemed
given
only
if
delivered
by
hand
or
byinternationally
recognized
overnight
delivery
service
that
maintains
records
of
delivery,
addressed
to
the
Parties
at
their
respective
addresses
specified
inSection
13.7.2
or
to
72
such
other
address
as
the
Party
to
whom
notice
is
to
be
given
may
have
provided
to
the
other
Party
in
accordance
with
this
Section
13.7.1.

Such
Notice
shall
bedeemed
to
have
been
given
as
of
the
date
delivered
by
hand
or
on
the
second
Business
Day
(at
the
place
of
delivery)
after
deposit
with
an
internationally
recognizedovernight
delivery
service.

This
Section
13.7.1
is
not
intended
to
govern
the
day-to-day
business
communications
necessary
between
the
Parties
in
performingtheir
obligations
under
the
terms
of
this
Agreement.
13.7.2. 



Address
for
Notice.
If
to
Insmed,
to:
10
Finderne
Ave.,Building
10,
Bridgewater,
NJ
08807-3365U.S.A.Attention:
General
Counsel
with
a
copy
(which
shall
not
constitute
notice)
to:
10
Finderne
Ave.,Building
10,Bridgewater,
NJ
08807-3365U.S.A.Attention:
SVP
Corporate
Development
If
to
AstraZeneca,
to:
AstraZeneca
ABSE-431
83
MölndalSwedenAttention:
Legal
Department
with
a
copy
(which
shall
not
constitute
notice)
to:
AstraZeneca
ABScientific
Partnering
and
AlliancesSE-431
83
MölndalSwedenAttention:
Business
Development
Director
13.8. 






Entire Agreement; Amendments. 

This
Agreement,
together
with
the
Schedules
attached
hereto,
sets
forth
and
constitutes
the
entireagreement
and
understanding
between
the
Parties
with
respect
to
the
subject
matter
hereof
and
all
prior
agreements,
understandings,
promises
and
representations,whether
written
or
oral,
with
respect
thereto
are
superseded
hereby.

Each
Party
hereby
confirms
that
it
is
not
relying
on
any
representations
or
73
warranties
of
the
other
Party
except
as
specifically
set
forth
in
this
Agreement.

No
amendment,
modification,
release
or
discharge
shall
be
binding
on
the
Partiesunless
in
writing
and
duly
executed
by
authorized
representatives
of
both
Parties.

In
the
event
of
any
inconsistencies
between
this
Agreement
and
any
schedules
orother
attachments
hereto,
the
terms
of
this
Agreement
shall
control.
13.9. 






English Language. 

This
Agreement
shall
be
written
and
executed
in,
and
all
other
communications
under
or
in
connection
with
thisAgreement
shall
be
in,
the
English
language.

Any
translation
into
any
other
language
shall
not
be
an
official
version
thereof
and
in
the
event
of
any
conflict
ininterpretation
between
the
English
version
and
such
translation,
the
English
version
shall
control.
13.10. 




Equitable Relief. 

Each
Party
acknowledges
and
agrees
that
the
restrictions
set
forth
in
Article
8
and
Article
9
are
reasonable
andnecessary
to
protect
the
legitimate
interests
of
the
other
Party
and
that
such
other
Party
would
not
have
entered
into
this
Agreement
in
the
absence
of
suchrestrictions
and
that
any
breach
or
threatened
breach
of
any
provision
of
such
Articles
may
result
in
irreparable
injury
to
such
other
Party
for
which
there
will
be
noadequate
remedy
at
law.

In
the
event
of
a
breach
or
threatened
breach
of
any
provision
of
such
Articles,
the
non-breaching
Party
shall
be
authorized
and
entitled
toseek
from
any
court
of
competent
jurisdiction
injunctive
relief,
whether
preliminary
or
permanent,
specific
performance
and
an
equitable
accounting
of
all
earnings,profits
and
other
benefits
arising
from
such
breach,
which
rights
shall
be
cumulative
and
in
addition
to
any
other
rights
or
remedies
to
which
such
non-breachingParty
may
be
entitled
in
law
or
equity.

Both
Parties
agree
to
waive
any
requirement
that
the
other
(i)
post
a
bond
or
other
security
as
a
condition
for
obtaining
anysuch
relief
and
(ii)
show
irreparable
harm,
balancing
of
harms,
consideration
of
the
public
interest
or
inadequacy
of
monetary
damages
as
a
remedy.

Nothing
in
thisSection
13.10
is
intended
or
should
be
construed,
to
limit
either
Party’s
right
to
equitable
relief
or
any
other
remedy
for
a
breach
of
any
other
provision
of
thisAgreement.
13.11. 




Waiver and Non-Exclusion of Remedies. 

Any
term
or
condition
of
this
Agreement
may
be
waived
at
any
time
by
the
Party
that
isentitled
to
the
benefit
thereof,
but
no
such
waiver
shall
be
effective
unless
set
forth
in
a
written
instrument
duly
executed
by
or
on
behalf
of
the
Party
waiving
suchterm
or
condition.

The
waiver
by
either
Party
hereto
of
any
right
hereunder
or
of
the
failure
to
perform
or
of
a
breach
by
the
other
Party
shall
not
be
deemed
awaiver
of
any
other
right
hereunder
or
of
any
other
breach
or
failure
by
such
other
Party
whether
of
a
similar
nature
or
otherwise.

The
rights
and
remedies
providedherein
are
cumulative
and
do
not
exclude
any
other
right
or
remedy
provided
by
Applicable
Law
or
otherwise
available
except
as
expressly
set
forth
herein.
13.12. 




No Benefit to Third Parties. 

Except
as
provided
in
Article
11,
covenants
and
agreements
set
forth
in
this
Agreement
are
for
the
solebenefit
of
the
Parties
hereto
and
their
successors
and
permitted
assigns
and
they
shall
not
be
construed
as
conferring
any
rights
on
any
other
Persons.
13.13. 




Further Assurance. 

Each
Party
shall
duly
execute
and
deliver
or
cause
to
be
duly
executed
and
delivered,
such
further
instrumentsand
do
and
cause
to
be
done
such
further
acts
and
things,
including
the
filing
of
such
assignments,
agreements,
documents
and
74
instruments,
as
may
be
necessary
or
as
the
other
Party
may
reasonably
request
in
connection
with
this
Agreement
or
to
carry
out
more
effectively
the
provisionsand
purposes
hereof
or
to
better
assure
and
confirm
unto
such
other
Party
its
rights
and
remedies
under
this
Agreement.
13.14. 



Relationship of the Parties. 

It
is
expressly
agreed
that
AstraZeneca,
on
the
one
hand
and
Insmed,
on
the
other
hand,
shall
beindependent
contractors
and
that
the
relationship
between
the
two
Parties
shall
not
constitute
a
partnership,
joint
venture
or
agency.

Neither
AstraZeneca,
on
theone
hand,
nor
Insmed,
on
the
other
hand,
shall
have
the
authority
to
make
any
statements,
representations
or
commitments
of
any
kind
or
to
take
any
action
thatwill
be
binding
on
the
other,
without
the
prior
written
consent
of
the
other
Party
to
do
so.

All
persons
employed
by
a
Party
shall
be
employees
of
such
Party
andnot
of
the
other
Party
and
all
costs
and
obligations
incurred
by
reason
of
any
such
employment
shall
be
for
the
account
and
expense
of
such
first
Party.
13.15. 



