Annual Report
Ready.
2024
Readiness is not a
milestone. It’s not a
moment. Readiness
is a state of mind.
It’s built on cultural
cohesion, adaptive
thinking, and the
willingness to fail.
Readiness is fueled
by intention.
At Insmed, we will always be ready to transform
the lives of patients and families and change
what it means to live with a serious disease.
The success we anticipate in 2025 and beyond
will never see us rest on our laurels. We have
been at the edge of readiness for over a decade,
and no matter how much we see our efforts
come to fruition, we will always be ready for
what’s next.
John, living with bronchiectasis
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LETTER FROM THE CHAIR & CEO
2024 was the single most important
year in Insmed’s history—truly one for
the record books. This was the year
we brought renewed hope to patients
and, in the process, showed that we
have what it takes to become the
next great biotechnology company.
It’s extraordinary to reflect on the
organization we have become, and
to know it’s only the beginning.
Among many successes throughout
the year, our defining moment was
delivering positive topline results
from the landmark Phase 3 ASPEN
study of brensocatib in patients with
bronchiectasis. These results were a
win for the bronchiectasis community,
heralding a potential new treatment
paradigm for patients with this serious,
chronic disease that to date has had
no approved therapies. The study not
only demonstrated that brensocatib
worked in patients with bronchiectasis
with a safety profile similar to placebo,
but also unlocked an entirely new
mechanism of action known as
dipeptidyl peptidase 1 (DPP1) inhibition
for the potential treatment of other
neutrophil-mediated diseases.
To the outside world, the ASPEN
readout was the catalyst that put
Insmed on the map. But for those of
us at Insmed, we know our success
did not happen overnight, nor did
it happen by chance. It was the
result of many years of hard work,
perseverance, and trust in both
ourselves and the future. As I think
about my early days at Insmed 12
years ago with just 30 colleagues, it’s
hard to believe that today we number
over 1,300 people and are at the
threshold of something so meaningful
in terms of potential value creation
and patient impact.
We are in a rare and enviable position
in our industry, and it’s one we don’t
take for granted. Against the backdrop
of a dismal biotech market with deep
investor skepticism, Insmed began
2025 with more than $1.4 billion in
cash, continues to achieve double-
digit growth for our commercial
product, expects a series of highly
relevant clinical readouts over the
next 12 months, and is preparing for
one of the most eagerly anticipated
drug launches in the industry later
this year, pending U.S. Food and Drug
Administration (FDA) approval. Behind
these near-term milestones sits our
pre-clinical research engine—the
answer to what’s next for Insmed that
has already been cultivated in house.
To our
shareholders:
“ This was the year we brought
renewed hope to patients
and, in the process, showed
that we have what it takes
to become the next great
biotechnology company.”
But even more important than our
many opportunities is the way in which
we approach them. Our ambition goes
beyond delivering critically needed
first- or best-in-class medicines; it’s
to be a role model within our industry
for building a place where people feel
proud and inspired, and genuinely
want to work. Culture is everything,
and at Insmed, we’re all authors of
our culture. We come to the table with
different perspectives and experiences,
but we share a common belief that our
industry can do extraordinary things—
and do them the right way. Above all,
we believe that if people are given
the space and trust to do their best
work in the most authentic way, the
clear consequence will be a benefit to
patients. Now more than ever, this kind
of example is needed.
We’ve set out to do something at
Insmed that is bigger than any one
of us individually, and that ambition
has begun to carry some water in
the industry. As just one example, we
received more than 7,000 resumes for
the 120 field sales positions we filled
in the U.S. last year in preparation for
the launch of brensocatib. This level of
interest speaks not only to the strong
excitement surrounding the upcoming
launch, but also to the notion that
we’ve built something truly special.
I am perhaps prouder of this than of
anything else we’ve achieved.
While we celebrate our successes,
we never sit still. If 2024 was a pivotal
year, 2025 has the potential to be even
bigger, and the following year even
bigger than that. We have meticulously
laid the groundwork for where we
stand now, and we are more than
ready for what’s to come.
Thank you to our shareholders who
have patiently supported and believed
in us throughout our journey. Thank
you to our Board of Directors for your
invaluable guidance, to the physician
and research communities with whom
we are proud to collaborate, and to
the most passionate and dedicated
group of employees I have been lucky
enough to work with.
Above all, my deepest thanks to the
patients and families we serve. You
are our “why” and the true North Star
in every decision we make.
Will Lewis
Chair & Chief Executive Officer
“ We have meticulously laid
the groundwork for where
we stand now, and we are
more than ready for what’s
to come.”
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2024 ANNUAL REPORT
NEWS & BUSINESS
2024
Year in review
Insmed announces positive results from
landmark Phase 3 ASPEN study
The results are in: In the largest study ever conducted in patients
with bronchiectasis, brensocatib met its primary endpoint and
several key secondary endpoints, with a safety profile similar to
placebo. The findings herald the potential for a new era in the
clinical management of bronchiectasis.
In an extraordinary year driven by key data
milestones and strong commercial performance,
we are equally proud of the unique culture we
continue to uphold.
Insmed announces positive
topline data from Phase 2
study of TPIP in patients
with PH-ILD
A Phase 2 study of treprostinil palmitil
inhalation powder (TPIP) in patients with
pulmonary hypertension associated with
interstitial lung disease (PH-ILD) showed
positive safety data and a nominally
statistically significant difference in
clinical worsening of disease that
favored patients treated with TPIP.
ARIKAYCE delivers full-year
2024 revenues of $363.7
million, exceeding the upper
end of guidance range
In its seventh year post-launch,
ARIKAYCE® (amikacin liposome
inhalation suspension) continues to
deliver double-digit growth globally.
IND cleared for INS1201
Insmed received clearance from the
FDA for the investigational new drug
(IND) application for INS1201, an
intrathecally delivered gene therapy
for patients with Duchenne muscular
dystrophy (DMD).
No. 1 Science
Top Employer
for fourth year in a row
U.S. Great
Place to Work
for fourth year in a row
Best Places
to Work
in the UK
by The Sunday Times
New Drug
Application
submitted to FDA
for brensocatib
in bronchiectasis
Multiple
accolades
from Extel, formerly
Institutional Investor
employees as of the end of 2024
1,200+
Speak Up In BE
awareness campaign helps
patients feel seen, understood,
and supported
Expanded U.S.
field force
deployed to focus on
bronchiectasis awareness while
growing ARIKAYCE
new employee
resource groups
2
Enrollment complete
in ENCORE trial of ARIKAYCE in
patients with newly diagnosed or
recurrent Mycobacterium avium
complex (MAC) lung disease who
had not been treated with antibiotics
in Phase 2 study of TPIP in
patients with pulmonary arterial
hypertension (PAH)
Enrollment complete
Best
Places
to Work
by BioSpace
in Phase 2 study of brensocatib
for hidradenitis suppurativa (HS)
1
st patient
enrolled
More than 10
new initiatives
leveraging AI to transform
drug discovery, development,
and commercialization
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2024 ANNUAL REPORT
SCIENCE & TECHNOLOGY
Our defining clinical
and commercial
catalysts
Critical successes in 2024 have set us up for a year
of execution in 2025.
In 2024, we delivered exceptional results across our
business, with double-digit growth for our marketed
product, ARIKAYCE, and critical achievements in our
development programs. Anchored by the positive
readout of the Phase 3 ASPEN study of brensocatib,
which has the potential to transform the treatment
landscape for bronchiectasis, 2024 proved to be the
most critical year in Insmed’s history.
Today, we are more determined than ever to
execute on the many opportunities in front of us
and to redefine Insmed from a company that can
serve approximately 30,000 patients to one able to
reach more than 2.5 million patients by the end of
the decade.
Multiple catalysts fuel our next era
TPIP Phase 2 topline
data in PAH
AUGUST ‘25
YE ‘25
LATE ‘25/
EARLY ‘26
U.S. launch of
brensocatib in
bronchiectasis, if
approved by PDUFA
target action date
Brensocatib Phase
2b topline data in
chronic rhinosinusitis
without nasal polyps
(CRSsNP)
Initial clinical data
from DMD gene
therapy as well as IND
filings for additional
gene therapies
MID ‘25
1Q ‘26
ARIKAYCE ENCORE
topline data
2024
Financial highlights
Global annual net
product revenues (in millions)
Cash, cash equivalents, and
marketable securities (in millions)
In 2025, we anticipate global
ARIKAYCE revenues to be between
$405 million and $425 million.
2022
$245.4
$1,148.3
2023
$305.2
$780.4
$363.7
2024
$1,433.8
ARIKAYCE
®
Continuing to drive double-digit growth
We saw strong global revenue performance for ARIKAYCE
in 2024, with full-year revenues exceeding the upper end
of our guidance range and reflecting double-digit growth
over the prior year. ARIKAYCE is our first commercial
product and is currently approved in the U.S., Europe,
and Japan as the first and only therapy for adults with
refractory MAC lung disease with limited treatment
options, in combination with their multidrug regimen.
Today, we are advancing the development of ARIKAYCE
as a potential treatment for all patients with MAC lung
disease, including those with newly diagnosed or recurrent
infections who have not been treated with antibiotics.
The ENCORE study, a postmarketing study in this patient
population, is currently underway and completed
enrollment in late 2024 with 425 patients, exceeding our
target. We look forward to sharing topline results in the first
quarter of 2026.
2022
2023
2024
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2024 ANNUAL REPORT
SCIENCE & TECHNOLOGY
Brensocatib
Set to transform the treatment landscape of bronchiectasis
The pinnacle achievement of 2024 was
the readout of positive data from the
Phase 3 ASPEN study of brensocatib
in patients with bronchiectasis. The
landmark study, which enrolled more
than 1,700 patients worldwide, met its
primary endpoint with both dosage
strengths of brensocatib demonstrating
statistically significant reductions in
the annualized rate of pulmonary
exacerbations versus placebo. The
study also met several prespecified
secondary endpoints with statistical
significance and demonstrated a
safety profile for brensocatib that
was comparable to placebo. With no
approved treatments for bronchiectasis
today, these results have the potential to
change the clinical management of this
chronic, debilitating pulmonary disease.
We are pleased that the FDA has since
accepted our New Drug Application
for brensocatib for the treatment of
patients with bronchiectasis under
Priority Review, and has set a PDUFA
target action date of August 12, 2025.
In preparation for the potential FDA
approval and launch of brensocatib in
the U.S., we’ve added 120 Therapeutic
Specialists to our U.S. sales force,
which we deployed in late 2024 to
begin disease state awareness efforts
for brensocatib, while also detailing
ARIKAYCE. We’ve also expanded our
Market Access team as well as many
other operational functions to prepare
for the significant growth ahead.
Beyond bronchiectasis, the ASPEN
results also further validated DPP1
inhibition as a mechanism of action
that warrants further exploration in
other neutrophil-mediated diseases,
including CRSsNP and HS. In 2024,
Insmed continued to advance the
Phase 2 BiRCh study of brensocatib
in patients with CRSsNP and initiated
the Phase 2 CEDAR study in patients
with HS. We anticipate sharing topline
results from the BiRCh study before the
end of 2025.
Another exciting milestone came
in 2024 with the topline readout
of data from our Phase 2 study of
TPIP in patients with PH-ILD. TPIP
is a prodrug of treprostinil that we
believe has the potential for clear
differentiation in the treatment of
both PAH and PH-ILD. The Phase
2 study in PH-ILD showed positive
safety data and a nominally
statistically significant difference in
clinical worsening of disease that
favored patients treated with TPIP.
We now look forward to initiating a
Phase 3 study in PH-ILD in the
second half of 2025.
In addition, we have completed
enrollment in the Phase 2 study in
PAH, and topline data are anticipated
in the middle of 2025.
TPIP
Advancing to Phase 3 in 2025
Insmed’s lead gene therapy candidate
is INS1201, an intrathecally delivered
investigational treatment for patients with
DMD. In December 2024, we received
clearance from the FDA to advance
INS1201 into the clinic and anticipate
initiating a clinical trial in patients with
DMD in the first half of 2025.
DMD is a genetic disorder that prevents
the body from producing dystrophin,
a protein that muscles need to work
properly. Without it, muscle cells become
damaged and weaken. While there have
been exciting developments recently in
the treatment of DMD, a significant need
remains for an effective treatment with a
manageable safety profile.
Beyond INS1201, Insmed’s next two
gene therapy candidates, which target
amyotrophic lateral sclerosis (ALS)
and Stargardt disease, are currently
advancing toward the clinic.
Our pre-clinical research is the
engine that will fuel our pipeline
for years to come. It spans several
cutting-edge technologies,
including targeted gene therapy,
deimmunized protein engineering
using AI, RNA end-joining, and
synthetic rescue. Today, we have
more than 30 identified pre-clinical
programs in development, all of
which have the potential to become
first-in-class or best-in-class
therapies for the indications being
pursued.
Our world-class Research team
operates collaboratively across our
laboratory sites in New Hampshire,
San Diego, New Jersey, and
Cambridge, UK, coming together for
periodic Research Summits to share
updates and build relationships
that have the potential to catalyze
scientific breakthroughs.
Pre-clinical research
The answer to what’s next
Gene therapy
First IND cleared
10
11
We believe TPIP has
the potential for
clear differentiation
in the treatment of
PAH and PH-ILD
With no approved
treatments for
bronchiectasis today,
these results have
the potential to
change the clinical
management of this
chronic, debilitating
pulmonary disease
Our pre-clinical
research is the
engine that will
fuel our pipeline
for years to come
2024 ANNUAL REPORT
Every decision we make is driven by the
potential to bring life-changing outcomes
to the patients we serve.
Patients are at the
heart of all we do
Dana
“ Find a support group. That group
will keep you going, give you
advice, make you feel like you’re
not alone, and give you a way to
help others.”
Living with bronchiectasis & nontuberculous
mycobacterial (NTM) lung disease
“ You have limited time at the doctor’s
office, so bring your questions with
you, take notes, and don’t be afraid
to ask for more clarity or support.”
Lusana
Living with bronchiectasis &
NTM lung disease
John
“ You have to be your own
advocate. No one is going to
watch out for you except you.”
Living with
bronchiectasis
Go to page 13 of this
PDF to read a few of
our patient stories.
“ The potential to bring a major
treatment to patients this year,
while simultaneously pushing
the boundaries to develop new
therapies, fills me with anticipation
and purpose. Driven by the
unwavering dedication of the
Biometrics Programming team, the
impact of our work, and our collective
passion for helping patients with
rare diseases, I feel ready for a
transformational 2025.”
“ One of the greatest strengths we
have at Insmed is how we show up
for each other, especially when we
are trying to solve a problem or tackle
a really big issue. The people I work
closely with have a way of making
difficult work feel lighter in the ways
we support each other, proactively
address issues, exude positive energy,
and demonstrate an unwavering
commitment to patients.”
“ I draw strength, inspiration, and
a sense of purpose at Insmed,
knowing that the work we do has a
direct impact on the lives of patients
around the world. It’s incredibly
inspiring to work alongside
outstanding colleagues, advancing
early-stage research that could
deliver groundbreaking medications
to patients in the years to come.”
“ Expanding the Japan Field Medical
team in 2025 will enhance our ability
to help patients. Working alongside
great colleagues in transformative
ways, I am excited to have more
opportunities to make a difference in
patients’ lives.”
“ Hearing firsthand from patients and
healthcare professionals as part
of my role is a constant reminder
that what we’re working toward
isn’t just a launch or a business
milestone—it’s real people who need
better options. I am also energized
by our collaborative culture and the
opportunity to work with such smart,
passionate colleagues who genuinely
want to make a difference and get us
ready for everything that lies ahead.”
“ I draw strength from the support
of my loved ones and the lessons
I’ve learned from past experiences.
Aspiration comes from setting goals
and envisioning the positive impact I
can have on myself and others.”
Barry Hammond
Director, Field
Access Managers
CULTURE
People are
our purpose
Our people are our greatest strength.
Together, we’re ready for what’s ahead.
Our mission
To transform the lives of patients
with serious and rare diseases.
Our vision
To be a globally recognized leading biotech company that empowers great
people to deliver, with a profound sense of urgency and compassion, life-altering
therapies to small patient populations experiencing big health problems.
Our values
Guiding the actions we take each day.
We are committed to acting in an
ethical, honest, and transparent
manner in everything we do.
Integrity
We embrace our colleagues’
differences, recognize their
contributions, and create a culture
of empowerment and trust.
Respect
We check our egos at the door and
share ideas openly and candidly.
When we disagree, we do so with
respect and a willingness to listen.
Collaboration
We are each responsible for ensuring
that our actions align with our values.
Accountability
We are driven to expect more than
others think is possible and deliver
excellence to our patients, fellow
employees, and stakeholders.
Passion
Our voices
As we gear up for this year, we asked employees: ‘What aspects of
our culture make you ready for an ambitious 2025?’
Roopali Lakhe
Associate Director,
Programming
Diana McCormick
Senior Director, HR
Business Partner -
Commercial &
Operations
Mo Sabbah
Director, Medicinal
Chemistry
Yusuke Ohta
Senior Manager,
Field Medical –
Japan
Fenna Gloggner
Director, Insights –
EMEA
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15
2024 ANNUAL REPORT
CULTURE
Highlights from our
annual employee
pulse survey
of employees
are inspired by
the work we do
of employees
are proud to
work at Insmed
of employees said
their coworkers
consistently go the
extra mile to achieve
great results
94%
93%
90%
overall employee
engagement score,
reflecting the strength
of connection employees
feel toward their work,
each other, and Insmed
90%
of employees
believe Insmed
will be successful
in the future
95%
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16
2024 ANNUAL REPORT
IN THE COMMUNITY
We feel a deep responsibility to make positive
changes within our local communities.
At Insmed, our ambition extends well
beyond delivering life-transforming
medicines to patients with serious
diseases. As we build the next great
biotechnology company, we aspire
to serve as an example within our
industry for how a company should
operate—including upholding a strong
sense of responsibility in all aspects of
our business.
2024 marked our strongest year of
support for the communities in which
we live and work, with a continued
focus on our core areas of health,
education, and human services.
We increased funding for our key
charitable recipients, enabling us
to reach even more people in need.
We continued to offer an employee
matching gift program, allowing
team members to double the impact
of their giving, and also launched
new initiatives, including a mentoring
program with a local community
college. Through Insmed Cares, our
employee-led volunteer team, we
held numerous in-person volunteer
events near our Bridgewater, NJ,
headquarters, and were excited to
launch an Insmed Cares chapter in our
San Diego location.
In October, we held our third annual
Global Day of Good, a companywide
day of service where Insmed
employees volunteer in their respective
communities simultaneously around
the world. This has quickly become our
signature giveback event, with more
than 1,000 employees participating
in 2024 to support projects such as
painting murals for children’s hospitals,
packing Thanksgiving meal kits,
redecorating a teen center, painting
and assembling playhouses, sorting
donated clothes, and much more.
Stay tuned for our 2024 Responsibility
Report, which will provide more details
on how we uphold our commitments to
all stakeholders as we grow.
Our impact
150+
Patient
Activity Kits
Hero Wagons
for hospitalized
children through
Starlight Children’s
Foundation
Visions and Pathways’ Wellness
Program to support overall
wellbeing for disadvantaged
youth and young adults
STEM workshops, reaching
1,100+ students through
Students 2 Science
an employee benefit that allows
team members to nominate a
charity of their choice and vote on
their favorites to receive one-time
funding from Insmed
2024 Giving Highlights
600
40+
29
Gifts
of Good,
Donated
Funded
Funded
collective volunteer hours
in a single day for our third
annual Global Day of Good
4,000
Gave more than
Created
in-kind donations
15,000
Collected
nonprofits
Supported
and
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19
2024 ANNUAL REPORT
From left to right: Gene Sullivan, Nicole Schaeffer, Drayton Wise, Martina Flammer, Will Lewis, Roger Adsett, Sara Bonstein, Mike Smith
EXECUTIVE PERSPECTIVES
Reflecting on
a pivotal year
We challenged our Executive Committee to define
2024 in just one word.
“ This year has been
transformative, first and
foremost in the fact that
we helped more patients than
ever in our history.”
Drayton Wise
Chief Commercial Officer
“ The impact we’ve had
on patients, families, and
the industry in 2024 is
absolutely tremendous. I’m
so proud of our team for their
hard work, dedication, and
execution throughout the year.”
Transformative
Sara Bonstein
Chief Financial Officer
“ The things we’ve
accomplished in 2024, the
things we’ve accomplished
in the history of Insmed, are
amazing. I’m gratified to be
part of this team and the
journey that we’re on.”
Impact
Mike Smith
Chief Legal Officer
“ When I think about what we
achieved in 2024, it reminds
me of a rocket launch—years
and years of meticulous work
by experts in a number of
fields to arrive at a pivotal
moment. This was the year we
really had liftoff.”
Gratified
Gene Sullivan
Chief Product Strategy Officer
Liftoff
“ We’ve been preparing for
the events of 2024 for a
long time, and it’s been truly
remarkable across the board.
As we continue to execute,
we continue to learn and to
improve our processes, and it
makes me feel so encouraged
for the opportunity we have in
front of us.”
Roger Adsett
Chief Operating Officer
Execution
“ I see Insmed in this moment
as a company that’s flying.
In a year with a range
of potential outcomes, we
came out at the very top—
we didn’t miss. That feels
incredibly gratifying to be a
part of, and I really do believe
next year will be even more
remarkable.”
Will Lewis
Chair and Chief Executive Officer
Flying
“ 2024, to me, was nothing
short of spectacular. The
fact that we were able to
execute across all aspects
of the business at the same
time, grow the organization,
have such high employee
engagement scores, attract
top talent, and have these
amazing data and commercial
outcomes is just incredible.”
“ 2024 was a year of revelation.
We revealed critically
important data, but we also
revealed who we are as
individuals and as a company.
I’m proud of our team for the
resilience, problem-solving,
and interpersonal skills we
demonstrated in navigating
the complexities of such a
significant data readout.”
Nicole Schaeffer
Chief People Strategy Officer
Martina Flammer
Chief Medical Officer
Spectacular
Revelation
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21
2024 ANNUAL REPORT
AT A GLANCE
U.S., Global Headquarters
France
Germany
Ireland
Italy
Japan
Netherlands
Switzerland
UK
New Jersey
New Hampshire
San Diego
Cambridge, UK
Corporate Offices
Research Locations
22
23
Singular mission,
global effort
To be held on Thursday, May 15, 2025,
at 9:00 a.m. ET
Shareholders may receive without charge a
copy of our Annual Report on Form 10-K for
the year ended December 31, 2024, by going
to investor.insmed.com or by sending a
written request to Mr. Michael A. Smith,
Corporate Secretary, Insmed Incorporated,
700 US Highway 202/206, Bridgewater,
New Jersey, 08807, (908) 977-9900. In connection
with any such request, we will provide a list of
exhibits to the Annual Report on Form 10-K for
the year ended December 31, 2024, and will
provide copies of any such exhibit upon the
payment of a reasonable fee.
Annual Meeting of
Shareholders
William H. Lewis, J.D., M.B.A.
Chair and Chief Executive Officer
Roger Adsett, M.B.A.
Chief Operating Officer
Sara M. Bonstein, M.B.A.
Chief Financial Officer
Martina Flammer, M.D., M.B.A.
Chief Medical Officer
S. Nicole Schaeffer, M.B.A.
Chief People Strategy Officer
Michael A. Smith, J.D.
Chief Legal Officer
Eugene J. Sullivan, M.D.
Chief Product Strategy Officer
Drayton Wise, M.B.A.
Chief Commercial Officer
William H. Lewis, J.D., M.B.A.
Chair and Chief Executive Officer,
Insmed Incorporated
Chair of the Board,
NewAmsterdam Pharma
David R. Brennan 3
Lead Independent Director,
Insmed Incorporated
Former Chief Executive Officer,
AstraZeneca PLC
Alfred F. Altomari 1,3*
Former Chairman and Chief Executive
Officer, Agile Therapeutics, Inc.
Elizabeth McKee Anderson 2
Former Worldwide Vice President,
Global Strategic Marketing and
Market Access, Infectious Diseases and
Vaccines, Janssen Pharmaceuticals, Inc.
Clarissa Desjardins, Ph.D.4
Founder and Chief Executive Officer,
Congruence Therapeutics
Leo Lee 3,4
President, China, Novartis Pharma
David W.J. McGirr 1
Former Chief Financial Officer,
Cubist Pharmaceuticals, Inc.
(acquired by Merck & Co., Inc.)
Carol A. Schafer 1,2
Managing Partner, Hyphen Advisors, LLC
Melvin Sharoky, M.D.2,4
Former President and Chief Executive
Officer, Somerset Pharmaceuticals, Inc.
Committee Legend
1: Audit; 2: Nominations & Governance;
3: Compensation; 4: Science & Technology
(chairpersons in green)
* Alfred Altomari, who is currently serving as a
Class I director, will not stand for re-election at
the Annual Meeting of Shareholders.
Executive Committee
Board of Directors
Trading Symbol
The common stock of Insmed
Incorporated is listed on the
Nasdaq Global Select Market
under the symbol INSM.
Transfer Agent & Registrar
Broadridge Corporate
Issuer Solutions
P.O. Box 1342
Brentwood, NY 11717
shareholder@broadridge.com
(866) 321-8022
Independent Auditors
Ernst & Young LLP
99 Wood Avenue South
Iselin, NJ 08830-9961
Investor Relations
Bryan Dunn
Vice President, Investor Relations
bryan.dunn@insmed.com
(646) 812-4030
Michael V. Morabito, Ph.D.
Director, Investor Relations
michael.morabito@insmed.com
(917) 936-8430
Gianna De Palma
Manager, Investor Relations
gianna.depalma@insmed.com
(848) 360-1281
Global Headquarters
700 US Highway 202/206
Bridgewater, NJ 08807
(908) 977-9900
2024 ANNUAL REPORT
Center
P AT I E N T S AT T H E
P AT I E N T S T O R I E S
We’re committed to building relationships with and
learning from the patients we serve. As you read their
stories, you’ll see that what drives us is a relentless
focus on placing patients at the center of our work.
daa
n
Dana
5
You are
not alone
Dana has been an artist her whole life, having lived
and worked in San Francisco, Chicago, and New York.
About 10 years ago, after returning to her hometown in
Montana, she went in for an annual check-up with her
primary care physician. As she lay down on the table,
she coughed, which caught her doctor’s attention.
When he asked her about it, she realized that she often
coughed as she lay down for bed at night.
Her doctor was concerned that she might have
walking pneumonia so sent her for a chest x-ray,
followed by a CT scan. He saw something in the
scans, but wasn’t sure what, so referred her to a
pulmonologist. The pulmonologist diagnosed her with
nontuberculous mycobacterial (NTM) lung disease
and referred her on to an infectious disease doctor,
who started her on the standard three-drug regimen.
Dana, who had felt fine up until this point, suddenly
began experiencing hearing loss, tinnitus, and nausea.
“Find a support group. That group
will keep you going, give you advice,
make you feel like you’re not alone,
and give you a way to help others.”
Living with bronchiectasis & NTM lung disease •
She returned to the infectious disease
doctor to discuss the side effects, and
it was during that visit that she was
also diagnosed with bronchiectasis.
None of the three doctors she had
met with thus far were able to give
her a helpful explanation of what
these diseases were, why she had
gotten them, or how to manage them.
It was then that she took matters into
her own hands and made her way
to a center in Denver that specialized
in NTM and bronchiectasis. Finally,
she met with experts who truly
understood her diseases and were
able to help her.
In the years since, Dana has been
treated by additional specialists in
various cities across the U.S., tried
new ways of managing her
conditions, including participating
in a clinical trial for bronchiectasis,
and gotten involved in a support
group for others living with NTM and
bronchiectasis. Having met individuals
who are really suffering, she feels like
one of the fortunate ones to be able
to largely manage day to day.
For Dana, finding a support network
was one of the best things she’s ever
done. Within this community, she
and others are able to share stories,
support one another, discuss how
they’re managing their symptoms,
and even meet up in person from
time to time. In fact, it’s one of the first
things she would tell someone in a
similar position.
“First, find the best doctors right away.
Find people who really know the
disease and know how to work with
it,” she shares. “Then, find a support
group. That group will keep you
going, give you advice, make you feel
like you’re not alone, and give you a
way to help others. To me, that’s an
extremely important thing, because
otherwise you will feel alone in this.”
6
• Living with bronchiectasis & NTM lung disease
Jeannie
Living with pulmonary hypertension
“Throughout this journey, I’ve found a number of
support groups where I’ve been able to connect with
other people who are going through the same thing,
and that has been huge. It is so great to see that
people are living their lives and finding ways to do
the things they love. There is so much hope in that.”
jh
on
John
In March 2020, John, a former banker and economics
professor, had an annual check-up with his primary
care doctor in Sarasota, Fla. At the request of his wife,
who had noticed that he had been coughing for several
months, he asked for a chest x-ray. The doctor saw
something on the x-ray and sent him to get a CT scan,
which showed that he had bronchiectasis.
Unsure of what the diagnosis meant and having been
warned about the dangers of COVID-19, which was
just emerging in the U.S., John felt as though he was
experiencing the perfect storm. “I can’t go out, I can’t do
anything,” he recalls. “I’m sitting there saying, what is this
thing now?”
After months of trying to find a local physician who was
familiar with bronchiectasis and able to help him, John
and his wife decided to return to their home in New York.
“You have to be your own
advocate. No one is going to
watch out for you except you.”
A new look
to living
9
Living with bronchiectasis •
Frustrated but undeterred, John
continued his research, which finally
led him to a pulmonologist in New
York City who specialized in the
disease. After more than a year of
what felt like floundering and not
knowing where to go, he at last had
found someone to offer support and
guide him on how to manage the
condition. Together, they aligned on
a strategy of regular chest clearance,
along with the use of a nebulizer and
airway clearance vest.
While the new strategy gave John
a feeling of empowerment, this
daily, time-intensive routine was
also a major adjustment and took
a toll on his mental well-being.
He remembers feeling sorry for
himself and wondering why this had
happened to him. But with time, and
the realization that there were others
out there dealing with problems far
more severe than his, he changed his
perspective and began to appreciate
life again.
Today, John understands that while
managing his bronchiectasis can be
“a pain in the neck,” this daily routine
is something he must do in order
to do the things he loves—writing,
reading Stephen King novels, taking
walks, and going out to dinner with
his wife. He now avoids gatherings
with large groups of people and
wears a mask in elevators, but “that’s
what life is,” he says.
Thinking about the advice he would
give to someone recently diagnosed
with the disease, John shares,
“You have to be your own advocate.
No one is going to watch out for
you except you. Bronchiectasis is a
progressive disease, and you have
to run your life so that your life will
mean something to you.”
10
• Living with bronchiectasis
Christine
Mother of Jett (living with Duchenne muscular dystrophy) and
co-founder of the Jett Foundation
“When I started my foundation in 2001, I thought
that the only person who knew how to keep my
son alive was me. However, I now realize that
our unity is our strength.”
a
n
aus
l
Lusana
Living in
the present
Lusana, a former jazz singer living in California, had
faced respiratory challenges her whole life, including
bouts with bronchitis and pneumonia. But she first
realized something was seriously wrong with her lung
health when she was packing up to move out of her
home in 2018 and could barely get up the stairs. Sapped
of energy and in the throes of a fever, she lay down on
the floor and called a friend who was a doctor, who
promptly called 911. The doctor who examined Lusana at
the hospital said her lungs “sounded like a forest fire.” She
was ultimately sent home with a diagnosis of pneumonia,
which persisted for another nine months. Lusana was 70
years old and was convinced she was going to die.
After recovering, Lusana followed up with a doctor at
a community clinic, where she received a CT scan and
bronchoscopy and was diagnosed simultaneously with
bronchiectasis and NTM lung disease.
“You have limited time at the doctor’s
office, so bring your questions with you,
take notes, and don’t be afraid to ask for
more clarity or support.”
13
Living with bronchiectasis & NTM lung disease •
Although hearing the names of two
unfamiliar diseases was scary, Lusana
felt a sense of relief and validation
for finally knowing what was causing
her symptoms. She was also gratified
to learn that neither condition was
contagious.
Armed with her diagnoses, Lusana
immediately set to work learning
everything she could from others
living with NTM and bronchiectasis.
She joined an active social media
group where patients felt comfortable
expressing themselves and sharing
experiences, advice, and tips. Through
her online research, as well as
speaking with her medical team,
Lusana learned about practices such
as airway clearance to help manage
her day-to-day symptoms. She also
discovered the importance of getting a
good night’s sleep.
Most days, Lusana still faces several
bouts of severe coughing, which leave
her breathless and worn out. She also
worries about how others will perceive
her symptoms and tries to avoid
coughing in front of people. Despite
these challenges, Lusana makes a
point of living in the present and not
getting too caught up in the things
she can’t control. She is still able to do
many of the things she loves, like biking,
walking, and dancing. And, while she
doesn’t perform in public anymore
because of the unpredictability of her
cough, she still enjoys singing at home.
When speaking to other patients
who have been diagnosed more
recently with NTM or bronchiectasis,
Lusana emphasizes the importance
of advocating for oneself. “You have
limited time at the doctor’s office,
so bring your questions with you, take
notes, and don’t be afraid to ask for
more clarity or support,” she says. “And
don’t give the disease so
much power.”
14
• Living with bronchiectasis & NTM lung disease
For more information on our commitment
to patients, visit insmed.com.
© 2025 Insmed Incorporated
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-30739
INSMED 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.)
700 US Highway 202/206
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
Trading symbols
Name of each exchange on which registered
Common Stock, par value $0.01 per share
INSM
Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ 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 ☒
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 the preceding 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 the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company (See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company"
in Rule 12b-2 of the Exchange Act). Large accelerated filer x Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth
company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued
its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by
any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a Shell Company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on June 30, 2024, was $11.0 billion (based on
the closing price for shares of the registrant's common stock as reported on the Nasdaq Global Select Market on that date). In determining this figure, the
registrant has assumed solely for this purpose that all of its directors, executive officers, persons beneficially owning 10% or more of the registrant's
outstanding common stock and certain other stockholders of the registrant may be considered to be affiliates. This assumption shall not be deemed conclusive
as to affiliate status for this or any other purpose.
On February 14, 2025, there were 180,999,350 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 2025 Annual Meeting of Shareholders to be filed with the Securities and
Exchange Commission no later than April 30, 2025 and to be delivered to shareholders in connection with the 2025 Annual Meeting of Shareholders, are
herein incorporated by reference in Part III of this Annual Report on Form 10-K.
INSMED INCORPORATED
INDEX
PAGE
REPORT: FORM 10-K
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
4
PART I
6
ITEM 1
BUSINESS
6
ITEM 1A RISK FACTORS
35
ITEM 1B UNRESOLVED STAFF COMMENTS
62
ITEM 1C CYBERSECURITY
62
ITEM 2
PROPERTIES
63
ITEM 3
LEGAL PROCEEDINGS
63
ITEM 4
MINE SAFETY DISCLOSURES
63
PART II
64
ITEM 5
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
64
ITEM 6
[RESERVED]
66
ITEM 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
67
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
77
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
77
ITEM 9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
77
ITEM 9A CONTROLS AND PROCEDURES
77
ITEM 9B OTHER INFORMATION
78
ITEM 9C DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT
PREVENT INSPECTIONS
78
PART III
79
ITEM 10
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
79
ITEM 11
EXECUTIVE COMPENSATION
79
ITEM 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
79
ITEM 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AND DIRECTOR INDEPENDENCE
79
ITEM 14
PRINCIPAL ACCOUNTANT FEES AND SERVICES
79
PART IV
80
ITEM 15
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
80
ITEM 16
FORM 10-K SUMMARY
84
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
86
CONSOLIDATED FINANCIAL STATEMENTS
89
Unless the context otherwise indicates, references in this Annual Report on Form 10-K to “Insmed Incorporated” refer to
Insmed Incorporated, a Virginia corporation, and the “Company,” “Insmed,” “we,” “us” and “our” refer to Insmed Incorporated
together with its consolidated subsidiaries. INSMED, PULMOVANCE, and ARIKAYCE are trademarks of Insmed
Incorporated. This Annual Report on Form 10-K also contains trademarks of third parties. Each trademark of another company
appearing in this Annual Report on Form 10-K is the property of its owner.
3
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and
uncertainties. "Forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995,
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the Exchange Act), 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 words or expressions referencing future events, conditions or
circumstances) identify forward-looking statements.
Forward-looking statements are based on 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 risks, uncertainties and other factors include, among others, the following:
•
failure to continue to successfully commercialize ARIKAYCE®, our only approved product, in the United States (US),
Europe or Japan (amikacin liposome inhalation suspension, Liposomal 590 mg Nebuliser Dispersion, and amikacin
sulfate inhalation drug product, respectively), or to maintain US, European or Japanese approval for ARIKAYCE;
•
our inability to obtain full approval of ARIKAYCE from the US Food and Drug Administration (FDA), including the
risk that we will not successfully or in a timely manner complete the confirmatory post-marketing clinical trial
required for full approval of ARIKAYCE, or our failure to obtain regulatory approval to expand ARIKAYCE’s
indication to a broader patient population;
•
failure to obtain, or delays in obtaining, regulatory approvals for brensocatib, treprostinil palmitil inhalation powder
(TPIP) or our other product candidates in the US, Europe or Japan or for ARIKAYCE outside the US, Europe or
Japan, including separate regulatory approval for the Lamira® Nebulizer System (Lamira) in each market and for
each usage;
•
failure to successfully commercialize brensocatib, TPIP or our other product candidates, if approved by applicable
regulatory authorities, or to maintain applicable regulatory approvals for brensocatib, TPIP or our other product
candidates, if approved;
•
uncertainties or changes in the degree of market acceptance of ARIKAYCE or, if approved, brensocatib, TPIP, or our
other product candidates, by physicians, patients, third-party payors and others in the healthcare community;
•
our inability to obtain and maintain adequate reimbursement from government or third-party payors for ARIKAYCE
or, if approved, brensocatib, TPIP, or our other product candidates, or acceptable prices for ARIKAYCE or, if
approved, brensocatib, TPIP, or our other product candidates;
•
inaccuracies in our estimates of the size of the potential markets for ARIKAYCE, brensocatib, TPIP, or our other
product candidates or in data we have used to identify physicians, expected rates of patient uptake, duration of
expected treatment, or expected patient adherence or discontinuation rates;
•
failure of third parties on which the Company is dependent to manufacture sufficient quantities of ARIKAYCE,
brensocatib, or TPIP for commercial or clinical needs, to conduct the Company's clinical trials, or to comply with the
Company's agreements or laws and regulations that impact the Company's business;
•
the risks and uncertainties associated with, and the perceived benefits of, our senior secured loan with certain funds
managed by Pharmakon Advisors, LP (Pharmakon) and our royalty financing with OrbiMed Royalty & Credit
Opportunities IV, LP (OrbiMed), including our ability to maintain compliance with the covenants in the agreements
for the senior secured loan and royalty financing and the impact of the restrictions on our operations under these
agreements;
•
our inability to create or maintain an effective direct sales and marketing infrastructure or to partner with third
parties that offer such an infrastructure for distribution of ARIKAYCE or any of our product candidates that are
approved in the future;
•
failure to successfully conduct future clinical trials for ARIKAYCE, brensocatib, TPIP, and our other product
candidates and our potential inability to enroll or retain sufficient patients to conduct and complete the trials or
generate data necessary for regulatory approval of our product candidates or to permit the use of ARIKAYCE in the
broader population of patients with Mycobacterium avium complex (MAC) lung disease, among other things;
•
development of unexpected safety or efficacy concerns related to ARIKAYCE, brensocatib, TPIP, or our other product
candidates;
•
risks that our clinical studies will be delayed, that serious side effects will be identified during drug development, or
that any protocol amendments submitted will be rejected;
4
•
failure to successfully predict the time and cost of development, regulatory approval and commercialization for novel
gene therapy products;
•
the risk that interim, topline or preliminary data from our clinical trials that we announce or publish from time to time
may change as more patient data become available or may be interpreted differently if additional data are disclosed,
or that blinded data will not be predictive of unblinded data;
•
risk that our competitors may obtain orphan drug exclusivity for a product that is essentially the same as a product we
are developing for a particular indication;
•
our inability to attract and retain key personnel or to effectively manage our growth;
•
our inability to successfully integrate our acquisitions and appropriately manage the amount of management’s time
and attention devoted to integration activities;
•
risks that our acquired technologies, products and product candidates will not be commercially successful;
•
inability to adapt to our highly competitive and changing environment;
•
inability to access, upgrade or expand our technology systems or difficulties in updating our existing technology or
developing or implementing new technology;
•
risk that we are unable to maintain our significant customers;
•
risk that government healthcare reform materially increases our costs and damages our financial condition;
•
business or economic disruptions due to catastrophes or other events, including natural disasters or public health
crises;
•
risk that our current and potential future use of artificial intelligence (AI) and machine learning may not be
successful;
•
deterioration in general economic conditions in the US, Europe, Japan and globally, including the effect of prolonged
periods of inflation, affecting us, our suppliers, third-party service providers and potential partners;
•
the risk that we could become involved in costly intellectual property disputes, be unable to adequately protect our
intellectual property rights or prevent disclosure of our trade secrets and other proprietary information, and incur
costs associated with litigation or other proceedings related to such matters;
•
restrictions or other obligations imposed on us by agreements related to ARIKAYCE, brensocatib or our other product
candidates, including our license agreements with PARI Pharma GmbH (PARI) and AstraZeneca AB (AstraZeneca),
and failure to comply with our obligations under such agreements;
•
the cost and potential reputational damage resulting from litigation to which we are or may become a party, including
product liability claims;
•
risk that our operations are subject to a material disruption in the event of a cybersecurity attack or issue;
•
our limited experience operating internationally;
•
changes in laws and regulations applicable to our business, including any pricing reform and laws that impact our
ability to utilize certain third parties in the research, development or manufacture of our product candidates, and
failure to comply with such laws and regulations;
•
our history of operating losses, and the possibility that we never achieve or maintain profitability;
•
goodwill impairment charges affecting our results of operations and financial condition;
•
inability to repay our existing indebtedness and uncertainties with respect to our ability to access future capital; and
•
delays in the execution of plans to build out an additional third-party manufacturing facility approved by the
appropriate regulatory authorities and unexpected expenses associated with those plans.