References. 

Unless
otherwise
specified,
(i)
references
in
this
Agreement
to
any
Article,
Section,
Schedule
or
Exhibit
shall
meanreferences
to
such
Article,
Section,
Schedule
or
Exhibit
of
this
Agreement,
(ii)
references
in
any
Section
to
any
clause
are
references
to
such
clause
of
suchSection
and
(iii)
references
to
any
agreement,
instrument
or
other
document
in
this
Agreement
refer
to
such
agreement,
instrument
or
other
document
as
originallyexecuted
or,
if
subsequently
amended,
replaced
or
supplemented
from
time
to
time,
as
so
amended,
replaced
or
supplemented
and
in
effect
at
the
relevant
time
ofreference
thereto.
13.16. 



Construction. 

Except
where
the
context
otherwise
requires,
wherever
used,
the
singular
shall
include
the
plural,
the
plural
thesingular,
the
use
of
any
gender
shall
be
applicable
to
all
genders
and
the
word
“or”
is
used
in
the
inclusive
sense
(and/or).

Whenever
this
Agreement
refers
to
anumber
of
days,
unless
otherwise
specified,
such
number
refers
to
calendar
days.

The
captions
of
this
Agreement
are
for
convenience
of
reference
only
and
in
noway
define,
describe,
extend
or
limit
the
scope
or
intent
of
this
Agreement
or
the
intent
of
any
provision
contained
in
this
Agreement.

The
term
“including,”“include,”
or
“includes”
as
used
herein
shall
mean
including,
without
limiting
the
generality
of
any
description
preceding
such
term.

The
language
of
thisAgreement
shall
be
deemed
to
be
the
language
mutually
chosen
by
the
Parties
and
no
rule
of
strict
construction
shall
be
applied
against
either
Party
hereto.
13.17. 



Counterparts. 

This
Agreement
may
be
executed
in
two
(2)
or
more
counterparts,
each
of
which
shall
be
deemed
an
original,
but
all
ofwhich
together
shall
constitute
one
and
the
same
instrument.

This
Agreement
may
be
executed
by
facsimile,
PDF
format
via
email
or
other
electronicallytransmitted
signatures
and
such
signatures
shall
be
deemed
to
bind
each
Party
hereto
as
if
they
were
original
signatures.
[SIGNATURE
PAGE
FOLLOWS.]
75
THIS
AGREEMENT
IS
EXECUTED
by
the
authorized
representatives
of
the
Parties
as
of
the
date
first
written
above.

ASTRAZENECA AB (publ.)INSMED INCORPORATED



By:/s/
Maarten
Kraan
By:/s/
William
H.
Lewis




Name:
Maarten
KraanName:
William
H.
Lewis

Title:
R&I
IMed
HeadTitle:
President
and
CEO
[
Signature Page to License Agreement ]

Schedule 1.5(ii) - Insmed Anti-Corruption Rules and Policies
Insmed Anti-Corruption Policy
Purpose
and
Scope
Insmed
has
a
zero-tolerance
approach
to
bribery
and
corruption,
and
is
committed
to
observing
high
standards
of
ethical
conduct
in
its
operations
in
the
U.S.
andaround
the
world.

This
includes
complying
with
laws
that
prohibit
bribery
and
other
forms
of
corrupt
conduct,
including
the
U.S.
Foreign
Corrupt
Practices
Act(FCPA),
as
well
as
state
laws
and
the
local
anti-bribery
and
anti-corruption
laws
of
the
countries
in
which
we
operate,
such
as
the
UK
Bribery
Act.
Insmed
is
an
increasingly
global
company
operating
in
the
highly
specialized
orphan
drug
sector.

Insmed’s
important
work
in
this
sector
raises
unique
anti-corruption
risks.

Because
the
community
of
health
care
professionals
(HCPs)
focusing
on
the
rare
disorders
treated
by
Insmed
products
is
relatively
small,
thesame
HCPs
who
treat
patients
with
these
conditions
also
may
partner
with
Insmed
in
research,
training,
pre-clinical,
advisory,
and
other
activities.

As
aresult,
Insmed
must
be
vigilant
in
assuring
that
all
interactions
with
HCPs
outside
the
U.S.,
as
well
as
all
interactions
with
foreign
regulators,
comply
withapplicable
laws
and
rules
and
do
not
raise
conflicts
of
interest.
With
this
context
in
mind,
this
policy
sets
forth
standards
to
which
all
officers,
directors,
and
employees
of
Insmed
operating
anywhere
in
the
world
must
adhere.
Insmed
also
requires
its
consultants,
vendors,
suppliers,
and
other
representatives
to
abide
by
its
ethical
standards.
Failure
to
comply
with
this
policy
could
result
in
substantial
criminal
and
civil
fines
or
other
penalties
against
Insmed,
and
could
cause
reputational
damage
to
thecompany.

Individual
employees
could
also
face
adverse
consequences
including
termination,
fines,
criminal
charges
and/or
imprisonment
for
their
role
in
anyfailure
to
comply
with
these
policies,
or
failure
to
properly
oversee
activities
that
raise
compliance
concerns.
Policy
Against
Bribery
and
Corruption
Insmed
prohibits
bribery
and
other
corrupt
conduct
in
any
form.

Bribery,
kickbacks,
and
other
improper
inducements
involving
HCPs,
government
officials,
andothers
in
the
commercial
marketplace
such
as
customers,
competitors,
and
suppliers,
are
prohibited.
S-
1
The
basic
rule
is
straightforward:
·


















No
Insmed
officer,
director,
employee,
distributor,
agent,
or
other
representative
worldwide
may,
directly
or
indirectly,
offer,
promise,
pay,give,
or
authorize
any
financial
or
other
advantage,
or
anything
else
of
value,
to
any
other
person
or
organization,
with
the
intent
to
exertimproper
influence
over
the
recipient,
induce
the
recipient
to
violate
his
or
her
duties,
secure
an
improper
advantage
for
Insmed,
orimproperly
reward
the
recipient
for
past
conduct.
·


















Insmed
policy
also
prohibits
requesting,
agreeing
to
receive,
or
accepting
a
bribe,
kickback,
or
any
other
improper
financial
or
otheradvantage.
No person subject to this policy will suffer adverse consequences for refusing to offer, promise, pay, give, or authorize any such improper benefit,advantage or reward, even if this results in the loss of business to Insmed.
Employees may not use personal funds, benefits, or other items of value  to accomplish what is otherwise prohibited by this policy.
Bribery
of
Health
Care
Professionals
and
Government
Officials
The
prohibition
against
bribery
applies
with
special
force
to
our
interactions
with
government
officials.

Under
laws
such
as
the
FCPA,
HCPs
outside
the
U.S.
maybe
considered
government
officials
for
purposes
of
anti-corruption
laws,
by
virtue
of
their
employment
by
or
affiliation
with
government
entities
or
publicinstitutions.

For
purposes
of
this
policy,
therefore,
“government
official”
includes
all
of
the
following:
·


















officers
and
employees
of
any
national,
regional,
local,
or
other
governmental
entity,
including
regulators,
elected
officials,
and
employees
of
publicinstitutions;
·


















directors,
officers
and
employees
(regardless
of
their
seniority)
of
enterprises
that
a
non-U.S.
government
controls
or
in
which
it
owns
a
majority
interest,including
hospitals
and
other
medical
facilities;
·


















candidates
for
political
office,
political
parties,
and
political
party
officials;
·


















officers,
employees,
and
representatives
of
public
(quasi-governmental)
international
organizations,
such
as
the
World
Health
Organization;
and
·


















any
private
person
acting
temporarily
in
an
official
capacity
for
or
on
behalf
of
any
of
the
foregoing
(such
as
a
consultant
retained
by
a
governmentagency).
S-
2
Government
officials
include:

employees
of
health
ministries,
other
regulators,
customs
officials,
government
consultants,
and
all
HCPs
whowork
for
a
government-owned,
government-run,
or
other
public
institution
outside
the
U.S.
Specific
Policies
and
Procedures
Providing
any
benefit
to
an
HCP,
government
official,
or
another
person
could
be
viewed
as
a
bribe
if
it
is
intended
to
induce
the
recipient
to
violate
a
duty
ofloyalty
or
to
obtain
an
improper
benefit
for
Insmed.

Benefits
that
fall
within
the
scope
of
anti-corruption
laws
can
include
cash
and
cash
equivalents,
gifts,
meals,entertainment,
donations
to
a
favored
charity,
loans,
travel
expenses,
and
job
placements.
The
policies
and
procedures
in
this
section
are
directed
at
specific
types
of
transactions
and
interactions
that
may
occur
during
the
course
of
our
business
and
thatwarrant
particular
vigilance
from
an
anti-corruption
compliance
perspective.

Many
of
the
issues
mentioned
below
are
addressed
in
further
detail
in
separatepolicies
and
SOPs.
1.1 






























Third Party Representatives
The
FCPA
and
many
other
anti-corruption
laws
regulate
indirect,
as
well
as
direct,
payments
and
benefits.

These
laws
thus
apply
to
benefits
provided
by
thirdparties
such
as
distributors,
agents,
regulatory
or
market
research
consultants,
clinical
research
organizations,
customs
brokers,
and
other
representatives
acting
onbehalf
of
Insmed.

The
risk
that
a
representative
will
take
actions
that
could
subject
Insmed
to
liability
is
highest
when
a
representative
is
dealing
with
governmentpersonnel
and
non-U.S.
HCPs.
You
must
comply
with
the
policies
and
procedures
set
forth
in
Anti-Corruption
Policy
SOP
A:

Engagement
of
Third
Party
Representatives
in
order
to
hire
a
ThirdParty
Representative.

A
“Third
Party
Representative”
is
any
person
or
entity
other
than
employees,
officers,
or
directors
of
Insmed
who
is
expected
to
interact
withnon-U.S.
government
officials
or
non-U.S.
HCPs
in
the
course
of
performing
services
for
Insmed
or
promoting
or
selling
Insmed
products.

Please
note
that
Anti-Corruption
Policy
SOP
A:

Engagement
of
Third
Party
Representatives
applies
whenever
a
third
party
might
interact
with
non-U.S.
government
officials
or
non-U.S.
HCPs
on
Insmed’s
behalf;
however,
when
Insmed
hires
a
consultant
who
will
not interact
with
non-U.S.
government
officials
or
HCPs
on
behalf
of
Insmedand
the
consultant
is
a
non-U.S.
HCP,
Anti-Corruption
Policy
SOP
B:
Consulting
Agreements
with
Non-U.S.
Health
Care
Professionals
applies.
S-
3
Third
Party
Representatives
can
include
consultants
retained
for
regulatory,
market
access
or
reimbursement
assistance,
clinical
researchorganizations,
sales
agents,
distributors,
and
customs
brokers.
1.2 






























Consulting Agreements with Non-U.S. HCPs
It
is
permissible
for
Insmed
to
contract
with
a
qualified
HCP
for
legitimate
services
relevant
to
the
company’s
business
in
exchange
for
compensation
that
does
notexceed
fair
market
value.

All
engagements
of
non-U.S.
HCPs
to
provide
services
to
Insmed
—
such
as
serving
on
an
advisory
board
or
providing
training
servicesto
Insmed
—
must
comply
with
Anti-Corruption
Policy
SOP
B:

Consulting
Agreements
with
Non-U.S.
Health
Care
Professionals
,
including
(i)
the
requirementthat
all
such
agreements
be
governed
by
written
contracts;
and
(ii)
the
prohibition
against
using
a
consulting
agreement
to
induce
the
prescribing,
purchasing,
orfavorable
formulary
treatment
of
Insmed
products.
1.3 






























Grants to Non-U.S. HCPs to Attend Educational and Scientific Events
It
is
permissible
for
Insmed
to
provide
financial
support
to
enable
a
qualified
HCP
outside
the
U.S.
to
attend
a
medical
congress,
continuing
medical
education(CME)
event,
or
similar
educational
or
scientific
meeting
in
order
to
expand
the
HCP’s
medical
knowledge.

Grants
to
non-U.S.
HCPs
must
comply
with
theInsmed
Grants,
Contributions,
and
Sponsorships
Policy
and
related
SOP:
Grant
Request
Management
,
including
(i)
the
prohibition
against
providing
a
grant
toinduce
the
prescribing,
purchasing,
or
favorable
formulary
treatment
of
Insmed
products;
and
(ii)
the
requirement
that
any
grant
to
an
HCP
must
have
as
its
primarypurpose
the
expansion
of
the
HCP’s
medical
knowledge
in
the
HCP’s
area
of
expertise
and
an
area
of
expertise
relevant
to
Insmed.

Grants
to
U.S.
HCPs
areprohibited.
1.4 






























Grants, Sponsorships, and Other Support to Organizations and Institutions
Insmed
may
make
grants
and
sponsorships
to
legitimate
medical
and
educational
organizations
to
support
an
educational
program,
support
research,
or
otherwise
tofurther
the
recipient
organization’s
legitimate
mission.

No
grant
or
sponsorships
may
be
used
to
confer
a
personal
benefit
on
an
HCP
or
other
government
officialor
be
made
as
part
of
an
exchange
of
favors.

The
provision
of
any
grants
or
sponsorships
to
organizations
and
institutions
—
including
a
foundation,
patientadvocacy
group,
or
similar
organization
—
and
to
sponsor
educational
programs
organized
by
a
legitimate
medical
or
educational
organization,
must
comply
withInsmed’s
Grants,
Contributions,
and
Sponsorships
Policy
and
the
related
SOP:
Grant
Management
Request
.

Support
for
patient
advocacy
groups
must
alsocomply
with
the
Global
SOP
on
Interactions
with
Patients,
Patient
Advocacy
Groups
and
Related
Stakeholders
.
S-
4
1.5 






























Gifts, Meals, and Hospitality
Any
gifts,
meals,
or
hospitality
provided
in
connection
with
Insmed’s
business
must
be
modest
in
value,
infrequently
provided,
consistent
with
applicable
industrycodes,
and
of
a
nature
that
would
not
embarrass
Insmed
if
publicly
disclosed.

Lavish
meals
or
gifts
and
similar
benefits
are
prohibited.