We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the
date they are made. Any forward-looking statement is based on information current as of the date of this Annual Report on
Form 10-K and speaks only as of the date on which such statement is made. Actual events or results may differ materially from
the results, plans, intentions or expectations anticipated in these forward-looking statements as a result of a variety of factors,
many of which are beyond our control. More information on factors that could cause actual results to differ materially from
those anticipated is included from time to time in our reports filed with the Securities and Exchange Commission (SEC),
including, but not limited to, those described in the sections titled “Risk Factors” and “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” included in this Annual Report on Form 10-K. We disclaim any obligation,
except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any
change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may
affect the likelihood that actual results will differ from those set forth in the forward-looking statements.
5
PART I
ITEM 1. BUSINESS
Business Overview
We are a people-first global biopharmaceutical company striving to deliver first- and best-in-class therapies to
transform the lives of patients facing serious diseases. Our first commercial product, ARIKAYCE, is approved in the US as
ARIKAYCE® (amikacin liposome inhalation suspension), in Europe as ARIKAYCE Liposomal 590 mg Nebuliser Dispersion
and in Japan as ARIKAYCE inhalation 590mg (amikacin sulfate inhalation drug product). ARIKAYCE received accelerated
approval in the US in September 2018 for the treatment of MAC lung disease as part of a combination antibacterial drug
regimen for adult patients with limited or no alternative treatment options in a refractory setting. In October 2020, the European
Commission (EC) approved ARIKAYCE for the treatment of nontuberculous mycobacterial (NTM) lung infections caused by
MAC in adults with limited treatment options who do not have cystic fibrosis (CF). In March 2021, Japan's Ministry of Health,
Labour and Welfare (MHLW) approved ARIKAYCE for the treatment of patients with NTM lung disease caused by MAC who
did not sufficiently respond to prior treatment with a multidrug regimen. NTM lung disease caused by MAC (which we refer to
as MAC lung disease) is a rare and often chronic infection that can cause irreversible lung damage and can be fatal.
Our pipeline includes clinical-stage programs, brensocatib, TPIP, and INS1201 as well as pre-clinical research
programs. Brensocatib is a small molecule, oral, reversible inhibitor of dipeptidyl peptidase 1 (DPP1), which we are developing
for the treatment of patients with bronchiectasis and other neutrophil-mediated diseases, including chronic rhinosinusitis
without nasal polyps (CRSsNP) and hidradenitis suppurativa (HS). TPIP is an inhaled formulation of the treprostinil prodrug
treprostinil palmitil which may offer a differentiated product profile for pulmonary hypertension associated with interstitial lung
disease (PH-ILD) and pulmonary arterial hypertension (PAH). INS1201 is an intrathecally delivered gene therapy for patients
with Duchenne muscular dystrophy (DMD). Our pre-clinical research programs encompass a wide range of technologies and
modalities, including gene therapy, artificial intelligence-driven protein engineering, protein manufacturing, RNA end-joining,
and synthetic rescue. A summary of our commercial and pipeline products is shown below:
The information below summarizes our updates and anticipated near-term milestones for ARIKAYCE and our product
candidates.
ARIKAYCE
•
Following the announcement of positive topline results from the ARISE trial, in June 2024, we met and aligned with
the FDA on the primary endpoint for the ENCORE trial. If the data are positive, ENCORE may support a label
expansion to include all MAC lung patients as well as support full approval for the current refractory indication.
•
We completed enrollment in the ENCORE trial with 425 patients in the fourth quarter of 2024.
•
We anticipate reporting topline data from the ENCORE trial in the first quarter of 2026, with the submission of a US
supplementary new drug application for ARIKAYCE in all patients with MAC lung disease projected for late 2026.
6
Brensocatib
•
We announced positive topline results from the ASPEN trial in May 2024. The study met its primary endpoint, with
both dosage strengths of brensocatib demonstrating statistically significant reductions in the annualized rate of
adjudicated pulmonary exacerbations (PEs) versus placebo.
•
Our new drug application (NDA) for brensocatib in patients with bronchiectasis was accepted and granted priority
review by the FDA in February 2025. Under the Prescription Drug User Fee Act (PDUFA), the FDA set a target action
date of August 12, 2025. We are advancing commercial readiness activities in preparation for a launch of brensocatib
for patients with bronchiectasis and, if approved, we anticipate a US launch in the third quarter of 2025. Launches in
Europe and Japan are expected in 2026, pending approvals.
•
We initiated a Phase 2b study of brensocatib in patients with CRSsNP, which we refer to as the BiRCh trial, in the
fourth quarter of 2023. We anticipate reporting topline data from the BiRCh trial before the end of 2025.
•
We initiated a Phase 2b study of brensocatib in patients with HS, which we refer to as the CEDAR trial, in December
2024.
TPIP
•
In May 2024, we reported topline safety data and certain exploratory efficacy endpoints from the Phase 2a study of
TPIP in patients with PH-ILD. We anticipate initiating a Phase 3 study of TPIP in patients with PH-ILD in the second
half of 2025.
•
Enrollment of the Phase 2b study of TPIP in patients with PAH was completed in the fourth quarter of 2024, with 102
patients enrolled in the study. We anticipate topline results for this study in mid-2025.
Gene Therapy
•
In the fourth quarter of 2024, we received clearance from the FDA for our investigational new drug (IND) application
for INS1201, an intrathecally delivered gene therapy for patients with DMD. We anticipate initiating a clinical trial in
patients with DMD in the first half of 2025.
Pre-Clinical Programs
•
We continue to progress our pre-clinical research programs across a wide range of technologies and modalities,
including gene therapy, artificial intelligence-driven protein engineering, protein manufacturing, RNA end-joining, and
synthetic rescue.
To complement our internal research and development, we also actively evaluate in-licensing and acquisition
opportunities for products, product candidates and technologies, including those that address serious diseases with significant
unmet need.
7
ARIKAYCE® (Amikacin Liposome Inhalation Suspension)
Refractory NTM: M. avium complex (MAC)
MAC Lung Disease
Brensocatib: DPP1 Inhibitor
Bronchiectasis
Chronic Rhinosinusitis without Nasal Polyps (CRSsNP)
Hidradenitis Suppurativa (HS)
Treprostinil Palmitil Inhalation Powder (TPIP)
Pulmonary Hypertension associated with Interstitial Lung Disease (PH-ILD)
Pulmonary Arterial Hypertension (PAH)
Gene Therapy
INS1201: Duchenne Muscular Dystrophy (DMD)
Pre-Clinical Research
Gene Therapy
Next-Generation DPP1 Inhibitor
Deimmunized Therapeutic Protein
Synthetic Rescue
Preclinical
Phase 1
Phase 2
Phase 3
Approved
Our Strategy
We strive to develop and commercialize first- and best-in-class therapies that serve patient communities where the
need is greatest. Our first product, ARIKAYCE, is approved in the US as ARIKAYCE® (amikacin liposome inhalation
suspension), in Europe as ARIKAYCE Liposomal 590 mg Nebuliser Dispersion and in Japan as ARIKAYCE inhalation 590mg
(amikacin sulfate inhalation drug product). We are not aware of any other approved inhaled therapies specifically indicated to
treat MAC lung disease in North America, Europe or Japan. We believe that ARIKAYCE has the potential to prove beneficial
in other patients with refractory MAC. Our product candidates are brensocatib, our Phase 3 product candidate that we are
developing for patients with bronchiectasis and other neutrophil-mediated diseases, TPIP, our Phase 2 product candidate that
may offer a differentiated product profile for patients with PH-ILD and PAH, and INS1201, our intrathecally delivered gene
therapy product candidate for patients with DMD. We announced positive topline results from our Phase 3 ASPEN trial of
brensocatib in May 2024 and the acceptance by the FDA of our NDA, with priority review granted, for brensocatib in patients
with bronchiectasis in February 2025, which we anticipate will be followed by filings with the European and Japanese
regulatory authorities. We are also advancing our pre-clinical research programs encompassing a wide range of technologies
and modalities, including gene therapy, AI-driven protein engineering, protein manufacturing, RNA end-joining, and synthetic
rescue.
Our key priorities are as follows:
•
Continue to provide ARIKAYCE to appropriate patients and expand our reliable revenue stream;
•
Advance commercial readiness activities to serve significantly more patients facing serious diseases;
•
Produce topline clinical data readouts in the near and long term; and
•
Control spending, prudently deploying capital to support the best return-generating opportunities.
ARIKAYCE for Patients with MAC Lung Disease
ARIKAYCE is our first approved product. ARIKAYCE received accelerated approval in the US in September 2018
for the treatment of refractory MAC lung disease as part of a combination antibacterial drug regimen for adult patients with
limited or no alternative treatment options. In October 2020, ARIKAYCE received approval in Europe for the treatment of
NTM lung infections caused by MAC in adults with limited treatment options who do not have CF. In March 2021,
ARIKAYCE received approval in Japan for the treatment of patients with NTM lung disease caused by MAC who did not
sufficiently respond to prior treatment with a multidrug regimen. MAC lung disease is a rare and often chronic infection that
can cause irreversible lung damage and can be fatal. Amikacin solution for parenteral administration is an established drug that
has activity against a variety of NTM; however, its use is limited by the need to administer it intravenously and by toxicity to
hearing, balance, and kidney function. Unlike amikacin solution for intravenous administration, our proprietary Pulmovance™
technology uses charge-neutral liposomes to deliver amikacin directly to the lungs where liposomal amikacin is taken up by the
lung macrophages where the MAC infection resides. This technology also prolongs the release of amikacin in the lungs, while
minimizing systemic exposure, thereby offering the potential for decreased systemic toxicities. ARIKAYCE's ability to deliver
high levels of amikacin directly to the lung and sites of MAC infection via the use of our Pulmovance technology distinguishes
it from intravenous amikacin. ARIKAYCE is administered once-daily using Lamira, an inhalation device developed and
manufactured by PARI. Lamira is a portable nebulizer that enables aerosolization of liquid medications via a vibrating,
perforated membrane, and was designed specifically for ARIKAYCE delivery.
The FDA has designated ARIKAYCE as an orphan drug and a Qualified Infectious Disease Product (QIDP) for the
treatment of NTM lung disease. Orphan designated drugs are eligible for seven years of exclusivity for the orphan indication.
QIDP designation provides an additional five years of exclusivity for the designated indication. The FDA granted a total of 12
years of exclusivity in the indication for which ARIKAYCE was approved.
ARIKAYCE also has been included in the international treatment guidelines for NTM lung disease treatment. The
evidence-based guidelines, issued by the American Thoracic Society (ATS), European Respiratory Society (ERS), European
Society of Clinical Microbiology and Infectious Diseases (ESCMID), and Infectious Diseases Society of America (IDSA),
strongly recommend the use of ARIKAYCE for MAC lung disease as part of a combination antibacterial drug regimen for adult
patients with limited or no alternative treatment options who have failed to convert to a negative sputum culture after at least six
months of treatment.
In October 2020, the FDA approved a supplemental new drug application for ARIKAYCE, adding important efficacy
data regarding the durability and sustainability of culture conversion to the ARIKAYCE label. The data, which are from the
Phase 3 CONVERT study of ARIKAYCE, demonstrate that the addition of ARIKAYCE to guideline-based therapy (GBT) was
associated with sustained culture conversion through the end of treatment as well as durable culture conversion three months
post-treatment compared with GBT alone.
8
Accelerated Approval
In March 2018, we submitted an NDA for ARIKAYCE to the FDA to request accelerated approval. Accelerated
approval allows drugs that (i) are being developed to treat a serious or life-threatening disease or condition and (ii) provide a
meaningful therapeutic benefit over existing treatments to be approved substantially based on an intermediate endpoint or a
surrogate endpoint that is reasonably likely to predict clinical benefit, rather than a clinical endpoint such as survival or
irreversible morbidity. In September 2018, the FDA granted accelerated approval for ARIKAYCE under the Limited
Population Pathway for Antibacterial and Antifungal Drugs (LPAD) for the treatment of refractory MAC lung disease as part of
a combination antibacterial drug regimen for adult patients with limited or no alternative treatment options. LPAD, which was
enacted as part of the 21st Century Cures Act, serves to advance the development of new antibacterial drugs to treat serious or
life-threatening infections in limited populations of patients with unmet needs. As required for drugs approved under the LPAD
pathway, labeling for ARIKAYCE includes certain statements to convey that the drug has been shown to be safe and effective
only for use in a limited population.
As a condition of accelerated approval, we must conduct a post-marketing confirmatory clinical trial. In December
2020, we commenced the post-marketing confirmatory clinical trial program for ARIKAYCE in patients with MAC lung
disease consisting of the ARISE trial, an interventional study designed to validate cross-sectional and longitudinal
characteristics of a PRO tool in MAC lung disease, and the ENCORE trial, designed to establish the clinical benefits and
evaluate the safety of ARIKAYCE in patients with newly diagnosed or recurrent MAC lung infection who have not started
antibiotics using the PRO tool validated in the ARISE trial. In September 2023, we announced positive topline results from the
ARISE trial. The study met its primary objective of demonstrating that the QOL-B respiratory domain works effectively as a
PRO tool in patients with MAC lung disease. In June 2024, we met and aligned with the FDA on the primary endpoint for the
ENCORE study. If the data are positive, ENCORE may support a label expansion to include all MAC lung patients as well as
support full approval for the current refractory indication. Based on feedback and in alignment with the FDA, we have
determined that the primary endpoint for the ENCORE study will include eight questions from the QOL-B respiratory domain
PRO. We completed enrollment of the ENCORE study in the fourth quarter of 2024, with 425 patients enrolled. We anticipate
reporting topline data in the first quarter of 2026.
Reimbursement Outside of the US
In October 2020, the EC granted marketing authorization for ARIKAYCE for the treatment of NTM lung infections
caused by MAC in adults with limited treatment options who do not have CF. ARIKAYCE can now be prescribed for
appropriate patients across the European Union (EU) countries as well as in the United Kingdom (UK). ARIKAYCE is
reimbursed nationally in France, Belgium, the Netherlands, the UK and Ireland. We have worked with the German National
Association of Statutory Health Insurance Funds towards an agreement on the reimbursement price of ARIKAYCE that would
allow us to better serve the needs of patients in Germany; however, since we have been unable to reach an agreement, patient
supply of ARIKAYCE in Germany was enabled by import from other EU countries in September 2022. To date, we have been
unable to reach an acceptable agreement of a nationally reimbursed price with the Italian Medicines Agency; however,
ARIKAYCE remains commercially available for physicians to prescribe in Italy under Class C, where we set the price and
funding is agreed locally.
In March 2021, Japan's MHLW approved ARIKAYCE for the treatment of patients with NTM lung disease caused by
MAC who did not sufficiently respond to prior treatment with a multidrug regimen. In July 2021, we launched ARIKAYCE in
Japan.
The CONVERT Study and 312 Study
Accelerated approval of ARIKAYCE was supported by preliminary data from the CONVERT study, a global Phase 3
study evaluating the safety and efficacy of ARIKAYCE in adult patients with refractory MAC lung disease, using achievement
of sputum culture conversion (defined as three consecutive negative monthly sputum cultures) by Month 6 as the primary
endpoint. Patients who achieved sputum culture conversion by Month 6 continued in the CONVERT study for an additional 12
months of treatment following the first monthly negative sputum culture in order to assess the durability of culture conversion,
as defined by patients that have completed treatment and continued in the CONVERT study off all therapy for three months. In
May 2019, we presented at the American Thoracic Society meeting that 41/65 (63.1%) of patients on ARIKAYCE plus GBT
who had achieved culture conversion by Month 6 had maintained durable culture conversion for three months off all therapy
compared to 0/10 (0%) on GBT only (p<0.0002). Safety data for these patients were consistent with safety data previously
reported for patients by Month 6 of the CONVERT study.
Patients who did not culture convert by Month 6 may have been eligible to enroll in the 312 study, an open-label
extension study for these non-converting patients who completed six months of treatment in the CONVERT study. The primary
objective of the 312 study was to evaluate the long-term safety and tolerability of ARIKAYCE in combination with a standard
multi-drug regimen. The secondary objectives of the 312 study included evaluating the proportion of subjects achieving culture
conversion (defined in the same way as the CONVERT study) by Month 6 and the proportion of subjects achieving culture
9
conversion by Month 12, which was the end of treatment. We previously reported interim data as of December 2017 for
patients in the 312 study, with 28.4% of patients who received GBT only in the CONVERT study (19/67) and 12.3% of patients
who had received ARIKAYCE plus GBT in the CONVERT study (7/57) achieving culture conversion by Month 6 of receiving
ARIKAYCE plus GBT as part of the 312 study. The 312 study has concluded and final efficacy data regarding culture
conversion were consistent with these interim data. We have analyzed the safety and efficacy data from the 312 study, and we
did not observe any new safety signals.
The ARISE Study
The ARISE trial was a global, randomized, double-blind, placebo-controlled Phase 3b study in adult patients with
newly diagnosed or recurrent MAC infections that aimed to generate evidence demonstrating the domain specification,
reliability, validity, and responsiveness of PRO-based scores, including a respiratory symptom score. The ARISE study met its
primary objective of demonstrating that the QOL-B respiratory domain works effectively as a PRO tool in patients with MAC
lung disease. Based on feedback and in alignment with the FDA, we have determined that the primary endpoint for the
ENCORE study will include eight questions from the QOL-B respiratory domain PRO.
Patients in ARISE (N=99) were randomized 1:1 to treatment with ARIKAYCE plus macrolide-based background
regimen (ARIKAYCE arm) or placebo plus macrolide-based background regimen (comparator arm) once daily for six months,
followed by one month off treatment. ARIKAYCE-treated patients performed better than those in the comparator arm as
measured by the QOL-B instrument, with 43.8% of patients achieving an improvement in QOL-B respiratory score above the
estimated meaningful within-subject score difference of 14.8, compared with 33.3% of patients in the comparator arm. While
the study was not powered to show a statistically significant difference between treatment arms, a strong trend toward
significance was observed for improvement from baseline at Month 7 (12.24 vs. 7.76, p=0.1073). Patients in the ARIKAYCE
arm also achieved nominally statistically significantly higher culture conversion rates at Month 7 versus patients in the
comparator arm (78.8% vs. 47.1%, p=0.0010), and culture conversion was faster and more likely to persist through Month 7 for
the ARIKAYCE arm.
Consistent with our expectations, the FDA and the Pharmaceuticals and Medical Devices Agency (PMDA) in Japan
confirmed that they would not consider a label expansion for ARIKAYCE based on data from the ARISE study alone.
ARISE Culture Conversion
Consistent with prior clinical studies, a higher proportion of patients in the ARIKAYCE arm achieved culture
conversion by Month 6 (defined as negative cultures at Months 5 and 6) compared to patients in the comparator arm (80.6% vs.
63.9%, p=0.0712). Among patients who achieved culture conversion by Month 6, more patients in the ARIKAYCE arm
achieved the first of their two required monthly negative cultures for clinical conversion at Month 1 versus the comparator arm
(74.3% vs. 46.7%). As reported above, at Month 7 (one month following the cessation of treatment), 78.8% of patients in the
ARIKAYCE arm vs. 47.1% of patients in the comparator arm were culture-converted, suggesting that ARIKAYCE-treated
patients are more likely to remain negative.
Correlation Between ARISE Culture Conversion and QOL-B Performance
Patients in the ARIKAYCE arm who achieved culture conversion at both Month 6 and Month 7 had nominally
statistically significantly greater improvements in QOL-B respiratory domain scores at Month 7 compared to patients in the
ARIKAYCE arm who did not achieve culture conversion (15.74 vs. 3.53, p=0.0167 at Month 6 and 14.89 vs. 4.50, p=0.0416 at
Month 7).
ARISE Safety and Tolerability
The discontinuation rate of ARIKAYCE or the placebo used in the comparator arm was 22.9% in the ARIKAYCE arm
and 7.8% in the comparator arm. Study completion rates were 91.7% in the ARIKAYCE arm and 94.1% in the comparator arm.
No new safety events were observed in the ARIKAYCE arm, and the safety profile in general was as expected in both treatment
arms. Treatment-emergent adverse events (TEAEs) were reported by 91.7% of patients in the ARIKAYCE arm and 80.4% of
patients in the comparator arm. The most common TEAEs were dysphonia (41.7% for the ARIKAYCE arm vs. 3.9% for the
comparator arm), cough (27.1% vs. 7.8%), diarrhea (27.1% vs. 25.5%), and COVID-19 (12.5% vs. 9.8%). Of the treatment-
emergent serious adverse events observed in the trial, none were determined to be related to ARIKAYCE by investigators.
Further Research and Lifecycle Management
We are currently exploring and supporting research and lifecycle management programs for ARIKAYCE beyond
treatment of refractory MAC lung disease as part of a combination antibacterial regimen for adult patients who have limited or
no treatment options. As noted above, we will continue to advance the post-marketing confirmatory MAC lung disease clinical
trial program for ARIKAYCE, through the completed ARISE and ongoing ENCORE trials, which are intended to fulfill the
FDA's post-marketing requirement to allow for the full approval of ARIKAYCE in the US, as well as to support the use of
ARIKAYCE as a treatment for patients with MAC lung disease.
10
The ENCORE trial is a randomized, double-blind, placebo-controlled Phase 3b study to evaluate the efficacy and
safety of an ARIKAYCE-based regimen in patients with newly diagnosed or recurrent MAC infection who have not started
antibiotics. Patients are randomized 1:1 to receive ARIKAYCE plus background regimen or placebo plus background regimen
once daily for 12 months. Patients will then discontinue all study treatments and remain in the trial for three months for the
assessment of durability of culture conversion. The primary endpoint is change from baseline to Month 13 in respiratory
symptom score. The key secondary endpoint is the proportion of subjects achieving durable culture conversion at Month 15. In
June 2024, we met and aligned with the FDA on the primary endpoint for the ENCORE study. If the data are positive,
ENCORE may support a label expansion to include all MAC lung patients as well as support full approval for the current
refractory indication. Based on feedback and in alignment with the FDA, we have determined that the primary endpoint for the
ENCORE study will include eight questions from the QOL-B respiratory domain PRO. We completed enrollment of the
ENCORE study in the fourth quarter of 2024, with 425 patients enrolled. We anticipate reporting topline data in the first quarter
of 2026.
Subsequent lifecycle management studies could also potentially enable us to reach more patients. These initiatives may
include new clinical studies sponsored by us and may also include investigator-initiated studies, which are independent clinical
studies initiated and sponsored by physicians or research institutions, with funding from us.
Market Opportunity for ARIKAYCE in MAC Lung Disease
NTM lung disease is associated with increased rates of morbidity and mortality, and MAC is the predominant
pathogenic species in NTM lung disease in the US, Europe and Japan. The prevalence of NTM lung disease has increased over
the past two decades, and we believe it is an emerging public health concern worldwide. Based on an analysis using information
from external sources, including market research funded by us and third parties, and internal analyses and calculations, we
estimate the potential patient populations in the US, the European 5 (comprised of France, Germany, Italy, Spain and the UK)
and Japan are as follows:
Potential Market
Estimated Number of
Patients with Diagnosed
MAC Lung Disease
Estimated Number of
Patients with Refractory
MAC Lung Disease
United States
95,000-115,000
12,000-17,000
European 5
14,000
1,400
Japan
125,000-145,000
15,000-18,000
We are not aware of any other approved inhaled therapies specifically indicated for NTM lung disease in North
America, Europe or Japan. Based on a burden of illness study that we conducted in the US with a major medical benefits
provider, we previously concluded that patients with NTM lung disease are costly to healthcare plans, while a claims-based
study in the US has shown that patients with NTM lung disease have higher resource utilization and costs than their age and
gender-matched controls. Accordingly, we believe that a significant market opportunity for ARIKAYCE in NTM lung disease
exists in the US and internationally.
Product Pipeline
Brensocatib
Brensocatib is a small molecule, oral, reversible inhibitor of DPP1, which we licensed from AstraZeneca in October
2016. DPP1 is an enzyme responsible for activating neutrophil serine proteases (NSPs) in neutrophils 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 destruction
and inflammatory mediation. Neutrophils contain the NSPs (including neutrophil elastase, proteinase 3, and cathepsin G) that
have been implicated in a variety of inflammatory diseases. In chronic inflammatory lung diseases, neutrophils accumulate in
the airways and result in excessive active NSPs that cause lung destruction and inflammation. Brensocatib may decrease the
damaging effects of inflammatory diseases such as bronchiectasis by inhibiting DPP1 and its activation of NSPs.
In June 2020, the FDA granted breakthrough therapy designation for brensocatib for the treatment of adult patients
with non-cystic fibrosis bronchiectasis (NCFBE) for reducing exacerbations. The FDA's breakthrough therapy designation is
designed to expedite the development and review of therapies that are intended to treat serious or life-threatening diseases and
for which preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over available
therapy. The benefits of breakthrough therapy designation include more frequent communication and meetings with the FDA,
eligibility for rolling and priority review, intensive guidance on an efficient drug development program, and organizational
commitment from the FDA involving senior managers. In November 2020, brensocatib was granted access to the PRIME
scheme from the European Medicines Agency (EMA) for patients with NCFBE.
In October 2021, the EMA’s Paediatric Committee approved the brensocatib Pediatric Investigational Plan for the
treatment of patients with NCFBE. Subsequently, the ASPEN trial included 41 adolescent patients between ages 12 to 17,
11
which will fulfill the pediatric study requirements to support marketing applications in this patient population in the US, Europe
and Japan.
The WILLOW Study
The WILLOW study was a randomized, double-blind, placebo-controlled, parallel-group, multi-center, multi-national,
Phase 2b study to assess the efficacy, safety and tolerability, and pharmacokinetics of brensocatib administered once daily for
24 weeks in patients with NCFBE. The WILLOW study was conducted at 116 sites and enrolled 256 adult patients diagnosed
with NCFBE who had at least two documented pulmonary exacerbations in the 12 months prior to screening. Patients were
randomized 1:1:1 to receive either 10 mg or 25 mg of brensocatib or matching placebo. The primary efficacy endpoint was the
time to first pulmonary exacerbation over the 24-week treatment period in the brensocatib arms compared to the placebo arm.
WILLOW Efficacy Data
We announced topline data for the WILLOW study in February 2020 and full data for the WILLOW study in June
2020. In September 2020, final results from the WILLOW study were published online in the New England Journal of
Medicine. The data demonstrate that the WILLOW study met its primary endpoint of time to first pulmonary exacerbation over
the 24-week treatment period for both the 10 mg and 25 mg dosage groups of brensocatib compared to placebo (p=0.027,
p=0.044, respectively). The risk of exacerbation at any time during the trial was reduced by 42% for the 10 mg group versus
placebo (HR 0.58, p=0.029) and by 38% for the 25 mg group versus placebo (HR 0.62, p=0.046). In addition, treatment with
brensocatib 10 mg resulted in a significant reduction in the rate of pulmonary exacerbations, a key secondary endpoint, versus
placebo. Specifically, patients treated with brensocatib experienced a 36% reduction in the 10 mg arm (p=0.041) and a 25%
reduction in the 25 mg arm (p=0.167) versus placebo. Change in concentration of active neutrophil elastase in sputum versus
placebo from baseline to the end of the treatment period was also statistically significant (p=0.034 for 10 mg, p=0.021 for 25
mg).
WILLOW Safety and Tolerability Data
Brensocatib was generally well-tolerated in the study. Rates of AEs leading to discontinuation in patients treated with
placebo, brensocatib 10 mg, and brensocatib 25 mg were 10.6%, 7.4%, and 6.7%, respectively. The most common AEs in
patients treated with brensocatib were cough, headache, sputum increase, dyspnea, fatigue, and upper respiratory tract infection.
Rates of adverse events of special interest (AESIs) in patients treated with placebo, brensocatib 10 mg, and brensocatib 25 mg,
respectively, were as follows: rates of skin events (including hyperkeratosis) were 11.8%, 14.8%, and 23.6%; rates of dental
events were 3.5%, 16.0%, and 10.1%; and rates of infections that were considered AESIs were 17.6%, 13.6%, and 16.9%.
The ASPEN Study
Based on the positive results of the WILLOW study, in December 2020 we commenced the ASPEN study, a global,
randomized, double-blind, placebo-controlled Phase 3 study to assess the efficacy, safety, and tolerability of brensocatib in
adult patients with bronchiectasis. Patients with bronchiectasis due to CF were not enrolled in the study. The primary endpoint
was the rate of adjudicated PEs over the 52-week treatment period. Secondary endpoints included the time to first adjudicated
PE, the proportion of subjects free of adjudicated PE by 52 weeks, the absolute change from baseline in post-bronchodilator
FEV1, the reduction in annualized rate of severe adjudicated PE, and the change from baseline in the Bronchiectasis QOL-B
Respiratory Symptoms Domain Score.
The total number of active sites in ASPEN was 391 sites in 35 countries. Adult patients (ages 18 to 85 years) were
randomized 1:1:1 and adolescent patients (ages 12 to <18 years) were randomized 2:2:1 for treatment with brensocatib 10 mg,
brensocatib 25 mg, or placebo once daily for 52 weeks, followed by 4 weeks off treatment.
ASPEN Safety and Efficacy Data
We announced positive topline results from the ASPEN trial in May 2024. The primary efficacy analysis included data
from 1,680 adult patients and 41 adolescent patients. Brensocatib was well-tolerated in the study. In addition, the study met its
primary endpoint, with both dosage strengths of brensocatib demonstrating statistically significant reductions in the annualized
rate of adjudicated PEs versus placebo. The study also met several of its prespecified secondary endpoints with statistical
significance. In February 2025, the FDA accepted our NDA, with priority review granted, for brensocatib in patients with
bronchiectasis.
12
Topline efficacy results from the ASPEN study were as follows:
Brensocatib 10 mg
compared to placebo
Brensocatib 25 mg
compared to placebo
Primary Endpoint
Reduction in annualized rate of PEs
21.1%
p=0.0019*
19.4%
p=0.0046*
Secondary Endpoints
Prolongation of time to first PE
18.7%
p=0.0100*
17.5%
p=0.0182*
Increase in odds of remaining exacerbation free over 52 weeks
41.2%
p=0.0059*
40.0%
p=0.0074*
Change from baseline in post-bronchodilator forced expiratory volume
in 1 second (FEV1) at week 52
11 mL
p=0.3841
38 mL
p=0.0054*
Reduction in annualized rate of severe PEs
25.8%
p=0.1277
26.0%
p=0.1025
Change from baseline in the Quality of Life – Bronchiectasis (QOL-B)
Respiratory Score at week 52
2.0 points
p=0.0594
3.8 points
p=0.0004^
* - Statistically significant
^ - Nominally significant p-value
Further Research and Development
In August 2019, we received notice from the FDA that we were awarded a development grant of $1.8 million for
specific work to be performed on a PRO tool. The grant funding was for the development of a novel PRO tool for use in clinical
trials to measure symptoms in patients with NCFBE with and without NTM lung infection. The grant has come to the end of the
funding period and met the objectives with grant deliverables submitted to the FDA’s Drug Development Tool Qualification
Program for evaluation by the FDA.
In January 2023, we reported topline data from the Phase 2a, multiple-dose, pharmacokinetic/pharmacodynamic study
of brensocatib in patients with CF. This Phase 2a study included both patients who were on background CFTR modulator drugs
and patients who were not on CFTR modulator drugs. The study duration was approximately one month and dosed CF patients
to placebo, 10 mg, 25 mg, and 40 mg of brensocatib. A clear dose-dependent and exposure-dependent inhibition of blood NSPs
was observed in patients treated with brensocatib across all doses in this study, consistent with the mechanism of action of
brensocatib. Safety and tolerability were consistent with what was observed during the Phase 2b WILLOW study, with no
significant drug-related findings. We concluded that an additional cohort evaluating a 65 mg dose of brensocatib is not needed
in this patient population.
We are conducting further studies to explore the potential of brensocatib in additional neutrophil-mediated diseases,
including CRSsNP and HS. CRSsNP currently has one approved pharmacological therapy (corticosteriod nasal spray);
however, many patients do not respond to corticosteroids or endoscopic sinus surgery. The Phase 2b BiRCh trial of brensocatib
in patients with CRSsNP is underway. In the fourth quarter of 2024, we initiated a Phase 2b study of brensocatib in patients
with HS.
Market Opportunity for Brensocatib in Bronchiectasis
Bronchiectasis is a severe, chronic pulmonary disorder in which the bronchi become permanently dilated due to a
cycle of infection, inflammation, and lung tissue damage. The condition is marked by frequent pulmonary exacerbations
requiring antibiotic therapy and/or hospitalizations. Symptoms include chronic cough, excessive sputum production, shortness
of breath, and repeated respiratory infections, which can worsen the underlying condition. Based on information from external
sources, including market research funded by us and third parties, and internal analyses and calculations, we estimate the
potential addressable market in bronchiectasis at launch in the US, the European 5 and Japan will be as follows
(approximately):
Potential Market
Estimated Number of Patients Diagnosed with Bronchiectasis
United States
500,000
European 5
600,000
Japan
150,000
Today, there are no approved therapies in the US, Europe, or Japan for the treatment of patients with bronchiectasis.
13
Treprostinil Palmitil Inhalation Powder
TPIP is an investigational inhaled formulation of a treprostinil prodrug that has the potential to address certain of the
current limitations of existing prostanoid therapies. We believe that TPIP prolongs duration of effect and may provide patients
with greater consistency in pulmonary arterial pressure reduction over time. Current inhaled prostanoid therapies must be dosed
four to nine times per day. Reducing dose frequency has the potential to ease treatment burden for patients and improve
compliance. Additionally, we believe that TPIP may be associated with fewer side effects, including severity and/or frequency
of cough, headache, throat irritation, nausea, flushing and dizziness that are associated with high initial drug levels and local
upper airway exposure when using current inhaled prostanoid therapies. We believe TPIP may offer a differentiated product
profile for PH-ILD and PAH.
In February 2021, we announced topline results from the Phase 1 study of TPIP in healthy volunteers. The objective of
this first-in-human single ascending dose and multiple ascending dose study was to assess the pharmacokinetics and tolerability
profile of TPIP. Data from the study demonstrated that TPIP was generally well tolerated, with a pharmacokinetic profile that
supports continued development with once-daily dosing. The most common AEs across all cohorts in the study were cough,
dizziness, headache, and nausea. Most AEs were mild in severity and consistent in nature with those typically seen with other
inhaled prostanoid therapies. There were few moderate AEs and no severe or serious AEs. Subjects in the multiple dose panel
that incorporated an up-titration approach beginning at 112.5 µg once-daily and progressing to 225 µg once-daily reported
fewer AEs compared to the panel dosed with 225 µg once-daily from the first dose.
Overall pharmacokinetic results demonstrated that treprostinil exposure (AUC and Cmax) was dose-proportional, with
low to moderate inter-subject variability. Treprostinil was detected in the plasma at 24 hours at all doses and throughout the 48-
hour sampling period for the two highest doses. Compared with currently available inhaled treprostinil therapy, TPIP showed
substantially lower Cmax and longer half-life. Data from this study were presented in an oral session at the European Society of
Cardiology Congress in August 2021.
In May 2024, we reported topline safety data and certain exploratory efficacy endpoints from the Phase 2a study of
TPIP in patients with PH-ILD. We anticipate initiating a Phase 3 registration program in PH-ILD in the second half of 2025.
We also have an ongoing Phase 2b study designed to investigate the effect of TPIP in patients with PAH. Enrollment in the
Phase 2b study of TPIP in PAH completed in the fourth quarter of 2024 and we anticipate topline results in mid-2025.
Market Opportunity for TPIP in PH-ILD and PAH
We believe TPIP may be a highly effective therapy that has the potential to ease the treatment burden for patients with
PH-ILD and PAH, improve compliance and be associated with fewer side effects compared to current therapies. Based on our
assessment of information from external sources, including market research conducted by third parties, we estimate the
potential addressable market for TPIP at launch in the US, the European 5 and Japan will be as follows (approximately):
Potential Market
Estimated Number of
Patients Diagnosed with
PH-ILD
Estimated Number of
Patients Diagnosed with
PAH
United States
50,000
35,000
European 5
65,000
40,000
Japan
20,000
15,000
Gene Therapy
In the fourth quarter of 2024, we received clearance from the FDA for our IND application for INS1201, a
microdystrophin adeno-associated virus gene replacement therapy for patients with DMD. Administered intrathecally, this
approach has the potential to target both skeletal and cardiac muscles at lower doses. We anticipate initiating a clinical trial in
patients with DMD in the first half of 2025.
Pre-Clinical Development
Our early-stage research efforts are comprised of our preclinical programs, advanced through internal research and
development and augmented through business development activities. In March 2021, we acquired a proprietary protein
deimmunization platform, called Deimmunized by Design, focused on the reengineering of therapeutic proteins to evade
immune recognition and reaction. In August 2021, we acquired Motus Biosciences, Inc. (Motus) and AlgaeneX, Inc.
(AlgaeneX), preclinical stage companies engaged in the research, development and manufacturing of gene therapies for rare
genetic disorders. In January 2023, we acquired Vertuis Bio, Inc. (Vertuis), a privately held, preclinical stage company engaged
in the research and development of gene therapies for rare genetic disorders. In June 2023, we acquired Adrestia Therapeutics
Ltd. (Adrestia), a privately held, preclinical stage company using precision genetic models to search for therapeutic targets,
precision diagnostics, novel drug compounds and new applications for existing drugs.
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We continue to progress our pre-clinical research programs across a wide range of technologies and modalities,
including gene therapy, AI-driven protein engineering, protein manufacturing, RNA end-joining, and synthetic rescue.
Corporate Development
We plan to continue to develop, acquire, in-license or co-promote other products, product candidates and technologies,
including those that address serious diseases that currently have significant unmet needs. We are focused broadly on serious
disease therapeutics and prioritizing those areas that best align with our core competencies.
Manufacturing
We do not have any in-house manufacturing capability other than for small-scale preclinical development programs
and we depend completely on a small number of third-party manufacturers and suppliers for the manufacture of our product
candidates for use in clinical trials. We plan to rely primarily on third-party manufacturers and suppliers for the commercial
manufacture and supply of most product candidates that we commercialize. ARIKAYCE is manufactured currently by
Resilience Biotechnologies Inc. (Resilience) (formerly Therapure Biopharma Inc.) in Canada at a 200 kilogram (kg) scale. For
additional information about our agreement with Resilience, see License and Other Agreements—ARIKAYCE-related
Agreements.