Gifts,
meals,
or
hospitalityprovided
to
a
non-U.S.
government
official
or
HCP
must
comply
with
Anti-Corruption
Policy
SOP
C
on
Travel,
Gifts,
Meals,
and
Hospitality
Provided
to
HealthCare
Professionals
and
Government
Officials
Outside
the
U.S
.
1.6 






























Travel for Non-U.S. HCPs and Government Officials
As
with
other
benefits,
the
provision
of
travel,
lodging,
or
related
expenses
to
a
government
official
or
HCP
outside
the
U.S.
should
be
approached
with
caution.
Travel
and
related
expenses
may
only
be
provided
when
offered
in
connection
with
a
legitimate
business
purpose
such
as
a
meeting
to
discuss
Insmed
products.
You
must
contact
the
Compliance
Department
for
approval
before
providing
travel
to
a
government
official
or
HCP
unless
that
travel
is
covered
by
an
approvedconsulting
or
speaker
agreement
or
is
part
of
an
approved
sponsorship
to
attend
a
medical
educational
event.

The
Compliance
Department
may
designate
aregional
lawyer
to
review
and
approve
the
proposed
travel.
The
Compliance
Department
or
its
designee
will
approve
travel
expenses
only
when
the
following
criteria
are
met:
·


















The
travel
must
be
for
a
legitimate
business
purpose
related
to
the
government
official’s
or
HCP’s
performance
of
lawful
duties;
·


















Expenses
covered
are
reasonable
in
value
and
not
excessive
or
lavish;
·


















No
friends
or
family
members
are
traveling
at
Insmed’s
expense;
and
·


















The
travel
is
transparent
to
the
recipient’s
employer
and/or
organization.
Payments
must
be
made
directly
to
the
airline,
hotel,
or
other
vendor
whenever
possible.

Insmed
will
only
make
a
reimbursement
against
a
written
receipt
if
directpayment
is
not
reasonably
possible,
and
then
only
for
expenses
actually
incurred.

Per
diem
payments
are
prohibited.
S-
5
1.7 






























Charitable and Product Donations
Insmed
funds
may
be
used
for
charitable
purposes
only
if
the
funding
is
used
for
a
bona fide charitable
purpose
and
without
expectation
of
favor
or
return
toInsmed.

Any
benefit
received
by
Insmed
must
be
minimal
and
incidental
to
the
main
purpose
of
the
charitable
contribution.

No
donation
may
be
used
to
confer
apersonal
benefit
on
an
HCP
or
other
government
official
or
may
be
made
as
part
of
exchange
of
favors.

Insmed
will
not
make
donations
in
cases
where
agovernment
official
or
HCP
has
promised
any
benefit
or
made
any
threat
in
connection
with
the
donation.


Charitable
contributions
may
not
be
made
to
individualsor
on
behalf
of
individuals.
The
provision
of
any
charitable
donation
must
comply
with
Insmed’s
Grants,
Contributions,
and
Sponsorships
Policy
and
the
related
SOP:
Grant
ManagementRequest
.

Support
for
patient
advocacy
groups
must
also
comply
with
the
Global
SOP
on
Interactions
with
Patients,
Patient
Advocacy
Groups
and
RelatedStakeholders
.
Participation
in
programs
where
Insmed
provides
product
free
of
charge,
such
as
compassionate
or
early
access
programs,
must
comply
with
the
CompassionateUse/Emergency
Named
Patient
Program
(CUENPP)
for
an
Insmed
Investigational
Product
SOP
.
Questions
to
Consider
Before
Seeking
Approval
of
a
Charitable
or
Production
Donation:
·


















Is
the
donation
consistent
with
Insmed
charitable
giving
practices?
·


















Was
the
donation
requested
by
anyone
and
why?
·


















Is
the
charity
affiliated
with
a
government
agency?
·


















Is
the
charity
affiliated
with
an
HCP,
a
government
official,
or
such
a
person’s
family
member(s)?
·


















Could
the
donation
result
in
a
personal
benefit
for
an
HCP,
a
government
official,
or
such
a
person’s
family
member(s)?
·


















Is
the
donation
being
given
with
the
expectation
of
anything
in
return?
S-
6
1.8 






























Political Contributions
As
set
forth
in
the
Code
of
Business
Conduct
and
Ethics,
Insmed
prohibits
the
use
of
corporate
funds,
resources
or
property
for
the
support
of
political
parties
orpolitical
candidates
for
any
office
unless
approved
in
advance
by
Insmed’s
Board
of
Directors.
1.9 






























Employment Decisions
Insmed
may
not
provide
a
job
or
internship
to
a
government
official
or
HCP,
or
a
member
of
their
family,
in
order
to
gain
influence
with
the
HCP
or
official.

If
anHCP
or
government
official
offers
to
give
a
benefit
to
Insmed
or
threatens
to
take
adverse
action
in
connection
with
a
hiring
decision,
the
suggested
candidatecannot
be
hired.
1.10 























Facilitating Payments
A
facilitating
payment
is
a
small
payment
to
secure
or
expedite
a
routine
government
action
by
a
non-U.S.
government
official,
such
as
obtaining
a
visa.
Facilitating
payments
are
impermissible
under
the
local
laws
of
the
countries
where
Insmed
does
business
and
are
prohibited
under
Insmed
policy.
1.11 























Joint Ventures, Mergers, and Acquisitions
When
Insmed
seeks
to
acquire
a
company
or
business,
or
enter
into
a
joint
venture
with
a
company
that
has
operations
or
sales
outside
the
U.S.,
the
due
diligenceInsmed
performs
on
the
target
company
must
include
an
anti-corruption
component.

Insmed
employees
must
consult
the
Legal
and
Compliance
Departments
forspecific
guidance
on
conducting
anti-corruption
due
diligence.
Post-acquisition
integration
plans
must
include
a
process
for
extending
Insmed’s
anti-corruption
policies
and
procedures
to
the
acquired
company
and
trainingemployees
of
the
target
company
in
those
policies
and
procedures.
For
co-marketing
or
co-promotion
agreements,
consult
with
the
Legal
and
Compliance
Departments
for
guidance.
S-
7
Maintain
Accurate
Books
and
Records
Payments
made
to
Third
Party
Representatives,
HCPs,
and
other
third
parties
must
be
accurately
recorded
in
Insmed’s
corporate
books,
records,
and
accounts
in
atimely
manner
and
in
reasonable
detail.

Undisclosed
or
unrecorded
accounts
may
not
be
established
for
any
purpose.

False,
misleading,
incomplete,
inaccurate,
orartificial
entries
in
the
books
and
records
of
Insmed
are
strictly
prohibited.

Written
contracts
with
counterparties
must
accurately
reflect
the
economics
of
theagreement.
Training
Insmed
employees
must
undergo
periodic
training
covering
anti-corruption
laws
and
the
anti-corruption
policies
and
procedures
set
forth
in
this
policy
and
relatedstandard
operating
procedures.

Training
should
occur
on
a
schedule
to
be
determined
by
the
Compliance
Department.
Seeking
Advice
and
Reporting
Potential
Violations
If
you
know
of
or
suspect
any
violations
of
any
anti-corruption
law
or
any
provision
of
this
policy,
you
must
immediately
report
the
matter
to
your
manager
or
amember
of
the
Legal
or
Compliance
Departments.

You
also
should
contact
the
Legal
or
Compliance
Department
if
you
have
any
questions
about
what
ispermissible
under
the
FCPA
or
other
anti-corruption
laws.
When
in
doubt,
seek
advice.

Corruption-related
issues
can
have
significant
consequences
for
Insmed
and
for
employees
who
make
poorjudgments.

Do
not
feel
it
is
your
responsibility
to
make
those
difficult
judgment
calls
alone.
Related
Policies
and
Procedures
The
following
Insmed
policies
and
procedures
supplement
this
Anti-Corruption
Policy:
·


















Anti-Corruption
Policy
SOP
A:

Engagement
of
Third
Party
Representatives·


















Anti-Corruption
Policy
SOP
B:

Consulting
Agreements
with
Non-U.S.
Health
Care
Professionals·


















Anti-Corruption
Policy
SOP
C:

Travel,
Gifts,
Meals,
and
Entertainment
Provided
to
Health
Care
Professionals
and
Government
Officials
Outside
theUnited
States·


















Grants,
Contributions,
and
Sponsorships
Policy·


















SOP
:

Grant
Request
Management·


















SOP:

Determination
of
Fair
Market
Value
Compensation
for
European
Expert
Services·


















SOP:

Determination
of
Fair
Market
Value
Compensation
for
U.S.
Expert
Services
S-
8
·


















Global
SOP
on
Interactions
with
Patients,
Patient
Advocacy
Groups
and
Related
Stakeholders·


















Code
of
Business
Conduct
and
Ethics
S-
9
Schedule 1.12 — AstraZeneca Know-How
The
following
list
refers
to
the
documents
that
were
provided
by
AstraZeneca
to
Insmed
in
the
electronic
data
room
used
by
Insmed
to
conduct
its
due
diligenceactivities
in
connection
with
the
Agreement.
[***]
***
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.
S-
10
Schedule 1.14 — AstraZeneca Regulatory Documentation
The
following
list
refers
to
the
documents
that
were
provided
by
AstraZeneca
to
Insmed
in
the
electronic
data
room
used
by
Insmed
to
conduct
its
due
diligenceactivities
in
connection
with
the
Agreement.
[***]
***
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.
S-
11
Schedule 1.52 - Existing Patents
[***]
***
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.
S-
12
Schedule 1.72 — In-License Agreements
[***]
***
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.
S-
13
Schedule   3.1 — Material Terms of Supply Agreement
In
accordance
with
Section

3.1
of
the
License
Agreement
(the
“
License Agreement ”)
by
and
between
AstraZeneca
AB,
a
company
incorporated
inSweden
under
no.
556011-7482
with
its
registered
office
at
SE-151
85
Södertälje,
Sweden
and
with
offices
at
SE-431
83
Mölndal,
Sweden
(“
AstraZeneca ”)
andInsmed
Incorporated,
a
Virginia
corporation
with
offices
at
10
Finderne
Ave.,
Building
10,
Bridgewater,
NJ
08807-3365
U.S.A.
(“
Insmed ”),
this
Schedule
3.1sets
forth
the
material
terms
of
the
Supply
Agreement
to
be
entered
into
by
and
between
AstraZeneca
and
Insmed.

All
capitalized
terms
used
herein
and
notdefined
shall
have
the
meanings
given
to
such
terms
in
the
License
Agreement.
A. 



































Tablet Manufacture .
In
[***],
Insmed
would
purchase
from
AstraZeneca
tablets
of
Licensed
Products
according
to
the
following
specifications:
Tablet Volume Packaging Shelf life Date of manufacture Price per tablet ($)[***]
[***]
[***]
[***]
[***]
[***][***]
[***]
[***]
[***]
[***]
[***][***]
[***]
[***]
[***]
[***]
[***]
After
[***],
Insmed
may
purchase
from
AstraZeneca
tablets
of
Licensed
Products,
which
tablets
shall
be
manufactured
using
GMP
bulk
API
held
by
AstraZeneca,according
to
the
following
specifications:
Tablet Volume Packaging Shelf life Date of manufacture Price per tablet ($)[***]
[***]
[***]
[***]
[***]
[***][***]
[***]
[***]
[***]
[***]
[***]
[***]
B. 



































Supply of Bulk API .
[***]
C. 



































Miscellaneous .
Licensed
Products
and
Bulk
API
would
be
delivered
[***].
***
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.
S-
14
Schedule 4.1.2 — Development Plan
[***]
***
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.
S-
15
Schedule 4.2.1(ii) — Assigned Regulatory Documentation
[***]
***
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.
S-
16
Schedule 9.4 — Press Release