In October 2017, we entered into certain agreements with Patheon UK Limited (Patheon), a wholly-owned subsidiary
of Thermo Fisher Scientific, Inc. (Thermo Fisher), related to increasing our long-term production capacity for ARIKAYCE
commercial inventory. The agreements provide for Patheon to manufacture and supply ARIKAYCE for our anticipated long-
term commercial needs. Under these agreements, we are required to deliver to Patheon the required raw materials, including
active pharmaceutical ingredients, and certain fixed assets needed to manufacture ARIKAYCE. The aggregate investment to
increase the long-term production capacity, including under these agreements, and related agreements or purchase orders with
third parties for raw materials and fixed assets, is estimated to be approximately $116.0 million. In addition, we have a
commercialization agreement with PARI, the manufacturer of our drug delivery nebulizer for ARIKAYCE, to address our
commercial supply needs (the Commercialization Agreement).
In January 2024, we entered into certain agreements with Patheon Inc., a wholly-owned subsidiary of Thermo Fisher,
related to the manufacture and supply of brensocatib by Patheon Inc. for our anticipated long-term commercial needs. In
addition, in September 2024, we entered into a commercial manufacturing and supply agreement with Esteve Química, S.A.
(Esteve) for the manufacture and supply of brensocatib's active pharmaceutical ingredient. We are required to deliver to
Patheon Inc. the active pharmaceutical ingredient needed to manufacture brensocatib.
We expect to utilize contract manufacturing organizations (CMOs) to fulfill our future manufacturing requirements for
TPIP. Certain product candidates will be manufactured using future in-house manufacturing capabilities.
Intellectual Property
We own or license rights to more than 850 issued patents and pending patent applications in the US and in foreign
countries, including more than 300 issued patents and pending patent applications related to ARIKAYCE. Our success depends
in large part on our ability to maintain proprietary protection surrounding our product candidates, technology and know-how; to
operate without infringing the proprietary rights of others; and to prevent others from infringing our proprietary rights. We
actively seek patent protection by filing patent applications, including on inventions that are important to the development of
our business in the US, Europe, Japan, Canada, and selected other foreign markets that we consider key for our product
candidates. These international markets generally 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, dosing and administration regimens and formulations. We also rely on trade secrets, know-how,
continuing technological innovation, in-licensing and partnership 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 potential to create blocks to our products or otherwise interfere with the development of our
business. We are aware, for example, of US patents, and corresponding international counterparts, owned by third parties that
contain claims related to treating lung infections using inhaled antibiotics. If any of these patents were to be asserted against us,
we do not believe that our marketed product or development candidates 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-party partners to sign confidentiality agreements to protect the exchange of proprietary materials
and information. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical
security of our premises and physical and electronic security of our information technology systems.
15
ARIKAYCE Patents
Of the patents and applications related to ARIKAYCE, there are 13 in force issued US patents that cover the
ARIKAYCE composition and its use in treating NTM that are listed in the FDA Orange Book. These patents and their
expiration dates, based on filing dates, 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. 8,679,532 (expires December 5, 2026)
•
US Patent No. 8,642,075 (expires December 5, 2026)
•
US Patent No. 9,566,234 (expires January 18, 2034)
•
US Patent No. 9,895,385 (expires May 15, 2035)
•
US Patent No. 10,251,900 (expires May 15, 2035)
•
US Patent No. 10,751,355 (expires May 15, 2035)
•
US Patent No. 11,446,318 (expires May 15, 2035)
•
US Patent No. 12,016,873 (expires May 15, 2035)
•
US Patent No. 12,168,021 (expires May 15, 2035)
•
US Patent No. 12,168,022 (expires May 15, 2035)
In addition, we own four pending US patent applications that cover the ARIKAYCE composition and/or its use in
treating NTM lung disease, including those caused by MAC infections. One or more of the patent applications, if issued as
patents in their current form, may be eligible for listing in the FDA Orange Book for ARIKAYCE. We also own a pending US
application that covers methods for making ARIKAYCE. We anticipate that in the US, we will have patent coverage for
ARIKAYCE and its use in treating NTM lung disease, including NTM lung disease caused by MAC, through at least May 15,
2035.
Ten patents have been granted by the European Patent Office (EPO) (European Patent Nos. 1909759, 1962805,
2823820, 2852391, 3067046, 3142643, 3466432, 3766501, 4005576 and 4122470) that relate to ARIKAYCE and its use in
treating NTM lung disease, including those caused by MAC infections. In addition, we have additional patent applications
pending before the EPO that relate to ARIKAYCE and its use in treating NTM lung disease. European Patent No. 1909759 (the
’759 patent), owned by us, was previously opposed by Generics (UK) Ltd. A hearing was held on October 19, 2015, during
which we submitted amended claims. The European Patent Office Opposition Division (EPOOD) maintained the patent as
amended and Generics (UK) Ltd appealed the decision. The EPO Technical Board of Appeals heard arguments related to the
appeal on January 8, 2019 and the product claims of the patent were held invalid. The method of manufacture claims was
remitted to the EPOOD for further consideration, and the EPO has since maintained the validity of these claims. European
Patent Nos. 1962805 and 3067046, both of which expire approximately five months after the ‘759 patent (December 5, 2026 vs.
July 19, 2026), also include claims related to ARIKAYCE and its use in treating NTM lung disease. European Patent Nos.
2852391 and 4005576 each expires May 21, 2033 and include claims related ARIKAYCE together with a vibrating mesh
nebulizer having certain properties. European Patent Nos. 3142643, 3466432, 3766501 and 4122470 each expire May 15, 2035
and include claims related to ARIKAYCE and its use for treating MAC lung infections.
More than 50 patents have also been issued and are in force in other major foreign markets, e.g., Japan, China, Korea,
Australia, and India, that relate to ARIKAYCE and/or methods of using ARIKAYCE for treating various pulmonary disorders,
including NTM lung disease. More than 30 foreign patent applications are pending that relate to the ARIKAYCE composition
and/or its use in treating various pulmonary disorders, including NTM lung disease.
Through our agreements with PARI, we have license rights to US and foreign patents and applications that cover the
Lamira medical device through January 18, 2034. We have entered into a commercial supply agreement with PARI and we also
have rights to use the nebulizers in expanded access programs and clinical trials.
Brensocatib Patents
Through our agreement with AstraZeneca, we have licensed US Patent Nos. 9,522,894, 9,815,805, 10,287,258,
10,669,245, 11,655,221, 11,655,222, 11,655,223, 11,655,224, 11,673,871, 11,773,069, 11,814,359, and 12,054,465, which have
claims related to brensocatib and methods for using brensocatib in certain treatment methods, including the treatment of
obstructive diseases of the airway such as bronchiectasis. US Patent No. 9,522,894 expires March 12, 2035 while the remaining
US patents expire January 21, 2035 (not taking into account any potential patent term extension). Counterpart patents of the
aforementioned US patents have issued in Australia, Canada, Europe, China, Japan, South Korea, India, Israel, and Mexico and
expire January 21, 2035, not accounting for any potential patent term extension. We have also licensed US Patent No.
12,059,424 from AstraZeneca, and this patent expires February 21, 2040. The claims in US Patent No. 12,059,424 relate to
certain components of the brensocatib oral tablet. Counterpart patents have issued in China, Europe and Japan and expire March
1, 2039. In addition, patent applications related to brensocatib and methods of using the same to treat indications of interest
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such as bronchiectasis, HS and chronic rhinosinusitis are pending in the US and throughout the world, including in Europe,
China, and Japan.
TPIP Patents
We own US Patent Nos. 9,255,064, 9,469,600, 10,010,518, 10,526,274, 10,995,055 and 11,795,135, each expiring
October 24, 2034 (not taking into account any potential patent term extensions or adjustments), each with claims covering
treprostinil palmitil, the treprostinil prodrug component of TPIP, compositions comprising the same, and/or its use. US Patent
No. 9,255,064 has claims reciting hexadecyl-treprostinil, and other treprostinil prodrugs. US Patent No. 9,469,600 has claims
related to TPIP and other treprostinil prodrug formulations. US Patent No. 10,010,518 has claims directed to methods of
treating pulmonary hypertension, including PAH, using compositions related to TPIP such as treprostinil prodrug formulations.
US Patent No. 10,526,274 has claims directed to methods for treating pulmonary fibrosis with treprostinil palmitil. US Patent
No. 10,995,055 has claims directed to compositions comprising treprostinil palmitil in the form of a dry powder, and methods
for treating pulmonary hypertension with the same. US Patent No. 11,795,135 has claims directed to methods for treating PH-
ILD, with treprostinil palmitil. Counterpart patent applications to these US Patents have issued in Europe, Japan and other
foreign jurisdictions. Counterpart patent applications to these US Patents are also pending in select jurisdictions, including the
US, Europe and Japan.
We own pending patent applications that relate to methods for using treprostinil prodrugs and formulations comprising
the same, including TPIP in treating patients with PAH and other diseases, as well as methods for manufacturing such
treprostinil prodrugs and formulations. Should the patent applications related to TPIP formulations and methods of using TPIP
in pulmonary hypertension treatment methods issue, these patents would expire in October 2041.
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 and ARIKAYCE. At present, we have received two registrations for the INSMED mark and one
registration for the ARIKAYCE mark from the US Patent and Trademark Office (USPTO). We have also received notices of
allowance or registrations in a number of countries abroad for the INSMED and ARIKAYCE marks, among others. The EMA
has authorized the use of the name ARIKAYCE liposomal, and the FDA has approved our use of the name ARIKAYCE, as the
trade name for amikacin liposome inhalation suspension. Our ability to obtain and maintain trademark registrations will in
certain geographical locations depend on making use of the mark in commerce on or in connection with our products and
approval of the trademarks for our products by regulatory authorities in each country.
License and Other Agreements
Multi-program Agreements
PPD Development, L.P. (a wholly-owned subsidiary of Thermo Fisher)
In April 2020, we entered into a master services agreement with PPD Development, L.P. (PPD) pursuant to which we
retained PPD to perform clinical development services in connection with certain of our clinical research programs. The master
services agreement has an initial term of five years. Either party may terminate (i) any project addendum under the master
services agreement for any reason and without cause upon 30 days’ written notice, (ii) any project addendum in the event of the
other party’s breach of the master services agreement or such project addendum upon 30 days’ written notice, provided that
such breach is not cured within such 30-day period, (iii) the master services agreement or any project addendum immediately
upon the occurrence of an insolvency event with respect to the other party or (iv) any project addendum upon 30 days’ written
notice if (a) the continuation of the services under such project addendum would post material ethical or safety risks to study
participants, (b) any approval from a regulatory authority necessary to perform the applicable study is revoked, suspended or
expires without renewal or (c) in the reasonable opinion of such party, continuation of the services provided under such project
addendum would be in violation of applicable law. We have entered into project addenda with PPD to perform clinical
development services over several years for, but not limited to, our ARISE, ENCORE and ASPEN studies and other trials
involving brensocatib and TPIP. The total cost of these project addenda is $498.9 million.
ARIKAYCE-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 of ARIKAYCE.
17
PARI
We have a licensing agreement with PARI for use of the optimized Lamira Nebulizer System for delivery of
ARIKAYCE in treating patients with NTM lung infections, CF and bronchiectasis. Under the licensing agreement, we have
rights under several US and foreign issued patents and patent applications involving improvements to the optimized Lamira
Nebulizer System, to exploit the system with ARIKAYCE for the treatment of such indications, but we cannot manufacture the
nebulizers except as permitted under our Commercialization Agreement with PARI, which is described in further detail below.
Lamira has been approved for use in the US (in combination with ARIKAYCE) and EU and is authorized for use in Japan. We
also currently have rights to use the nebulizers in expanded access programs and clinical trials. Lamira must receive regulatory
approval before we can market ARIKAYCE outside the US, EU and Japan, and it is labeled as investigational for use in our
clinical trials outside of these regions.
We have certain obligations under this licensing agreement in relation to specified licensed indications. With respect to
NTM, we met all obligations to achieve certain commercial, developmental and regulatory milestones by the required
deadlines. With respect to bronchiectasis, we have satisfied our obligation to use commercially reasonable efforts to initiate a
Phase 3 trial for bronchiectasis. With respect to CF, we are obligated to use commercially reasonable efforts to develop, obtain
regulatory and reimbursement approval, market and sell ARIKAYCE in two or more major European countries, as well as to
achieve certain milestones specified in the licensing agreement. Termination of the licensing agreement or loss of exclusive
rights may occur if we fail to meet our obligations, including payment of royalties to PARI.
Under the licensing agreement, we paid PARI an upfront license fee and milestone payments. Upon FDA acceptance
of our NDA and the subsequent FDA and EMA approvals of ARIKAYCE, we made additional milestone payments of €1.0
million, €1.5 million and €0.5 million, respectively, to PARI. In October 2017, we exercised an option to buy-down the
royalties payable to PARI. PARI is entitled to receive royalty payments in the mid-single digits on annual global net sales of
ARIKAYCE pursuant to the licensing agreement, subject to certain specified annual minimum royalties.
This licensing agreement will remain in effect on a country-by-country basis until the final royalty payments have been
made with respect to the last country in which ARIKAYCE is sold, or until the agreement is otherwise terminated by either
party. We have the right to terminate this licensing agreement upon written notice for PARI's uncured material breach, if PARI
is the subject of specified bankruptcy or liquidation events, or if PARI fails to reach certain specified obligations. PARI has the
right to terminate this licensing agreement upon written notice for our uncured material breach, if we are the subject of specified
bankruptcy 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 set forth in the agreement, or if we fail to reach certain specified milestones.
In July 2014, we entered into a Commercialization Agreement with PARI for the manufacture and supply of the
Lamira® Nebulizer Systems and related accessories (the Device), which is an e-Flow® nebulizer modified and optimized for
use with ARIKAYCE. Under the Commercialization Agreement, PARI manufactures 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 certain third
parties deemed under the Commercialization Agreement to compete with PARI). The Commercialization Agreement has an
initial term of 15 years that began to run in October 2018 (the Initial Term). The term of the Commercialization Agreement may
be extended by us for an additional five years by providing written notice to PARI at least one year prior to the expiration of the
Initial Term.
Resilience
In February 2014, we entered into a contract manufacturing agreement with Therapure Biopharma Inc., which has
been assumed by Resilience, for the manufacture of ARIKAYCE, on a non-exclusive basis, at a 200 kg scale. Pursuant to the
agreement, we collaborated with Resilience to construct a production area for the manufacture of ARIKAYCE in Resilience's
existing manufacturing facility in Mississauga, Ontario, Canada. The agreement had an initial term of five years, which began
in October 2018, and renews automatically for successive periods of two years each, unless terminated by either party by
providing the required two years' prior written notice to the other party. Under the agreement, we are obligated to pay a
minimum of $6.0 million, subject to inflation, for commercial ARIKAYCE batches produced and certain manufacturing
activities each calendar year. The agreement allows for termination by either party upon the occurrence 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
entered into 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 than 180 days' advance notice.
Patheon (a wholly-owned subsidiary of Thermo Fisher) and related agreements
In October 2017, we entered into certain agreements with Patheon related to the increase of our long-term production
capacity for ARIKAYCE. The agreements provide for Patheon to manufacture and supply ARIKAYCE for our anticipated
commercial needs. Under these agreements, we are required to deliver to Patheon the required raw materials, including active
pharmaceutical ingredients, and certain fixed assets needed to manufacture ARIKAYCE. Patheon's supply obligations will
18
commence once certain technology transfer and construction services are completed. Our manufacturing and supply agreement
with Patheon will remain in effect for a fixed initial term, after which it will continue for successive renewal terms unless either
we or Patheon have given written notice of termination. The technology transfer agreement will expire when the parties agree
that the technology transfer services have been completed. The agreements may also be terminated under certain other
circumstances, including by either party due to a material uncured breach of the other party or the other party’s insolvency.
These early termination clauses may reduce the amounts due to the relevant parties. The aggregate investment to increase our
long-term production capacity, including under the Patheon agreements and related agreements or purchase orders with third
parties for raw materials and fixed assets, is estimated to be approximately $116.0 million.
Cystic Fibrosis Foundation Therapeutics, Inc.
In 2004 and 2009, we entered into research funding agreements with Cystic Fibrosis Foundation Therapeutics, Inc.
(CFFT) whereby we received $1.7 million and $2.2 million in research funding for the development of ARIKAYCE. As a result
of the US approval of ARIKAYCE and in accordance with the CFFT agreements, as amended, we owe milestone payments to
CFFT of $13.4 million in the aggregate payable through 2025, of which $10.4 million has been paid as of December 31, 2024.
Furthermore, if certain global sales milestones were met within five years of the commercialization of ARIKAYCE, we would
have owed up to an additional $3.9 million. We met and paid $1.7 million of these additional global sales milestone payments.
Brensocatib-related Agreements
AstraZeneca
In October 2016, we entered into a license agreement with AstraZeneca (the AZ License Agreement), pursuant to
which AstraZeneca granted us exclusive global rights for the purpose of developing and commercializing AZD7986 (renamed
brensocatib). In consideration of the licenses and other rights granted by AstraZeneca, we made an upfront payment of
$30.0 million in late October 2016. In December 2020, we incurred a $12.5 million milestone payment obligation upon the first
dosing in a Phase 3 clinical trial of brensocatib. In May 2024, upon our release of an official public statement that we intended
to file an NDA, we incurred an additional $12.5 million milestone payment obligation. Upon regulatory approval by the FDA of
an NDA, we will owe AstraZeneca an additional $30.0 million. Subsequent to this milestone, we are also obligated to make a
series of additional contingent milestone payments totaling up to an additional $30.0 million upon the achievement of
regulatory filing milestones. If we elect to develop brensocatib for a second indication, we will be obligated to make an
additional series of contingent milestone payments totaling up to $42.5 million, the first of which occurs at the initiation of a
Phase 3 trial in the additional indication. We are not obligated to make any additional milestone payments for additional
indications. In addition, we have agreed to pay AstraZeneca tiered royalties ranging from a high single-digit to mid-teens on net
sales of any approved product based on brensocatib and one additional payment of $35.0 million upon the first achievement of
$1.0 billion in annual net sales. The AZ License Agreement provides AstraZeneca with the option to negotiate a future
agreement with us for commercialization of brensocatib in chronic obstructive pulmonary disease or asthma. If we fail to
comply with our obligations under our agreements with AstraZeneca (including, among other things, if we fail to use
commercially reasonable efforts to develop and commercialize a product based on brensocatib, or we are subject to a
bankruptcy or insolvency), AstraZeneca would have the right to terminate the license.
In March 2020, AstraZeneca exercised its first option pursuant to our October 2016 license agreement under which
AstraZeneca can advance clinical development of brensocatib in the indications of chronic obstructive pulmonary disease
(COPD) or asthma. Under the terms of the agreement, upon exercise of this option, AstraZeneca became solely responsible for
all aspects of the development of brensocatib up to and including Phase 2b clinical trials in COPD or asthma. In March 2024,
AstraZeneca exercised its second and final option under the agreement to further develop brensocatib beyond Phase 2b clinical
trials and, if approved, commercialize brensocatib in the indications of COPD or asthma, upon reaching agreement after good
faith negotiations resulting in terms, including financial terms, satisfactory to us and to AstraZeneca for such further
development and commercialization. In June 2024, the negotiation period following such exercise of the final option expired.
No agreement was reached between us and AstraZeneca to permit AstraZeneca to further develop and, if approved,
commercialize brensocatib in the indications of COPD or asthma. As a result, we retain full worldwide development and
commercialization rights for brensocatib in all indications other than COPD or asthma and AstraZeneca has no further
development or commercialization rights for brensocatib in COPD, asthma or any other indication.
Patheon Inc. (a wholly-owned subsidiary of Thermo Fisher) and related agreements
In January 2024, we entered into certain agreements with Patheon Inc. related to the manufacture and supply of
brensocatib by Patheon Inc. for our anticipated long-term commercial needs. Under these agreements, we are required to deliver
to Patheon Inc. the active pharmaceutical ingredients needed to manufacture brensocatib. Our master commercial
manufacturing services agreement with Patheon Inc. will remain in effect for a fixed initial term, after which it will continue for
successive renewal terms unless either we or Patheon Inc. have given written notice of termination. The agreements may also be
terminated under certain other circumstances, including by either party due to a material uncured breach of the other party or
the other party’s insolvency. Patheon Inc.'s supply obligations are governed by individual product agreements entered into from
19
time to time under the master commercial manufacturing services agreement. The product agreements specify, among other
things, the term and pricing for Patheon Inc.’s supply obligations.
Esteve Química, S.A.
In September 2024, we entered into a commercial manufacturing and supply agreement with Esteve for the
manufacture and supply of brensocatib's active pharmaceutical ingredient. The commercial manufacturing and supply
agreement has an initial term of three years, after which it will continue for successive 12-month renewal terms unless either we
or Esteve have given written notice of termination. The agreement may also be terminated under certain other circumstances,
including by either party due to a material uncured breach of the other party or the other party’s insolvency, the discontinue of
specified dosages or changes in the regulatory landscape. Esteve’s supply obligations are based on rolling forecasts of our
anticipated demand for brensocatib.
Competition
The biotechnology and pharmaceutical industries are highly competitive. We face potential competitors from many
different areas including commercial pharmaceutical, biotechnology and device companies, academic institutions and scientists,
other smaller or earlier stage companies and non-profit organizations developing anti-infective drugs and drugs for respiratory,
inflammatory, immunology, oncology, and rare diseases. Many of these companies have greater human and financial resources
and may have product candidates in more advanced stages of development and may reach the market before our product
candidates. Competitors may develop products that are more effective, safer or less expensive or that have better tolerability or
convenience. We also may face generic competitors where third-party payors will encourage use of the generic products.
Although we believe that our formulation delivery technology, respiratory and anti-infective expertise, experience and
knowledge in our specific areas of focus provide us with competitive advantages, these potential competitors could reduce our
commercial opportunity. Additionally, there currently are, 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, product candidates. For instance, PAH
is a competitive indication with established marketed products, including other formulations of treprostinil.
In the lung disease market, our major competitors include pharmaceutical and biotechnology companies that have
approved therapies or therapies in development for the treatment of chronic lung infections. There are other companies that are
currently conducting clinical trials for the treatment of lung disease. While there are currently no approved treatments for
bronchiectasis, clinical studies in this disease state and specific endotypes (for instance, bronchiectasis with eosinophilic
inflammation) have been initiated. Certain entities have expressed interest in studying other DPP1 inhibitors for the treatment of
bronchiectasis and we are aware of at least two entities currently conducting clinical trials for the treatment of bronchiectasis
with a DPP1 inhibitor. Products developed by certain of our competitors may potentially be used in combination with
brensocatib, if approved.
With regard to ARIKAYCE, we are not aware of any approved inhaled therapies specifically indicated for refractory
NTM lung infections in North America, Europe or Japan, but there is a recommended treatment regimen that is utilized. The
international treatment guidelines, which are issued by the ATS, ERS, ESCMID and IDSA, strongly recommend the use of
ARIKAYCE for the treatment of patients with refractory NTM lung disease caused by MAC as a part of a combination
antibacterial drug regiment for adult patients with limited or no alternative treatment options who have failed to convert to a
negative sputum culture after at least six months of treatment.
The fields of gene therapy and protein engineering are rapidly advancing and highly competitive. While we believe our
internal expertise provides a competitive advantage, we expect competition to intensify, including from other pharmaceutical
companies, government agencies and public and private research institutions. If any of our gene therapy or protein engineering
programs are approved for their indications, we expect to compete with other gene therapy products, protein engineering
technologies and any other existing or new therapies or technologies that may become available in the future.
Government Regulation
Orphan Drug Designation
United States
Under the Orphan Drug Act (ODA), the FDA may grant orphan drug designation to drugs intended to treat a rare
disease or condition, defined as a disease or condition for which the drug is intended affects fewer than 200,000 people in the
US or for which there is no reasonable expectation that the cost of developing and making available in the US a drug for such
disease or condition will be recovered from US sales of such drug, if it meets certain criteria specified 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
are listed by the FDA in a publicly accessible database. The FDA designated ARIKAYCE as an orphan drug for treatment of
NTM infections, bronchiectasis in patients with Pseudomonas aeruginosa or other susceptible microbial pathogens, and
bronchopulmonary Pseudomonas aeruginosa infections in CF patients. However, the orphan drug designations for
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bronchiectasis in patients with Pseudomonas aeruginosa or other susceptible microbial pathogens and bronchopulmonary
Pseudomonas aeruginosa infections in CF patients were withdrawn at our request in August 2023.
Orphan drug designation qualifies the sponsor for various development incentives of the ODA, including tax credits
for qualified clinical testing, and a waiver of the PDUFA application fee (unless the application seeks approval for an indication
not included in the orphan drug designation). Orphan drug designation also may afford the company a period of exclusivity for
the orphan indication upon approval of the drug. Specifically, the first NDA or biologics license application (BLA) applicant
with an FDA orphan drug designation for a particular drug to receive FDA approval of the drug for an indication covered by the
orphan designation is entitled to a seven-year exclusive marketing period, often referred to as orphan drug exclusivity, in the
US for that drug in that indication. A product that has several separate orphan designations may have several separate
exclusivities for separate orphan indications. During the orphan drug exclusivity period, the FDA may not approve any other
applications to market the same drug for the same indication for use, except in limited circumstances, such as a showing of
clinical superiority to the product that has orphan drug exclusivity. Orphan drug exclusivity does not prevent 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 the timing or scope of the regulatory review and approval process; the sponsor must still submit evidence from clinical and
non-clinical studies sufficient to demonstrate the safety and effectiveness of the drug.
In a decision issued in September 2021 (Catalyst Pharmaceuticals, Inc. v. Becerra), the US Court of Appeals for the
Eleventh Circuit held that the FDA had erred by limiting the scope of orphan drug exclusivity for FIRDAPSE® (amifampridine)
to the product’s approved indication, an action that the FDA taken in accordance with its regulations interpreting the ODA. The
court held that under the ODA, FIRDAPSE’s orphan drug exclusivity instead protected the broader rare disease or condition
that received orphan drug designation. Notwithstanding the Eleventh Circuit’s decision in Catalyst, the FDA announced in
January 2023 that it would continue to apply the FDA’s regulations tying the scope of orphan drug exclusivity to a product’s
approved uses or indications. In light of the FDA’s announcement, the scope of orphan drug exclusivity and other issues
relating to the FDA’s implementation of the ODA with respect to previously approved and future products may be the subject
of further litigation or legislative action.
European Union
The EMA grants orphan drug designation to promote the development of drugs or biologics (1) for life-threatening or
chronically debilitating 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 in the EU where, without incentives, sales of the drug in the European Economic
Area (the EU plus Iceland, Lichtenstein and Norway) (EEA) are unlikely to be sufficient to justify its development. Orphan
drug designation is available either if no other satisfactory method of diagnosing, preventing or treating the condition is
approved in the EEA or if such a method does exist but the proposed orphan drug will be of significant benefit to patients.
If a drug with an orphan drug designation subsequently receives an orphan drug marketing authorization from the EC
for a therapeutic indication which is covered by such designation, the drug is entitled to orphan exclusivity. The EC has granted
an orphan drug marketing authorization for ARIKAYCE for the treatment of NTM lung infections caused by MAC in adults
with limited treatment options who do not have CF. Orphan exclusivity means that the EMA or a national medicines agency
may not accept another application for authorization, or grant an authorization, for a same or similar drug for the same
therapeutic indication. Competitors may receive such a marketing authorization despite orphan exclusivity, provided that they
demonstrate that the existing orphan product is not supplied in sufficient quantities or that the 'second' drug or biologic is
clinically superior to the existing orphan product. The 'second' drug may but need not have an orphan designation as well. The
period of orphan exclusivity is 10 years, which can be extended by two years where an agreed pediatric investigation plan has
been implemented. The exclusivity period may also be reduced to six years if the designation criteria are no longer met,
including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity. Each
orphan designated marketing authorization carries the potential for one market exclusivity for all the therapeutic indications that
are covered by the designation. Market exclusivity is an orphan incentive awarded by the EC to a specific clinical indication
with an orphan designation. Each indication with an orphan designation confers ten years of market exclusivity for the
particular indication. A medicine that has multiple orphan designations for different conditions may benefit from separate
market exclusivity periods pertaining to its different orphan designations.
Orphan drug designation also provides opportunities for free protocol assistance and fee reductions for access to the
centralized regulatory procedure or fee exemptions for companies with a small and medium enterprises status. In addition, EU
Member States may provide national benefits to orphan drugs, such as early access 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 the time of marketing authorization, the criteria for orphan designation are examined again, and
the EC decides on the maintenance of the orphan designation in granting an orphan drug marketing authorization. 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 or exemptions, and national benefits.
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Japan
The MHLW may, after hearing the opinion of the Pharmaceutical Affairs and Food Sanitation Council, grant orphan
drug designation to a drug intended to treat a rare disease or condition if the drug meets the following conditions: (i) the number
of target patients is less than 50,000 in Japan; (ii) the necessity of orphan drug designation is high from a medical point of view;
and (iii) the plan for development of the drug is appropriate. Even if a drug is granted orphan drug designation, however, it does
not always receive the manufacturing and marketing approval that is necessary for the drug to be sold or marketed in Japan.
ARIKAYCE did not qualify for orphan drug designation in Japan due to the estimated number of NTM patients in Japan
exceeding 50,000.
Drug Approval
United States
In the US, pharmaceutical products are subject to extensive regulation by the FDA and other government bodies. The
US Federal Food, Drug, and Cosmetic Act (FDCA), the Public Health Services Act (PHSA) (in the case of biological products),
and other federal and state statutes and regulations govern, among other things, the research, development, testing, manufacture,
storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting,
sampling and import and export of pharmaceutical products. Failure to comply with applicable US requirements at any time
during product development, approval, or after approval may subject a company to a variety of administrative or judicial
sanctions, such as imposition of clinical holds, FDA refusal to file or approve NDAs or BLAs, warning letters, product seizures,
total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution,
disgorgement, civil penalties, and criminal prosecution. The description below summarizes the current approval process in the
US for our product and product candidates.
Preclinical Studies
Preclinical studies may include laboratory evaluation of product chemistry, formulation and toxicity, and
pharmacology, as well as animal trials to assess the characteristics and potential safety and efficacy of the product. The conduct
of the preclinical tests must comply with federal regulations and requirements including the FDA's good laboratory practice
(GLP) regulations and the US Department of Agriculture's regulations implementing the Animal Welfare Act. An IND sponsor
must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical
data or literature, and a proposed clinical trial protocol, among other things, to the FDA as part of an IND. Certain non-clinical
tests, such as animal tests of reproductive toxicity and carcinogenicity, may continue even after the IND is submitted. An IND
automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns 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 might not
result in the FDA allowing clinical trials to commence.
Clinical Trials
Clinical trials involve the administration of the investigational new drug to human subjects (healthy volunteers or
patients) under the supervision of a qualified investigator. Clinical trials must be conducted (i) in compliance with all applicable
federal regulations and guidance, including those pertaining to good clinical 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 included as a submission to the IND, and the FDA must be notified of subsequent
protocol amendments, including new protocols. In addition, the protocol must be reviewed and approved by an institutional
review board (IRB), and all study subjects must provide informed consent. Typically, before any clinical trial, each institution
participating in the trial will require review of the protocol before the trial commences at that institution. Progress reports
detailing the results of the clinical trials must be submitted at least annually to the FDA and there are additional, more frequent
reporting requirements for certain AEs.
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 temporary or 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 presents an unacceptable risk to the clinical trial subjects. An IRB
also may require the clinical trial at the site to be halted, either temporarily or permanently, for failure to comply with the IRB's
requirements, or may impose other conditions.
Clinical trials to support NDAs or BLAs for marketing approval are typically conducted in three sequential pre-
approval phases, but the phases may overlap or be combined. 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 with the 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 a
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larger group of subjects (typically up to several hundred) with the target condition to further evaluate its safety and gather
preliminary evidence of efficacy. Phase 3 studies typically last between several months and two years. In Phase 3, the drug is
given to a large group of subjects with the target disease or condition (typically several hundred to several thousand), often at
multiple geographical sites, to confirm its effectiveness, monitor side effects, and collect data to support drug approval. Only a
small percentage of investigational drugs complete all three phases of development and obtain marketing approval.
NDAs and BLAs
After completion of the required clinical testing, an NDA or BLA can be prepared and submitted to the FDA. FDA
approval of the NDA or BLA is required before marketing of the product may begin in the US. The NDA or BLA is a large
submission that must include, among other things, the results of all preclinical, clinical and other testing and a compilation of
data relating to the product's pharmacology, chemistry, manufacture, and controls. The application also includes representative
samples, copies of the proposed product labeling, patent information, and a financial certification or disclosure statement. The
cost of preparing and submitting an NDA or BLA is substantial. Additionally, under federal law (as amended by the most recent
reauthorization of the Prescription Drug User Fee Act (PDUFA VII) in the FDA User Fee Reauthorization Act of 2022), most
NDAs and BLAs are subject to a substantial application fee and, upon approval, the applicant will be assessed an annual
prescription drug program fee, both of which are adjusted annually. NDAs and BLAs for orphan drugs are not subject to an
application fee, unless the application includes an indication other than an orphan-designated indication. The FDA also has the
authority to grant waivers of certain user fees, pursuant to the FDCA.
The FDA has 60 days from its receipt of an NDA or BLA to determine whether the application is accepted for filing
based on the FDA's threshold determination that it is sufficiently complete to permit substantive review. Once the submission is
accepted for filing, the FDA begins a substantive review. The FDA may refer applications for novel drug or biological products
or drug or biological products that present difficult questions of safety or efficacy to an advisory committee, typically a panel
that includes outside clinicians and other experts, for review, evaluation and a recommendation as to whether the application
should be approved. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such
recommendations.
Before approving an NDA or BLA, the FDA will typically inspect one or more clinical sites to assure compliance with
GCP. Additionally, the FDA will typically inspect the facility or the facilities at which the drug or biological product is
manufactured. The FDA will not approve the product unless, among other requirements, compliance with current good
manufacturing practice (cGMP) is satisfactory and the NDA or BLA contains data that provide substantial evidence of
effectiveness for the proposed indication, generally consisting of adequate and well-controlled clinical investigations, and that
the drug is safe for use under the conditions of use in the proposed labeling. The FDA also reviews the proposed labeling
submitted with the NDA or BLA and typically requires changes in the labeling text.
After the FDA evaluates the NDA or BLA and the manufacturing and testing facilities, it issues either an approval
letter or a complete response letter. Complete response letters generally outline the deficiencies in the submission and delineate
the additional testing or information needed in order for the FDA to reconsider the application. If and when those deficiencies
have been addressed to the FDA's satisfaction in a resubmission of the NDA or BLA, the FDA will issue an approval letter. An
approval letter, which may specify post approval requirements, authorizes commercial marketing of the drug or biological
product for the approved indication or indications and the other conditions of use set out in the approved prescribing
information. Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or
problems are identified following initial marketing. The FDA sets a goal date by which the FDA expects to issue either an
approval letter or a complete response letter, unless the review period is adjusted by mutual agreement between the FDA and
the applicant or as a result of the applicant submitting a major amendment. The FDA's current performance goals call for the
FDA to complete review of 90 percent of standard (non-priority) NDAs and BLAs within 10 months of the end of the 60-day
filing review period and priority NDAs and BLAs within six months of the end of the 60-day filing review period (in the case
of new molecular entity (NME) NDA and original BLA submissions). For non-NME NDA/BLAs the FDA's current
performance goals call for the FDA to complete review of 90 percent of standard (non-priority) NDAs and BLAs within 10
months of receipt and priority NDAs and BLAs within 6 months of receipt.
As a condition of NDA or BLA approval, the FDA may require substantial post-approval testing, known as Phase 4
studies, to be conducted in order to gather additional information on the drug's effect in various populations and any side
effects. Beyond routine post marketing safety surveillance, the FDA may require specific additional surveillance to monitor the
drug's safety or efficacy and may impose other conditions, including labeling restrictions that can materially affect the potential
market and profitability of the drug. As a condition of approval, or after approval, the FDA also may require submission of a
risk evaluation and mitigation strategy (REMS) or a REMS with elements to assure safe use 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 risk minimization tools. Further
post-approval requirements are discussed below.
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Expedited Review and Approval of Eligible Drugs
Under the FDA's accelerated approval program, the FDA may approve certain drugs for serious or life-threatening
conditions on the basis of a surrogate or intermediate endpoint that is reasonably likely to predict clinical benefit, which can
substantially reduce time to approval. A surrogate endpoint used for accelerated approval is a marker—a laboratory
measurement, radiographic image, physical sign or other measure that is thought to predict clinical benefit, but is not itself a
measure of clinical benefit. An intermediate clinical endpoint is a clinical endpoint that can be measured earlier than irreversible
morbidity and mortality (IMM) that is reasonably likely to predict an effect on IMM or other clinical benefit. The FDA bases its
decision on whether to accept the proposed surrogate or intermediate clinical endpoint on the scientific support for that
endpoint.
As a condition of accelerated approval, the FDA typically requires certain post-marketing clinical studies to verify and
describe clinical benefit of the product, and may impose restrictions on distribution to assure safe use. Under the Consolidated
Appropriations Act, 2023, Congress gave FDA the authority to require, as appropriate, that a confirmatory trial be underway
prior to accelerated approval or within a specified time period after the date of accelerated approval. In addition, promotional
materials for an accelerated approval drug to be used in the first 120 days post-approval must 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 FDA may withdraw approval of the drug under streamlined procedures in accordance with the
FDCA, as amended by the Consolidated Appropriations Act, 2023. The agency may also withdraw approval of a drug if, among
other things, the promotional materials for the product are false or misleading, or other evidence demonstrates that the drug
product is not shown to be safe or effective under its conditions of use.
The FDA also has various programs—fast track designation, priority review and breakthrough designation—that are
intended to expedite or streamline the process for the development and FDA review of drugs that meet certain qualifications.
The purpose of these programs is to provide important new drugs to patients earlier than under standard FDA review
procedures. The programs each have different eligibility criteria and provide different benefits, and can be applied either alone
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 for which 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 later than the pre-NDA or pre-BLA meeting. The FDA must respond to requests for fast track designation within 60 days of
receipt of the request. If granted, the applicant is eligible for actions to expedite development and review, such as frequent
interaction with the review team, as well as rolling review, meaning that the applicant may submit sections of the application as
they are available. The timing of the FDA's review of these sections depends on a number of factors, and the review clock does
not start running until the agency has received a complete NDA or BLA submission. The FDA may withdraw fast track
designation if the agency determines that the designation is no longer supported by data emerging in the drug development
process.
Priority review applies to an application (both original and efficacy supplement) for a drug that treats a serious
condition and that, if approved, would provide a significant improvement in safety or effectiveness. It also applies to any
supplement that proposes a labeling change pursuant to a report on a pediatric study conducted pursuant to section 505A of the
FDCA. A request for priority review is submitted at the time of submission of an NDA or BLA, or supplemental NDA or BLA.
The FDA must respond within 60 days of receipt of the request. If granted, the review time is shortened from the standard
10 months to 6 months, beginning either after the 60-day filing review period (in the case of NME NDA and original BLA
submissions) or the date of receipt (in the case of non-NME original NDA submissions).
Breakthrough therapy designation applies to a drug that is intended to treat a serious condition and for which
preliminary clinical evidence indicates that the drug may demonstrate substantial improvement on a clinically significant
endpoint(s) over available therapies. It can be requested with the IND submission and ideally 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 intensive guidance
on efficient drug development, intensive involvement of senior managers and experienced review and regulatory health project
management staff in a proactive, collaborative, cross-disciplinary review, rolling review, and other actions to expedite review.
Designation may be rescinded if the product no longer meets the criteria for breakthrough therapy designation.
Drugs that are designated as QIDPs may be eligible for priority review and will receive fast track designation upon the
request of the sponsor, and also may be eligible for market exclusivity. A product is eligible for QIDP designation if it is an
antibacterial or anti-fungal drug for human use that is intended to treat serious or life-threatening infections, including: those
caused by an anti-bacterial or anti-fungal resistant pathogen, including novel or emerging infectious pathogens; or caused by
qualifying pathogens listed by the FDA. A drug sponsor may request that the FDA designate its product as a QIDP at any time
prior to NDA submission.
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Additionally, the FDA may approve eligible drugs under the LPAD. A product is eligible if it is intended to treat a
serious or life-threatening infection in a limited population of patients with unmet needs, the drug otherwise meets the standards
of approval, and the FDA receives a written request from the sponsor to approve the drug under this pathway. An antibacterial
or anti-fungal drug approved through this pathway may follow a streamlined clinical development program involving smaller,
shorter, or fewer clinical trials. Approval is based on a benefit-risk assessment in the intended limited population, taking into
account the severity, rarity, or prevalence of the infection the drug is intended to treat and the availability or lack of alternative
treatment for the patient population. Such drugs might not have favorable benefit-risk profiles in a broader population. Drugs
approved under LPAD are subject to additional regulatory requirements, including labeling and advertising statements
regarding the limited population and submission of promotional materials to the FDA at least 30 days prior to
dissemination. The FDA may remove these additional requirements if the agency approves the drug for a broader population.
Exclusivities
In the US, after NDA or BLA approval of a drug not previously approved, owners of relevant drug patents may obtain
up to a five-year patent term extension on a single patent. The allowable patent term extension is generally calculated as half of
the drug's testing phase (the time between the date the IND becomes effective and the NDA or BLA submission date) and all of
the review phase (the time between the NDA or BLA submission date and the approval date) up to a maximum of five years, to
the extent such testing phase and approval phase occur after the issue date of the patent. The total post-NDA or BLA approval
patent term including the extension may not exceed 14 years. The extension also can be shortened if the FDA determines that
the NDA/BLA applicant did not pursue approval with due diligence. For patents that might expire while a patent term extension
application is pending, the patent owner may request an interim patent term extension. The Director of the USPTO shall extend,
until a final determination is made, the term of the patent for periods of up to one year if the Director determines that the patent
is eligible for extension. An interim patent term extension may be renewed up to four times until a final determination is made,
and up to the amount of time for which the patent might be eligible for extension. For each interim patent term extension
granted, the final patent term extension is reduced by a corresponding amount. Interim patent extensions may also be available
for a patent that will expire before a drug is expected to be approved, but the NDA or BLA for the drug must have 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 competing products.
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 any other application submitted under section 505(b) of the
FDCA. During the exclusivity period for an NCE, the FDA may not accept for review an abbreviated NDA (ANDA) or a
505(b)(2) NDA submitted by another company that references (i.e., relies on the FDA's prior approval of) the NCE drug.
However, an ANDA 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 with the FDA for the NCE drug.
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 the application contains reports of new clinical investigations (other than bioavailability studies)
conducted or sponsored by the sponsor that were essential to approval of the application, for example, for new indications,
dosages, strengths or dosage forms of an existing drug. This three-year exclusivity covers only the conditions of use associated
with the new clinical investigations, which means that the FDA may approve ANDAs and 505(b)(2) NDAs for other versions of
the original, unmodified drug product. Where this form of exclusivity applies, it prevents FDA approval of an ANDA or
505(b)(2) NDA that is 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) NDA for a duplicate version of the approved
drug during the period of exclusivity, provided that the follow-on applicant conducts or obtains a right of reference to all of the
preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.
Products with QIDP designation may receive a five-year extension of other non-patent exclusivities for which the drug
is also eligible, subject to certain limitations. Depending upon the scope of the non-patent exclusivity that is extended, the five-
year extension might not prevent the FDA from approving a subsequent application for a change to the QIDP-designated drug
that results in, for example, a new indication, route of administration, dosing, schedule, dosage form, delivery system, delivery
device, or strength. A drug that has been designated as both an orphan drug and a QIDP for the same indication, like
ARIKAYCE, might be eligible for a combined 12 years of exclusivity for that indication.
Under the PHSA, the FDA recognizes reference product exclusivity starting from the first licensure of a biological
product. Reference product exclusivity affects the timing of submission and approval of a BLA for a biosimilar product. Under
section 351(k) of the PHSA, a BLA for a biosimilar product may be approved based upon a showing that the proposed product
is highly similar to a previously licensed product, known as the reference product, notwithstanding minor differences in
clinically inactive components; and there are no clinically meaningful differences between the proposed biosimilar product and
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the reference product in terms of safety, purity, and potency. Reference product exclusivity prevents the FDA from accepting a
BLA submitted under section 351(k) of the PHSA for a proposed biosimilar product for 4 years after the date of first licensure
of the reference product, and prevents the FDA from approving such BLA for a proposed biosimilar product for 12 years after
such date of first licensure. An additional period of reference product exclusivity is not available upon approval of a
supplemental BLA. Moreover, the PHSA limits the availability of reference product exclusivity for a subsequent BLA filed by
the same sponsor or manufacturer of a biological product (or a licensor, predecessor in interest, or other related entity).
Medical Device Regulation
Medical devices, such as Lamira, may be marketed as stand-alone devices, or in some cases, as constituent parts of a
combination product. In either case, the product will need to satisfy and comply with FDA requirements. Unless an exemption
applies, each medical device commercially distributed in the US requires either FDA clearance of a 510(k) premarket
notification, approval of a premarket approval application (PMA), or issuance of a de novo classification order. Medical devices
are classified into one of three classes -- Class I, Class II or Class III -- depending on the degree of risk and the level of control
necessary to assure the safety and effectiveness of each medical device. Medical devices deemed to pose lower risks are
generally placed in either Class I or II.
While most Class I devices are exempt from the 510(k) premarket notification requirement, manufacturers of most
Class II devices are required to submit to the FDA a pre-market notification. The FDA’s permission to commercially distribute
a device subject to a 510(k) premarket notification is generally known as 510(k) clearance. Devices deemed by the FDA to pose
the greatest risk, such as life-sustaining, life-supporting, or many implantable devices, or devices that have been found not
substantially equivalent to a legally marketed Class I or Class II predicate device, are placed in Class III, requiring approval of a
PMA. De novo classification is a risk-based classification process to classify novel medical devices into Class I or Class II.
Medical devices are also subject to certain postmarket requirements. Those requirements include, for example,
establishment registration and device listing; compliance with the requirements of the Quality System Regulation (QSR);
medical device reporting regulations; correction and removal reporting regulations; compliance with requirements for Unique
Device Identification; and post-market surveillance activities and obligations. Device manufacturers must also comply with
FDA requirements regarding promotion, which require that promotion is truthful, not misleading, fairly balanced, and that all
claims are substantiated, and prohibit the promotion of products for unapproved or “off-label” uses.
Medical device manufacturers must demonstrate and maintain compliance with the FDA’s QSR. The QSR is a
complex regulatory scheme that covers the methods and documentation of the design, testing, control, manufacturing, labeling,
quality assurance, packaging, storage and shipping of medical devices. The FDA enforces the QSR through periodic inspections
and unannounced “for cause” inspections. In January 2024, the FDA issued a final rule amending the QSR to align more closely
with the international consensus standard for Quality Management Systems for medical devices used by many other regulatory
authorities around the world, ISO 13485:2016. The revised regulation is referred to as the Quality Management System
Regulation (QMSR) and becomes effective on January 2, 2026. The FDA made conforming edits to the combination product
regulation to clarify the device Quality Management System (QMS) requirements for combination products.
The FDCA permits medical devices intended for investigational use to be shipped to clinical sites if such devices
comply with prescribed procedures and conditions. All clinical investigations of devices to determine safety and effectiveness
must be conducted in accordance with the FDA’s investigational device exemption, or IDE, regulations that govern
investigational device labeling, prohibit promotion of the investigational device, and specify an array of study review and
approval, informed consent, recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators.
Failure to comply with applicable regulations could result in enforcement actions such as: warning letters; fines;
injunctions; civil penalties; inability to distribute products; recalls or seizures of products; delays in the introduction of products
into the market; total or partial suspension of production; FDA refusal to grant, or delay in obtaining, marketing authorizations;
and in the most serious cases, criminal penalties.
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. Drugs that are administered using a nebulizer or another device, such as ARIKAYCE or TPIP, are examples of
drug/device combination products.
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 for Drug Evaluation and Research, while device applications, premarket notifications,
and de novo authorization requests are reviewed by the Center for Devices and Radiological Health. Combination products,
such as drug/device combinations, are typically reviewed through a marketing submission that corresponds to the constituent
part which provides the product's primary mode of action (PMOA), i.e., is the single mode of action that provides the most
important therapeutic action of the combination product. If the PMOA is unclear or in dispute, a sponsor may file a Request for
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Designation with the FDA’s Office of Combination Products (OCP), which will render a determination and assign a lead
Center. OCP generally assigns jurisdiction based on PMOA. If it is not possible to determine which one mode of action will
provide a greater contribution than any other mode of action to the overall therapeutic effects of the combination product, the
FDA makes a determination as to which Center to assign the product based on consistency with other combination products
raising similar types of safety and effectiveness questions. When there are no other combination products that present similar
questions of safety and effectiveness with regard to the combination product as a whole, the agency will assign the combination
product to the Center with the most expertise in evaluating the most significant safety and effectiveness questions raised by the
combination product.
When evaluating an application or other marketing submission for a combination product, a lead Center may consult
other Centers, or it may assign 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
a single marketing application or through separate applications for the individual constituent parts (e.g., an NDA for the drug
and a premarket notification for the device). The FDCA directs the FDA to conduct a review of a combination product under a
single marketing application whenever appropriate. Applicants may choose to submit separate applications for constituent parts
of a combination product (unless the FDA determines one application is necessary), and in limited situations, the FDA may
determine an application for each constituent part is warranted. One reason to submit multiple applications is if the applicant
wishes to receive some benefit that accrues only from approval under a particular type of application, like new drug product
exclusivity. If multiple applications are submitted, each application is generally reviewed by the Center with authority over each
application type. For combination products that contain an approved constituent part (such as a drug-device combination
product in which the device has previously received clearance), the FDA may require that the application(s) include only such
information as is necessary to meet the standard for clearance or approval, using a risk-based approach and 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 marketing requirements including cGMP, adverse event reporting, periodic reports, labeling and advertising
and promotion requirements and restrictions. Failure to comply with applicable requirements could result in enforcement
actions.
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 disclose certain information about their clinical trials. This can include information related to the
investigational drug, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical
trial. This information is then made publicly available. Under US regulations, sponsors are obligated to disclose the results of
these trials after completion. In the US, disclosure of the results of these trials can be delayed for up to two years if the sponsor
is seeking initial approval of the product or approval of 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 or BLA is approved, a product will be subject to certain post-approval requirements, including those
relating to advertising, promotion, adverse event reporting, recordkeeping, and cGMP, as well as registration, listing, and
inspection. There also are continuing, annual user fee requirements.
The FDA regulates the content and format of prescription drug labeling, advertising, and promotion, including direct-
to-consumer advertising and promotional Internet communications. The FDA also establishes parameters for permissible non-
promotional communications between industry and the medical community, including industry-supported scientific and
educational activities. The FDA and other agencies actively enforce the laws and regulations prohibiting the 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 have met applicable promotion rules may be subject to significant liability under the FDCA, the PHSA, 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 or BLA.
All aspects of pharmaceutical manufacture must conform to cGMP after approval. Drug manufacturers and certain of
their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to
periodic unannounced inspections by the FDA during which the FDA inspects manufacturing facilities to assess compliance
with cGMP. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being
implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting
and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use.
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Accordingly, manufacturers must continue to expend time, money and effort in the areas of production and quality control to
maintain compliance with cGMP.
Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved
labeling. Changes to some of the conditions established in an approved application, including changes in indications, labeling,
product formulation, or manufacturing processes or facilities, require submission and FDA approval of a new NDA or BLA or
NDA or BLA supplement, in some cases before the change may be implemented. An NDA or BLA supplement for a new
indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and
actions in reviewing NDA supplements as it does in reviewing NDAs or BLAs.
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 the distribution of drugs and drug samples at the federal level, and sets minimum standards for the
registration and regulation of drug distributors by the states. Both the PDMA and state laws limit the distribution of prescription
pharmaceutical product samples and impose requirements to ensure accountability in distribution.
European Union
Marketing 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, a decentralized or a national procedure. The centralized procedure, which is compulsory for
medicines produced by certain biotechnological processes or for orphan drugs, 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 each member state as a
national marketing authorization. As a general rule, only one marketing authorization may be granted for drugs approved
through the centralized procedure and the marketing authorization is also relevant for the EEA countries.
Under the centralized procedure, the Committee for Medicinal Products for Human Use (CHMP) is required to adopt
an opinion on a valid application within 210 days, excluding clock stops when additional information is to be provided by the
applicant in response to questions. More specifically, on day 80 of the procedure, the Rapporteur and Co-Rapporteur generate
their draft assessment report. This is followed at day 120 by issuing to the applicant their formal report and a list questions.
Applicants then have up to three months to respond to the questions (and can request a three-month extension). The Rapporteur,
Co-Rapporteur and CHMP assess the applicant's replies and at day 150 generate their Joint Assessment Report. At day 180, the
Joint Assessment Report along with a list of outstanding issues for unresolved matters (as needed) is provided to the applicant.
Applicants then have one month to respond to the CHMP (and can request a one or two-month extension). At day 180 the
CHMP can also request the involvement of a Scientific Advisory Group (SAG), where the applicant is given the opportunity to
present data supporting the application and addressing the specific questions addressed by the CHMP to the SAG. If the
outstanding issues remain, an oral explanation may be requested by the EMA, where the applicant must attend the CHMP
plenary session and address the Major Objections related to approval of the marketing authorization application (MAA). The
CHMP members can then question the applicant on the key issues. At day 210, once its scientific evaluation is completed, the
CHMP gives a favorable or unfavorable opinion as to whether to grant the marketing authorization. After the adoption of the
CHMP opinion, a decision must be adopted by the EC, after consulting the Standing Committee of the Member States. The EC
prepares a draft decision and circulates it to the member states; if the draft decision differs from the CHMP opinion, the
Commission must provide detailed explanations. The EC adopts a decision within 15 days of the end of the consultation
procedure.
Accelerated Procedure, Conditional Approval and Approval Under Exceptional Circumstances
Various programs, including accelerated assessment, conditional approval and approval under exceptional
circumstances, are intended to expedite or simplify the approval of drugs that meet certain qualifications. The purpose of these
programs is to provide important new drugs to patients earlier than under standard 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 may submit 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 normally required 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 may recommend, the granting of a marketing authorization, subject to
certain specific obligations; such marketing authorization may be conditional or under exceptional circumstances. The timelines
for the centralized procedure described above also apply with respect to applications for a conditional marketing authorization
or marketing authorization under exceptional circumstances.
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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) the product fulfills unmet medical needs, and (4) the
benefit to public health of the immediate availability on the market of the medicinal product concerned outweighs the 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 of conditional 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 or to
fulfill specific obligations in relation to pharmacovigilance. Once the holder has provided a comprehensive data package, the
conditional marketing authorization is replaced by a 'regular' marketing authorization.
Marketing authorizations under exceptional circumstances may be granted where the applicant demonstrates that, for
objective and verifiable reasons, they are unable to provide comprehensive data on the efficacy and safety of the drug under
normal conditions of use. Such marketing authorizations are subject to certain 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 indefinite period 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.
Exclusivities
If an approved drug contains a new active substance, it is protected by data exclusivity for eight years from the
notification of the Commission decision granting the marketing authorization and then by marketing protection for an additional
two or three years. Overall, the drug is protected for ten or eleven years against 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 regulatory purposes. During the period of marketing protection, competitors may not market their generic
drugs. The period of marketing protection is normally two years but may become three years if, during the eight-year data
exclusivity period, a new therapeutic indication is approved that is considered as bringing a significant clinical benefit over
existing therapies.
Medical Devices Regulations
In May 2017, the EU adopted a new Medical Devices Regulation (EU) 2017/745 (MDR), which repealed and replaced
Directive 93/42/EEC on Medical Devices (Directive 93/42) on May 26, 2021. The MDR and its associated guidance documents
and harmonized standards, govern, among other things, device design and development, preclinical and clinical or performance
testing, premarket conformity assessment, registration and listing, manufacturing, labeling, storage, claims, sales and
distribution, export and import and post-market surveillance, vigilance, and market surveillance.
As of May 26, 2021, before a device can be placed on the market in the EU, compliance with the MDR requirements
(i.e., the General Safety and Performance Requirements, or GSPRs, set out in Annex I of the MDR) must be demonstrated in
order to affix the Conformité Européene mark, or CE Mark, to the product. The MDR provides recourse to harmonized
European standards in order to facilitate compliance with the GSPRs. Harmonized standards provide a presumption of
conformity with the GSPRs (although there are a limited number of standards harmonized currently). However, under
transitional provisions provided for in the MDR, medical devices with Notified Body certificates issued under Directive 93/42
prior to May 26, 2021 may continue to be placed on the market for the remaining validity of the certificate, until December 31,
2027 at the latest for higher risk medical devices and until December 31, 2028 for other medical devices, in each case, so long
as there is no significant changes in the design or intended purpose. After the expiry of any applicable transitional period, only
devices that have been CE marked under the MDR may be placed on the market in the EU.
To demonstrate compliance with these requirements, a conformity assessment procedure is required. The MDR
provides for several conformity assessment procedures, which depends on the type of medical device and the risks involved.
Devices are divided in four groups based on risk: Class I, Class IIa, Class IIb, and Class III. Class I devices present the lowest
level of risk so that, for most of these devices (other than those that are sterile and/or have measuring functionality) the
manufacturer can self-certify the product plus affix the CE mark. For the other classes, the conformity assessment is carried out
by an organization designated and supervised by a member state of the EEA to conduct conformity assessments, known as a
Notified Body. The manufacturer initially classifies every device. However, when a device undergoes a conformity assessment
with a Notified Body, the Notified Body may dispute the classification and assert that the device should be included in a class
requiring stricter conformity assessment procedures. Specific rules apply to custom-made medical devices, medical devices that
are used in clinical trials, and medical devices that incorporate a medicinal ingredient.
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For classes of devices other than Class I, the Notified Body carries out the conformity assessment and issues a
certificate of conformity, which entitles the manufacturer to affix the CE mark to its devices after having prepared and signed a
related EU Declaration of Conformity. Affixing a CE mark allows the product to move freely within the EU and thus prevents
EU Member States from restricting sales and marketing of the devices, unless such measure is justified on the basis of evidence
of non-compliance. Ultimately, the manufacturer is responsible for the conformity of the device with the GSPRs and for the
affixing of the CE mark. Lamira is CE marked by PARI, i.e., its manufacturer, in the EU.
Clinical evidence is required for most medium and high risk devices. In some cases, a clinical study may be required to
support a CE marking application. A manufacturer that wishes to conduct a clinical study involving the device is subject to the
clinical investigation requirements of the MDR, EU member state requirements, and current good clinical practices defined in
harmonized standards and guidance documents.
After a device is placed on the market, it remains subject to significant regulatory requirements. The MDR prohibits
misleading claims about devices and so devices may be marketed only for the uses and indications for which they are approved
(although more detailed rules on marketing may be contained in national legislation). For CE marked devices, certain
modifications to the device or quality system depending on the conformity assessment procedure used must be submitted to and
approved by the Notified Body before placing the modified device on the market.
Economic Operators, include device manufactures, must register their establishments and devices in the EUDAMED
database once available. Manufacturers of medical devices are subject to vigilance obligations that require reporting of
incidents and are required to implement a post-marketing surveillance system (for monitoring data about the device and
confirming the benefits of the device outweigh the risks). The vigilance obligations require that manufacturers must report
serious incidents involving the device made available in the EU and any field safety corrective actions in respect of the device
made available in the EU (including actions taken outside the EU) to relevant competent authorities. In addition, Notified
Bodies regularly reassess the conformity of a medical device to the GSPRs and may from time to time audit the manufacturer
and may, where needed, suspend or withdraw the manufacturer's certificate of conformity.
Japan
Under the Japanese regulatory system administered by the MHLW and the PMDA (which is responsible for product
review and evaluations under the supervision of the MHLW), in principle, pre-marketing approval and clinical studies are
required for all pharmaceutical products. The Law on Securing Quality, Efficacy and Safety of Products Including
Pharmaceuticals and Medical Devices (Act No. 145 of 1960) requires a license for marketing authorization when importing to
Japan and selling pharmaceutical products manufactured in other countries, a holder of such license is referred to as a marketing
authorization holder. It also requires a foreign manufacturer to get each of its manufacturing sites certified as a manufacturing
site of pharmaceutical products to be marketed in Japan. To receive a license for marketing authorization, the manufacturer or
seller must, at the very least, employ certain manufacturing marketing, quality and safety personnel. A license for marketing
authorization may not be granted if the quality management methods and post marketing safety management methods applied
with respect to the pharmaceutical product fail to conform to the standards stipulated in the ordinances promulgated by the
MHLW. To obtain manufacturing/marketing approval for a new product, a Company must submit an application for approval
to the MHLW with results of CMC, nonclinical and clinical studies to show the quality, efficacy and safety of the product
candidate. A data compliance review, on-site inspection for good clinical practice, audit and detailed data review for
compliance with current good manufacturing practices are undertaken by the PMDA. The application is then discussed by the
committees of the Pharmaceutical Affairs and Food Sanitation Council. Based on the results of these reviews, the final decision
on approval is made by the MHLW. The time required for the approval process varies depending on the product. PMDA's target
review period (submission to approval) is twelve months (standard review) and nine months (priority review), although this is
not a commitment. The product also needs approval for pricing in order to be eligible for reimbursement under Japan's National
Health Insurance system. The medical products which, once they are approved and marketed, are subject to the continuing
standards of Good Manufacturing Practice and Good Quality Practice and are also subject to regular post-marketing vigilance
of safety and quality under the standards of Good Vigilance Practice and Good Post-marketing Study Practice. In Japan, the
National Health Insurance system maintains a Drug Price List specifying which pharmaceutical products are eligible for
reimbursement, and the MHLW sets the prices of the products on this list. After receipt of marketing approval, negotiations
regarding the reimbursement price with the MHLW would begin. Price would be determined within 60 to 90 days following
receipt of marketing approval unless the applicant disagrees, which may result in extended pricing negotiations. The
government is currently introducing price cut rounds every year and mandates price decreases for specific products. New
products judged innovative or useful, that are indicated for pediatric use, or that target orphan or small population diseases,
however, may be eligible for a pricing premium. Price revisions after product launch based on Health Technology Assessment
(HTA) and Cost-Effectiveness Analysis (CEA) were introduced in 2019. Products meeting the relevant criteria may have their
prices adjusted according to the outcomes of the HTA/CEA evaluation. Additionally, certain rules for post-launch price
reductions, such as Repricing for Market Expansion, are also applied. The government has also promoted the use of generics,
where available.
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Pediatric Information
United States
Under the Pediatric Research Equity Act of 2003 (PREA), as amended, certain NDAs, BLAs, and supplements must
contain data that are adequate to assess the safety and effectiveness of the drug for the claimed indications in all relevant
pediatric subpopulations and to support dosing and administration for each pediatric subpopulation 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 data or full
or partial waivers. Unless otherwise required by regulation, and subject to an exception for certain oncology drugs, PREA does
not apply to any drug for an indication for which orphan designation has been granted. Under the Best Pharmaceuticals for
Children Act (BPCA), pediatric research is incentivized by the possibility of six months of pediatric exclusivity, which if
granted, is added to existing statutory and patent-based exclusivity periods listed for the applicable drug in the FDA's Orange
Book at the time the FDA determines that the sponsor has satisfied the FDA's "written request" for pediatric research, provided
that the FDA makes such determination at least nine months before the expiration of such exclusivity period. Sponsors may
seek to negotiate the terms of a written request during drug development. While the sponsor of an orphan-designated drug may
not be required to perform pediatric studies under PREA unless one of the above exceptions applies, they are eligible to
participate in the incentives under the BPCA if the FDA issues a written request.
European Union
In the EU, new drugs (i.e., drugs containing a new active substance) for adults must also be tested in children.
This can also include pediatric pharmaceutical forms, in all subsets of the pediatric population. The mandatory pediatric testing
is carried out through the implementation of a pediatric investigation plan (PIP), which is proposed by the applicant and
approved by the EMA. A PIP contains all the studies to be conducted and measures to be taken in order to support the approval
of the new drug, including pediatric pharmaceutical forms, in all subsets of the pediatric population. Implementation of a PIP is
a prerequisite to validation of an MAA. Following granting of the marketing authorization, post approval compliance is also
reviewed through the life cycle of the product until the PIP is completed. A PIP may allow for one or more waivers or deferral
for one or more of the studies or measures included therein in order not to delay the approval of the drug in adults, and, on
another hand, the EMA may grant either a product-specific waiver for the (adult) disease/condition or one or more pediatric
subsets or a class waiver for the disease/condition. PIPs are subject to potential modifications from time to time, when they no
longer are workable, if approved by EMA. Any new indication as a variation to an existing marketing authorization requires a
new PIP for that indication. In the case of orphan medicinal products, completion of an approved PIP can result in an extension
of the market exclusivity period from ten to twelve years. To benefit from the additional exclusivity the PIP must be completed
and content from the PIP must be included in the approved summary of product characteristics.
Japan
In Japan, there is no statutory rule which imposes any different obligation on pharmaceutical manufacturers engaging
in pediatric drug development than on other pharmaceutical manufacturers. However, the guidelines of the MHLW (Handling
of Pharmaceuticals during the Reexamination Interval Period (Issue No. 107, February 1, 1999) and Enforcement of the
Ministerial Ordinance Partially Revising the Ministerial Ordinance on Standards for Post-marketing Surveillance of
Pharmaceutical Products and Review of Post-marketing Surveillance for the Reexamination of Pharmaceutical Products (No.
1324, December 27, 2000)) state as follows: (i) since information on pediatric patients obtained in clinical trials may be limited,
the MHLW recommends that pharmaceutical manufacturers conduct adequate post-marketing surveillance during the
reexamination interval period and collect as much information as possible for proper use of drugs for pediatric patients; and (ii)
if a pharmaceutical manufacturer plans to conduct a clinical trial to set the dose of a pediatric drug to prepare application for
manufacturing/marketing approval or after receiving the same approval, the reexamination interval period may be extended up
to ten years. The notification of MHLW (Partial Revision of Handling of Reexamination Period (Issue No. 0116/3, January 16,
2024)) states that ten years will be applied as the reexamination period for the “addition of clearly different dosage such as
pediatric doses.” In addition, since February 2010 the MHLW has convened a study group composed of physicians on a regular
basis to discuss and promote the development of children’s drugs that have been approved for use in Europe and the US but are
not yet approved in Japan, so that they can be used as early as possible in Japan as well.
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 our candidate products, including medical devices. Regardless of whether we obtain
FDA approval for a product candidate, we must obtain approval by the comparable regulatory authorities of countries outside
the US before we can commence clinical studies or marketing of 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 or shorter than that required for
FDA approval. Under certain harmonized medical device approval/clearance regulations outside the US, reference to US
clearance permits fast-tracking of market clearance. Other regions are harmonized with EU standards, and therefore recognize
the CE mark as a declaration of conformity to applicable standards. Furthermore, we must obtain any required pricing approvals
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in addition to regulatory approval prior to launching a product candidate in the approving country. Although the UK is no
longer part of the EU, its medicinal product and medical device regulations remain broadly aligned with the EU requirements.
Early Access Programs (EAPs)
Certain countries allow the supply or use of non-authorized medicinal products within strictly regulated EAPs. Some
may also provide reimbursement for drugs provided in the context of EAPs. 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 also regulated at the European level. ARIKAYCE is available in certain
countries under these 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 their condition (compassionate use). As a general rule, compassionate use programs can only be put
in place for drugs or biologics that are expected to help patients with life-threatening, long-lasting or seriously disabling
illnesses who currently cannot be treated satisfactorily with authorized medicines, or who have a disease for 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
obtain treatment with a potentially life-saving medicine. Compassionate use programs are coordinated and implemented by the
EU member states, which decide independently how and when to open such programs according to national rules and
legislation. These programs are mainly used to treat a group or cohort of patients. Generally, doctors who wish to obtain a
promising drug for their seriously ill patients will need to contact the relevant national authority in their respective country and
follow the procedure that has been set up. Typically, the national 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 effects reported 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 use programs. For access via named-patient such
medicine should, or must (depending on legislation) be authorized in at least one country, from which it can be imported into
the patient’s country under a named-patient access program. 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 payors, as well as the Medicare and state Medicaid programs, reimburse
dispensers of pharmaceutical products. Medicare is the federal program that provides healthcare benefits to senior citizens and
certain disabled and chronically ill persons. Medicaid is the need-based federal and state program administered by the states to
provide healthcare benefits to certain persons.
As one of the conditions for obtaining Medicaid and, if applicable, Medicare Part B coverage for our marketed
pharmaceutical products, we will need to agree to pay a rebate to state Medicaid agencies that provide reimbursement for those
products. We will also have to agree to sell our commercial products under contracts with the Department of Veterans Affairs,
Department of Defense, Public Health Service, and numerous other federal agencies as well as certain hospitals that are
designated by federal statutes to receive drugs at prices that are significantly below the price we charge to commercial
pharmaceutical distributors. These programs and contracts are highly regulated and will impose restrictions on our business.
Failure to comply with these regulations and restrictions could result in adverse consequences such as civil money penalties,
imposition of a Corporate Integrity Agreement and/or a loss of Medicare and Medicaid reimbursement for our drugs.
Private healthcare payors also attempt to control costs and influence drug pricing through a variety of mechanisms,
including through negotiating discounts with the manufacturers and through the use of tiered formularies and other mechanisms
that provide preferential access to certain drugs over others within a therapeutic class. Payors also set other criteria to govern
the uses of a drug that will be deemed medically appropriate and therefore reimbursed or otherwise covered.
In August 2022, President Biden signed the Inflation Reduction Act (IRA) of 2022 (P.L. 117-169) into law. This law
will, for the first time, allow Medicare to negotiate the price of certain high expenditure, single source Medicare Part B or Part
D drugs. The Centers for Medicare & Medicaid Services has implemented a Medicare Drug Price Negotiation Program, and
this program may affect future Medicare reimbursement for our drugs. The IRA also requires manufacturers of certain Part B
and Part D drugs to issue to the US Department of Health and Human Services (HHS) rebates based on certain calculations and
triggers (i.e., when drug prices increase and outpace the rate of inflation) which may influence the pricing of current and future
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products. Drug pricing is an active area for regulatory reform at both the federal and state levels, and additional significant
changes to current drug pricing and reimbursement structures in the US could be forthcoming.
Different pricing and reimbursement schemes exist in other countries. In the EU, governments influence the price of
drugs through their pricing and reimbursement rules and control of national healthcare systems that fund a large part of the cost
of those products to patients. Some jurisdictions operate positive and 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 product candidate to currently
available therapies. Other member states allow companies to fix their own prices for drugs, but monitor and control company
profits. The downward pressure on healthcare costs in general, particularly prescription drugs, has become very intense. As a
result, increasingly high barriers are being erected to the entry of new drugs. In addition, in some countries, cross-border
imports from low-priced markets exert a commercial pressure on pricing within a country. There can be no assurance that any
country that has price controls or reimbursement limitations for drugs will allow favorable reimbursement and pricing
arrangements for any of our products.
In Japan, drugs can be sold on the market if they undergo the PMDA’s review of quality, efficacy and safety and
receive manufacturing/marketing approval. However, in order for drugs to be covered by the National Health Insurance, they
must be included in a Drug Price List. The "Drug Pricing Organization," which is a division of the Central Social Insurance
Medical Council (CSIMC), calculates the price of drugs, the general meeting of the CSIMC approves the calculated price, and
the MHLW includes the drugs and the calculated price in the Drug Price List. After receiving manufacturing/marketing
approval, drugs are included in the Drug Price List within 60 to 90 days unless the applicant disagrees, which may result in
extended pricing negotiations. The MHLW updates the Drug Price List annually after taking into account the survey result of
the actual sales price of drugs and hearing the opinion of the CSIMC.
Fraud and Abuse and Other Laws
Physicians and other healthcare providers and third-party payors (government or private) often play a primary role in
the recommendation and prescription of healthcare products. In the US and most other jurisdictions, numerous detailed
requirements apply to government and private healthcare programs, and a broad range of fraud and abuse laws, transparency
laws, and other laws are relevant to pharmaceutical companies. US federal and state healthcare laws and regulations in these
areas include the following:
•
The federal Anti-kickback Statute;
•
The federal civil False Claims Act;
•
The federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), as amended by the Health
Information Technology for Economic and Clinical Health Act;
•
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 and Japan, which have been set out by laws or industry codes
of conduct.
Employees
As of December 31, 2024, we had a total of 1,271 full-time employees: 579 in research, clinical, regulatory, medical
affairs and quality assurance; 89 in technical operations, manufacturing and quality control; 210 in general and administrative
functions; and 393 in commercial activities. We had 1,007 full-time employees in the US, 153 employees in Europe and 111
employees in Japan. We anticipate increasing our headcount in 2025.
None of our employees are represented by a labor union and we believe that our relations with our employees are
generally good. Generally, our US employees are at-will employees; however, we have entered into employment agreements
with certain of our executive officers.
Human Capital
Employee Attraction, Retention and Development
We are dedicated to attracting and retaining the best possible talent. Our compensation program, including short- and
long-term incentives and benefits, is designed to allow us to attract and retain individuals whose skills are critical to our current
and long-term success. Total compensation is generally positioned within a competitive range of the peer market median, with
33
differentiation based on market benchmarks, experience, skills, proficiency, and performance to attract and retain key talent.
With our compensation program, we also aim to align the interests of our employees with those of our stockholders.
We believe that continued growth and development are essential to the professional well-being of our team. We seek
to develop our employee talent within the organization through access to internal and external training, continuous learning
programs and other development initiatives. As our organization and capabilities grow, we aim to ensure we have provided our
team members with the guidance and resources they need to develop as professionals and to support our business.
Our Values
Five core values—collaboration, accountability, passion, respect, and integrity—set the tone for our culture and guide
the actions we take each day. We strive to ensure that these values drive all of our human capital endeavors, including hiring,
our annual employee feedback process, our Global Core Competencies, our Recognition Program, and our employee
onboarding initiatives.
We are focused on maintaining an inclusive work environment that best supports the varied needs of the patient
communities we serve. We continue to grow our list of employee resource groups, adding two in 2024, and expand our
sourcing for new talent to enhance our talent pipeline. We are also committed to equitable pay for all employees. We use
industry benchmarks and annual internal equity reviews to make salary adjustments as needed in efforts to ensure a fair and
bias-free compensation system. As we grow, we are continuing to implement initiatives to advance the development of our
talent and ensure comprehensive succession plans both in our employee workforce and our board of directors.
As part of our effort to further the integration of our values across our business, in 2024, we hired a director of
sustainability, with centralized responsibility for our Responsibility Report and sustainability efforts. This individual, together
with members of our executive leadership, updates our Nominations and Governance Committee and Board of Directors on
sustainability considerations and strategy. We are cognizant of our environmental impact, currently support several green
measures and community service programs, and continue to explore options to improve and build upon our sustainability
efforts. We are committed to ensuring the health and well-being of our employees and promoting patient advocacy and safety.
Finally, we are driven by integrity and believe good corporate governance is important and necessary to maintain ethical and
compliant business practices. In 2024, we published our second Responsibility Report.
Available Information
We file electronically with the SEC our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports
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 furnishing them 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.
Also available through our website's "Investors-Corporate Governance" page are charters for the Audit, Compensation,
Nominations and Governance and Science and Technology Committees of our board of directors, our Corporate Governance
Guidelines, and our Code of Business Conduct and Ethics. We intend to satisfy the disclosure requirements regarding any
amendment to, or waiver from, a provision of the Code of Business Conduct and Ethics by making disclosures concerning such
matters available on our website.
The references to our website and the SEC's website are intended to be inactive textual references only. Neither the
information in or that can be accessed through our website, nor the contents 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.
34
ITEM 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, could materially 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 in this
Annual Report on Form 10-K (please read the Cautionary Note Regarding Forward-Looking Statements appearing at the
beginning of this Annual Report on Form 10-K).
Risk Factor Summary
An investment in our securities is subject to various risks, the most significant of which are summarized below.
•
Our prospects are highly dependent on the success of our only approved product, ARIKAYCE. If we are unable to
continue to successfully market and commercialize or maintain approval for ARIKAYCE, our business, financial
condition, results of operations and prospects and the value of our common stock will be materially adversely affected.
•
We may not be able to obtain regulatory approvals for brensocatib, TPIP, or for our other product candidates and we
may not be able to receive approval for ARIKAYCE in front-line NTM lung disease or in new markets. Any such
failure to obtain regulatory approvals, particularly for brensocatib in the US, may materially adversely affect us.
•
The commercial success of ARIKAYCE depends on continued market acceptance by physicians, patients, third-party
payors and others in the healthcare community, and the commercial success of brensocatib, TPIP, or our other product
candidates, if approved, will similarly depend on such market acceptance.
•
We obtained regulatory approval of ARIKAYCE in the US through an accelerated approval process, and full approval
will be contingent on successful and timely completion of a confirmatory post-marketing clinical trial.
•
We remain subject to substantial, ongoing regulatory requirements related to ARIKAYCE, and failure to comply with
these requirements could lead to enforcement action or otherwise materially harm our business.
•
If we are unable to obtain or maintain adequate reimbursement from government or third-party payors for ARIKAYCE
or, if approved, brensocatib, TPIP, or our other product candidates, or if we are unable to obtain or maintain acceptable
prices for ARIKAYCE, or, if approved, brensocatib, TPIP, or our other product candidates, our prospects for
generating revenue and achieving profitability will be materially adversely affected.
•
ARIKAYCE, brensocatib, TPIP, or our other product candidates could develop unexpected safety or efficacy
concerns, which could have a material adverse effect on us.
•
If estimates of the size of the potential markets for ARIKAYCE, brensocatib, TPIP, or our other product candidates are
overstated or data we have used to identify physicians is inaccurate, our ability to earn revenue to support our business
could be materially adversely affected.
•
We may not be successful in clinical trials or in obtaining regulatory approvals required to expand the indications for
ARIKAYCE, which may materially adversely affect our prospects and the value of our common stock.
•
Pharmaceutical research and development is very costly and highly uncertain, and we may not succeed in developing
product candidates in the future.
•
Interim, topline and preliminary data from our clinical trials that we announce or publish from time to time may
change as more patient data become available, may be interpreted differently if additional data are disclosed, and are
subject to audit and verification procedures that could result in material changes in the final data.
•
Failure to obtain or maintain regulatory approval or clearance of our product devices, including Lamira, as a delivery
system for ARIKAYCE, and the dry powder delivery system for TPIP, could materially harm our business.
•
If 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 may experience delays, incur additional costs and ultimately be unable to
obtain regulatory approval for and commercialize our product candidates in the US, Europe, Japan or other markets.
•
We may not be able to enroll enough patients to conduct and complete our clinical trials or retain a sufficient number
of patients in our clinical trials to generate the data necessary for regulatory approval of our product candidates or to
permit the use of ARIKAYCE in the broader population of patients with MAC lung disease.
•
If another party obtains orphan drug exclusivity for a product that is considered the same or essentially the same as a
product we are developing for a particular indication, we may be precluded or delayed from commercializing the
product in that indication.
•
Our pre-clinical research activities include the research and development of novel gene therapy product candidates. It
will be difficult to predict the time and cost of development and of subsequently obtaining regulatory approval for any
such product candidates, or how long it will take to commercialize any gene therapy product candidates.
•
If we are unable to form and sustain relationships with third-party service providers that are critical to our business, or
if any third-party arrangements that we may enter into are unsuccessful, our ability to develop and commercialize our
products may be materially adversely affected.
•
We may not have, or may be unable to obtain, sufficient quantities of ARIKAYCE, Lamira or our product candidates
to meet our required supply for commercialization or clinical studies, which would materially harm our business.
35
•
Adverse consequences to our business could result if we and our manufacturing partners fail to comply with applicable
regulations or maintain required approvals.
•
We 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 and the value of our common stock.
•
We expect to continue to expand our development, regulatory and sales and marketing capabilities, and as a result,
may encounter difficulties in managing our growth, which could disrupt our operations.
•
Any acquisitions we make, or collaborative relationships we enter into, may not be clinically or commercially
successful, and may require financing or a significant amount of cash, which could adversely affect our business.
•
Our business and operations, including our drug development and commercialization programs, could be materially
disrupted and/or subject to reputational harm in the event of system failures, security breaches, cyber-attacks,
deficiencies in our cybersecurity, violations of data protection laws or data loss or damage by us or third parties.