Insmed Announces Worldwide License Agreement with AstraZeneca for Oral DPP1 Inhibitor
Insmed
expects
to
advance
compound
into
a
phase
2
dose-ranging
study
in
non-cystic
fibrosis
bronchiectasis
in
2017
BRIDGEWATER, N.J. ,
October
5,
2016
(GLOBE
NEWSWIRE)
—
Insmed
Incorporated
(Nasdaq:
INSM),
a
global
biopharmaceutical
company
focused
on
theunmet
needs
of
patients
with
rare
diseases,
today
announced
a
licensing
agreement
with
AstraZeneca
(NYSE:
AZN)
for
global
exclusive
rights
to
AZD7986,
anovel
oral
inhibitor
of
dipeptidyl
peptidase
I
(DPP1,
also
known
as
cathepsin
C).
DPP1
is
an
enzyme
that
catalyzes
the
activation
of
neutrophil
serine
proteases(NSPs),
which
play
a
key
role
in
pulmonary
diseases
such
as
non-cystic
fibrosis
bronchiectasis
(non-CF
bronchiectasis).
Insmed
has
renamed
the
compound
INS1007
and
will
pursue
an
initial
indication
of
non-CF
bronchiectasis,
a
rare,
progressive,
neutrophil-driven
pulmonarydisorder
in
which
the
bronchi
become
permanently
dilated
due
to
chronic
inflammation
and
infection.
Symptoms
include
chronic
cough,
excessive
sputumproduction,
shortness
of
breath,
and
repeated
respiratory
infections,
which
can
worsen
the
underlying
condition.
The
estimated
global
prevalence
of
non-CFbronchiectasis
exceeds
2
million,
of
which
at
least
110,000
cases
are
in
the
United
States.
There
is
currently
no
cure
for
non-CF
bronchiectasis.
Bronchiectasis
increases
susceptibility
to
nontuberculous
mycobacterial
(NTM)
lung
disease,
and
up
to
50
percent
of
patients
with
bronchiectasis
may
also
have
anactive
NTM
infection.
NTM
lung
disease
is
a
rare
and
often
chronic
infection
that
is
capable
of
causing
irreversible
lung
damage
and
can
be
fatal.
Insmed
iscurrently
advancing
a
global
phase
3
clinical
study
of
ARIKAYCE
(liposomal
amikacin
for
inhalation)
in
NTM
lung
disease.
Insmed
has
also
completed
a
phase
2study
of
ARIKAYCE
for
the
treatment
of
chronic
Pseudomonas aeruginosa infection
in
non-CF
bronchiectasis.
“With
this
transaction
we
have
added
a
highly
complementary
therapy
that
aligns
perfectly
with
our
established
expertise
in
rare
pulmonary
diseases,”
said
WillLewis,
president
and
chief
executive
officer
of
Insmed.
“Because
NTM
lung
disease
and
bronchiectasis
often
co-exist,
we
can
readily
leverage
our
existingrelationships
with
physician
experts
around
the
world
who
are
eagerly
awaiting
new
treatment
options.
We
continue
to
expect
patient
enrollment
in
our
phase
3study
of
ARIKAYCE
to
conclude
later
this
year
and
to
report
top
line
data
in
2017.
We
expect
that
when
approved,
ARIKAYCE
and
INS1007
will
allow
us
toprovide
great
value
to
the
patients
who
are
living
with
NTM
lung
disease
and
bronchiectasis,
as
well
as
the
physicians
who
treat
them.”
S-
17
“We
are
pleased
to
be
working
with
Insmed
on
this
program
from
our
early
stage
respiratory
portfolio,
which
represents
a
novel
approach
to
treatingbronchiectasis,”
said
Maarten
Kraan,
head
of
the
Respiratory
and
Inflammation
Innovative
Medicines
Unit
at
AstraZeneca.
“Insmed
has
the
expertise
andexperience
required
to
take
AZD7986
forward
in
this
important
indication
and
bring
about
results
that
we
hope
will
benefit
patients
in
the
future.”
In
a
phase
1
study
of
healthy
volunteers
AZD7986
was
well
tolerated
and
demonstrated
inhibition
of
the
activity
of
the
NSP
neutrophil
elastase
in
a
dose
andconcentration
dependent
manner.
In
preclinical
studies,
AZD7986
was
shown
to
effectively
and
reversibly
inhibit
DPP1
and
the
activation
of
NSPs
within
maturingneutrophils.
Insmed
is
completing
its
plans
for
a
phase
2
study
in
non-CF
bronchiectasis.
The
study
is
expected
to
begin
in
2017.
Under
the
terms
of
the
agreement,
Insmed
will
pay
AstraZeneca
an
upfront
payment
of
$30
million.
AstraZeneca
will
be
eligible
to
receive
future
paymentstotaling
$120
million
in
future
clinical
regulatory
and
sales
related
milestones
.
AstraZeneca
would
also
be
entitled
to
receive
tiered
royalties
ranging
from
a
highsingle-digit
to
mid-teen.
In
addition,
the
agreement
provides
AstraZeneca
with
the
option
to
negotiate
a
future
agreement
with
Insmed
for
commercialization
ofAZD7986/INS1007
in
chronic
obstructive
pulmonary
disease
or
asthma.
Insmed
recently
closed
a
$55
million
debt
agreement
with
Hercules
Capital,
Inc.,
which
refinanced
the
company’s
existing
debt
and
will
add
$30
million
of
newdebt
to
fund
the
upfront
payment.
The
company
confirms
its
cash
operating
expense
guidance
for
the
second
half
of
2016
of
$62
to
$72
million.
Going
forward
thecompany
remains
committed
to
maintaining
a
disciplined
use
of
capital
that
ensures
key
corporate
activities
pertaining
to
its
priority
ARIKAYCE
and
INS1007programs
are
fully
resourced.
About INS1007
INS1007
is
a
small
molecule,
reversible
inhibitor
of
dipeptidyl
peptidase
I
(DPP1),
an
enzyme
responsible
for
activating
neutrophil
serine
proteases
(NSPs)
inneutrophils
when
they
are
formed
in
the
bone
marrow.
Neutrophils
are
the
most
common
type
of
white
blood
cell
and
play
an
essential
role
in
pathogen
destructionand
inflammatory
mediation.
Neutrophils
contain
three
NSPs
(neutrophil
elastase,
proteinase
3,
and
cathepsin
G)
that
have
been
implicated
in
a
variety
ofinflammatory
diseases.

In
chronic
inflammatory
lung
diseases,
neutrophils
accumulate
in
the
airways
and
result
in
excessive
active
NSPs
that
cause
lungdestruction
and
inflammation.
INS1007
may
decrease
the
damaging
effects
of
inflammatory
diseases,
such
as
non-cystic
fibrosis
bronchiectasis,
by
inhibitingDPP1
and
its
activation
of
NSPs.
About Insmed
Insmed
Incorporated
is
a
global
biopharmaceutical
company
focused
on
the
unmet
needs
of
patients
with
rare
diseases.
The
company
is
advancing
a
global
phase
3clinical
study
of
ARIKAYCE
(liposomal
amikacin
for
inhalation)
in
nontuberculous
mycobacteria
(NTM)
lung
disease,
a
rare
and
often
chronic
infection
that
iscapable
of
causing
irreversible
lung
damage
and
can
be
fatal.
There
are
currently
no
products
indicated
for
the
treatment
of
NTM
lung
disease
in
the
United
Statesor
European
Union.
The
company’s
earlier-stage
clinical
pipeline
includes
INS1009,
a
nebulized
prodrug
formulation
of
treprostinil
that
the
company
believes
mayoffer
a
differentiated
product
profile
with
therapeutic
potential
in
rare
pulmonary
disorders
such
as
pulmonary
arterial
hypertension
(PAH),
idiopathic
pulmonaryfibrosis
(IPF),
sarcoidosis,
and
severe
refractory
asthma.
To
complement
its
internal
research,
Insmed
actively
seeks
in-
S-
18
licensing
opportunities
for
a
broad
range
of
rare
diseases.

For
more
information,
visit
www.insmed.com.
“Insmed”
and
“ARIKAYCE”
are
the
company’s
trademarks.
All
other
trademarks,
trade
names
or
service
marks
appearing
in
this
press
release
are
the
property
oftheir
respective
owners.
S-
19
About AstraZeneca
AstraZeneca
is
a
global,
science-led
biopharmaceutical
company
that
focuses
on
the
discovery,
development
and
commercialisation
of
prescription
medicines,primarily
for
the
treatment
of
diseases
in
three
therapy
areas
—
Respiratory
and
Autoimmunity,
Cardiovascular
and
Metabolic
Diseases,
and
Oncology.
Thecompany
is
also
active
in
inflammation,
infection
and
neuroscience
through
numerous
collaborations.
AstraZeneca
operates
in
over
100
countries
and
its
innovativemedicines
are
used
by
millions
of
patients
worldwide.
For
more
information
please
visit:
www.astrazeneca.com
Forward-looking statements
This
press
release
contains
forward
looking
statements.