•
We are subject to data privacy laws and regulations that govern how we can collect, process, store and transfer
personal data, and violations can result in meaningful penalties, enforcement, and/or reputational harm and have a
significant impact on our operations.
•
We have limited experience operating internationally, are subject to a number of risks associated with our international
activities and operations and may not be successful in any efforts to further expand internationally.
•
We have a limited number of significant customers and losing any of them could have an adverse effect on our
financial condition and results of operations.
•
Deterioration in general economic conditions in the US, Europe, Japan and globally, including the effect of prolonged
periods of inflation on our suppliers, third-party service providers and potential partners, could harm our business and
results of operations.
•
If we are unable to adequately protect our intellectual property rights, the value of ARIKAYCE and our product
candidates could be materially diminished.
•
If we fail to comply with obligations in our third-party agreements, our business could be adversely affected, including
as a result of the loss of license rights that are important to our business.
•
Government healthcare reform could materially increase our costs, which could materially adversely affect our
business, financial condition, results of operations and prospects and the value of our common stock.
•
If we fail to comply with applicable laws, including "fraud and abuse" laws, anti-corruption laws and trade control
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 prospects and the
value of our common stock.
•
We have a history of operating losses, expect to incur operating losses for the foreseeable future and may never
achieve or maintain profitability.
•
We may need to raise additional funds to continue our operations, and any failure to obtain capital when needed on
acceptable terms, or at all, could force us to delay, reduce or eliminate our development programs, commercialization
efforts, or other operations.
•
We have outstanding indebtedness in the form of convertible senior notes, a term loan and a royalty financing
arrangement and may incur additional indebtedness in the future, which could adversely affect our financial position,
prevent us from implementing our strategy, and dilute the ownership interest of our existing shareholders.
•
We may be unable to use certain of our net operating losses and other tax assets.
•
Goodwill impairment charges in the future could have a material adverse effect on our business, results of operations
and financial condition.
•
Our shareholders may experience dilution of their ownership interests because of the future issuance of additional
shares of our common stock for general corporate purposes and upon the conversion of the 2028 Convertible Notes.
•
Certain provisions of Virginia law, our articles of incorporation and amended and restated bylaws and arrangements
between us and our employees could hamper a third party’s acquisition of us or discourage a third party from
attempting to acquire control of us.
Risks Related to the Commercialization and Continued Approval of ARIKAYCE, and the Potential Approval and
Commercialization of Brensocatib and TPIP
Our prospects are highly dependent on the continued success of our only approved product, ARIKAYCE, which was
approved in the United States as ARIKAYCE (amikacin liposome inhalation suspension), in Europe as ARIKAYCE
Liposomal 590 mg Nebuliser Dispersion and in Japan as ARIKAYCE inhalation 590mg (amikacin sulfate inhalation drug
product). If we are unable to continue to successfully market and commercialize or maintain approval for ARIKAYCE, our
business, financial condition, results of operations and prospects and the value of our common stock will be materially
adversely affected.
Our long-term viability and growth depend on the continued successful commercialization of ARIKAYCE, our only
approved product. ARIKAYCE was approved in the US for the treatment of MAC lung disease as part of a combination
36
antibacterial drug regimen for adult patients with limited or no alternative treatment options in a refractory setting, as defined
by patients who do not achieve negative sputum cultures after a minimum of six consecutive months of a multidrug background
regimen therapy. Subsequently, ARIKAYCE was approved in Europe for the treatment of NTM lung infections caused by
MAC in adults with limited treatment options who do not have CF, and in Japan for the treatment of patients with NTM lung
disease caused by MAC who did not sufficiently respond to prior treatments with a multidrug regimen. We refer to NTM lung
disease caused by MAC as MAC lung disease. We have invested and continue to invest significant efforts and financial
resources in the commercialization of ARIKAYCE, and our ability to continue to generate revenue from ARIKAYCE will
depend heavily on successfully commercializing and obtaining full regulatory approval for ARIKAYCE from the FDA by
conducting an appropriate confirmatory post-marketing study. ARIKAYCE was our first commercial launch, and its continued
successful commercialization and our receipt of full regulatory approval for ARIKAYCE in the US are subject to many risks.
In order to continue to commercialize ARIKAYCE, we must continue to establish and maintain marketing, market
access, sales and distribution capabilities on our own or make arrangements with third parties for its marketing, sale and
distribution. We are commercializing ARIKAYCE in the US, Europe and Japan using our sales force, but we may not continue
to be successful in these efforts. The establishment, development and maintenance of our own sales force is and will continue to
be expensive and time-consuming. As a result, we may seek one or more partners to handle some or all of the sales and
marketing of ARIKAYCE in certain markets following approval by the relevant regulatory authority in those markets. In that
case, we will be reliant on third parties to successfully commercialize ARIKAYCE and will have less control over
commercialization efforts than if we handled commercialization with our own sales force. 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 that either our own
marketing, market access, sales force or third-party marketing, and sales organizations are not effective, our ability to generate
revenue would be adversely affected.
We may not be able to obtain regulatory approvals for brensocatib, or for our other product candidates and we may not be
able to receive approval for ARIKAYCE in front-line NTM lung disease or in new markets. Any such failure to obtain
regulatory approvals, particularly for brensocatib, may materially adversely affect us.
We are required to obtain various regulatory approvals prior to studying our products in humans and then again before
we market and distribute our products, and the failure to obtain such approvals will prevent us from commercializing our
products, which would materially adversely affect our business, financial condition, results of operations and prospects and the
value of our common stock. While we have obtained accelerated approval for ARIKAYCE in the US and approval in the EU
and Japan, seeking regulatory approvals for brensocatib and any future regulatory approvals for our other product candidates as
well as approval for ARIKAYCE in front-line NTM lung disease or in other jurisdictions presents significant obstacles.
Approval processes in the US, Europe, Japan and other markets require the submission of extensive preclinical and clinical
data, manufacturing and quality information regarding the process and facility, scientific data characterizing our product and
other supporting data in order to establish safety and effectiveness. These processes are complex, lengthy, expensive, resource
intensive and uncertain. Regulators will also conduct a rigorous review of any trade name we intend to use for our products.
Even after they approve a trade name, these regulators may request that we adopt an alternative name for the product if adverse
event reports indicate a potential for confusion with other trade names and medication error. If we are required to adopt an
alternative name, potential commercialization of brensocatib or our other product candidates could be delayed or continued
commercialization of ARIKAYCE could be delayed or interrupted. We have limited experience in submitting and pursuing
applications necessary to obtain these regulatory approvals.
Data submitted to regulators are subject to varying interpretations that could delay, limit or prevent regulatory agency
approval. Even if we believe our clinical trial results are promising, regulators may disagree with our interpretation of data,
study design or execution and may refuse to accept our application for review or decline to grant approval.
In addition, the grant of a designation by the FDA or EMA or approval by the FDA, EC or MHLW does not ensure a
similar decision by the regulatory authorities of other countries, and a decision by one foreign regulatory authority does not
ensure regulatory authorities in other foreign countries or the FDA will agree with the decision. For instance, although
ARIKAYCE received orphan drug designation in the US, ARIKAYCE did not qualify for orphan drug designation in Japan due
to the estimated number of NTM patients in Japan exceeding 50,000. Similarly, clinical studies conducted in one country may
not be accepted by regulatory authorities in other countries. Approval procedures vary among countries and can involve
additional product testing, including additional preclinical studies or clinical trials, and administrative review periods. The time
required to obtain approval in these other territories might differ from that required to obtain FDA approval. We may never
obtain approval for brensocatib or for our other product candidates in the US or other jurisdictions, or for ARIKAYCE outside
of the US, Europe and Japan, which would limit our market opportunities and materially adversely affect our business. Even if
brensocatib or another product candidate is approved, or if ARIKAYCE is approved outside of the US, Europe and Japan,
regulators may limit the indications for which the product may be marketed, require extensive warnings on the product labeling
or require expensive and time-consuming additional clinical trials or reporting as conditions of approval.
We may also encounter delays 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 any application for regulatory agency approval of a particular
37
product. Resolving such delays could force us or third parties to incur significant costs, limit our allowed activities or the
allowed activities of third parties, diminish any competitive advantages that we or our third parties may attain or adversely
affect our ability to receive royalties, any of which could materially adversely affect our business, financial condition, results of
operations and prospects and the value of our common stock.
The commercial success of ARIKAYCE depends on continued market acceptance by physicians, patients, third-party payors
and others in the healthcare community and the commercial success of brensocatib, TPIP, or our other product candidates,
if approved, will similarly depend on market acceptance.
Despite receiving FDA, EC and Japan's MHLW approval of ARIKAYCE, market acceptance may vary among
physicians, patients, third-party payors or others in the healthcare community. ARIKAYCE was the first product approved in
the US via the LPAD pathway, and its approval under this pathway may impact market acceptance of the product. The degree
of market acceptance of ARIKAYCE, which we launched in the US early in the fourth quarter of 2018, in Europe in the fourth
quarter of 2020, and in Japan in the second quarter of 2021, is also dependent on a number of additional factors, including the
following:
•
The willingness of the target patient populations to use, and of physicians to prescribe, ARIKAYCE;
•
The efficacy and potential advantages of ARIKAYCE over alternative treatments;
•
The risk and safety profile of ARIKAYCE, including, among other things, physician and patient concern regarding the
US boxed warning and other safety precautions resulting from its association with an increased risk of respiratory
adverse reactions, and any adverse safety information that becomes available as a result of longer-term use of
ARIKAYCE;
•
Relative convenience and ease of administration, including any requirements for hospital administration of
ARIKAYCE;
•
The ability of the patient to tolerate ARIKAYCE;
•
The pricing of ARIKAYCE;
•
The ability and willingness of the patient to pay out of pocket costs for ARIKAYCE (for example co-payments);
•
Sufficient third-party insurance coverage and reimbursement;
•
The strength of marketing and distribution support and timing of market introduction of competitive products and
treatments; and
•
Publicity concerning ARIKAYCE or any potential competitive products and treatments.
Our efforts to educate physicians, patients, third-party payors and others in the healthcare community on the benefits
of ARIKAYCE have required and will continue to require significant resources, which may be greater than those required to
commercialize more established technologies and these efforts may never be successful. If approved, the market acceptance of
brensocatib, TPIP, or our other product candidates may vary among physicians, patients, third-party payors or others in the
healthcare community and will depend on substantially similar factors.
We obtained regulatory approval of ARIKAYCE in the US through an accelerated approval process, and full approval will
be contingent on successful and timely completion of a confirmatory post-marketing clinical trial. Failure to obtain full
approval or otherwise meet our post-marketing requirements and commitments would have a material adverse effect on our
business.
The FDA approved ARIKAYCE under the LPAD and accelerated approval pathways, and full approval will be based
on results from a post-marketing confirmatory clinical trial. Accelerated approval allows drugs that (i) are being developed to
treat a serious or life-threatening disease or condition and (ii) provide a meaningful therapeutic benefit over existing treatments
to be approved substantially based on an intermediate endpoint or a surrogate endpoint that is reasonably likely to predict
clinical benefit, rather than a clinical endpoint such as survival or irreversible morbidity. Accelerated approval of ARIKAYCE
was supported by preliminary data from the Phase 3 CONVERT study, which evaluated the safety and efficacy of ARIKAYCE
in adult patients with refractory MAC lung disease, using achievement of sputum culture conversion (defined as three
consecutive negative monthly sputum cultures) by Month 6 as the primary endpoint.
As a condition of accelerated approval, we must conduct a post-marketing confirmatory clinical trial. Additionally, we
are required to submit periodic reports on the progress of this clinical trial. In the fourth quarter of 2020, we commenced the
post-marketing confirmatory clinical trial program for ARIKAYCE in patients with MAC lung disease. The confirmatory
clinical trial program consists of the ARISE trial, an interventional study designed to validate cross-sectional and longitudinal
characteristics of a PRO tool in MAC lung disease, and the ENCORE trial, designed to establish the clinical benefits and
evaluate the safety of ARIKAYCE in patients with newly diagnosed or recurrent MAC lung disease using the PRO tool
validated in the ARISE trial. The confirmatory clinical program is intended to fulfill the FDA’s post-marketing requirement to
allow for full approval of ARIKAYCE by the FDA, and verification and description of clinical benefit in the ENCORE trial
will be necessary for full approval of ARIKAYCE. The trial completion timetable agreed upon with the FDA when the
38
approval letter for ARIKAYCE was received has been delayed. We remain engaged with the FDA regarding the timeline, status
and execution of the post-marketing confirmatory clinical trials. There is little precedent for clinical development and
regulatory expectations for agents to treat MAC lung disease. In September 2023, we announced positive topline results from
the ARISE trial. The study met its primary objective of demonstrating that the QOL-B respiratory domain works effectively as
a PRO tool in patients with MAC lung disease. Based on feedback and in alignment with the FDA, we have determined that the
primary endpoint for the ENCORE trial will include eight questions from the QOL-B respiratory domain PRO. We completed
enrollment of the ENCORE trial in the fourth quarter of 2024, with 425 patients enrolled. However, we may encounter
substantial delays in conducting the ENCORE trial, and we may not be able to conduct the trial in a manner satisfactory to the
FDA or within the time period required by the FDA. The FDA could, among other things, withdraw its approval of
ARIKAYCE using expedited procedures if the ENCORE trial is not successful or if the FDA concludes that we failed to
conduct the ENCORE trial with due diligence, that other evidence demonstrates that ARIKAYCE is not shown to be safe and
effective, or that we disseminated false or misleading promotional materials with respect to ARIKAYCE. Additionally, under
the amendments to the FDCA made by the Consolidated Appropriations Act, 2023, the FDA could pursue administrative and
judicial remedies for a violation of the FDCA if we were to fail to conduct the ENCORE trial with due diligence or not timely
submit the required reports on the progress of the ENCORE trial. Separate from the confirmatory trial, additional results from
ongoing and recently completed studies may affect the FDA’s benefit-risk analysis for the product. Failure to meet all post-
marketing commitments may raise additional regulatory challenges.
We remain subject to substantial, ongoing regulatory requirements, and failure to comply with these requirements could
lead to enforcement action or otherwise materially harm our business.
We are subject to a variety of manufacturing, packaging, storage, labeling, advertising, promotion, and record-keeping
requirements in the US, Europe, and Japan including requirements to:
•
Conduct sales, marketing and promotion, scientific exchange, speaker programs, charitable donations and educational
grant programs in compliance with federal and state laws;
•
Disclose clinical trial information and payments to healthcare professionals and healthcare organizations on publicly
available databases;
•
Monitor and report complaints, AEs and instances of failure to meet product specifications;
•
Comply with cGMP and quality systems requirements for devices;
•
Acquire licenses for marketing authorization and certifications for our third-party manufacturers when importing and
selling pharmaceutical products manufactured in other countries into Japan;
•
Negotiate with national governments and other counterparties on pricing and reimbursement status;
•
Carry out post-approval confirmatory clinical trials;
•
Comply with ongoing pharmacovigilance requirements; and
•
Disclose payments to healthcare professionals and healthcare organizations to national regulatory authorities and/or on
publicly available websites.
If we ultimately receive approval for ARIKAYCE or any of our product candidates in jurisdictions other than the US,
Europe, and Japan, we expect to be subject to similar ongoing regulatory oversight by the relevant foreign regulatory
authorities, including the requirement to negotiate with national governments and other counterparties on pricing and
reimbursement prices for each new jurisdiction.
Failure to comply with these ongoing regulatory obligations could have significant negative consequences, including:
•
Issuance of warning letters or untitled letters by the FDA asserting that we are in violation of the law;
•
Imposition of injunctions or civil monetary penalties or pursuit by regulators of civil or criminal prosecutions and fines
against us or our responsible officers;
•
Suspension or withdrawal of regulatory approval;
•
Suspension or termination of ongoing clinical trials or refusal by regulators to approve pending marketing applications
or supplements to approved applications;
•
Seizure of products, required product recalls or refusal to allow us to enter into supply contracts, including government
contracts, or to import or export products;
•
Enforcement actions, such as a product recalls, or product shortages due to failure to meet certain manufacturing or
regulatory requirements, including the successful completion and results of quality control or release testing;
•
Suspension of, or imposition of restrictions on, our operations, including costly new manufacturing requirements with
respect to ARIKAYCE, brensocatib, TPIP, INS1201, or any of our other product candidates; and
39
•
Negative publicity, including communications issued by regulatory authorities, which could negatively impact the
perception of us or ARIKAYCE, brensocatib, TPIP, INS1201, or any of our other product candidates by patients,
physicians, third-party payors or the healthcare community.
We provide financial assistance with out-of-pocket costs to patients enrolled in commercial health insurance plans. In
addition, independent foundations may assist with out-of-pocket financial obligations. The ability of these organizations to
provide assistance to patients is dependent on funding from external sources, and we cannot guarantee that such funding will be
available at adequate levels, if at all. Patient assistance programs, whether provided directly by manufacturers or charitable
foundations, have come under recent government scrutiny. If we are deemed to fail to comply with relevant laws, regulations or
government guidance with respect to these programs, we could be subject to significant fines or penalties.
If we are unable to obtain adequate reimbursement from government or third-party payors for ARIKAYCE or, if approved,
brensocatib, TPIP, or our other product candidates, or if we are unable to obtain acceptable prices for ARIKAYCE, or, if
approved, brensocatib or TPIP, our prospects for generating revenue and achieving profitability will be materially adversely
affected.
Our prospects for generating revenue and achieving profitability depend heavily upon the availability of adequate
reimbursement for the use of ARIKAYCE or, if approved, brensocatib, TPIP, or our other product candidates from
governmental and other third-party payors, both in the US and in other markets. A portion of our current ARIKAYCE revenue
in the US comes from Medicare reimbursement, and we expect that trend to continue. Reimbursement by a third-party payor
depends upon a number of factors, including the third-party payor’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 a determination of coverage and reimbursement for a product from each relevant governmental or other
third-party payor is a time-consuming and costly process that could require us to provide supporting scientific, clinical and cost-
effectiveness data for the use of our products to each payor. Payors in the US have evaluated ARIKAYCE for inclusion on
formularies. Going forward, we may not be able to provide data sufficient to gain positive coverage and reimbursement
determinations or we might need to conduct post-marketing studies in order to demonstrate the cost-effectiveness of
ARIKAYCE to such payors’ satisfaction. Such studies might require us to commit a significant amount of management time
and financial and other resources.
Even when a payor determines that a product is eligible for reimbursement, the payor may impose coverage limitations
that preclude payment for some uses that are approved by the FDA or non-US regulatory authorities and/or may set a
reimbursement rate that is too low to support a profitable sales price for the product. For example, in France we agreed with the
French authorities to a reimbursed price which was lower than the price in our temporary authorization for use (Autorisation
Temporaire d'Utilisation or ATU) and are required to refund the difference. As a result, we recorded a revenue reversal in the
fourth quarter of 2022, related to revenue recorded in prior periods. In addition, in 2023, we experienced a one-time,
prospective price decrease for ARIKAYCE in Japan of 9.4%. In the US, payors have restricted and continue to restrict coverage
of ARIKAYCE by using a variable co-payment structure that imposes higher costs on patients for drugs that are not preferred
by the payor and by imposing requirements for prior authorization or step edits. Subsequent approvals of competitive products
could result in a detrimental change to the reimbursement of our products. The occurrence of any of these events likely would
adversely impact market acceptance and demand for ARIKAYCE, which, in turn, could affect our ability to successfully
commercialize ARIKAYCE and adversely impact our business, financial condition, results of operations and prospects and the
value of our common stock.
There is a significant focus in the US healthcare industry and elsewhere on drug prices and value, and public and
private payors are taking increasingly aggressive steps to control their expenditures for pharmaceuticals by, among other things,
negotiating manufacturer discounts and placing restrictions on reimbursement for, and patient access to, medications. These
pressures could negatively affect our business. We expect changes in the Medicare program and state Medicaid programs, as
well as managed care organizations and other third-party payors, to continue to put pressure on pharmaceutical product pricing.
One significant example of recent legislative action is the IRA, which was signed into law on August 16, 2022. The IRA gives
the HHS the ability and authority to directly negotiate with manufacturers the price that Medicare will pay for certain high-
priced drugs and set caps on the negotiated price of such drugs, among other changes. The IRA also requires manufacturers of
certain Part B and Part D drugs to issue to HHS rebates based on certain calculations and triggers (i.e., when drug prices
increase and outpace the rate of inflation), which may influence the pricing of current and future products. At this time, while
we believe that ARIKAYCE will be excluded from negotiation due to its orphan drug designation, we cannot predict other
potential implications the IRA provisions will have on our business or the pricing of brensocatib or TPIP, if approved, or any
40
future products. These types of laws may have a significant impact on our ability to set a product price we believe is fair and
may adversely affect our ability to generate revenue and achieve or maintain profitability. We expect further federal and state
proposals and healthcare reforms to continue to be proposed, which could limit the prices that can be charged for the products
we develop or may otherwise limit our commercial opportunity. See Reimbursement of Pharmaceutical Products in Item 1 of
Part I of this Annual Report on Form 10-K for more information. In addition, in connection with various government programs,
we are required to report certain pricing information to the government, and the failure to do so may subject us to penalties.
In markets outside the US, including countries in Europe, Japan and Canada, pricing of pharmaceutical products is
subject to governmental control. Evaluation criteria used by many government agencies in European countries for the purposes
of pricing and reimbursement typically focus on a product’s degree of innovation and its ability to meet a clinical need
unfulfilled by currently available therapies. The Patient Protection and Affordable Care Act (ACA) created a similar entity, the
Patient-Centered Outcomes Research Institute, designed to review the effectiveness of treatments and medications in federally-
funded healthcare programs. An adverse result could lead to a treatment or product being removed from Medicare or Medicare
coverage. The decisions of such governmental agencies could affect our ability to sell our products profitably.
We continue to have discussions with third-party payors regarding our price for ARIKAYCE, and our pricing may
meet resistance from them and the public generally. If we are unable to maintain adequate reimbursement for ARIKAYCE in
the US, Europe and Japan, the adoption of ARIKAYCE by physicians and patients may be limited. If we are unable to negotiate
acceptable prices for ARIKAYCE, we may be unable to generate sufficient revenue to achieve profitability. Both of these risks,
in turn, could affect our ability to successfully commercialize ARIKAYCE and adversely impact our business, financial
condition, results of operations and prospects and the value of our common stock.
ARIKAYCE, brensocatib, TPIP, or our other product candidates could develop unexpected safety or efficacy concerns,
which would likely have a material adverse effect on us.
ARIKAYCE is now being used by larger numbers of patients, for longer periods of time than during our clinical trials
(including in the CONVERT study), and we and others (including regulatory agencies and private payors) are collecting
extensive information on the efficacy and safety of ARIKAYCE by monitoring its use in the marketplace. In addition, we are
conducting a confirmatory trial to assess and describe the clinical benefit of ARIKAYCE in patients with MAC lung disease.
We may also conduct additional trials in connection with lifecycle management programs for ARIKAYCE and, if approved,
brensocatib or TPIP. New safety or efficacy data from both market surveillance and our clinical trials may result in negative
consequences including the following:
•
Modification to product labeling or promotional statements, such as additional boxed or other warnings or
contraindications, or the issuance of additional “Dear Doctor Letters” or similar communications to healthcare
professionals;
•
Required changes in the administration of ARIKAYCE, brensocatib, or TPIP;
•
Imposition of additional post-marketing surveillance, post-marketing clinical trial requirements, distribution
restrictions or other risk management measures, such as a risk evaluation and mitigation strategy (REMS) or a REMS
with elements to assure safe use;
•
Suspension or withdrawal of regulatory approval;
•
Suspension or termination of ongoing clinical trials or refusal by regulators to approve pending marketing applications
or supplements to approved applications;
•
Suspension of, or imposition of restrictions on, our operations, including costly new manufacturing requirements with
respect to ARIKAYCE, brensocatib, or TPIP; and
•
Voluntary or mandatory product recalls or withdrawals from the market and costly product liability claims.
Any of these circumstances could reduce ARIKAYCE’s market acceptance or, if approved, the market acceptance of
brensocatib or TPIP and would be likely to materially adversely affect our business.
If estimates of the size of the potential markets for ARIKAYCE, brensocatib, TPIP, or our other product candidates are
overstated or data we have used to identify physicians is inaccurate, our ability to earn revenue to support our business
could be materially adversely affected.
We have relied on external sources, including market research funded by us and third parties, and internal analyses and
calculations to estimate the potential market opportunities for ARIKAYCE, brensocatib, TPIP, or any of our other product
candidates. The externally sourced information used to develop these estimates has been obtained from sources we believe to be
reliable, but we have not verified the data from such sources, and their accuracy and completeness cannot be assured. With
respect to ARIKAYCE, our internal analyses and calculations are based upon management’s understanding and assessment of
numerous inputs and market conditions, including, but not limited to, the projected increase in prevalence of MAC lung disease,
Medicare patient population growth and ongoing population shifts to geographies with increased rates of MAC lung disease.
These understandings and assessments necessarily require assumptions subject to significant judgment and may prove to be
41
inaccurate. As a result, our estimates of the size of these potential markets for ARIKAYCE could prove to be overstated,
perhaps materially.
In addition, we are relying on third-party data to identify the physicians who treat the majority of MAC lung disease
patients in the US and to determine how to deploy our resources to market to those physicians; however, we may not be
marketing to the appropriate physicians and may therefore be limiting our market opportunity.
With regard to brensocatib, our estimated number of total diagnosed bronchiectasis patients in the US was derived
from an external source. A similar per capita prevalence was used to calculate the estimated prevalence in the European 5. Our
potential addressable market for TPIP in the US, the European 5 and Japan was also derived from external sources. However,
studies indicate a lack of consensus on prevalence rates.
In the future, we may develop additional estimates with respect to market opportunities for our other product
candidates, and such estimates are subject to similar risks. In addition, a potential market opportunity could be reduced if a
regulator limits the proposed treatment population for one of our product candidates, similar to the limited population for which
ARIKAYCE was approved. In either circumstance, even if we obtain regulatory approval, we may be unable to commercialize
the product on a scale sufficient to generate significant revenue from such product candidates, which could have a material
adverse effect on our business, financial condition, results of operations and prospects and the value of our common stock.
We may not be successful in clinical trials or in obtaining regulatory approvals required to expand the indication for
ARIKAYCE, which may materially adversely affect our prospects and the value of our common stock.
The FDA granted accelerated approval of ARIKAYCE for the treatment of MAC lung disease as part of a combination
antibacterial drug regimen for adult patients with limited or no alternative treatment options in a refractory setting, as defined
by patients who do not achieve negative sputum culture after a minimum of six consecutive months of a multidrug background
regimen therapy. Our CONVERT study and 312 study focused on this refractory population, and we do not anticipate obtaining
an indication for a broader population of patients with MAC lung disease or any other illnesses or infections without additional
clinical data. Additional clinical trials will require additional time and expense. While we reported positive topline results from
our ARISE trial, we are continuing to conduct our confirmatory clinical trial program for full approval of ARIKAYCE in the
broader population of patients with MAC lung disease through our ENCORE trial, but this trial program, along with any other
clinical trials of ARIKAYCE, may not be successful. Additional results from ongoing and recently completed studies may
affect the FDA’s benefit-risk analysis for the product. If we are unable to expand the indication for use of ARIKAYCE, our
prospects and the value of our common stock may be materially adversely affected.
Risks Related to the Development and Regulatory Approval of Our Product Candidates Generally
Pharmaceutical research and development is very costly and highly uncertain, and we may not succeed in developing
product candidates in the future.
Product development in the pharmaceutical industry is an expensive, high-risk, lengthy, complicated, resource
intensive process. In order to develop a product successfully, we must, among other things:
•
Identify potential product candidates;
•
Submit for and receive regulatory approval to perform clinical trials;
•
Design and conduct appropriate preclinical and clinical trials, including confirmatory clinical trials, according to good
laboratory practices and good clinical practices and disease-specific expectations of the FDA and other regulatory
bodies;
•
Select and recruit clinical investigators and subjects for our clinical trials;
•
Obtain and correctly interpret data establishing adequate safety of our product candidates and demonstrating with
statistical significance that our product candidates are effective for their proposed indications, as indicated by
satisfaction of pre-established endpoints;
•
Submit for and receive regulatory approvals for marketing; and
•
Manufacture the product candidates and device constituent parts according to cGMP and other applicable standards
and regulations.
There is a high rate of failure inherent in this process, and potential products that appear promising at early stages of
development may fail for a number of reasons. Importantly, positive results from preclinical studies of a product candidate may
not be predictive of similar results in human clinical trials, promising results from earlier clinical trials of a product candidate
may not be replicated in later clinical trials, and observations from ongoing trials, including observations based on interim,
preliminary, or blinded data, may not be representative of results after the trials are completed and all data is collected and
analyzed. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage
clinical trials even after achieving positive results in earlier stages of development and have abandoned development efforts or
sought partnerships in order to continue development.
42
In addition, there are many other difficulties and uncertainties inherent in pharmaceutical research and development
that could significantly delay or otherwise materially impair our ability to develop future product candidates, including the
following:
•
Conditions imposed by regulators, ethics committees or institutional review boards for preclinical testing and clinical
trials relating to the scope or design of our clinical trials, including selection of endpoints and number of required
patients or clinical sites;
•
Challenges in designing our clinical trials to support potential claims of superiority over current standard of care or
future competitive therapies;
•
Restrictions placed upon, or other difficulties with respect to, clinical trials and clinical trial sites, including with
respect to potential clinical holds or suspension or termination of clinical trials due to, among other things, potential
safety or ethical concerns or noncompliance with regulatory requirements;
•
Delayed or reduced enrollment in clinical trials, high discontinuation rates or overly concentrated patient enrollment in
specific geographic regions;
•
Failure by third-party contractors, contract research organizations (CROs), clinical investigators, clinical laboratories,
or suppliers to comply with regulatory requirements or meet their contractual obligations in a timely manner;
•
Greater than anticipated cost of our clinical trials; and
•
Insufficient product supply or inadequate product quality.
We cannot state with certainty when or whether our product candidates now under development will be approved or
launched; whether, if initially granted, such approval will be maintained; whether we will be able to develop, license, or
otherwise acquire additional products or product candidates; or whether our products, once launched, will be commercially
successful. Failure to successfully develop future product candidates for any of these reasons may materially adversely affect
our business, financial condition, results of operations and prospects and the value of our common stock.
Interim, topline and preliminary data from our clinical trials that we announce or publish from time to time may change as
more patient data become available, may be interpreted differently if additional data are disclosed, and are subject to audit
and verification procedures that could result in material changes in the final data.
From time to time, we may publicly disclose preliminary or topline data from our clinical trials, which may be based
on a preliminary analysis of then-available data in a summary or topline format, and the results and related findings may change
as more patient data become available, may be interpreted differently if additional data are disclosed at a later time and are
subject to audit and verification procedures that could result in material changes in the final data. For example, in May 2024, we
announced topline data for the ASPEN trial. If additional results from our clinical trials are not consistent with this topline data
or other previously released data or are not viewed favorably, our ability to obtain approval for and commercialize our approved
drug and drug candidates, our business, operating results, prospects, or financial condition may be harmed and our stock price
may decrease.
We also make assumptions, estimates, calculations, and conclusions as part of our analyses of data, and we may not
have received or had the opportunity to fully and carefully evaluate all data. As a result, the preliminary or topline results that
we report may differ from future results of the same trials, or different conclusions or considerations may qualify such results,
once additional data have been disclosed and/or are received and fully evaluated. Such data also remain subject to audit and
verification procedures that may result in the final data being materially different from the preliminary data we previously
published. As a result, preliminary and topline data should be viewed with caution until the final data are available. We may
also disclose interim data from our clinical trials. Interim data from clinical trials that we may complete are subject to the risk
that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become
available. Differences between preliminary or interim data and final data could significantly harm our business prospects. In
addition, blinded data may not be predictive of unblinded data.
Further, other parties, including regulatory agencies, may not accept or agree with our assumptions, estimates,
calculations, conclusions, or analyses or may interpret or weigh the importance of data differently, which could impact the
value of the particular program, the approvability or commercialization of the particular drug candidate or product, and our
business in general. In addition, in regards to the information we publicly disclose regarding a particular study or clinical trial,
such as topline data, you or others may not agree with what we determine is the material or otherwise appropriate information
to include in such disclosure, and any information we determine not to disclose, or to disclose at a later date, such as at a
medical meeting may ultimately be deemed significant with respect to future decisions, conclusions, views, activities, or
otherwise regarding a particular drug, drug candidate, or our business. If the topline data that we report differ from actual
results or are interpreted differently once additional data are disclosed at a later date, or if others, including regulatory
authorities, disagree with the conclusions reached, our ability to obtain approval for and commercialize our drug candidates, our
business, operating results, prospects, or financial condition may be harmed or our stock price may decline.
43
We will need to secure regulatory approval in each market for Lamira as a delivery system for ARIKAYCE. Any failures to
secure separate regulatory approvals for Lamira as a delivery system will limit our ability to successfully commercialize
ARIKAYCE. Additionally, we plan to submit an NDA for TPIP as a drug/device combination product or as a stand-alone
marketing application, as dictated by local regulations, with Lamira as the dry powder delivery system for TPIP. Failure to
obtain or maintain regulatory approval or clearance of our devices or drug-device combination products could materially
harm our business.
Lamira must receive separate regulatory approval or clearance in connection with each approved product or product
candidate it will be used to administer. The FDA granted accelerated approval of Lamira with ARIKAYCE as part of the
approval of the drug/device combination product, and Lamira is CE marked by PARI in Europe and authorized for use by
MHLW in Japan. However, outside the US, Europe and Japan, Lamira is labeled as investigational for use in our clinical trials,
including in Canada and Australia, and is not approved for commercial use in Canada or certain other markets in which we may
seek to commercialize ARIKAYCE in the future.
In addition, we plan to submit a marketing application for TPIP as a drug/device combination product or as a stand-
alone application, as dictated by local regulations, with Lamira as the dry powder delivery system for TPIP. We will need to
seek additional approvals in connection with the delivery device for TPIP in certain markets before we can market and
commercialize TPIP in them.
We will continue to work closely with PARI to coordinate efforts regarding regulatory requirements, including our
proposed filings. If we and PARI are not successful in obtaining approval for each usage of Lamira in each market, our ability
to commercialize ARIKAYCE in those markets would be materially impaired. In addition, failure to maintain regulatory
approval or clearance of Lamira could result in increased development costs, withdrawal of regulatory approval, delays or other
material harm our business. Finally, failure to obtain regulatory approval or clearance of the delivery device for TPIP would
affect our ability to develop and commercialize TPIP.
If 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 may experience delays, incur additional costs and ultimately be unable to obtain regulatory
approval for and successfully commercialize our product candidates in the US, Europe, Japan or other markets.
Before obtaining regulatory approval for the sale of our product candidates, we must conduct, at our own expense,
extensive preclinical tests to demonstrate the safety of our product candidates in animals, and clinical trials to demonstrate the
safety and efficacy of our product candidates in humans. If we experience delays in our clinical trials or other testing or the
results of these trials or tests are not positive or are only modestly positive, including with respect to safety, we may:
•
Experience increased product development costs;
•
Be delayed in obtaining, or be unable to obtain, regulatory approval for one or more of our product candidates;
•
Obtain approval for indications or patient populations that are not as broad as intended or entirely different than those
indications for which we sought approval or with labeling with boxed warnings or other warnings or contraindications;
•
Need to change the way the product is administered;
•
Be required to perform additional clinical trials to support approval or be subject to additional post-marketing testing
requirements;
•
Have regulatory authorities withdraw, or suspend, their approval of the product or impose risk mitigation strategies
such as restrictions on distribution or other REMS;
•
Face a shortened patent protection period during which we may have the exclusive right to commercialize our
products;
•
Have competitors that are able to bring similar products to market before us;
•
Be sued for alleged injuries caused to patients using our products; or
•
Suffer reputational damage.
Such circumstances would impair our ability to commercialize our products and harm our business and results of
operations.
The risk of finding adverse side effects may be particularly heightened in the case of gene therapies. For instance, new
gene copies may produce too much or too little of the desired protein or RNA, or the production of the desired protein or RNA
may change over time. Because the treatment is irreversible, there may be challenges in managing side effects. Some adverse
effects would not be able to be reversed or relieved and might require us to develop additional clinical safety procedures.
Furthermore, new gene copies may disrupt other normal biological molecules and processes which could also result in
undesirable adverse effects. Adverse side effects may also be experienced by patients as a result of the process for
administering the therapy or related procedures.
44
There have been several significant adverse side effects in gene therapy treatments in the past, including reported cases
of leukemia, immune-mediated responses, and death seen in other trials. Gene therapy is still a relatively new approach to
disease treatment and additional adverse side effects could develop. For instance, possible adverse side effects that could occur
include immunologic-mediated reactions early after administration, which could substantially limit the effectiveness of the
treatment, and could lead to further adverse side effects, possibly including organ failure or death. Additional manufacturing,
clinical, and preclinical testing may be required, as well as additional analyses, assessments, and potential long-term patient and
clinical study subject monitoring, beyond what is currently required, and sample testing and associated regulatory reporting.
Serious adverse events in our clinical trials, or other clinical trials involving gene therapy products or our competitors’ products,
even if not ultimately attributable to the relevant product candidates, and the resulting publicity, could further adversely impact
our product candidates in the form of increased government regulation, unfavorable public perception, the need for additional
testing or monitoring, potential regulatory delays, stricter labeling requirements, and a decrease in demand.
We may not be able to enroll enough patients to conduct and complete our clinical trials or retain a sufficient number of
patients in our clinical trials to generate the data necessary for regulatory approval of our product candidates or to permit
the use of ARIKAYCE in the broader population of patients with MAC lung disease.
The completion rate of our clinical trials is dependent on, among other factors, the patient enrollment rate. Patient
enrollment is a function of many factors, including:
•
Investigator identification and recruitment;
•
Regulatory approvals to initiate study sites;
•
Patient population size;
•
The nature of the protocol to be used in the trial;
•
Patient proximity to clinical sites;
•
Eligibility criteria for the trial;
•
Patient willingness to participate in the trial;
•
Discontinuation rates; and
•
Competition from other companies’ potential clinical trials for the same patient population.
Delays in patient enrollment for our clinical trials could increase costs and delay commercialization and sales, if any,
of our products. Once enrolled, patients may 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, including with respect to our ENCORE trial, we
may be unable to generate the data required by regulators for approval of our product candidates.
If another party obtains orphan drug exclusivity for a product that is considered the same or essentially the same as a
product we are developing for a particular indication, we may be precluded or delayed from commercializing the product in
that indication.
Under the ODA, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition. In
the EU, the EMA Committee for Orphan Medicinal Products grants orphan drug designation to products that are intended for
the diagnosis, prevention or treatment of a life-threatening or chronically debilitating disease or condition affecting not more
than five in 10,000 people in the EU. The company that obtains the first regulatory approval from the FDA for a designated
orphan drug for an indication within the designated rare disease or condition generally receives marketing exclusivity for use of
that drug for that indication for a period of seven years. Similar laws exist in the EU with a term of 10 years. See Business —
Government Regulation — Orphan Drug Designation in Item 1 of Part I of this Annual Report on Form 10-K for additional
information. If a competitor obtains approval of the same drug for the same indication before us, and the FDA grants such
orphan drug exclusivity, we would be prohibited from obtaining approval for our product for seven years (or longer if the
seven-year exclusivity period is extended for a QIDP or due to pediatric exclusivity), unless our product can be shown to be
clinically superior. In addition, even if we obtain orphan exclusivity, the FDA may approve another product during our orphan
exclusivity period for the same indication under certain circumstances.
Our pre-clinical research activities include the research and development of novel gene therapy product candidates. It will
be difficult to predict the time and cost of development and of subsequently obtaining regulatory approval for any such
product candidates, or how long it will take to commercialize any gene therapy product candidates.
We intend to identify and develop novel gene therapy product candidates as part of our pre-clinical research efforts.
We have limited experience in developing gene therapy programs and cannot be certain that any gene therapy product
candidates that we develop will successfully complete preclinical studies and clinical trials, or that they will not cause
significant adverse events or toxicities. Any such results could impact our ability to develop a product candidate, including our
ability to enroll patients in our clinical trials. Furthermore, there is the potential risk of delayed adverse events following
exposure to gene therapy products due to persistent biological activity of the genetic material or other components of products
45
used to carry the genetic material, which could adversely affect our ability to obtain and maintain regulatory approvals for and
commercialize any gene therapy products we may develop.
In addition, to date, only a small number of gene therapy products have been approved in the US, Europe or elsewhere,
and regulatory requirements governing gene therapy products have changed frequently and may continue to change in the
future. We may seek regulatory approval in territories outside the US and Europe, which may have their own regulatory
authorities along with frequently changing requirements or guidelines. The regulatory review committees and advisory groups
in the US, Europe and elsewhere, and any new guidelines they promulgate, may lengthen the regulatory review process, require
us to perform additional studies, increase our development costs, lead to changes in regulatory positions and interpretations,
delay or prevent approval and commercialization of our product candidates or lead to significant post-approval limitations or
restrictions. Within the FDA, the Center for Biologics Evaluation and Research (CBER) regulates gene therapy products.
Within CBER, the review of gene therapy and related products is consolidated in the Office of Therapeutic Products, and the
FDA has established the Cellular, Tissue and Gene Therapies Advisory Committee to advise CBER on its reviews. CBER
works closely with the National Institutes of Health (the NIH) in connection with the development of gene therapy. The FDA
has published specific guidance documents with respect to the development and approval of gene therapy products. For
example, in January 2020, the FDA issued final guidance documents that updated draft guidance documents that were
originally released in July 2018 to reflect recent advances in the field, and to set forth the framework for the development,
review and approval of gene therapies. Amongst these guidance documents are final guidance documents that pertain to the
development of gene therapies for the treatment of specific disease categories, including rare diseases of interest to Insmed, and
to manufacturing and long-term follow-up issues relevant to gene therapy, among other topics. The FDA also issued a final
guidance document in September 2021 describing the FDA’s approach for determining whether two gene therapy products are
the same or are different for the purpose of orphan-drug designation and orphan-drug exclusivity. The FDA has continued to
issue additional draft and final guidance documents on the development and manufacture of gene therapy products. In addition,
the FDA can put an IND for a gene therapy study on clinical hold for several reasons, including, but not limited to, if the
information in an IND is not sufficient to assess the potential risks in study subjects.
As we advance gene therapy product candidates, we will be required to consult with these regulatory authorities and
advisory groups, and comply with applicable guidelines. If we fail to do so, we may be required to delay or discontinue
development of certain of our product candidates. These additional processes may result in a review and approval process that
is longer than we otherwise would have expected. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory
approval necessary to bring a potential product to market could decrease our ability to generate product revenue.
Due to these factors, it is more difficult for us to predict the time and cost of gene therapy product candidate
development, and we cannot predict whether the application of our approach to gene therapy, or any similar or competitive
programs, will result in the identification, development and regulatory approval of any product candidates, or that the gene
therapy programs of our competitors will not be considered better or more attractive or available in the market prior to ours.
There can be no assurance that any development problems we experience in the future related to gene therapy product
candidates will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may
also experience delays and challenges in achieving sustainable, reproducible and scalable production. Additionally, if a safety
concern arises in connection with a gene therapy product from any sponsor, regulatory authorities might apply greater scrutiny
to our gene therapy product candidates and any approved gene therapy products, and it might become more challenging to
enroll patients in clinical trials and commercialize approved gene therapy products. Any of these factors may prevent us from
completing our pre-clinical studies or clinical trials or commercializing any gene therapy product candidates we may develop
on a timely or profitable basis, if at all.
Risks Related to Our Reliance on Third Parties
We rely on third parties including collaborators, CROs, clinical and analytical laboratories, CMOs and other providers
for many services that are critical to our business. 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 to non-compliance by such third
parties with our agreements or applicable law, our ability to develop and commercialize our products may be materially
adversely affected.
We currently rely, and expect to continue to rely, on third parties for significant research, analytical services, pre-
clinical development, clinical development and manufacturing of our product candidates and commercial scale manufacturing
of ARIKAYCE and Lamira. For example, we do not own facilities for clinical-scale or commercial manufacturing of our
product candidates, and we expect that our future supply requirements for brensocatib and TPIP will be manufactured by
CMOs. We currently rely on Resilience and Patheon to provide our clinical and commercial supply of ARIKAYCE. We
currently primarily rely on Esteve and Thermo Fisher to provide our clinical supply for brensocatib. Additionally, almost all of
our clinical trial work is done by CROs, such as PPD, our CRO for the ENCORE, BiRCh, and TPIP trials, and clinical
laboratories. In addition, we rely on third parties to manufacture clinical materials for our pre-clinical research programs.
Reliance on these third parties poses a number of risks, including the following:
46
•
The diversion of management time and cost of third-party advisers associated with the negotiation, documentation and
implementation of agreements with third parties in the pharmaceutical industry;
•
The inability to control whether third parties devote sufficient resources to our programs or products, including with
respect to meeting contractual deadlines;
•
The inability to control the regulatory and contractual compliance of third parties, including their quality systems,
processes and procedures, systems utilized to collect and analyze data, and equipment used to test drug product and/or
clinical supplies;
•
The inability to establish and implement collaborations or other alternative arrangements on favorable terms;
•
Disputes with third parties, including CROs, leading to loss of intellectual property rights, delay or termination of
research, development, or commercialization of product candidates or litigation or arbitration;
•
Contracts with our collaborators fail to provide sufficient protection of our intellectual property; and
•
Difficulty enforcing our contractual rights if one of these third parties fails to perform.
We also rely on third parties to select and enter into agreements with clinical investigators to conduct clinical trials to
support approval of our product candidates, and the failure of these third parties to appropriately carry out such evaluation and
selection can adversely affect the quality of the data from these studies and, potentially, the approval of our products. In
particular, as part of future drug approval submissions to the FDA, we must disclose certain financial interests of investigators
who participated 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 the information contained in such disclosures to determine whether disclosed interests
may have an impact on the reliability of a study. If the FDA determines that financial interests of any clinical investigator raise
serious questions of data integrity, the FDA can institute a data audit, request that we submit further data analyses, 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 for approval. A finding by the FDA that a financial relationship of an investigator raises serious questions of data
integrity could delay or otherwise adversely affect approval of our products.
In January 2024, the US House of Representatives introduced the BIOSECURE Act (H.R. 7085) and the Senate
advanced a substantially similar bill (S.3558), which legislation, if passed and enacted into law, would potentially restrict our
ability to utilize certain products and services from, or otherwise collaborate with, any "biotechnology company of concern,” in
the performance of a government contract or subcontract. Although the House version of the bill passed on September 9, 2024,
the legislation ultimately did not pass before the end of the last session of Congress. It is possible that the BIOSECURE Act
could be raised again in some form in this new and current session of Congress, either as a standalone bill or as part of broader
legislation, and focus on these issues is expected to continue. We do business with companies in China and it is possible some
of our contractual counterparties could be impacted by this legislation.
These risks could materially harm our business, financial condition, results of operations and prospects and the value
of our common stock.
We may not have, or may be unable to obtain, sufficient quantities of ARIKAYCE, Lamira or our product candidates to meet
our required supply for commercialization or clinical studies, which would materially harm our business.
We do not have any in-house manufacturing capability other than for small-scale preclinical development programs
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 remain dependent upon Resilience and Patheon
to supply ARIKAYCE both for our clinical trials and commercial sale. Resilience manufactures placebo for our clinical trials
and our current supply of ARIKAYCE for commercial sale. However, we may not be able to maintain adequate quantities to
meet future demand, including as a result of manufacturing and/or quality issues experienced by our third-party manufacturers
or higher customer demand than expected. If we encounter delays or difficulties in the manufacturing process that disrupt our
ability to supply our distributors and others with ARIKAYCE or our product candidates, we may experience product stock-outs,
which would likely have a material adverse effect on our business and reputation.
In addition, we have entered into certain agreements with Patheon related to increasing our long-term production
capacity for ARIKAYCE commercial inventory, although Patheon’s supply obligations will commence only after certain
technology transfer and construction services are completed. Any delay in the commencement of Patheon’s supply obligations,
whether due to delays in technology transfer and construction or from adding Patheon to our NDA as a CMO, would increase
the risks associated with Resilience being unable to provide us with an adequate supply of ARIKAYCE.
We are also dependent upon PARI being able to provide an adequate supply of nebulizers for commercial sale of
ARIKAYCE, any ongoing clinical trials, and future commercial sales of our product candidates that use Lamira as their
delivery mechanism, as PARI is the sole manufacturer of Lamira. We have no alternative supplier for the nebulizer, and
because significant effort and time were expended in the optimization of the nebulizer for use with ARIKAYCE, we do not
intend to seek an alternative or secondary supplier. In the event PARI cannot provide us with sufficient quantities of the
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nebulizer, replication of the optimized device by another party would likely require considerable time and additional regulatory
approval. In the case of certain specified supply failures, we have the right under our commercialization agreement with PARI
to make the nebulizer and have it made by certain third parties, but not those deemed under the commercialization agreement to
compete with PARI.
We will be reliant on CMOs to manufacture supply of brensocatib and TPIP for our future requirements. Esteve
manufactures the active pharmaceutical ingredient for brensocatib and Patheon manufactures our current supply of brensocatib.
We plan to enter into commercial agreements with CMOs for TPIP, and cannot guarantee that we will be able to locate
adequate partners or enter into favorable agreements with them.
We are in the process of developing in-house clinical manufacturing capability for our gene therapy product
candidates, but we expect to rely on third-party CMOs for manufacturing of all testing materials for the foreseeable future.
Products intended for use in gene therapies are novel, complex and difficult to manufacture. As we shift towards in-house
clinical manufacturing capability for our gene therapy product candidates, we may encounter delays in obtaining regulatory
approval of our manufacturing processes or in complying with ongoing manufacturing regulatory requirements and applicable
cGMP, including challenges related to producing adequate quantities of clinical grade materials that meet FDA, EMA, MHLW
or other applicable standards or specifications with consistent and acceptable production yields and costs.
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.
An inadequate supply of ARIKAYCE, Lamira, brensocatib, TPIP, or our other product candidates would likely harm
our commercial efforts or delay or impair clinical trials of ARIKAYCE or our product candidates and adversely affect our
business, financial condition, results of operations and prospects and the value of our common stock.
The manufacturing facilities of our third-party manufacturers are subject to significant government regulations and
approvals, which are often costly and could result in adverse consequences to our business if we and our manufacturing
partners fail to comply with the regulations or maintain the approvals.
Manufacturers of ARIKAYCE, Lamira and our product candidates are subject to cGMP, Quality System Regulations
and similar standards. While we have policies and procedures in place to select third-party manufacturers for our product and
product candidates that adhere, and monitor their adherence to, such standards, they may nonetheless fail to do so. Similarly,
while we have entered into a Commercialization Agreement with PARI for the manufacture of Lamira for use with
ARIKAYCE, PARI and its affiliates involved in manufacturing may fail to adhere to applicable standards. These manufacturers
and their facilities will be subject to periodic review and inspections by the FDA and other regulatory authorities following
regulatory approval of our products, as with ARIKAYCE. For instance, to monitor compliance with applicable regulations, the
FDA routinely conducts inspections of facilities and may identify potential deficiencies. The FDA issues what are referred to as
“Form 483s” that set forth observations and concerns identified during its inspections. Failure to satisfactorily address the
concerns or potential deficiencies identified in a Form 483 could result in the issuance of a warning letter, which is a notice of
the issues that the FDA believes to be significant regulatory violations requiring prompt corrective actions. Failure to respond
adequately to a warning letter, or to otherwise fail to comply with applicable regulatory requirements could result in
enforcement, remedial and/or punitive actions by the FDA or other regulatory authorities.
If one of these manufacturers fails to maintain compliance with regulatory requirements or experiences supply
problems, including in the scale-up of commercial production, the production of ARIKAYCE, Lamira, brensocatib and our
other product candidates could be interrupted, resulting in delays, additional costs or restrictions on the marketing or sale of our
products. An alternative manufacturer would need to be qualified, through regulatory filings, which could result in further
delay. The regulatory authorities may also require additional testing if a new manufacturer is relied upon for commercial
production. In addition, with respect to our product candidates, our manufacturers and their facilities are subject to pre-approval
cGMP inspection by the FDA and other regulatory authorities, and the findings of the cGMP inspection could result in a failure
to obtain, or a delay in obtaining, regulatory approval for future product candidates.
Risks Related to the Operation of our Business
We 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 and the value of our common stock.
We depend heavily on our management team and our principal clinical and commercial personnel, the loss of whose
services might significantly delay or prevent the achievement of our research, development or commercialization objectives.
Our success depends, in large part, on our ability to attract and retain qualified management, clinical and commercial personnel,
including those who join us through our business development activities. Our inability to retain and attract personnel could also
negatively impact our ability to develop and maintain important relationships with commercial partners, leading research
institutions and key distributors.
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Competition for skilled personnel in our industry and market is intense because of the numerous pharmaceutical and
biotechnology companies that seek similar personnel. These companies may have greater financial and other resources, offer a
greater opportunity for career advancement and have a longer history in the industry than we do. We also experience
competition for the hiring of our clinical and commercial personnel from universities, research institutions, and other third
parties. We cannot assure that we will attract and retain such people or maintain such relationships. Our inability to retain and
attract qualified employees would materially harm our business, financial condition, results of operations and prospects and the
value of our common stock.
We expect to continue to expand our development, regulatory and sales and marketing capabilities, and as a result, we may
encounter difficulties in managing our growth, which could disrupt our operations.
In connection with our commercialization of ARIKAYCE in the US, Europe and Japan, our continued international
expansion efforts, and our ongoing development and planned commercialization of brensocatib, TPIP, INS1201, and other
product candidates, we expect to continue to experience significant growth in the number of our employees and the scope of our
operations, particularly in the areas of drug development, regulatory affairs, quality, commercial compliance, medical affairs,
and sales and marketing. For example, we plan to continue to hire additional personnel to support ARIKAYCE, the continued
development and anticipated commercialization of brensocatib and the advancement of our other pipeline programs. To manage
our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems,
expand our facilities and continue to recruit and train additional qualified personnel, all while continuing to maintain our
culture. Due to the limited experience of our management team in managing a company with this anticipated growth, we may
not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The
physical expansion of our operations may lead to significant costs and may divert our management and business development
resources. We may not be able to effectively manage the expansion of our operations, which could delay the execution of our
business plans or disrupt our operations.
Any acquisitions we make, or collaborative relationships we enter into, may not be clinically or commercially successful, and
may require financing or a significant amount of cash, which could adversely affect our business.
As part of our business strategy, we may effect acquisitions to obtain additional businesses, products, technologies,
capabilities and personnel. For example, we acquired Motus and AlgaeneX in August 2021 (the Business Acquisition), Vertuis
in January 2023, and Adrestia in June 2023, each a privately-held, pre-clinical stage company. Acquisitions involve a number
of operational risks, including:
•
Failure to achieve expected synergies;
•
The possibility that our acquired technologies, products and product candidates may not be commercially successful;
•
Difficulty and expense of assimilating the operations, technology and personnel of any acquired business;
•
The inability to retain the management, key personnel and other employees of any acquired business;
•
The inability to maintain any acquired company’s relationship with key third parties, such as alliance partners;
•
Exposure to legal claims or other liabilities for activities of any acquired business prior to acquisition;
•
Diversion of our management’s attention from our core business; and
•
Potential impairment of intangible assets, adversely affecting our reported results of operations and financial condition.
We also may enter into collaborative relationships that would involve our collaborators conducting proprietary
development programs. Disagreements with collaborators may develop over the rights to our intellectual property, and any
conflict with our collaborators could limit our ability to obtain future collaboration agreements and negatively influence our
relationship with existing collaborators.
If we make one or more significant acquisitions or enter into a significant collaboration in which the consideration
includes cash, we may be required to use a substantial portion of our available cash and/or need to raise additional capital,
which could adversely affect our financial condition.
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,
particularly as we continue to commercialize ARIKAYCE in the US, Europe and Japan, and look to commercialize brensocatib,
if approved. Regardless of merit or eventual outcome, liability claims may result in:
•
Decreased demand for ARIKAYCE and any other products that we may commercialize, and a corresponding loss of
revenue;
•
Substantial monetary awards to patients or trial participants;
•
Significant time and costs to defend the related litigation;
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•
Withdrawal or reduced enrollment of clinical trial participants; and
•
Reputational harm and significant negative media attention.
We have limited product liability insurance for our products. We do not know if we will be able to maintain existing,
or obtain additional, product liability insurance on acceptable terms or with adequate coverage against potential liabilities. This
type of insurance is expensive and may not be available on acceptable terms. If we are unable to obtain or maintain sufficient
insurance coverage on reasonable terms or to otherwise protect against potential product liability claims, we may be unable to
commercialize our products. A successful product liability claim brought against us in excess of our insurance coverage, if any,
may require us to pay substantial amounts and may materially adversely affect our business, financial condition, results of
operations and prospects and the value of our common stock.
Our business and operations, including our drug development and commercialization programs, could be materially
disrupted and/or subject to reputational harm in the event of system failures, security breaches, cyber-attacks, deficiencies in
cybersecurity, violations of data protection laws or data loss or damage by us or third parties.
We are dependent upon information technology systems, infrastructure, and data to operate our business. In the
ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business
information and that of our suppliers, as well as personally identifiable information, including protected health information, of
clinical trial participants, patients and employees. Despite the implementation of security measures, our internal computer
systems and those of our CROs, CMOs and other contractors and consultants are vulnerable to damage from computer viruses,
unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. Such an event could have a
material adverse effect on our business operations, including a material disruption of our drug development and
commercialization programs.
It is critical that we maintain such confidential information in a manner that preserves its confidentiality and integrity.
Unauthorized disclosure of or access to sensitive or confidential patient or employee data, including personally identifiable
information, whether through breach of computer systems, systems failure, employee negligence, fraud or misappropriation, or
otherwise, or whether by our employees or third parties, could result in negative publicity, legal liability and damage to our
reputation. Unauthorized disclosure of personally identifiable information could also expose us to sanctions for violations of
data privacy laws and regulations around the world. In addition, the loss of clinical trial data for our product candidates could
result in delays in our regulatory submission and approval efforts and significantly increase our costs to recover or reproduce
the data, if possible. To the extent that any disruption or security breach resulted in a loss of or damage to our data or
applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further
development of our product candidates could be delayed. For example, the loss of or damage to clinical trial data, such as from
completed or ongoing clinical trials, for any of our product candidates could result in delays in our regulatory approval efforts
and significantly increase our costs to recover or reproduce the data. Likewise, we rely on third parties for the manufacture of
our drug candidates or any future drug candidates and to conduct clinical trials, and similar events relating to their systems and
operations could also have a material adverse effect on our business and lead to regulatory agency actions.
We have previously been, and expect to remain, the target of cyber-attacks. We may not be able to anticipate all types
of security threats, and we may not be able to implement preventive measures effective against all such security threats. The
techniques used by cyber criminals change frequently, may not be recognized until launched, and can originate from a wide
variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist
organizations, or hostile foreign governments or agencies. Notifications and follow-up actions related to a security incident
could impact our reputation or cause us to incur substantial costs, including legal and remediation costs, in connection with
these measures and otherwise in connection with any actual or suspected security breach. Although we have general liability
insurance coverage, including coverage for errors and omissions and potential cyber security breaches, our insurance may not
cover all claims, continue to be available on reasonable terms or be sufficient in amount to cover one or more large claims;
additionally, the insurer may disclaim coverage as to any 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, financial
condition, results of operations and prospects and the value of our common stock.
We are subject to data privacy laws and regulations that govern how we can collect, process, store, and transfer personal
data, and violations can result in meaningful penalties, enforcement, and/or reputational harm and have a significant
impact on our operations.
Laws and regulations governing personal data continue to develop at a rapid pace, and jurisdictions around the world
continue to propose new legislation and rules. For example, a number of US states have passed consumer privacy laws or
consumer health data laws. Other jurisdictions outside of the US either have data protection laws in place or continue to
advance proposals for similar legislation and regulation. These laws place restrictions on how we collect, use, and transfer
personal data, and they result in increased compliance and operational costs. Noncompliance with data protection laws and
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regulations can result in meaningful penalties, enforcement, and/or reputational harm and have a significant impact on our
operations.
Our inability to access, upgrade or expand our technology systems or difficulties in updating our existing technology or
developing or implementing new technology could have a material adverse effect on our business or results of operations.
We have and will continue to expand, upgrade and develop our information technology capabilities, including our
enterprise resource planning system, which was implemented through Oracle software in 2022, and a new enterprise-wide
human capital management system, Workday, implemented in 2024. If we are unable to successfully continue upgrading or
expanding our technological capabilities to support our growth or if there are deficiencies in the design or implementation of
such capabilities, we may not be able to take advantage of market opportunities, manage our costs effectively, manage our
inventory, maintain a secure data environment, file timely reports with the SEC, or otherwise efficiently manage our internal
controls. In addition, costs, potential problems and interruptions associated with the implementation of new or upgraded
systems and technology, or with maintenance or adequate support of existing systems, could also disrupt or reduce the
efficiency of our operations. Moreover, many of our vendors provide their services to us via a cloud-based model instead of
software that is installed on our premises. As a result, we depend upon our vendors to provide us with services that are always
available and are free of errors or defects that could cause disruptions in our business processes. Any failure by such vendors to
do so, or any disruption in our ability to access the Internet, could materially and adversely affect our ability to manage our
operations.
We have limited experience operating internationally, are subject to a number of risks associated with our international
activities and operations and may not be successful in our efforts to expand internationally.
We currently have limited operations outside of the US. As of December 31, 2024, we had 153 employees located in
Europe and 111 employees located in Japan, although we have clinical trial sites and suppliers located around the world. In
order to meet our long-term goals, we expect to grow our international operations over the next several years, including in
Europe and Japan, and continue to source material used in the manufacture of our product candidates from abroad.
Additionally, a substantial portion of our commercial supply of ARIKAYCE is currently manufactured in Canada and, if
approved, we expect that commercial supply of brensocatib will also be manufactured in Canada. Consequently, we are and will
continue to be subject to risks related to operating in foreign countries, including:
•
Limited experience with international regulatory requirements;
•
An inability to achieve optimal pricing and reimbursement for ARIKAYCE, if approved in another jurisdiction, or
subsequent changes in reimbursement, pricing and other regulatory requirements;
•
Any implementation of, or changes to, tariffs, trade barriers and other import-export regulations in the US or other
countries in which we, or our third-party partners, operate;
•
Unexpected AEs related to ARIKAYCE or our product candidates occurring in foreign markets that we have not
experienced in the US, Europe or Japan;
•
Scrutiny from customers, regulators, investors and other stakeholders related to environmental, health and safety,
diversity, labor conditions, human rights and other concerns in the countries in which we, or our third-party partners,
operate;
•
Economic and political conditions, including foreign currency fluctuations and inflation, could result in reduced
revenue, increased or unpredictable operating expenses and other obligations incident to doing business in, or with a
company located in, another country;
•
Geopolitical events, such as conflicts, war and terrorism, could cause disruptions in our international operations,
including planned or ongoing clinical studies; and
•
Compliance with foreign or US laws, rules and regulations, including data privacy requirements, labor relations laws,
tax laws, anti-competition regulations, import, export and trade restrictions, anti-bribery/anti-corruption laws,
regulations or rules, which could lead to actions by us or our distributors, manufacturers, other third parties who act on
our behalf or with whom we do business in foreign countries or our employees who 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 operations and prospects and the value of our common stock.
We 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. Our future success will depend in large part on our ability to maintain a competitive position with
respect to these technologies and to obtain and maintain protection for our intellectual property. Compounds, products or
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processes that we develop or that are developed on our behalf may become obsolete before we recover any expenses incurred in
connection with their development. We face substantial competition from pharmaceutical, biotechnology and other companies,
universities and research institutions with respect to NTM lung disease, bronchiectasis, PAH and PH-ILD, and our gene therapy
indications, and will face substantial competition with respect to future product candidates we may develop in these and other
disease areas. Relative to us, most of these entities have substantially greater capital resources, research and development staffs,
facilities and experience in conducting clinical studies, obtaining regulatory approvals, and manufacturing and marketing
pharmaceutical products. Many of our competitors may achieve product commercialization or obtain patent protection earlier
than us. Furthermore, we believe that our competitors have used, and may continue to use, litigation and patent office
challenges to gain a competitive advantage. Our competitors may also use different technologies or approaches to develop
products similar to ARIKAYCE, brensocatib, TPIP, INS1201, and our pre-clinical product candidates.
We expect that competing successfully will depend on, among other things, the relative speed with which we can
develop products, complete the clinical testing and regulatory approval processes and supply commercial quantities of the
product to the market, as well as product efficacy, safety, reliability, availability, timing and scope of regulatory approval and
price. We expect competition to increase as technological advances are made and commercial applications broaden. There are
potential competitive products, both approved and in development, which include oral, systemic, or inhaled antibiotic products
to treat chronic respiratory infections. For instance, certain entities have expressed interest in studying their products for lung
disease and are seeking to advance studies in lung disease, including NTM lung disease caused by mycobacterial species other
than MAC. We are not aware of any entities currently conducting clinical trials for the treatment of refractory MAC lung
disease or of any other approved inhaled therapies specifically indicated for NTM lung disease in North America, Europe or
Japan. If any of our competitors develops a product that is more effective, safe, tolerable or convenient, or less expensive than
ARIKAYCE or our product candidates, it would likely materially adversely affect our ability to generate revenue. We also may
face lower priced generic competitors if third-party payors encourage use of generic or lower-priced versions of our product or
if competing products are imported into the US or other countries where we may sell ARIKAYCE. In addition, in an effort to
put downward pressure on drug pricing, Congress and the FDA are working to facilitate generic competition, which could result
in our experiencing competition earlier than otherwise would be the case.
There are also other amikacin products that have been approved by the FDA, MHLW and other regulatory agencies for
use in other indications, and physicians may elect to prescribe those products rather than ARIKAYCE to treat the indications
for which ARIKAYCE has received approval, which is commonly referred to as off-label use. Although regulations prohibit a
drug company from promoting off-label use of its product, the FDA and other regulatory agencies do not regulate the practice
of medicine and 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 a competitor’s product to treat diseases for which we have received FDA or other
regulatory agency approval, even if this use violates our patents or any statutory exclusivities that the FDA may grant for the
use of amikacin to treat such diseases.
In addition, based in part on our successful phase 2b Willow trial in bronchiectasis, certain entities have expressed
interest in studying other DPP1 inhibitors for the treatment of bronchiectasis. We are aware of at least two entities currently
conducting clinical trials for the treatment of bronchiectasis with a DPP1 inhibitor. If any of these competitors develops a DPP1
inhibitor product that is more effective, safe, tolerable or convenient, it would likely materially adversely affect our ability to
generate revenue, should brensocatib ultimately be approved. If we are unable to compete successfully, it will materially
adversely affect our business, financial condition, results of operations and prospects and the value of our common stock.
We have a limited number of significant customers and losing any of them could have an adverse effect on our financial
condition and results of operations.
Our three largest customers as of December 31, 2024 accounted for 85% and 88% of our total gross product revenue
for the years ended December 31, 2024 and 2023, respectively. The degree to which a limited number of customers make up a
significant portion of our gross product revenue may change as we continue to commercialize ARIKAYCE and, if approved,
our product candidates in additional markets. There can be no guarantee that we will be able to sustain our accounts receivable
or gross sales levels from our key customers. If, for any reason, we were to lose, or experience a decrease in the amount of
business with our largest customers, whether directly or through our distributor relationships, our financial condition and results
of operations could be negatively affected.
Deterioration in general economic conditions in the United States, Europe, Japan and globally, including the effect of
prolonged periods of inflation on our suppliers, third-party service providers and potential partners, could harm our
business and results of operations.
Our business and results of operations could be adversely affected by changes in national or global economic
conditions. These conditions include but are not limited to inflation, rising interest rates, limited availability of financing,
energy availability and costs, the negative impacts caused by public health crises, negative impacts resulting from the military
conflict between Russia and the Ukraine or the ongoing conflict in the Middle East, relations between the US and China, and
the effects of governmental initiatives to manage economic conditions. Impacts of such conditions could be passed on to our
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business in the form of higher costs for labor and materials, possible reductions in pharmaceutical industry-wide spending on
research and development and acquisitions and higher costs of capital.
The emergence of a pandemic, and efforts to reduce its spread, could negatively impact our business and operations.
Our global operations expose us to risks associated with public health crises and pandemics, particularly as the patients
we seek to treat suffer from serious diseases that may make them especially vulnerable. A pandemic, including a resurgence of
COVID-19, may also have an adverse impact on our operations and supply chain as a result of (i) our or our third-party
manufacturers’ employees or other key personnel becoming infected, (ii) preventive and precautionary measures that
governments and we and other businesses, including our third-party manufacturers, are taking, such as border closures,
prolonged quarantines and other travel restrictions, (iii) shortages of supplies necessary for the manufacture of ARIKAYCE,
including as a result of government orders providing for the requisition of personal protective equipment and other medical
supplies and equipment, and (iv) cold-chain storage and shipping limitations resulting from the need to prioritize delivery of
vaccines, which could cause disruptions or delays in our ability to distribute ARIKAYCE due to lack of sufficient cold-chain
storage and shipping capacity. Any of these circumstances could impact the ability of third parties on which we rely to
manufacture ARIKAYCE or its components and our ability to perform critical functions, which could significantly hamper our
ability to supply ARIKAYCE to patients. While we have experienced no disruption to date in our supply chain due to a
pandemic, if we encounter delays or difficulties in the manufacturing process that disrupt our ability to supply ARIKAYCE, we
may not be able to satisfy patient demand or we may experience a product stock-out, which would likely have a material
adverse effect on our business.
The emergence of a pandemic could also require us to delay the start of new clinical trials or otherwise impair our
ability to complete those trials. For instance, our ability to enroll patients and retain principal investigators and site staff could
be impaired due to an outbreak in their geography or prioritization of hospital resources toward the outbreak, or as a result of
quarantines and other travel restrictions that interrupt healthcare services. Furthermore, patients, investigators, or site staff may
be unwilling or unable to comply with clinical trial protocols due to illness, concerns about a pandemic, or quarantines or other
travel restrictions that impede their movement. Additionally, any interruption in the supply of the study drug might delay our
ability to start or complete clinical trials. Significant delays in the timing and completion of our clinical trials are costly and
could adversely affect our ability to satisfy our post-marketing requirements for ARIKAYCE and to obtain regulatory approval
for and to commercialize our product candidates.
Our current and potential future use of artificial intelligence (AI) and machine learning may not be successful and presents
new risks and challenges to our business.
We currently integrate AI and machine learning in certain of our research and development activities, including
identification of potential product candidates, and are seeking to further integrate AI and machine learning throughout our
business. We are exploring additional opportunities to incorporate AI and machine learning into our processes for drug
discovery, drug development, drug commercialization, and in connection with our enabling functions. For example, we are
currently evaluating the use of AI to produce initial drafts of documents like clinical study reports. Such efforts may not be
successful. Issues relating to the use of new and evolving technologies such as AI and machine learning may cause us to
experience brand or reputational harm, competitive harm, legal liability, and new or enhanced governmental or regulatory
scrutiny, and we may incur additional costs to resolve such issues.
As with many innovations, AI presents risks and challenges that could undermine or slow its adoption, and therefore
harm our business. Developing, testing and deploying AI systems may also increase our operating costs due to the nature of the
computing costs involved in such systems, which could adversely affect our business, financial condition and results of
operation. The use of AI by us and our business partners may lead to novel and urgent cybersecurity risks, which could have a
material adverse effect on our operations and reputation as well as the operations of any of our business partners. We may also
face increased competition from other companies that are using AI, some of whom may develop more effective methods than
we and any of our business partners have, which could have a material adverse effect on our business, results of operations, or
financial condition. In addition, our efforts to develop, acquire or integrate these technologies will involve significant time,
costs, and other resources, and may divert our management team’s attention and focus from executing on other elements of our
strategy. Furthermore, uncertainties regarding developing legal and regulatory requirements and standards may require
significant resources to modify and maintain business practices to comply with US and non-US laws concerning the use of AI,
the nature of which cannot be determined at this time.
Risks Related to Our Intellectual Property
If we are unable to protect our intellectual property rights adequately, the value of ARIKAYCE and our product candidates
could be materially diminished.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain and involves
complex legal, technical, scientific and factual questions, and our success depends in large part on our ability to protect our
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proprietary technology and to obtain and maintain patent protection for our products, prevent third parties from infringing our
patents, both domestically and internationally. We have sought to protect our proprietary position by filing patent applications
in 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 may not 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 to identify patentable aspects of our research and
development output before it is too late to obtain patent protection. Our existing patents and any future patents we obtain 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 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 of publicly available databases and other information. There may
be information not available to us or otherwise not reviewed by us that could render these conclusions inaccurate. Our
competitors may also be able to circumvent our owned or licensed patents by developing similar or alternative technologies or
products in 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, either in district court, the US international trade commission (ITC) or US patent office
(USPTO), or in analogous foreign courts and patent offices, which could limit our ability to stop competitors from marketing
similar products or reduce the term of patent protection for ARIKAYCE or our product candidates. US patents and 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. Our foreign patents have been and may be in
the future subject to opposition or comparable proceedings in the corresponding foreign patent office, which could result in
either loss of the patent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the
patent or patent application. See Intellectual Property—ARIKAYCE Patents in Item 1 of Part I of this Annual Report on Form
10-K for more information on our European patents that have been previously opposed.
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 or narrow the scope of our patent protection, including making it easier for competitors to
challenge our patents. For example, the America Invents Act included a number of changes to established practices, including
the transition to a first-inventor-to-file system and new procedures for challenging patents and implementation 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
ARIKAYCE and our product candidates could be materially diminished.
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 and restrictive
covenant agreements with our employees, consultants, advisors, collaborators, and other third parties and partners to protect our
trade secrets and other proprietary information. These agreements may not effectively prevent disclosure of confidential
information or may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In
addition, third parties may independently develop or discover our trade secrets and proprietary information. Regulators also
may disclose information we consider to be proprietary to third parties under certain circumstances, including in response to
third-party requests for such disclosure under the Freedom of Information Act or comparable laws. Additionally, the FDA, as
part of its Transparency Initiative, continues to consider whether to make additional information publicly available on a routine
basis, including information that we may consider to be trade secrets or other proprietary information, and it is not clear at the
present time whether and how the FDA’s disclosure policies may change in the future. Further, several states have limited or
prohibited the use of post-employment non-compete agreements and the Federal Trade Commission is evaluating a federal-
level prohibition on such agreements, which could increase the difficulty of protecting trade secrets and other proprietary
information. There are similar risks outside the US, such as the risk that a foreign regulatory agency would make available
information we consider to be proprietary to third parties or the public, and the risks arising from other factors making it
difficult to protect trade secrets, such as prohibitions or restrictions on post-employment non-compete agreements and other
rules and regulations.
We may not be able to enforce our intellectual property rights throughout the world, which could harm our business.
The legal systems of some foreign countries, particularly developing countries, do not favor the enforcement of patents
and other intellectual property protection, especially those relating to life sciences. Many companies have encountered
significant problems in protecting and defending intellectual property rights in such foreign jurisdictions. For example, certain
foreign countries have compulsory licensing laws under which a patent owner may be required to grant licenses to third parties.
In addition, many countries limit the enforceability of patents against third parties, including government agencies or
government contractors. In these countries, patents may provide limited or no benefit. This legal environment could make it
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difficult for us to stop the infringement of our patents or in-licensed patents or the misappropriation of our other intellectual
property rights. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our
efforts and attention from other aspects of our business, and our efforts to protect our intellectual property rights in such
countries may be inadequate.
The drug research and development industry has a history of intellectual property litigation, and we could become involved
in costly intellectual property disputes, which could delay or impair our product development efforts or prevent us from, or
increase the cost of, commercializing ARIKAYCE or any other approved product candidate.
Third parties may claim that we have infringed upon or misappropriated their proprietary rights. Any existing third-
party patents, or patents that may later issue to third parties, could negatively affect our commercialization of ARIKAYCE,
brensocatib, TPIP, INS1201, or any other product candidate that receives regulatory approval. For instance, PAH is a
competitive indication with established products, including other formulations of treprostinil. Our supply of treprostinil
palmitil, the treprostinil prodrug present in TPIP, is dependent upon a single supplier. The supplier owns patents on its
manufacturing process and crystalline drug product, and we have filed patent applications for TPIP; however, a competitor in
the PAH or PH-ILD indication may claim that we or our supplier have infringed upon or misappropriated its proprietary rights.
Moreover, in the event that we pursue approval of TPIP, or any other product candidate, via the 505(b)(2) regulatory pathway,
we will be required to file a certification of non-infringement or invalidity against any unexpired patents listed in the Orange
Book for the third-party drug we reference as part of our regulatory submission. This certification process may lead to litigation
and could also delay launch of a product candidate, if approved by regulators.
In the event of successful litigation or settlement of claims against us for infringement or misappropriation of a third
party’s proprietary rights, we may be required to take actions including but not limited to the following:
•
Paying damages, including up to treble damages, royalties, and the other party’s attorneys’ fees, which may be
substantial;
•
Ceasing development, manufacture, marketing and sale of products or use of processes that infringe the proprietary
rights of others;
•
Expending significant resources to redesign our products or our processes so that they do not infringe the proprietary
rights of others, which may not be possible, or may result in significant regulatory delays associated with conducting
additional clinical trials or other steps to obtain regulatory approval; and/or
•
Acquiring one or more licenses from third parties, which may not be available to us on acceptable terms or at all.
We may also have to undertake costly litigation or engage in other proceedings, such as interference or inter partes
review, to enforce or defend the validity of any patents issued or licensed 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’s intellectual property rights.
Any proceedings regarding our intellectual property rights are likely to be time consuming and may divert management
attention from operation of our business, and could have a material adverse effect on our business, financial condition, results of
operations and prospects and the value of our common stock.
Certain of the agreements to which we are, or may become, a party relating to ARIKAYCE and our product candidates
impose, or may in the future impose, restrictions on our business or other material obligations on us. If we fail to comply
with these obligations, our business could be adversely affected, including as a result of the loss of license rights that are
important to our business.
We are a party to various agreements related to ARIKAYCE and our product candidates, including licensing
agreements with PARI and AstraZeneca, which we view as material to our business. For additional information regarding the
terms of these agreements, see Business—License and Other Agreements in Item 1 of Part I of this Annual Report on Form 10-
K. These agreements impose a number of obligations on us and our business, including restrictions on our ability to freely
develop or commercialize our product candidates and requirements to make milestone and royalty payments to our
counterparties upon certain events. For example, under our license agreement with AstraZeneca, AstraZeneca retains a right of
first negotiation pursuant to which it may exclusively negotiate with us before we can negotiate with a third party regarding any
transaction to develop or commercialize brensocatib, subject to certain exceptions. While this right of first negotiation is not
triggered by a change of control, it may impede or delay our ability to consummate certain other transactions involving
brensocatib.
If we fail to comply with our obligations under these agreements, our counterparties may have the right to take action
against us, up to and including termination of a relevant license. For instance, under our license agreement with AstraZeneca,
AstraZeneca may terminate our license to brensocatib if we fail to use commercially reasonable efforts to develop and
commercialize a product based on brensocatib, or we are subject to a bankruptcy or insolvency. Reduction or elimination of our
licensed rights may result in our having to negotiate new or reinstated licenses with less favorable terms and may materially
harm our business.
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Risks Related to Government Regulation
Government healthcare reform could materially increase our costs, which could materially adversely affect our business,
financial condition, results of operations and prospects and the value of our common stock.
Our industry is highly regulated and changes in or revisions to laws and regulations that make gaining regulatory
approval, reimbursement and pricing more difficult or subject to different criteria and standards may adversely impact our
business, operations or financial results.
There have been a number of legal challenges and certain changes to the ACA since it was enacted. On January 28,
2021, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through May 15,
2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed
certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare,
including, among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements,
and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA.
Further, on February 10, 2021, the Biden Administration withdrew the federal government’s support for overturning the ACA.
Changes to the ACA, to the Medicare or Medicaid programs, or to the ability of the federal government to negotiate or
otherwise affect drug prices, or other federal legislation regarding healthcare access, financing or legislation in individual states,
could affect our business, financial condition, results of operations and prospects and the value of our common stock. We may
face similar challenges to gaining regulatory approval and sufficient reimbursement and pricing due to government healthcare
reform in the EU, Japan and other jurisdictions where ARIKAYCE or any of our other product candidates are approved. The
Trump Administration has discussed several changes to the reach and oversight of the FDA, which could affect its relationship
with the pharmaceutical industry, transparency in decision making and ultimately the cost and availability of prescription drugs.