“Forward-looking
statements,”
as
that
term
is
defined
in
the
Private
Securities
Litigation
Reform
Act
of1995,
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
similar
expressions
(as
well
as
other
wordsor
expressions
referencing
future
events,
conditions
or
circumstances)
identify
forward-looking
statements.
Forward-looking statements are based upon the company’s current expectations and beliefs, and involve known and unknown risks, uncertainties and otherfactors, which may cause 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” in the company’s Annual Report on Form 10-K for the year ended December 31, 2015 and subsequent quarterly reports on Form 10-Q,and the following: the ability to successfully develop INS1007 (formerly known as AZD7986) for the treatment of non-CF bronchiectasis; the ability to completedevelopment of, receive, and maintain regulatory approval for, and successfully commercialize ARIKAYCE, INS1007 (formerly known as AZD7986), and INS1009;the number of patients enrolled and the timing of patient enrollment in the company’s global phase 3 clinical study of ARIKAYCE; estimates of expenses and futurerevenues and profitability; status, timing, and the results of preclinical studies and clinical trials and preclinical and clinical data described herein; the sufficiencyof preclinical and clinical data in obtaining regulatory approval for the company’s product candidates; the timing of responses to information and data requestsfrom the US Food and Drug Administration, the European Medicines Agency, and other regulatory authorities; expectation as to the timing of regulatory reviewand approval; estimates regarding capital requirements and the needs for additional financing, including for payment milestones and royalty obligations under thelicense agreement; estimates of the size of the potential markets for product candidates; selection and licensing of product candidates; ability to attract thirdparties with acceptable development, regulatory and commercialization expertise; the benefits to be derived from corporate license agreements and other thirdparty efforts, including those relating to the development and commercialization of product candidates; the degree of protection afforded to the company by itsintellectual property portfolio; the safety and efficacy of product candidates; sources of revenues and anticipated revenues, including contributions from licenseagreements and other third party efforts for the development and commercialization of products; ability to create an effective direct sales and marketinginfrastructure for products the company elects to market and sell directly; the rate and degree of market acceptance of product candidates; the impact of anylitigation the company is a party to, including, without limitation, the class action lawsuit
S-
20
recently filed against the company; the timing, scope and rate of reimbursement for product candidates; the success of other competing therapies that may becomeavailable; and the availability of adequate supply and manufacturing capacity and quality for product candidates.
The company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. Insmeddisclaims any obligation, except as specifically required by law and the rules of the Securities and Exchange Commission, to publicly update or revise any suchstatements to reflect any change in expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect thelikelihood that actual results will differ from those set forth in the forward-looking statements.
Insmed
Incorporated:Susan
MescoHead
of
Investor
Relations908-947-4326
###
S-
21
Schedule 9.5.2 — Pending and Planned Publications
Submitted
[***]
Planned
[***]
***
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.
S-
22QuickLinks
--
Click
here
to
rapidly
navigate
through
this
documentExhibit
10.30
November
30,
2016VIA
E-MAILMartha
J.
Demski
Chief
Financial
Officer
Ajinomoto
Althea,
Inc.
11040
Roselle
Street
San
Diego,
CA
92121RE:
Extension
of
Commercial
Fill/Finish
Services
AgreementDear
Ms.
Demski,













As
you
know,
Ajinomoto
Althea,
Inc.
("Althea")
and
Insmed
Incorporated
("Insmed")
are
parties
to
the
Commercial
Fill/Finish
Supply
Agreement,
datedJanuary
1,
2015
(the
"Agreement").
Per
Section
7.1
of
the
Agreement,
the
Initial
Term
(as
defined
in
the
Agreement)
of
the
Agreement
expires
December
31,
2017and
the
parties
may
mutually
agree
to
extend
the
Agreement
for
an
additional
two
(2)
year
period
at
least
one
(1)
year
prior
to
the
expiration.
Insmed
kindlyrequests
that
Althea
acknowledge
and
agree
to
a
two
(2)
year
extension
of
the
Agreement
until
December
31,
2019
by
signing
below.













We
appreciate
all
of
the
efforts
made
to
date
by
Althea
and
look
forward
to
continuing
our
relationship.
Please
contact
me
at
908-947-4309
with
anyquestions.AGREED
AND
ACKNOWLEDGED:AJINOMOTO
ALTHEA,
INC.


10
Finderne
Avenue,
Building
10
|
Bridgewater,
NJ
08807
|
Phone:
908-977-9900
|
Fax:
908-526-4026
www.insmed.com
Sincerely,
/s/
DON
NOCIOLO
Don
Nociolo
Vice President, Technical OperationsBy:
/s/
MARTHA
J.
DEMSKI





Name:
Martha
J.
Demski



Title:
Sr. Vice President and CFO

QuickLinks
Exhibit
10.30
QuickLinks
--
Click
here
to
rapidly
navigate
through
this
documentExhibit
10.31
AMENDMENT
TO
EMPLOYMENT
AGREEMENT














This
Amendment
to
EMPLOYMENT
AGREEMENT
(this
"
Amendment "),
is
made
and
entered
into
as
of
September
26,
2016
(the
"
Effective Date ")
byand
between
Insmed
Incorporated,
a
Virginia
corporation
(the
"
Company "),
and
Christine
A.
Pellizzari
(the
"
Executive ")
(each
of
the
Executive
and
theCompany,
a
"Party",
and
collectively,
the
"Parties").














WHEREAS
,
the
Executive
has
been
performing
services
as
an
employee
to
the
Company
pursuant
to
that
certain
Employment
Agreement
between
theCompany
and
the
Executive
dated
July
29,
2013
(the
"
Employment Agreement ");














WHEREAS
,
the
Executive
and
the
Company
mutually
desire
to
amend
the
Employment
Agreement
to
revise
the
severance
terms
and
amounts
payableto
Executive
in
the
event
the
Company
terminates
her
employment
other
than
for
"Cause,"
death
or
"Disability"
(as
those
terms
are
defined
in
the
EmploymentAgreement),
or
in
the
event
the
Executive
terminates
her
employment
for
Good
Reason
following
a
Change
in
Control,
as
that
term
is
defined
in
Section
1(g)
of
theEmployment
Agreement;
and














WHEREAS
,
this
Amendment,
dated
as
of
Effective
Date,
between
the
parties
contain
the
entire
agreement
between
the
Executive
and
the
Company
andsupersedes
any
and
all
prior
agreements,
arrangements
and
understandings
regarding
the
subject
matter
contained
herein.














NOW,
THEREFORE
,
in
consideration
of
the
premises
and
agreements
set
forth
herein
and
for
other
good
and
valuable
consideration,
the
sufficiencyand
receipt
of
which
are
hereby
acknowledged,
the
Company
and
the
Executive
hereby
agree
that,
as
of
the
Effective
Date
of
this
Amendment,
the
EmploymentAgreement
shall
be
amended
as
follows:













1.










Section
6(e)
is
hereby
amended
and
restated
in
its
entirety
as
follows
(changes
indicated
in
bold
):













(e)




Termination
Without
Cause
or
Resignation
With
Good
Reason.




The
Company
may
terminate
the
Term
of
Employment
withoutCause,
and
the
Executive
may
terminate
the
Term
of
Employment
for
Good
Reason,
at
any
time
upon
written
notice.
If
the
Term
of
Employment
isterminated
by
the
Company
without
Cause
(other
than
due
to
the
Executive's
death
or
Disability)
or
by
the
Executive
for
Good
Reason,
in
eithercase
prior
to
the
date
of
a
Change
in
Control
or
more
than
one
year
after
a
Change
in
Control,
the
Executive
shall
be
entitled
to
the
following:






















(i)

The
Accrued
Obligations,
payable
as
and
when
those
amounts
would
have
been
paid
had
the
Term
of
Employmentnot
ended;





















(ii)

Any
unpaid
Bonus
in
respect
to
any
completed
fiscal
year
that
has
ended
on
or
prior
to
the
Termination
Date,payable
within
2
1
/
2
months
following
the
last
day
of
the
month
in
which
the
Termination
Date
occurs;



















(iii)

The
Pro-Rata
Bonus,
payable
within
2
1
/
2
months
following
the
end
of
the
fiscal
year
in
which
the
TerminationDate
occurs;




















(iv)


Double
t
he
Severance
Amount,
payable
in
equal
installments
consistent
with
the
Company's
normal
payrollschedule
over
the
12
month
periodbeginning
with
the
first
regularly
scheduled
payroll
date
that
occurs
more
than
30
days
following
the
Termination
Date;





















(v)

Provided
that
the
Executive
timely
elects
continued
coverage
under
COBRA,
the
Company
will
reimburse
theExecutive
for
the
monthly
COBRA
cost
of
continued
health
and
dental
coverage
of
the
Executive
and
his
qualified
beneficiaries
paidby
the
Executive
under
the
health
and
dental
plans
of
the
Company,
less
the
amount
that
the
Executive
would
be
required
tocontribute
for
health
and
dental
coverage
if
the
Executive
were
an
active
employee
of
the
Company,
for
12
months
(or,
if
less,
for
theduration
that
such
COBRA
coverage
is
available
to
Executive);
and




















(vi)

Accelerated
vesting,
as
of
the
Termination
Date,
of
any
stock
options
that
would
have
otherwise
vested
withintwelve
months
following
the
Termination
Date.













2.










Except
as
modified
by
this
Amendment,
all
other
terms
and
conditions
of
the
Employment
Agreement
remain
in
full
force
and
effect.













IN
WITNESS
WHEREOF,
the
undersigned,
intending
to
be
legally
bound,
have
executed
this
Amendment,
effective
as
of
the
date
set
forth
above.

INSMED
INCORPORATED

By:
/s/
WILL
LEWIS




Name:
Will
Lewis



Title:
Chief Executive Officer



/s/
CHRISTINE
A.
PELLIZZARI
Christine
A.
PellizzariQuickLinks
Exhibit
10.31
AMENDMENT
TO
EMPLOYMENT
AGREEMENT
QuickLinks
--
Click
here
to
rapidly
navigate
through
this
documentExhibit
10.32
AMENDMENT
TO
EMPLOYMENT
AGREEMENT














This
Amendment
to
EMPLOYMENT
AGREEMENT
(this
"
Amendment "),
is
made
and
entered
into
as
of
September
26,
2016
(the
"
Effective Date ")
byand
between
Insmed
Incorporated,
a
Virginia
corporation
(the
"
Company "),
and
S.
Nicole
Schaeffer
(the
"
Executive ")
(each
of
the
Executive
and
the
Company,
a"Party",
and
collectively,
the
"Parties").














WHEREAS
,
the
Executive
has
been
performing
services
as
an
employee
to
the
Company
pursuant
to
that
certain
Employment
Agreement
between
theCompany
and
the
Executive
dated
July
29,
2013
(the
"
Employment Agreement ");














WHEREAS
,
the
Executive
and
the
Company
mutually
desire
to
amend
the
Employment
Agreement
to
revise
the
severance
terms
and
amounts
payableto
Executive
in
the
event
the
Company
terminates
her
employment
other
than
for
"Cause,"
death
or
"Disability"
(as
those
terms
are
defined
in
the
EmploymentAgreement),
or
in
the
event
the
Executive
terminates
her
employment
for
Good
Reason
following
a
Change
in
Control,
as
that
term
is
defined
in
Section
1(g)
of
theEmployment
Agreement;
and














WHEREAS
,
this
Amendment,
dated
as
of
Effective
Date,
between
the
parties
contain
the
entire
agreement
between
the
Executive
and
the
Company
andsupersedes
any
and
all
prior
agreements,
arrangements
and
understandings
regarding
the
subject
matter
contained
herein.














NOW,
THEREFORE
,
in
consideration
of
the
premises
and
agreements
set
forth
herein
and
for
other
good
and
valuable
consideration,
the
sufficiencyand
receipt
of
which
are
hereby
acknowledged,
the
Company
and
the
Executive
hereby
agree
that,
as
of
the
Effective
Date
of
this
Amendment,
the
EmploymentAgreement
shall
be
amended
as
follows:













1.










Section
6(e)
is
hereby
amended
and
restated
in
its
entirety
as
follows
(changes
indicated
in
bold
):













(e)




Termination
Without
Cause
or
Resignation
With
Good
Reason.




The
Company
may
terminate
the
Term
of
Employment
withoutCause,
and
the
Executive
may
terminate
the
Term
of
Employment
for
Good
Reason,
at
any
time
upon
written
notice.
If
the
Term
of
Employment
isterminated
by
the
Company
without
Cause
(other
than
due
to
the
Executive's
death
or
Disability)
or
by
the
Executive
for
Good
Reason,
in
eithercase
prior
to
the
date
of
a
Change
in
Control
or
more
than
one
year
after
a
Change
in
Control,
the
Executive
shall
be
entitled
to
the
following:






















(i)

The
Accrued
Obligations,
payable
as
and
when
those
amounts
would
have
been
paid
had
the
Term
of
Employmentnot
ended;





















(ii)


Any
unpaid
Bonus
in
respect
to
any
completed
fiscal
year
that
has
ended
on
or
prior
to
the
TerminationDate,
payable
within
2
1
/
2
months
following
the
last
day
of
the
month
in
which
the
Termination
Date
occurs;



















(iii)

The
Pro-Rata
Bonus,
payable
within
2
1
/
2
months
following
the
end
of
the
fiscal
year
in
which
the
TerminationDate
occurs;




















(iv)


Double
t
he
Severance
Amount,
payable
in
equal
installments
consistent
with
the
Company's
normal
payrollschedule
over
the
12
month
periodbeginning
with
the
first
regularly
scheduled
payroll
date
that
occurs
more
than
30
days
following
the
Termination
Date;





















(v)

Provided
that
the
Executive
timely
elects
continued
coverage
under
COBRA,
the
Company
will
reimburse
theExecutive
for
the
monthly
COBRA
cost
of
continued
health
and
dental
coverage
of
the
Executive
and
her
qualified
beneficiaries
paidby
the
Executive
under
the
health
and
dental
plans
of
the
Company,
less
the
amount
that
the
Executive
would
be
required
tocontribute
for
health
and
dental
coverage
if
the
Executive
were
an
active
employee
of
the
Company,
for
12
months
(or,
if
less,
for
theduration
that
such
COBRA
coverage
is
available
to
Executive);
and





















(v)


Accelerated
vesting,
as
of
the
Termination
Date,
of
any
stock
options
that
would
have
otherwise
vestedwithin
twelve
months
following
the
Termination
Date.













2.










Except
as
modified
by
this
Amendment,
all
other
terms
and
conditions
of
the
Employment
Agreement
remain
in
full
force
and
effect.













IN
WITNESS
WHEREOF,
the
undersigned,
intending
to
be
legally
bound,
have
executed
this
Amendment,
effective
as
of
the
date
set
forth
above.

INSMED
INCORPORATED

By:
/s/
WILL
LEWIS




Name:
Will
Lewis



Title:
Chief Executive Officer



/s/
S.
NICOLE
SCHAEFFER
S.
Nicole
SchaefferQuickLinks
Exhibit
10.32
AMENDMENT
TO
EMPLOYMENT
AGREEMENT
QuickLinks
--
Click
here
to
rapidly
navigate
through
this
documentEXHIBIT
21.1
APPENDIX
A
LIST
OF
SUBSIDIARIES
Name
Jurisdiction
of
IncorporationCeltrix
Pharmaceuticals,
Inc.

DelawareInsmed
Limited
England
and
WalesInsmed
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
No.
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
23,
2017,
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,
2016.Iselin,
New
Jersey
February
23,
2017

/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
23,
2017

By:
/s/
William
H.
Lewis
William
H.
Lewis
Chief Executive Officer (Principal Executive Officer)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,
2016
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
23,
2017This
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)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
23,
2017


/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,
2016
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
23,
2017This
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