Drug pricing is an active area for regulatory reform at both the federal and state levels, and additional significant changes to
current drug pricing and reimbursement structures in the US could be forthcoming. It remains unclear how any new legislation
or regulation might affect the prices we may obtain for ARIKAYCE or any of our product candidates for which regulatory
approval is obtained.
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 federal or state healthcare programs, which may adversely affect our business, financial
condition, results of operations and prospects and the value of our common stock.
In the US, we are subject to various federal and state healthcare “fraud and abuse” laws, including anti-kickback laws,
false claims laws and other laws intended to reduce fraud and abuse in federal and state healthcare programs. Although we seek
to structure our business arrangements in compliance with all applicable 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 civil
sanctions, including fines or exclusion or suspension from federal and state healthcare programs such as Medicare and
Medicaid and debarment from contracting with the US government, and our business, financial condition, results of operations
and prospects and the value of our common stock may be adversely affected. Our reputation could also suffer. In addition,
private individuals have the ability to bring actions on behalf of the government under the federal False Claims Act as well as
under the false claims laws of several states.
Under the ACA and certain state laws, we are required to report information on payments or transfers of value to any
US physicians, physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, or
certified nurse-midwives (in each case who are not bona fide employees of the applicable manufacturer that is reporting the
payment) and teaching hospitals, which is posted in searchable form on a public website. Failure to submit required information
may result in civil monetary penalties.
Several states also impose other marketing restrictions or require pharmaceutical companies to make marketing or
price disclosures to the state. In addition to the federal government, some states, as well as other countries, including France,
require the disclosure of certain payments to healthcare professionals. The Health Insurance Portability and Accountability Act
of 1996 (HIPAA), state, and foreign privacy laws may limit access to information identifying those individuals who may be
prospective users or limit the ability to market to them. Some of these laws are new or ambiguous as to what is required to
comply with their requirements, and we could be subject to penalties if it is determined that we have failed to comply with an
applicable legal requirement.
We are subject to anti-corruption laws and trade control laws, as well as other laws governing 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 prospects and the
value of our common stock.
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Our operations are subject to anti-corruption laws, including the US Foreign Corrupt Practices Act (FCPA), the UK
Bribery Act and other anti-corruption laws that apply in countries where we do business. The FCPA, UK Bribery Act and these
other laws generally prohibit us, our employees and our intermediaries from making prohibited payments to government
officials or other persons to obtain or retain business or gain some other business advantage. We have conducted various
studies at a broad range of trial sites around the world. Certain of these jurisdictions pose a risk of potential FCPA violations,
and we have relationships with third parties whose actions could potentially subject us to liability under the FCPA or local anti-
corruption laws. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our
international operations might be subject or the manner in which existing laws might be administered or interpreted.
We are also subject to other laws and regulations governing our international operations, including regulations
administered by the US Department of Commerce’s Bureau of Industry and Security, the US Department of Treasury’s Office
of Foreign Assets Control, and various non-US government entities, including applicable export control regulations, economic
sanctions on countries and persons, customs requirements, currency exchange regulations and transfer pricing regulations
(collectively, Trade Control laws).
We may not be effective in ensuring our compliance with all applicable anti-corruption laws, including the FCPA or
other legal requirements, including Trade Control laws. If we are not in compliance with the FCPA and other anti-corruption
laws or Trade Control laws, we may be subject to criminal and civil penalties, 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 prospects and the value of our common stock. Likewise, even an investigation by US or foreign authorities of potential
violations of the FCPA other anti-corruption laws or Trade Control laws could have an adverse impact on our reputation,
business, financial condition, results of operations and prospects and the value of our common stock.
Our research, development and manufacturing activities used in the production of ARIKAYCE and our product candidates
involve the use of hazardous materials, which could expose us to 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 our product candidates involve the controlled use
of hazardous materials and chemicals. We generally contract with third parties for the disposal of these materials and wastes.
Although we strive to comply with all pertinent regulations, the risk of environmental contamination, damage to
facilities or injury to personnel from the accidental or improper use or control of these materials remains. In addition to any
liability we could have for any misuse by us of hazardous materials 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 as a result of civil or criminal fines
and penalties.
In addition, we may incur substantial costs to comply with current or future environmental, health and safety laws and
regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to
comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
Inadequate funding for the FDA and other government agencies and/or potentially shifting priorities under the new
administration could hinder the FDA's and/or those other government agencies' ability to hire and retain key leadership and
other personnel, prevent new products and services from being developed or commercialized in a timely manner, or
otherwise prevent those agencies from performing normal business functions on which the operation of our business may
rely, which could negatively impact our business.
The ability of the FDA to review and approve new products, provide feedback on clinical trials and development
programs, meet with sponsors and otherwise review regulatory submissions can be affected by a variety of factors, including
government budget and funding levels; ability to hire and retain key personnel and accept the payment of user fees; and
statutory, regulatory, and policy changes, among other factors. Average review times at the agency may fluctuate as a result. In
addition, government funding of other government agencies on which our operations may rely is subject to the political process,
which is inherently fluid and unpredictable.
Disruptions at the FDA and other agencies may also increase the time necessary for new drugs to be reviewed and/or
approved by necessary government agencies or to otherwise respond to regulatory submissions, such as our NDA submission
for brensocatib, which would adversely affect our business. For example the Trump Administration has discussed several
changes to the reach and oversight of the FDA, which could affect its relationship with the pharmaceutical industry,
transparency in decision making and ultimately the cost and availability of prescription drugs. Additionally, over the last several
years, the US government has shut down multiple times and certain regulatory agencies, such as the FDA, have had to furlough
critical FDA and other government employees and stop critical activities. If funding for the FDA is reduced, FDA priorities
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change, or a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and
process our regulatory submissions, including our NDA submission for brensocatib, which could have a material adverse effect
on our business.
Risks Related to Our Financial Condition and Need for Additional Capital
We have a history of operating losses, expect to incur operating losses for the foreseeable future and may 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 Merck & Co, Inc. As of December 31, 2024, our accumulated deficit was $4.4 billion. For the years
ended December 31, 2024, 2023 and 2022, our consolidated net loss was $913.8 million, $749.6 million and $481.5 million,
respectively. Our ability to generate revenue depends on the success of commercial sales of ARIKAYCE; however, we do not
anticipate our revenue from the sale of ARIKAYCE will be sufficient for us to become profitable without reductions in our
operating expenses. Despite commercialization of ARIKAYCE in the US, Europe and Japan, we expect to continue to incur
substantial operating expenses, and resulting operating losses, for the foreseeable future as we:
•
Initiate or continue clinical studies of our product candidates;
•
Complete a post-marketing clinical trial of ARIKAYCE, consisting of the completed ARISE and ongoing ENCORE
trials, as required by the FDA;
•
Seek to discover or in-license additional product candidates;
•
Support the sales and marketing efforts necessary for the continued commercialization of ARIKAYCE;
•
Scale-up manufacturing capabilities for future ARIKAYCE production, including the increase of production capacity
at Patheon and process improvements in order to manufacture at a larger commercial scale;
•
Seek the approval of brensocatib in the US and other markets and, if approved, support the commercial launch of
brensocatib and scale-up manufacturing capabilities for brensocatib;
•
Seek the approval of TPIP and other product candidates in various markets and, if approved, support the commercial
launch of TPIP;
•
File, prosecute, defend, and enforce patent claims related to ARIKAYCE, brensocatib, TPIP, INS1201 and our other
product candidates; and
•
Enhance operational, compliance, financial, quality and information management systems and hire more personnel,
including personnel to support our commercialization efforts and development of our product candidates.
Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual
basis.
We may need to raise additional funds to continue our operations, and any failure to obtain capital when needed on
acceptable terms, or at all, could force us to delay, reduce, or eliminate our development programs, commercialization
efforts or other operations.
Our operations have consumed substantial amounts of cash since our inception. We expect to expend substantial
financial resources on pre-commercialization activities and the regulatory approval process for brensocatib, to continue to
commercialize ARIKAYCE and conduct the confirmatory post-marketing ENCORE trial, seek full regulatory approval for
ARIKAYCE, as well as continue research and development of brensocatib, TPIP, and INS1201, as well as our other current and
future product candidates. We may need to raise additional capital to fund these activities, including due to changes in our
product development plans or misjudgment of expected costs, to fund corporate development, to maintain our intellectual
property portfolio or for other purposes, including to resolve litigation. Our operating expenses and long-term investments were
significantly higher in 2024 than in 2023, reflecting our continued investment in the build-out of our commercial organization
to support global expansion activities for ARIKAYCE, preparation for the commercial launch of brensocatib if approved for the
treatment of bronchiectasis, the manufacture of commercial inventory, which includes capital and long-term investments, and
continued investment in research and development as well as selling, general and administrative expenses. We do not know
whether additional financing will be available when needed, or, if available, whether the terms will be favorable. If adequate
funds are not available to us when needed, we may be forced to delay, restrict or eliminate all or a portion of our development
programs or commercialization efforts.
We have outstanding indebtedness in the form of convertible senior notes, a term loan and a royalty financing
arrangement and may incur additional indebtedness in the future, which could adversely affect our financial position,
prevent us from implementing our strategy, and dilute the ownership interest of our existing shareholders.
In October 2022, we entered into a loan agreement (the Loan Agreement) with certain funds managed by Pharmakon
and a revenue interest purchase agreement (the Royalty Financing Agreement) with OrbiMed. In October 2024, we entered into
an Amended and Restated Loan Agreement (the A&R Loan Agreement) and amended the Royalty Financing Agreement.
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The A&R Loan Agreement provides for a senior secured term loan of $350.0 million (in addition to the accrual and
capitalization of $46.8 million of paid-in-kind interest under the Loan Agreement), which we drew in full in connection with
our entry into the Loan Agreement (the Tranche A Term Loan). The A&R Loan Agreement amends the Loan Agreement to,
among other items, add a new $150.0 million senior secured term loan tranche (the Tranche B Term Loan and, together with the
Tranche A Term Loan, the Term Loans). The Term Loans bear interest at a fixed rate of 9.60% per annum. The A&R Loan
Agreement extends the maturity date of the Term Loans to September 30, 2029, subject to acceleration to February 1, 2028 on
the occurrence of certain prespecified events. As consideration for the provision of the Tranche B Term Loan, we agreed to pay
Pharmakon a fee equal to 2.00% of the Tranche B Term Loan at the closing date of the Tranche B Term Loan and an additional
exit fee of 2.00% of the amount of each prepayment or repayment of the Term Loans. The Term Loans will be repaid in eight
equal quarterly payments starting on January 3, 2028.
Under the Royalty Financing Agreement, OrbiMed paid us $150.0 million in exchange for the right to receive, on a
quarterly basis, royalties (the Royalty Financing) in an amount equal to 4.0% of ARIKAYCE global net sales prior to
September 1, 2025 and 4.5% of ARIKAYCE global net sales on or after September 1, 2025, as well as 0.75% of brensocatib
global net sales, if approved (the Revenue Interest Payments). In the event that OrbiMed has not received aggregate Revenue
Interest Payments equal to or greater than $150.0 million on or prior to March 31, 2028, the royalty rate for ARIKAYCE will
be increased for all subsequent fiscal quarters to a rate that, if applied retroactively, would have resulted in aggregate Revenue
Interest Payments to OrbiMed for all fiscal quarters ended on or prior to March 31, 2028 equal to $150.0 million. In addition,
we must make a one-time payment to OrbiMed in an amount that, when added to the aggregate amount of Revenue Interest
Payments received by OrbiMed as of March 31, 2028, would equal $150.0 million. The total Revenue Interest Payments
payable by us to OrbiMed are capped at 1.8x of the purchase price or up to a maximum of 1.9x of the purchase price under
certain conditions.
In May 2021, we completed an underwritten offering of 0.75% convertible senior notes due in 2028 (the 2028
Convertible Notes). The 2028 Convertible Notes may be convertible into common stock at an initial conversion rate of 30.7692
shares of common stock per $1,000 principal amount of 2028 Convertible Notes. We sold $575.0 million aggregate principal
amount of the 2028 Convertible Notes, including the exercise in full of the underwriters’ option to purchase additional 2028
Convertible Notes, resulting in net proceeds of approximately $559.3 million. Holders of the 2028 Convertible Notes may
convert their 2028 Convertible Notes at their option at any time prior to the close of business on the business day immediately
preceding March 1, 2028, only under certain circumstances, which circumstances have existed each quarter since the third
quarter of 2024. On or after March 1, 2028, until the close of business on the second scheduled trading day immediately
preceding the maturity date, holders may convert their 2028 Convertible Notes at any time. Upon conversion of the 2028
Convertible Notes, we may deliver cash, shares of our common stock or a combination of cash and shares of our common
stock, at our election.
Our debt service obligations and the degree to which we are leveraged could have negative consequences on our
business, such as the following:
•
We may be more vulnerable to economic downturns, less able to withstand competitive pressures, and less flexible in
responding to changing economic conditions;
•
Our ability to obtain financing in the future may be limited;
•
We may be required to sell debt or equity securities or to sell some of our core assets, possibly on unfavorable terms,
to meet payment obligations;
•
We may be placed at a possible competitive disadvantage with less leveraged competitors and competitors that may
have better access to capital resources;
•
A substantial portion of our cash flows from operations in the future may be required for the payment of our interest or
principal payments under the A&R Loan Agreement, Revenue Interest Payments under the Royalty Financing
Agreement and the principal amounts of the 2028 Convertible Notes when they or any additional indebtedness become
due, thereby reducing the amount of our cash flow available for other purposes, including funds for clinical
development or to pursue future business opportunities; and
•
We may elect to make cash payments upon conversion of the 2028 Convertible Notes, which would reduce our
available cash.
Our ability to pay principal or interest on or, if desired, to refinance our indebtedness, including the A&R Loan
Agreement, the Royalty Financing Agreement and the 2028 Convertible Notes, depends on our future performance, which is
subject to economic, financial, competitive and other factors, some of which are beyond our control. Our business may not
generate cash flow from operations in the future sufficient to satisfy any obligations under the A&R Loan Agreement, the
Royalty Financing Agreement or the 2028 Convertible Notes or our obligations under any future indebtedness we may incur. If
we are unable to generate such cash flow, we may be required to delay, restrict or eliminate all or a portion of our development
programs or commercialization efforts or refinance or obtain additional equity capital on terms that may be onerous or highly
dilutive. If we do not meet our debt obligations, it could materially adversely affect our results of operations, financial condition
and the value of our common stock.
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The A&R Loan Agreement and the Royalty Financing Agreement each contain customary affirmative and negative
covenants that restrict our operations, including, among other things, restrictions on our ability to incur liens, incur additional
indebtedness, make investments, engage in certain mergers and acquisitions or asset sales, and declare dividends or redeem or
repurchase capital stock. The A&R Loan Agreement includes certain customary events of default. If a default occurs and is
continuing, we may be required to repay all amounts outstanding under the A&R Loan Agreement. The Royalty Financing
Agreement gives OrbiMed the option (the Put Option) to terminate the Royalty Financing Agreement and to require us to
repurchase future Revenue Interest Payments upon enumerated events such as a bankruptcy event, a payment default, an
uncured material breach or a change of control. The triggering of the Put Option, including by our failure to comply with these
covenants, could permit OrbiMed to declare certain amounts to be immediately due and payable. Further, if we are liquidated,
Pharmakon’s and OrbiMed’s rights to repayment would be senior to the rights of the holders of our common stock. Any
triggering of the Put Option or other event of default under the A&R Loan Agreement or Royalty Financing Agreement could
significantly harm our financial condition, business and prospects and could cause the price of our common stock to decline.
We may also incur additional indebtedness in the future which would result in increased fixed payment obligations and
could also result in additional restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our
ability to acquire, sell or license assets or intellectual property rights and other operating restrictions that could adversely impact
our ability to conduct our business.
We may be unable to use certain of our net operating losses and other tax assets.
We have substantial tax loss carry forwards in the US (both federal and state), Ireland, the United Kingdom and
Switzerland. In general, our net operating losses and tax credits have been fully offset by a valuation allowance due to
uncertainties surrounding our ability to realize these tax benefits. In particular, our ability to fully use certain US tax loss carry
forwards and general business tax credit carry forwards recorded prior to December 2010 to offset future income or tax liability
is limited under 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 shares of our common stock offerings or upon exercise of outstanding options,
may limit or eliminate our ability to use certain net operating losses and tax credit carry forwards in the future.
Changes in our effective income tax rate and future changes to US and non-US tax laws could adversely affect our results
of operations.
We are subject to income taxes in the US and various ex-US jurisdictions in which we operate globally. Various
factors may have favorable or unfavorable impacts on our effective tax rate, including changes in tax rates and laws,
interpretations of existing laws, changes in accounting standards, changes in the jurisdiction of our pre-tax earnings and
examinations of our tax filings.
Goodwill impairment charges in the future could have a material adverse effect on our business, results of operations and
financial condition.
We have recorded a significant amount of goodwill on our consolidated balance sheet as a result of acquisitions. We
review the recoverability of goodwill annually and whenever events or circumstances indicate that the carrying value of a
reporting unit may not be recoverable.
The impairment tests require us to make an estimate of the fair value of our reporting units. An impairment could be
recorded as a result of changes in assumptions, estimates or circumstances, some of which are beyond our control. Since a
number of factors may influence determinations of fair value of goodwill, we are unable to predict whether impairments of
goodwill will occur in the future, and there can be no assurance that continued conditions will not result in future impairments
of goodwill. The future occurrence of a potential indicator of impairment could include matters such as (i) a decrease in
expected net earnings, (ii) adverse equity market conditions, (iii) a decline in current market multiples, (iv) a decline in our
common stock price, (v) a significant adverse change in legal factors or the general business climate, and (vi) an adverse action
or assessment by a regulator. Any such impairment would result in us recognizing a non-cash charge in our consolidated
financial statements, which could adversely affect our business, results of operations and financial condition.
Risks Related to Ownership of Our Common Stock
Our shareholders may experience dilution of their ownership interests because of the future issuance of additional shares of
our common stock for general corporate purposes and upon the conversion of the 2028 Convertible Notes.
In the future, we may issue additional equity securities for capital raising purposes, in connection with hiring or
retaining employees, to fund acquisitions, or for other business purposes. We have previously funded, and expect to continue to
fund, acquisitions using shares of our common stock as consideration. In addition, we may issue shares of our common stock
upon the conversion of our 2028 Convertible Notes. The conversion of some or all of the 2028 Convertible Notes will dilute the
ownership interests of our existing shareholders to the extent we deliver shares upon their conversion. Any sales in the public
market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common
stock. In addition, the existence of the 2028 Convertible Notes may encourage short selling by market participants because the
60
conversion of the 2028 Convertible Notes could be used to satisfy short positions, or the anticipated conversion of the 2028
Convertible Notes into shares of our common stock could depress the price of our common stock. The future issuance of any
additional shares of common stock will dilute our current shareholders and may create downward pressure on the value of our
shares. The potential for the issuance of a significant amount of our common stock pursuant to the 2028 Convertible Notes
could create a circumstance commonly referred to as an “overhang” and in anticipation of which the market price of our stock
could fall. The existence of an overhang, whether or not sales have occurred or are occurring, could also hinder our ability to
raise additional equity capital at a time and price that we deem reasonable or appropriate.
The market price of our stock has been and may continue to be highly volatile, which could lead to shareholder litigation
against us.
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 continue to 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 beyond our control. In addition, the stock market has from
time to time experienced extreme price and volume fluctuations, which have particularly affected the market prices for
emerging biotechnology and pharmaceutical companies like us, and which have often been unrelated to their operating
performance.
Historically, when the market price of a stock has been volatile, shareholders are more likely to institute securities and
derivative class action litigation against the issuer of such stock. We previously faced a shareholder suit following a decline in
our stock price. If any of our shareholders bring a lawsuit against us in the future, it could have a material adverse effect on our
business. We have insurance policies related to some of the risks associated with our business, including directors’ and officers’
liability insurance policies; however, our insurance coverage may not be sufficient and our insurance carriers may not cover all
claims in a given litigation. If we are not successful in our defense of claims asserted in shareholder litigation, those claims are
not covered by insurance or they exceed our insurance coverage, we may have to pay damage awards, indemnify our executive
officers, directors and third parties from damage awards that may be entered against them and pay our and their costs and
expenses incurred in defense of, or in any settlement of, such claims. In addition, such shareholder suits could divert the time
and attention of management from our business.
Certain provisions of Virginia law, our articles of incorporation and amended and restated bylaws and arrangements
between us and our employees could hamper a third party’s acquisition of us or discourage a third party from attempting to
acquire control of us.
Certain provisions of Virginia law, our articles of incorporation and amended and restated bylaws and arrangements
with our employees could hamper a third party’s acquisition of us or discourage 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. These provisions or arrangements
include:
•
The ability to issue preferred stock with rights senior to those of our common stock without any further vote or action
by the holders of our common stock. The issuance of preferred stock could decrease the amount of earnings and assets
available for distribution to the holders of our common stock or could adversely affect the rights and powers, including
voting rights, of the holders of our common stock. In certain circumstances, such issuance could have the effect of
decreasing the market price of our 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 the time required to change the composition of a majority of directors.
•
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 of directors first calling the meeting.
•
The prohibition against entering into a business combination with the beneficial owner of 10% or more of our
outstanding voting stock for a period of three years after the 10% or greater owner first reached that level of stock
ownership, unless certain criteria are met.
•
In addition to severance agreements with our officers and provisions in our incentive plans that permit acceleration of
equity awards upon a change in control, a severance plan for eligible full-time employees that provides such
employees with severance equal to six months of their then-current base salaries in connection with a termination of
employment without cause upon, or within 18 months following, a change in control.
Under Virginia law, our board of directors may implement a shareholders’ rights plan or "poison pill" without
shareholder approval. Our board of directors regularly considers this matter, even in the absence of specific circumstances or
takeover proposals, to facilitate its future ability to quickly and effectively protect shareholder value.
61
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
We incorporate assessment of our cybersecurity initiatives into our Enterprise Risk Management program. The
Enterprise Risk Management program evaluates risk areas including, but not limited to, operational risk, intellectual property
theft, fraud, harm to employees, patients, or third parties, and violation of privacy or security-related laws or regulations. As
part of our efforts to mitigate cyber risk, we have implemented cybersecurity processes, technologies, and controls designed to
identify and manage potential material cyber risks and have obtained cyber-specific insurance coverage.
We employ a range of tools and services, including regular network and endpoint monitoring, managed detection and
response, system patching, managed security services, server and endpoint scheduled backups, awareness training and testing,
periodic vulnerability assessment and penetration testing, to update our ongoing risk identification and mitigation efforts. We
have a cybersecurity assessment process, which helps identify our cybersecurity risks by comparing our processes to standards
set by the Center for Internet Security. Our processes also assess cybersecurity risks associated with our use of third-party
service providers. We proactively engage with key vendors, industry participants, and law enforcement/cyber threat intelligence
communities as part of our continuing efforts to evaluate and enhance the effectiveness of our information security policies and
procedures.
Our information security program is managed by a senior director who reports to the Chief Information Officer (CIO),
providing routine security program updates and briefings. The current senior director has more than 25 years of experience in
cybersecurity, federal law enforcement, and cyber investigations, while possessing the required subject matter expertise, skills,
experience, and industry certifications expected of an individual assigned to these duties. Our information security team, which
includes the CIO and senior director, as well as additional professionals, is responsible for leading enterprise-wide
cybersecurity strategy, policy, standards, and processes. Our CIO provides regular updates to our Chief Executive Officer and
other members of management. The Audit Committee of the Board of Directors is responsible for oversight of the Company’s
cybersecurity risk exposure and the CIO provides reports to the Audit Committee, as well as the full Board of Directors, at least
annually. The reports to management and our Board include updates on the Company’s cyber risks and threats, the status of
projects to strengthen our information security systems, assessments of the information security program, and the emerging
threat landscape.
For the year ended December 31, 2024, we are not aware of any material cybersecurity incidents.
62
ITEM 2. PROPERTIES
We currently lease 117,022 square feet of office space for our corporate headquarters in Bridgewater, New Jersey. The
initial lease, which commenced in the fourth quarter of 2019, provided us a one-time option to expand the leased premises by
up to 50,000 square feet prior to the fifth anniversary of the initial lease commencement. We did not exercise the one-time
option. The initial term of this lease will expire in 2030.
We lease laboratory space located in Bridgewater for which we exercised the renewal option to extend the lease term
until December 2026. In July 2023, we expanded this lease to a total of 46,671 square feet and further extended the lease term
until April 2027. We also lease facilities in California totaling 54,478 square feet and a facility in New Hampshire. In addition,
we lease space outside of the US in France, Ireland, the Netherlands, Switzerland, the UK, and Japan.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we are a party to various lawsuits, claims and other legal proceedings that arise in the ordinary
course of business. While the 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 our consolidated financial position, results of operations or cash
flows.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
63
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Our trading symbol is "INSM." Our common stock currently trades on the Nasdaq Global Select Market. As of
February 14, 2025, there were approximately 148 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 to finance the growth and development of our business for the foreseeable future. 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, to the extent permissible thereunder, will be at the sole discretion of our Board of Directors and will depend
on our financial condition, results of operations, capital requirements and other factors our board of directors deems relevant at
that time.
64
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Insmed Incorporated, the NASDAQ Composite Index,
the S&P 500 Index, the NASDAQ Biotechnology Index and the SPDR S&P Biotech ETF Index
_________________________________
*
$100 invested on 12/31/19 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
Copyright© 2025 Standard & Poor's, a division of S&P Global. All rights reserved.
65
ITEM 6. [RESERVED]
Not applicable.
66
ITEM 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 this Annual Report on Form 10-K. This discussion contains forward-looking statements that
involve risks and uncertainties. As a result of many factors, such as those set forth under the section entitled Risk Factors,
Cautionary Note Regarding Forward-Looking Statements and elsewhere herein, our actual results may differ materially from
those anticipated in these forward-looking statements.
EXECUTIVE OVERVIEW
We are a people-first global biopharmaceutical company striving to deliver first- and best-in-class therapies to
transform the lives of patients facing serious diseases. Our first commercial product, ARIKAYCE, was approved in the US in
September 2018, in the EU in October 2020 and in Japan in March 2021. Our pipeline includes clinical-stage programs
brensocatib, TPIP, and INS1201, as well as pre-clinical research programs. Brensocatib is a small molecule, oral, reversible
inhibitor of DPP1, which we are developing for the treatment of patients with bronchiectasis and other neutrophil-mediated
diseases, including CRSsNP and HS. TPIP is an inhaled formulation of the treprostinil prodrug treprostinil palmitil which may
offer a differentiated product profile for PH-ILD and PAH. INS1201 is an intrathecally delivered gene therapy for patients with
DMD. Our pre-clinical research programs encompass a wide range of technologies and modalities, including gene therapy, AI-
driven protein engineering, protein manufacturing, RNA end-joining, and synthetic rescue.
Refer to Part I, Item 1. "Business" for a summary of our ongoing commercial and clinical programs for ARIKAYCE
and our ongoing clinical activities for brensocatib, TPIP, INS1201, and pre-clinical research programs.
Prior to 2019, we had not generated significant revenue and through December 31, 2024, we had an accumulated
deficit of $4.4 billion. We have financed our operations primarily through the public offerings of our equity securities, debt
financings and revenue interest financings. Although it is difficult to predict our future funding requirements, based upon our
current operating plan, we anticipate that our cash and cash equivalents and marketable securities as of December 31, 2024 will
enable us to fund our operations for at least the next 12 months.
Our ability to reduce our operating loss and begin to generate positive cash flow from operations depends on the
continued success in commercializing ARIKAYCE and achieving positive results from the ARIKAYCE confirmatory clinical
trial program in order to obtain full approval of ARIKAYCE in the US and potentially reach more patients. Our continued
success also depends on commercializing brensocatib, if approved, as well as bringing additional clinical stage products to
market, such as TPIP and INS1201, and advancement of our pre-clinical research programs. We expect to continue to incur
substantial expenses related to our research and development activities as we continue the ARIKAYCE confirmatory clinical
program, conduct studies to explore the potential of brensocatib in additional neutrophil-mediated diseases, including CRSsNP
and HS, continue the trials for TPIP, and fund development of our pre-clinical research programs. We also expect to continue to
incur significant costs related to the commercialization of ARIKAYCE and our commercial readiness activities, and if
approved, commercial activities in preparation for a launch of brensocatib for patients with bronchiectasis. Our financial results
may fluctuate from quarter to quarter and will depend on, among other factors, the net sales of ARIKAYCE; the scope and
progress of our research and development efforts; and the timing of certain expenses. We cannot predict whether or when new
products or new indications for marketed products will receive regulatory approval or, if any such approval is received, whether
we will be able to successfully commercialize such products and whether or when they may become profitable.
KEY COMPONENTS OF OUR RESULTS OF OPERATIONS
Product Revenues, Net
Product revenues, net consist of net sales of ARIKAYCE. In October 2018, we began shipping ARIKAYCE to our
customers in the US, which include specialty pharmacies and specialty distributors. In December 2020, we began commercial
sales of ARIKAYCE in Europe. In July 2021, we began recognizing product revenue from commercial sales of ARIKAYCE in
Japan. We recognize revenue for product received by our customers net of allowances for customer credits, including prompt
pay discounts, service fees, estimated rebates, including government rebates, such as Medicaid rebates and Medicare Part D
coverage gap reimbursements in the US, and chargebacks.
Cost of Product Revenues (Excluding Amortization of Intangible Assets)
Cost of product revenues (excluding amortization of intangible assets) consist primarily of direct and indirect costs
related to the manufacturing of ARIKAYCE sold, including third-party manufacturing costs, packaging services, freight, and
allocation of overhead costs, in addition to royalty expenses. We began capitalizing ARIKAYCE related inventory upon FDA
approval of ARIKAYCE in September 2018.
67
Research and Development (R&D) Expenses
R&D expenses consist of salaries, benefits and other related costs, including stock-based compensation, for personnel
serving in our research and development functions. R&D expenses also include other internal operating expenses, the cost of
manufacturing product candidates, including the medical devices for drug delivery, for clinical study, the cost of conducting
clinical studies, and the cost of conducting preclinical and research activities. In addition, R&D expenses include payments to
third parties for the license rights to products in development (prior to marketing approval), such as brensocatib, and may
include the cost of asset acquisitions. Our R&D expenses related to manufacturing our product candidates and medical devices
for clinical study are primarily related to activities at CMOs that manufacture brensocatib, TPIP, INS1201, and pre-clinical
research activities. Our R&D expenses related to clinical trials are primarily related to activities at CROs that conduct and
manage clinical trials on our behalf. These contracts with CROs set forth the scope of work to be completed at a fixed fee or
amount per patient enrolled. Payments under these contracts with CROs primarily depend on performance criteria 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 contracted amounts applied to the level of patient enrollment and to activity according to the clinical trial protocol.
Deposits for goods or services that will be used or rendered for future research and development activities are deferred and
capitalized. Such amounts are then recognized as an expense as the related goods are delivered or the services are performed.
Selling, General and Administrative (SG&A) Expenses
SG&A expenses consist of salaries, benefits and other related costs, including stock-based compensation, for our non-
employee directors and personnel serving in our executive, finance and accounting, legal and compliance, commercial and pre-
commercial, corporate development, field sales, information technology and human resource functions. SG&A expenses also
include professional fees for legal services, consulting services, including commercial activities, insurance, board of director
fees, tax and accounting services and certain milestones related to ARIKAYCE.
Amortization of Intangible Assets
Upon commercialization of ARIKAYCE, our intangible assets began to be amortized over their estimated useful lives.
The fair values assigned to our intangible assets are based on estimates and assumptions we believe are reasonable based on
available facts and circumstances. Unanticipated events or circumstances may occur that require us to review the assets for
impairment.
Change in Fair Value of Deferred and Contingent Consideration Liabilities
In connection with the Business Acquisition, we recorded deferred and contingent consideration liabilities related to
potential future milestone payments. Adjustments to the fair value are due to changes in the probability of achieving milestones,
our stock price, or certain other estimated assumptions. The change in fair value of deferred and contingent consideration
liabilities is calculated quarterly with gains and losses recorded in the consolidated statements of comprehensive loss. Our
deferred consideration liabilities were fully settled in the third quarter of 2024. As of December 31, 2024, only contingent
consideration liabilities exist.
Investment Income and Interest Expense
Investment income consists of interest and dividend income earned on our cash and cash equivalents and marketable
securities. Interest expense consists primarily of contractual interest costs, Royalty Financing Agreement non-cash interest
expense and the amortization of debt issuance costs related to our debt. Debt issuance costs are amortized to interest expense
using the effective interest rate method over the term of the debt. Our consolidated balance sheets reflect debt, net of the debt
issuance costs paid to the lender, and other third-party costs.
Change in Fair Value of Interest Rate Swap
We record derivative and hedge transactions in accordance with generally accepted accounting principles in the US
(GAAP). In the fourth quarter of 2022, we entered into an interest rate swap contract (the Swap Contract) with a notional value
of $350.0 million to economically hedge our variable rate-based term debt for three years, effectively changing the variable rate
under the term debt to a fixed interest rate. Our interest rate swap was not designated as a hedging instrument for accounting
purposes. We settled and terminated the Swap Contract in October 2024. All changes in the fair value of the Swap Contract
were reported as change in fair value of interest rate swap in the consolidated statements of comprehensive loss.
RESULTS OF OPERATIONS
Comparison of the Years Ended December 31, 2024 and 2023
Overview - Operating Results
Our operating results for the year ended December 31, 2024, included the following:
68
•
Product revenues, net, increased $58.5 million, or 19.2%, as compared to the prior year as a result of the growth in
ARIKAYCE sales;
•
The cost of product revenues (excluding amortization of intangibles) increased $20.2 million, or 30.8%, as compared
to the prior year primarily as a result of the growth in ARIKAYCE sales;
•
R&D expenses increased $27.4 million, or 4.8%, as compared to the prior year primarily as a result of the increase in
compensation and benefit-related expenses and stock-based compensation costs;
•
SG&A expenses increased $116.6 million, or 33.9%, as compared to the prior year primarily as a result of the increase
in compensation and benefit-related expenses and stock-based compensation costs;
•
Amortization of intangible assets was consistent with the prior year;
•
The change in fair value of deferred and contingent consideration liabilities increased $63.0 million as compared to the
prior year primarily as a result of the increase in our share price;
•
Investment income increased $11.2 million, or 26.5%, as compared to the prior year primarily as a result of an increase
in our average cash and cash equivalents and marketable securities balances; and
•
Interest expense increased $3.2 million, or 3.9%, as compared to the prior year primarily as a result of the $150.0
million Tranche B Term Loan borrowing in October 2024.
Product Revenues, Net
Product revenues, net, consist of net sales of ARIKAYCE. The following table summarizes revenue by geography for
the years ended December 31, 2024 and 2023 (in thousands):
Years Ended December 31,
Increase (decrease)
2024
2023
$
%
US
$
254,800 $
224,195 $
30,605
13.7%
Japan
87,699
65,733
21,966
33.4%
Europe and rest of world
21,208
15,280
5,928
38.8%
Total product revenues, net
$
363,707 $
305,208 $
58,499
19.2%
Product revenues, net for the year ended December 31, 2024 were $363.7 million as compared to $305.2 million for
the year ended December 31, 2023, an increase of $58.5 million, or 19.2%. This increase was a result of the growth in sales of
ARIKAYCE in the US, Japan, and Europe and the rest of the world.
Cost of Product Revenues (Excluding Amortization of Intangibles)
Cost of product revenues (excluding amortization of intangibles) for the years ended December 31, 2024 and 2023
were comprised of the following (in thousands):
Years Ended December 31,
Increase (decrease)
2024
2023
$
%
Cost of product revenues (excluding
amortization of intangibles)
$
85,742
$
65,573
$
20,169
30.8%
Cost of product revenues, as % of revenues
23.6 %
21.5 %
Cost of product revenues (excluding amortization of intangibles) were $85.7 million for the year ended December 31,
2024 as compared to $65.6 million for the year ended December 31, 2023, an increase of $20.2 million, or 30.8%. This increase
was primarily attributable to the growth in total revenues discussed above.
69
R&D Expenses
R&D expenses for the years ended December 31, 2024 and 2023 were comprised of the following (in thousands):
Years Ended December 31,
Increase (decrease)
2024
2023
$
%
External Expenses
Clinical development and research
$
171,635 $
166,448 $
5,187
3.1%
AstraZeneca milestone
12,500
—
12,500
NA
Manufacturing
94,766
73,614
21,152
28.7%
Regulatory, quality assurance, and medical affairs
36,476
27,002
9,474
35.1%
Non-cash asset acquisitions
—
86,747
(86,747)
(100.0)%
Subtotal—external expenses
$
315,377 $
353,811 $ (38,434)
(10.9)%
Internal Expenses
Compensation and benefit-related expenses
$
194,907 $
140,861 $ 54,046
38.4%
Stock-based compensation
47,674
35,880
11,794
32.9%
Other internal operating expenses
40,409
40,459
(50)
(0.1)%
Subtotal—internal expenses
$
282,990 $
217,200 $ 65,790
30.3%
Total R&D expenses
$
598,367 $
571,011 $ 27,356
4.8%
R&D expenses were $598.4 million for the year ended December 31, 2024 as compared to $571.0 million for the year
ended December 31, 2023, an increase of $27.4 million, or 4.8%. This increase was primarily due to the $65.8 million increase
in compensation and benefit-related expenses and stock-based compensation costs due to an increase in headcount, a $21.2
million increase in manufacturing expense, the $12.5 million AstraZeneca milestone upon our release of an official public
statement that we intended to file an NDA for brensocatib, and a $9.5 million increase in regulatory, quality assurance, and
medical affairs expense, partially offset by the $86.7 million non-cash asset acquisition cost of Adrestia and Vertuis in 2023.
External R&D expenses by product for the years ended December 31, 2024 and 2023 were comprised of the following
(in thousands):
Years Ended December 31,
Increase (decrease)
2024
2023
$
%
ARIKAYCE external R&D expenses
$
60,269 $
62,418 $
(2,149)
(3.4)%
Brensocatib external R&D expenses
98,569
108,556
(9,987)
(9.2)%
TPIP external R&D expenses
65,935
50,185
15,750
31.4%
Non-cash asset acquisitions
—
86,747
(86,747)
(100.0)%
AstraZeneca milestone
12,500
—
12,500
NA
Other external R&D expenses
78,104
45,905
32,199
70.1%
Total external R&D expenses
$
315,377 $
353,811 $
(38,434)
(10.9)%
We expect R&D expenses to increase in 2025 relative to 2024 primarily due to our clinical trial activities and related
spend including our confirmatory clinical trial of ARIKAYCE in a treatment setting for patients with MAC lung disease, our
TPIP and brensocatib clinical trials, and other research efforts for our product candidates.
70
SG&A Expenses
SG&A expenses for the years ended December 31, 2024 and 2023 were comprised of the following (in thousands):
Years Ended December 31,
Increase (decrease)
2024
2023
$
%
Compensation and benefit-related expenses
$
168,498 $
117,926 $
50,572
42.9%
Stock-based compensation
49,161
38,898
10,263
26.4%
Professional fees and other external expenses
173,631
138,151
35,480
25.7%
Facility related and other internal expenses
69,826
49,526
20,300
41.0%
Total SG&A expenses
$
461,116 $
344,501 $ 116,615
33.9%
SG&A expenses were $461.1 million during the year ended December 31, 2024 as compared to $344.5 million for the
year ended December 31, 2023, an increase of $116.6 million, or 33.9%. This increase was primarily due to a $60.8 million
increase in compensation and benefit-related expenses and stock-based compensation costs due to an increase in headcount as
part of commercial readiness activities for brensocatib, a $35.5 million increase in professional fees and other external expenses
driven by commercial readiness activities for brensocatib, and a $20.3 million increase in facility-related and other internal
expenses. We expect SG&A expenses to continue to increase in 2025 relative to 2024 due, in part, to commercial readiness
activities, and commercial activities for brensocatib, if approved.
Amortization of Intangible Assets
Amortization of intangible assets for both the years ended December 31, 2024 and 2023 was $5.1 million.
Amortization of intangible assets is comprised of amortization of acquired ARIKAYCE R&D and amortization of the
milestones paid to PARI for the FDA and EMA approvals of ARIKAYCE.
Change in Fair Value of Deferred and Contingent Consideration Liabilities
The change in fair value of deferred and contingent consideration liabilities for the year ended December 31, 2024 was
$91.7 million and was primarily due to the increase in our share price. The change is related to the fair value of the potential
future consideration to be paid to former equityholders of the businesses we have acquired.
Investment Income
Investment income was $53.3 million for the year ended December 31, 2024 as compared to $42.1 million for the year
ended December 31, 2023. The increase was primarily due to an increase in our average cash and cash equivalents and
marketable securities balances in 2024 relative to 2023.
Interest Expense
Interest expense was $84.9 million for the year ended December 31, 2024 as compared to $81.7 million for the year
ended December 31, 2023. The increase was primarily due to the $150.0 million Tranche B Term Loan borrowing in October
2024 and the increase in the Term Loan principal balance due to the capitalization of paid-in-kind interest partially offset by the
interest reduction on the Tranche A Term Loan. See Note 10 - Debt and Note 11 - Royalty Financing Agreement for further
details.
Change in Fair Value of Interest Rate Swap
The change in fair value of interest rate swap for the year ended December 31, 2024 was $0.2 million. Prior to
settlement and termination of the Swap Contract in October 2024, adjustments to the fair value were due to changes in interest
rates during 2024 relative to the interest rate of the Swap Contract as of December 31, 2023.
Provision for Income Taxes
The income tax provision was $3.7 million for the year ended December 31, 2024 as compared to $2.6 million for the
year ended December 31, 2023. The income tax provision for the years ended December 31, 2024 and 2023 reflects the income
tax expense recorded as a result of taxable income in certain of our subsidiaries in Europe and Japan, as well as a liability for
certain state income taxes.
Comparison of the Years Ended December 31, 2023 and 2022
Please refer to the section titled "Management's Discussion and Analysis of Financial Condition and Results of
Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 for a comparative discussion of
our fiscal years ended December 31, 2023 and December 31, 2022.
71
LIQUIDITY AND CAPITAL RESOURCES
Overview
There is considerable time and cost associated with developing potential pharmaceutical products to the point of
regulatory approval and commercialization. We commenced commercial shipments of ARIKAYCE in October 2018. We
expect to continue to incur consolidated operating losses, including losses at our US and certain international entities, as we
plan to fund R&D for ARIKAYCE, brensocatib, TPIP and our other pipeline programs, continue commercialization and
regulatory activities for ARIKAYCE, fund commercial readiness activities for brensocatib, and engage in other general and
administrative activities.
In May 2024, we completed an underwritten offering of 14,514,562 shares of our common stock at a public offering
price of $51.50 per share. 1,893,203 of the shares of common stock were issued pursuant to the exercise in full of the
underwriters' option to purchase additional shares. Our net proceeds from the sale of the shares, after deducting underwriting
discounts and estimated offering expenses of $34.3 million, were $713.2 million.
In October 2022, we entered into a $350.0 million Tranche A Term Loan with Pharmakon that would have matured on
October 19, 2027. The Tranche A Term Loan originally bore interest at a rate based upon the Secured Overnight Financing
Rate (SOFR), subject to a SOFR floor of 2.5%, in addition to a margin of 7.75% per annum. Net proceeds from the Tranche A
Term Loan, after deducting the lenders fees and deal expenses of $15.1 million, were $334.9 million. In October 2024, we
entered into the A&R Loan Agreement with BioPharma Credit PLC, BPCR Limited Partnership and BioPharma Credit
Investments V (Master) LP, which are funds managed by Pharmakon, and the guarantors party to such agreement. The A&R
Loan Agreement amends and restates the Loan Agreement, dated as of October 19, 2022, pursuant to which the Tranche A
Term Loan was provided. The A&R Loan Agreement, among other items, provides an additional $150.0 million senior secured
Tranche B Term Loan. The A&R Loan Agreement extends the maturity of the Term Loans to September 30, 2029, subject to
acceleration to February 1, 2028 on the occurrence of certain prespecified events, and amends the interest rate on the Term
Loans to a fixed rate of 9.6% per annum. As consideration for the provision of the Tranche B Term Loan, we agreed to pay
Pharmakon a fee equal to 2.0% of the Tranche B Term Loan at the closing date of the Tranche B Term Loan and an additional
exit fee of 2.0% of the amount of each prepayment or repayment of the Term Loans. The Term Loans will be repaid in eight
equal quarterly payments starting on January 3, 2028. Net proceeds from the Tranche B Term Loan, after deducting the lenders
fees and administrative expenses of $3.7 million, were $146.3 million.
In October 2022, we entered into the Royalty Financing Agreement with OrbiMed, whereby OrbiMed paid us
$150.0 million in exchange for the right to receive, on a quarterly basis, royalties in an amount equal to 4.0% of ARIKAYCE
global net sales prior to September 1, 2025 and 4.5% of ARIKAYCE global net sales on or after September 1, 2025, as well as
0.75% of brensocatib global net sales, if approved. In the event that OrbiMed has not received aggregate Revenue Interest
Payments equal to or greater than $150.0 million on or prior to March 31, 2028, the royalty rate for ARIKAYCE will be
increased for all subsequent fiscal quarters to a rate which, if applied retroactively, would have resulted in aggregate Revenue
Interest Payments to OrbiMed for all fiscal quarters ended on or prior to March 31, 2028 equal to $150.0 million. In addition,
we must make a one-time payment to OrbiMed in an amount that, when added to the aggregate amount of Revenue Interest
Payments received by OrbiMed as of March 31, 2028, would equal $150.0 million. The total Revenue Interest Payments
payable by us to OrbiMed are capped at 1.8x of the purchase price or up to a maximum of 1.9x of the purchase price under
certain conditions. Net proceeds from the Royalty Financing Agreement, after deducting the lenders fees and deal expenses of
$3.6 million, were $146.4 million. The Royalty Financing Agreement was amended in October 2024 to, among other things,
amend certain restrictions on the Company’s ability to incur indebtedness.
In the first quarter of 2021, we entered into a sales agreement with SVB Leerink LLC (now known as Leerink Partners
LLC) (Leerink Partners), to sell shares of our common stock, with aggregate gross sales proceeds of up to $250.0 million, from
time to time, through an “at the market” equity offering program (the ATM program), under which Leerink Partners acted as
sales agent. During the year ended December 31, 2023, we issued and sold an aggregate of 6,503,041 shares of common stock
through the ATM program at a weighted-average public offering price of $24.12 per share and received net proceeds of $152.2
million. In the first quarter of 2024, we entered into a new sales agreement (the new sales agreement) with Leerink Partners to
sell shares of our common stock, with aggregate gross sales proceeds of up to $500.0 million, from time to time, through a new
"at the market" equity offering program (the new ATM program), under which Leerink Partners acted as sales agent. In
connection with entering into the new ATM program, we terminated the ATM program. During the year ended December 31,
2024, we issued and sold an aggregate of 5,022,295 shares of common stock through the new ATM program at a weighted-
average public offering price of $75.64 per share and received net proceeds of $371.3 million. On November 18, 2024, we
terminated the new sales agreement.
We may need to raise additional capital to fund our operations, the continued commercialization of ARIKAYCE,
commercial readiness activities for the launch of brensocatib for the treatment of patients with bronchiectasis, if approved,
clinical trials for brensocatib, TPIP, INS1201, and our future product candidates, and to develop, acquire, in-license or co-
promote other products or product candidates, including those that address serious diseases. While we believe we currently
have sufficient funds to meet our financial needs for at least the next 12 months, we may opportunistically raise additional
capital and may do so through equity or debt financing(s), strategic transactions or otherwise. Our cash requirements for the
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next 12 months will be impacted by a number of factors, the most significant of which we expect to be expenses related to our
commercialization efforts and our ARISE and ENCORE clinical trials for ARIKAYCE, and other development activities for
brensocatib, and to a lesser extent, expenses related to the clinical development of TPIP and INS1201, and our pre-clinical
research programs.
Cash Flows
We had cash and cash equivalents of $555.0 million as of December 31, 2024 as compared with $482.4 million as of
December 31, 2023, an increase of $72.7 million. This increase was primarily due to our underwritten offering of common
stock in May 2024, proceeds from the new ATM program, and maturities of marketable securities, partially offset by our cash
used in operating activities. In addition, we had marketable securities of $878.8 million as of December 31, 2024 as compared
to $298.1 million as of December 31, 2023, an increase of $580.7 million. This increase is due to our use of cash proceeds to
purchase investments. Our working capital was $1.3 billion as of December 31, 2024 as compared to $703.4 million as of
December 31, 2023.
Net cash used in operating activities was $683.9 million and $536.2 million for the years ended December 31, 2024
and 2023, respectively. The net cash used in operating activities during the years ended December 31, 2024 and 2023 was
primarily for the commercial, clinical, and manufacturing activities related to ARIKAYCE, as well as other SG&A expenses
and clinical trial expenses related to brensocatib and TPIP. The increase in cash used in operating activities for the year ended
December 31, 2024 as compared to 2023 was primarily due to the increase in net loss, excluding the adjustments to reconcile
net loss to net cash used in operating activities.
Net cash used in investing activities was $583.2 million and $223.6 million for the years ended December 31, 2024
and 2023, respectively. The increase in cash used for investing activities for the year ended December 31, 2024 as compared to
2023 is due to the purchases of marketable securities, partially offset by maturity of certain marketable securities.
Net cash provided by financing activities was $1.3 billion and $168.4 million for the years ended December 31, 2024
and 2023, respectively. The increase in cash provided by financing activities for the year ended December 31, 2024 as
compared to 2023 is due to net cash proceeds received from the issuance of common stock in our underwritten offering in May
2024, proceeds from our terminated new ATM program, proceeds from the Tranche B Term Loan, and proceeds from stock
options and our Employee Stock Purchase Program (ESPP).
Contractual Obligations
In October 2022, we entered into financings resulting in aggregate gross proceeds of $500.0 million, comprised of the
$350.0 million Tranche A Term Loan with funds managed by Pharmakon and the $150.0 million Royalty Financing Agreement
with OrbiMed, which was subsequently amended in October 2024. Under the Royalty Financing Agreement, OrbiMed will be
entitled to receive royalties of 4.0% on ARIKAYCE global net sales until September 1, 2025, and royalties of 4.5% on
ARIKAYCE global net sales on or after September 1, 2025, as well as royalties of 0.75% on brensocatib global net sales, if
approved. The total royalty payable to OrbiMed is capped at 1.8x of the $150.0 million purchase price or up to a maximum of
1.9x of the $150.0 million purchase price under certain conditions. For more information, see Note 10 - Debt and Note 11 -
Royalty Financing Agreement in our notes to the consolidated financial statements.
In October 2024, we entered into the A&R Loan Agreement with BioPharma Credit PLC, BPCR Limited Partnership
and BioPharma Credit Investments V (Master) LP, which are funds managed by Pharmakon, and the guarantors party to such
agreement. The A&R Loan Agreement amends and restates the Loan Agreement, dated as of October 19, 2022, pursuant to
which the Tranche A Term Loan was provided. The A&R Loan Agreement, among other items, provides the Tranche B Term
Loan. The A&R Loan Agreement extends the maturity of the Term Loans to September 30, 2029, subject to acceleration to
February 1, 2028 on the occurrence of certain prespecified events, and amends the interest rate on the Term Loans to a fixed
rate of 9.6% per annum. For more information, see Note 10 - Debt in our notes to the consolidated financial statements.
In May 2021, we completed an underwritten public offering of $575.0 million aggregate principal amount of the 2028
Convertible Notes pursuant to an indenture between the Company and Wells Fargo Bank, National Association, as trustee (the
Indenture). Net proceeds from the offering, after deducting underwriting discounts and offering expenses of $15.7 million, were
$559.3 million. The 2028 Convertible Notes bear interest payable semiannually in arrears on June 1 and December 1 of each
year, beginning on December 1, 2021. The 2028 Convertible Notes mature on June 1, 2028, unless earlier converted, redeemed,
or repurchased. The 2028 Convertible Notes are convertible into common stock of the Company under certain circumstances
described in the Indenture. On July 1, 2024 and October 1, 2024, the 2028 Convertible Notes became convertible, through the
end of the third quarter of 2024 and fourth quarter of 2024, respectively, by the holders of such notes due to the satisfaction of
the Stock Price Convertibility Trigger applicable to such notes. The current conversion rate for the 2028 Convertible Notes is
30.7692 shares of common stock per $1,000 principal amount of notes (equivalent to an initial conversion price of
approximately $32.50 per share of common stock). We have elected to settle any conversions of the 2028 Convertible Notes in
shares of common stock. For more information, see Note 10 - Debt in our notes to the consolidated financial statements.
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In January 2024, we entered into certain agreements with Patheon Inc., a wholly-owned subsidiary of Thermo Fisher,
related to the manufacture and supply of brensocatib by Patheon Inc. for our anticipated long-term commercial needs. Under
these agreements, we are required to deliver to Patheon Inc. the active pharmaceutical ingredients needed to manufacture
brensocatib. In addition, in September 2024, we entered into a commercial manufacturing and supply agreement with Esteve for
the manufacture and supply of brensocatib's active pharmaceutical ingredient.
In April 2020, we entered into a master services agreement with PPD pursuant to which we retained PPD to perform
clinical development services in connection with certain of our clinical research programs. The master services agreement has
an initial term of five years. Either party may terminate (i) any project addendum under the master services agreement for any
reason and without cause upon 30 days’ written notice, (ii) any project addendum in the event of the other party’s breach of the
master services agreement or such project addendum upon 30 days’ written notice, provided that such breach is not cured
within such 30-day period, (iii) the master services agreement or any project addendum immediately upon the occurrence of an
insolvency event with respect to the other party or (iv) any project addendum upon 30 days’ written notice if (a) the
continuation of the services under such project addendum would post material ethical or safety risks to study participants, (b)
any approval from a regulatory authority necessary to perform the applicable study is revoked, suspended or expires without
renewal or (c) in the reasonable opinion of such party, continuation of the services provided under such project addendum
would be in violation of applicable law. We have entered into project addenda with PPD to perform clinical development
services over several years for, but not limited to, our ARISE, ENCORE and ASPEN studies and other trials involving
brensocatib and TPIP. The total cost of these project addenda is $498.9 million.
In September 2018, we entered into an agreement (the Lease) with Bridgewater Biotech Center LLC (assumed from
Exeter 700 Route 202/206, LLC) to lease 117,022 square feet of office space located in Bridgewater, New Jersey for our
corporate headquarters. Subject to certain conditions, we had the one-time option to expand the leased premises by up to 50,000
rentable square feet, exercisable prior to the fifth anniversary of the Commencement Date, which was October 1, 2019. We did
not exercise this one-time option. The initial Lease term runs 130 months from the Commencement Date and we have the
option to extend that term for up to three additional five-year periods. In addition, we are responsible for operating expenses
and taxes pursuant to the Lease. Future minimum payments under the Lease during the initial Lease term are approximately
$15.3 million. The Lease contains customary default provisions, including those relating to payment defaults, performance
defaults and events of bankruptcy.
In October 2017, we entered into certain agreements with Patheon related to the increase of our long-term production
capacity for ARIKAYCE. The agreements provide for Patheon to manufacture and supply ARIKAYCE for our anticipated
commercial needs. Under these agreements, we are required to deliver to Patheon the required raw materials, including active
pharmaceutical ingredients, and certain fixed assets needed to manufacture ARIKAYCE. Patheon's supply obligations will
commence once certain technology transfer and construction services are completed. Our manufacturing and supply agreement
with Patheon will remain in effect for a fixed initial term, after which it will continue for successive renewal terms unless either
we or Patheon have given written notice of termination. The technology transfer agreement will expire when the parties agree
that the technology transfer services have been completed. The agreements may also be terminated under certain other
circumstances, including by either party due to a material uncured breach of the other party or the other party’s insolvency.
These early termination clauses may reduce the amounts due to the relevant parties. The aggregate investment to increase our
long-term production capacity, including under the Patheon agreements and related agreements or purchase orders with third
parties for raw materials and fixed assets, is estimated to be approximately $116.0 million.
In October 2016, we entered into the AZ License Agreement, pursuant to which AstraZeneca granted us exclusive
global rights for the purpose of developing and commercializing AZD7986 (which we renamed brensocatib). In consideration
of the licenses and other rights granted by AstraZeneca, we made an upfront payment of $30.0 million, which was included as
research and development expense in the fourth quarter of 2016. In December 2020, we incurred a $12.5 million milestone
payment obligation upon first dosing in a Phase 3 clinical trial of brensocatib. In May 2024, upon our release of an official
public statement that we intended to file an NDA, we incurred an additional $12.5 million milestone payment obligation. Upon
regulatory approval by the FDA of an NDA, we will owe AstraZeneca an additional $30.0 million. Subsequent to this
milestone, we are also obligated to make a series of additional contingent milestone payments totaling up to an additional $30.0
million upon the achievement of regulatory filing milestones. If we elect to develop brensocatib for a second indication, we will
be obligated to make an additional series of contingent milestone payments totaling up to $42.5 million, the first of which
occurs at the initiation of a Phase 3 trial in the additional indication. We are not obligated to make any additional milestone
payments for any additional indications. In addition, we have agreed to pay AstraZeneca tiered royalties ranging from a high
single-digit to mid-teens on net sales of any approved product based on brensocatib 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 future agreement with us for commercialization of brensocatib in chronic obstructive pulmonary
disease or asthma.
We have a licensing agreement with PARI for the use of optimized Lamira for delivery of ARIKAYCE in treating
patients with NTM lung infections, CF and bronchiectasis. Under the licensing agreement, we have rights under several US and
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foreign issued patents, and patent applications involving improvements to optimized Lamira, to exploit the system with
ARIKAYCE for the treatment of such indications, but we cannot manufacture the nebulizers except as permitted under our
Commercialization Agreement with PARI, as described below. Lamira has been approved for use in the US (in combination
with ARIKAYCE), the EU and Japan. Under the licensing agreement, we made an upfront license fee and milestone payments
to PARI. Upon the FDA acceptance of our NDA and the subsequent FDA and EMA approvals of ARIKAYCE, we made
additional milestone payments of €1.0 million, €1.5 million, and €0.5 million, respectively, to PARI. In October 2017, we
exercised an option to buy-down the royalties payable to PARI, which was included within selling, general and administrative
expenses in the fourth quarter of 2017. PARI is entitled to receive royalty payments in the mid-single digits on the annual
global net sales of ARIKAYCE, pursuant to the licensing agreement, subject to certain specified annual minimum royalties.
In July 2014, we entered into a Commercialization Agreement with PARI for the manufacture and supply of Lamira,
which is an e-Flow® nebulizer modified and optimized for use with ARIKAYCE. Under the Commercialization Agreement,
PARI manufactures Lamira except in the case of certain defined supply failures, when the Company will have the right to make
Lamira and have it made by third parties (but not certain third parties deemed under the Commercialization Agreement to
compete with PARI). The Commercialization Agreement has an initial term of 15 years that began in October 2018. The term
of the Commercialization Agreement may be extended by us for an additional five years by providing written notice to PARI at
least one year prior to the expiration of the Initial Term.
In February 2014, we entered into a contract manufacturing agreement with Therapure Biopharma Inc., which has
been assumed by Resilience, for the manufacture of ARIKAYCE, on a non-exclusive basis, at a 200 kg scale. Pursuant to the
agreement, we collaborated with Resilience to construct a production area for the manufacture of ARIKAYCE in Resilience's
existing manufacturing facility in Canada. The agreement has an initial term of five years, which began in October 2018, and
renews automatically for successive periods of two years each, unless terminated by either party by providing the required two
years' prior written notice to the other party. Under the agreement, we are obligated to pay certain minimum amounts for the
batches of ARIKAYCE produced each calendar year.
In 2004 and 2009, we entered into research funding agreements with CFFT whereby we received $1.7 million and $2.2
million, respectively, in research funding for the development of ARIKAYCE. As a result of the US approval of ARIKAYCE
and in accordance with the agreements, as amended, we owe milestone payments to CFFT of $13.4 million in the aggregate
payable through 2025, of which $10.4 million has been paid as of December 31, 2024. Furthermore, if certain global sales
milestones were met within five years of the commercialization of ARIKAYCE, we would have owed up to an additional $3.9
million. Through December 31, 2024, we have met and paid $1.7 million of these additional global sales milestone payments.
Future Funding Requirements
We may need to raise additional capital to fund our operations, including the development and potential
commercialization of brensocatib, continued commercialization of ARIKAYCE, current and future clinical trials related to
ARIKAYCE, development of TPIP, and the potential development, acquisition, in-license or co-promotion of other products or
product candidates, including those that address orphan or serious diseases. We expect that our future capital requirements may
be substantial and will depend on many factors, including:
•
The timing, outcome, and cost of our ongoing and anticipated clinical trials for our product candidates;
•
The timing and cost of our current and future clinical trials of ARIKAYCE for the treatment of patients with NTM
lung infections, including the ENCORE trial;
•
The cost of discovering or in-licensing additional product candidates;
•
The costs of activities related to the regulatory approval process and the timing of approvals, if received;
•
The cost of supporting the sales and marketing efforts necessary to support the continued commercial efforts of
ARIKAYCE;
•
The timing and costs of supporting the commercial launch activities of brensocatib, if approved;
•
The cost of eventually supporting the commercial launches of TPIP and our other product candidates;
•
The cost of filing, prosecuting, defending, and enforcing patent claims;
•
The costs of our manufacturing-related activities;
•
The cost of hiring more personnel to support our ongoing development and commercialization efforts; and
•
The levels, timing and collection of revenue earned from sales of ARIKAYCE and other products approved in the
future, if any.
We have raised $2.2 billion in net proceeds from securities offerings and other financing transactions since January 1,
2022. We believe we currently have sufficient funds to meet our financial needs for at least the next 12 months. However, our
business strategy may require us to raise additional capital at any time through equity or debt financing(s), strategic transactions
or otherwise.
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Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future
material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources. We do not have any interest in special purpose entities, structured finance entities or other variable interest entities.
CRITICAL ACCOUNTING ESTIMATES
Preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions affecting
the reported amounts of assets, liabilities, revenues and expenses and the disclosures of contingent assets and liabilities. We use
our historical experience and other relevant factors when developing our estimates and assumptions and we regularly evaluate
these estimates and assumptions. The amounts of assets and liabilities reported in our consolidated balance sheets and the
amounts reported in our consolidated statements of comprehensive loss are affected by estimates and assumptions, which are
used for, but not limited to, the accounting for revenue recognition and indefinite-lived intangible assets. The accounting
estimates discussed below involve a significant level of estimation uncertainty and have had or are reasonably likely to have a
material impact on our financial condition or results of operations. Actual results could differ materially from our estimates. For
additional accounting policies, see Note 2 - Summary of Significant Accounting Policies in our notes to the consolidated
financial statements.
Revenue Recognition
In accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers, we
recognize revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration
we expect to receive in exchange for the goods or services provided. To determine revenue recognition for arrangements within
the scope of ASC 606, we perform the following five steps: (1) identify the contracts with a customer; (2) identify the
performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance
obligations in the contract; and (5) recognize revenue when or as the entity satisfies a performance obligation. At contract
inception, we assess the goods or services promised within each contract and determine those that are performance obligations
and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price
that is allocated to the respective performance obligation when or as the performance obligation is satisfied. For all contracts
that fall into the scope of ASC 606, we have identified one performance obligation: the sale of ARIKAYCE to our customers.
We have not incurred or capitalized any incremental costs associated with obtaining contracts with customers.
Product revenues, net, consist of net sales of ARIKAYCE. Our customers in the US include specialty pharmacies and
specialty distributors. In December 2020, we began recognizing product revenue from commercial sales of ARIKAYCE in
Europe. In July 2021, we began recognizing product revenue from commercial sales of ARIKAYCE in Japan. Globally,
product revenues are recognized once we perform and satisfy all five steps of the revenue recognition criteria mentioned above.
Revenue is recorded at net selling price (transaction price), which includes estimates of variable consideration for
which reserves are established for estimated government rebates, such as Medicaid and Medicare Part D reimbursements, and
estimated managed care rebates. These reserves are based on the amounts earned or to be claimed on the related sales and are
classified as a current liability. Where appropriate, these estimates take into consideration a range of possible outcomes which
are probability-weighted for relevant factors such as our historical experience, current contractual and statutory requirements,
and forecasted customer buying and payment patterns. Overall, these reserves reflect our best estimates of the amount of
consideration to which we are entitled based on the terms of the applicable contract. The amount of variable consideration
included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable
that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts
of consideration ultimately received may differ from our estimates. If actual results in the future vary from estimates, we adjust
these estimates, which would affect net product revenue and earnings in the period such variances become known.
Rebates: We contract with certain government agencies and managed care organizations, or collectively, third-party
payors, so that ARIKAYCE will be eligible for purchase by, or partial or full reimbursement from, such third-party payors. We
estimate the rebates we will provide to third-party payors and deduct these estimated amounts from total gross product revenues
at the time the revenues are recognized. These reserves are recorded in the same period in which the revenue is recognized,
resulting in a reduction of product revenue and the establishment of a current liability. The current liability is included in
accounts payable and accrued liabilities on the consolidated balance sheets. We estimate the rebates that will be provided to
third-party payors based upon (i) our contracts with these third-party payors, (ii) the government mandated discounts applicable
to government-funded programs, (iii) a range of possible outcomes that are probability-weighted for the estimated payor mix,
and (iv) information obtained from our specialty pharmacies.
If any, or all, of our actual experience vary from the estimates above, we may need to adjust prior period accruals,
affecting revenue in the period of adjustment.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of December 31, 2024, our cash and cash equivalents were in cash accounts or were invested in money market
funds. Our investments in money market funds are not insured by the federal government. As of December 31, 2024, our
marketable securities were invested in US treasury notes with an original maturity of six months or less.
As of December 31, 2024, we had $574.9 million of 2028 Convertible Notes outstanding. Our 2028 Convertible Notes
bear interest at a coupon rate of 0.75%. In addition, as of December 31, 2024, we had our $500.0 million Term Loans
outstanding. The Term Loans accrue interest quarterly at a fixed rate of 9.6% per annum. The Royalty Financing Agreement
pays interest at 4.0% of ARIKAYCE global net sales prior to September 1, 2025 and 4.5% thereafter as well as 0.75% of
brensocatib global net sales, if approved. If a 10% change in interest rates had occurred on December 31, 2024, it would not
have had a material effect on the fair value of our debt as of that date, nor would it have a material effect on our future earnings
or cash flows.
The majority of our business is conducted in US dollars. However, we do conduct certain transactions in other
currencies, including Euros, British Pounds and Japanese Yen. Historically, fluctuations in foreign currency exchange rates
have not materially affected our results of operations. During the years ended December 31, 2024, 2023 and 2022, our results of
operations 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 set forth in
Item 15 of Part IV of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2024. The term "disclosure
controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act means controls and other
procedures that are designed to ensure that information required to be disclosed by us in the reports that 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
ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation our
Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective
as of December 31, 2024 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 reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act, as a process
designed by, or under the supervision of, our principal executive and principal financial and accounting officers and effected by
our board of directors and management to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles 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 US generally accepted accounting principles, and that receipts and expenditures of our company
are being made only in accordance with authorizations of 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 a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our
management assessed the effectiveness of our internal control over financial reporting as of December 31, 2024, based on the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—
77
Integrated Framework. Based on management's assessment, management concluded that the Company's internal control over
financial reporting was effective as of December 31, 2024.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation
required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended December 31, 2024 that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Attestation Report on Internal Control over Financial Reporting
Ernst & Young LLP, our independent registered public accounting firm, issued an attestation report on our internal
control over financial reporting. The report of Ernst & Young LLP is contained in Item 15 of Part IV of this Annual Report on
Form 10-K.
ITEM 9B. OTHER INFORMATION
During the three months ended December 31, 2024, no director or officer (as defined in Rule 16a-1(f) under the
Exchange Act) of the Company adopted or terminated any “Rule 10b5-1 trading arrangement” or any “non Rule 10b5-1 trading
arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
78
PART III
ITEM 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 of Class I Directors, Corporate Governance, Delinquent Section 16(a) Reports and Compensation
and Discussion and Analysis in our definitive proxy statement for our 2025 annual meeting of shareholders to be filed with the
SEC no later than 120 days after the close of the fiscal year covered by this Annual Report on Form 10-K.
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 Compensation Discussion and Analysis, Compensation Committee Report, Compensation Committee
Interlocks and Insider Participation and Director Compensation in our definitive proxy statement for our 2025 annual meeting
of shareholders to be filed with the SEC no later than 120 days after the close of the fiscal year covered by this Annual Report
on Form 10-K.
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 Compensation Discussion and Analysis and Security Ownership of Certain Beneficial Owners, Directors,
and Management in our definitive proxy statement for our 2025 annual meeting of shareholders to be filed with the SEC no
later than 120 days after the close of the fiscal year covered by this Annual Report on Form 10-K.
ITEM 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 Corporate Governance and Certain Relationships and Related Party Transactions in our definitive proxy
statement for our 2025 annual meeting of shareholders to be filed with the SEC no later than 120 days after the close of the
fiscal year covered by this Annual Report on Form 10-K.
ITEM 14. PRINCIPAL ACCOUNTANT 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 Corporate Governance and Ratification of the Appointment of Independent Registered Public Accounting
Firm in our definitive proxy statement for our 2025 annual meeting of shareholders to be filed with the SEC no later than
120 days after the close of the fiscal year covered by this Annual Report on Form 10-K.
79
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Documents filed as part of this report.
1.
FINANCIAL STATEMENTS. The following consolidated financial statements of the Company are set
forth herein, beginning on page 89:
(i)
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42)
(ii)
Consolidated Balance Sheets as of December 31, 2024 and 2023
(iii)
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2024, 2023 and 2022
(iv)
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2024, 2023 and 2022
(v)
Consolidated Statements of Cash Flows for the Years Ended December 31, 2024, 2023 and 2022
(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.
EXHIBIT INDEX
3.1
Articles of Incorporation of Insmed Incorporated, as amended through June 14, 2012
(incorporated by reference from Exhibit 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 Insmed Incorporated's Current Report on Form 8-K filed on May 11, 2023).
4.1
Specimen stock certificate representing common stock, $0.01 par value per share, of the
Registrant (incorporated by reference from Exhibit 4.2 to Insmed Incorporated's Registration
Statement on Form S-4/A (Registration No. 333-30098) filed on March 24, 2000).
4.2
Indenture, dated as of January 26, 2018, by and between the Company and Wells Fargo
Bank, National Association (incorporated by reference from Exhibit 4.1 to Insmed
Incorporated’s Current Report on Form 8-K filed on January 26, 2018).
4.3
Second Supplemental Indenture, dated as of May 13, 2021, by and between the Company and
Wells Fargo Bank, National Association (incorporated by reference from Exhibit 4.2 to
Insmed Incorporated’s Current Report on Form 8-K filed on May 13, 2021).
4.4
Form of 0.75% Convertible Senior Note due 2028 (included in Exhibit 4.3).
4.5
Description of Securities Registered Under Section 12 of the Securities Exchange Act of
1934 (incorporated by reference from Exhibit 4.5 of Insmed Incorporated’s Annual Report on
Form 10-K filed on February 25, 2021).
10.1**
Insmed Incorporated 2013 Incentive Plan (incorporated by reference from Exhibit 99.1 to
Insmed Incorporated's Registration Statement on Form S-8 filed on May 24, 2013).
10.1.1**
Form of Award Agreement for Incentive Stock Options pursuant to the Insmed Incorporated
2013 Incentive Plan (incorporated by reference from Exhibit 10.5 to Insmed Incorporated's
Annual Report on Form 10-K filed on March 6, 2014).
10.1.2**
Form of Award Agreement for Non-Qualified Stock Options pursuant to the Insmed
Incorporated 2013 Incentive Plan (incorporated by reference from Exhibit 10.6 to Insmed
Incorporated's Annual Report on Form 10-K filed on March 6, 2014).
10.2**
Insmed Incorporated 2015 Incentive Plan (incorporated by reference from Exhibit 99.1 to
Insmed Incorporated's Registration Statement on Form S-8 filed on May 28, 2015).
80
10.2.1**
Form of Award Agreement for Non-Qualified Stock Options pursuant to the Insmed
Incorporated 2015 Incentive Plan (incorporated by reference from Exhibit 10.2 to Insmed
Incorporated’s Quarterly Report on Form 10-Q filed May 3, 2017).
10.3**
Insmed Incorporated 2017 Incentive Plan (incorporated by reference from Exhibit 10.3 to
Insmed Incorporated’s Quarterly Report on Form 10-Q filed August 3, 2017).
10.3.1**
Form of Award Agreements for Restricted Stock Units pursuant to the Insmed Incorporated
2017 Incentive Plan (incorporated by reference from Exhibit 10.4 to Insmed Incorporated’s
Quarterly Report on Form 10-Q filed August 3, 2017).
10.3.2**
Amendment to Form of Award Agreement for Restricted Stock Units pursuant to the Insmed
Incorporated 2017 Incentive Plan (incorporated by reference from Exhibit 10.4.2 to Insmed
Incorporated's Annual Report on Form 10-K filed on February 17, 2022).
10.3.3**
Form of Award Agreement for Non-Qualified Stock Options pursuant to the Insmed
Incorporated 2017 Incentive Plan (incorporated by reference from Exhibit 10.5 to Insmed
Incorporated’s Quarterly Report on Form 10-Q filed August 3, 2017).
10.4**
Insmed Incorporated Amended and Restated 2019 Incentive Plan (incorporated by reference
from Appendix A to Insmed Incorporated’s Proxy Statement on Schedule 14A filed on
March 31, 2023).
10.4.1**
Amendment No. 1 to Insmed Incorporated Amended and Restated 2019 Incentive Plan
(incorporated by reference from Appendix A to Insmed Incorporated’s Proxy Statement on
Schedule 14A filed on April 1, 2024).
10.4.2**
Form of Award Agreement for Restricted Stock Units pursuant to the Insmed Incorporated
Amended and Restated 2019 Incentive Plan (incorporated by reference from Exhibit 10.1.3 to
Insmed Incorporated’s Quarterly Report on Form 10-Q filed on August 8, 2024).
10.4.3**
Form of Award Agreement for Restricted Stock Units to non-US employees pursuant to the
Insmed Incorporated Amended and Restated 2019 Incentive Plan (incorporated by reference
from Exhibit 10.1.4 to Insmed Incorporated's Quarterly Report on Form 10-Q filed on August
8, 2024).
10.4.4**
Form of Award Agreement for Non-Qualified Stock Options pursuant to the Insmed
Incorporated Amended and Restated 2019 Incentive Plan (incorporated by reference from
Exhibit 10.1.1 to Insmed Incorporated’s Quarterly Report on Form 10-Q filed on August 8,
2024).
10.4.5**
Form of Award Agreement for Non-Qualified Stock Options issued to non-US employees
pursuant to the Insmed Incorporated Amended and Restated 2019 Incentive Plan
(incorporated by reference from Exhibit 10.1.2 to Insmed Incorporated’s Quarterly Report on
Form 10-Q filed on August 8, 2024).
10.4.6**
Form of Award Agreement for Restricted Stock Units issued to directors pursuant to the
Insmed Incorporated Amended and Restated 2019 Incentive Plan (incorporated by reference
from Exhibit 10.1.5 of Insmed Incorporated’s Quarterly Report on Form 10-Q filed on
August 3, 2023).
10.4.7**
Form of Award Agreement for Performance-Based Restricted Stock Units pursuant to the
Insmed Incorporated Amended and Restated 2019 Incentive Plan (incorporated by reference
from Exhibit 10.1.6 to Insmed Incorporated's Quarterly Report on Form 10-Q filed on August
3, 2023).
10.4.8**
Form of Award Agreement for Performance-Based Restricted Stock Units to non-US
employees pursuant to the Insmed Incorporated Amended and Restated 2019 Incentive Plan
(incorporated by reference from Exhibit 10.1.7 to Insmed Incorporated's Quarterly Report on
Form 10-Q filed on August 3, 2023).
10.5**
Omnibus Amendment to Insmed Incorporated Incentive Plans, dated December 10, 2020
(incorporated by reference from Exhibit 10.6 of Insmed Incorporated’s Annual Report on
Form 10-K filed on February 25, 2021).
10.5.1**
Omnibus Amendment to Insmed Incorporated Incentive Awards and Inducement Awards,
dated May 8, 2024 (incorporated by reference from Exhibit 10.2 to Insmed Incorporated’s
Quarterly Report on Form 10-Q filed on August 8, 2024).
81
10.6**
Insmed Incorporated Senior Executive Bonus Plan (incorporated by reference from Exhibit
10.2 to Insmed Incorporated's Quarterly Report on Form 10-Q filed on November 5, 2013).
10.7**
Form of Non-Qualified Stock Option Inducement Award Agreement (incorporated by
reference from Exhibit 10.3 to Insmed Incorporated’s Quarterly Report on Form 10-Q filed
August 8, 2024).
10.8**
Form of Non-Qualified Stock Option Inducement Award Agreement for non-U.S. employees
(incorporated by reference from Exhibit 10.4 to Insmed Incorporated’s Quarterly Report on
Form 10-Q filed August 8, 2024).
10.9**
Form of Indemnification Agreement entered into with each of the Company's directors and
officers (incorporated by reference from Exhibit 10.1 to Insmed Incorporated's Current
Report on Form 8-K filed on January 16, 2014).
10.10**
Employment Agreement, effective as of September 10, 2012, between Insmed Incorporated
and William Lewis (incorporated by reference from Exhibit 10.1 to Insmed Incorporated's
Current Report on Form 8-K filed on September 11, 2012).
10.10.1**
Amendment to Employment Agreement, effective as of July 31, 2019, between Insmed
Incorporated and William Lewis (incorporated by reference from Exhibit 10.5 to Insmed
Incorporated’s Quarterly Report on Form 10-Q filed on August 1, 2019).
10.11**
Amended and Restated Employment Agreement, effective as of April 1, 2022, between
Insmed Incorporated and S. Nicole Schaeffer (incorporated by reference from Exhibit 10.4 to
Insmed Incorporated's Quarterly Report on Form 10-Q filed on May 5, 2022).
10.12**
Amended and Restated Employment Agreement, effective as of April 1, 2022, between
Insmed Incorporated and Roger Adsett (incorporated by reference from Exhibit 10.1 to
Insmed Incorporated's Quarterly Report on Form 10-Q filed May 5, 2022).
10.12.1**
Side Letter to Amended and Restated Employment Agreement, effective as of August 8,
2022, between Insmed Incorporated and Roger Adsett (incorporated by reference from
Exhibit 10.3 to Insmed Incorporated’s Quarterly Report on Form 10-Q filed October 27,
2022).
10.13**
Amended and Restated Employment Agreement, effective as of April 1, 2022, between
Insmed Incorporated and Sara Bonstein (incorporated by reference from Exhibit 10.2 to
Insmed Incorporated's Annual Report on Form 10-Q filed May 5, 2022).
10.14**
Amended and Restated Employment Agreement, effective as of April 1, 2022, by and
between Insmed Incorporated and Martina Flammer, M.D. (incorporated by reference from
Exhibit 10.3 of Insmed Incorporated’s Quarterly Report on Form 10-Q filed May 5, 2022).
10.15**
Amended and Restated Employment Agreement, effective as of April 1, 2022, by and
between Insmed Incorporated and Michael Smith (incorporated by reference from Exhibit
10.5 of Insmed Incorporated’s Quarterly Report on Form 10-Q filed May 5, 2022).
10.16**
Employment Agreement, effective as of May 23, 2022, by and between Insmed Incorporated
and J. Drayton Wise (incorporated by reference from Exhibit 10.1 of Insmed Incorporated’s
Quarterly Report on Form 10-Q filed August 4, 2022).
10.17*
License Agreement, dated April 25, 2008, between Transave, Inc. and PARI Pharma GmbH,
and Amendments No. 1-4 thereto (incorporated by reference from Exhibit 10.1 to Insmed
Incorporated's Quarterly Report on Form 10-Q filed on October 29, 2020).
10.17.1*
Amendment No. 5 to License Agreement between Insmed Incorporated and PARI Pharma
GmbH, effective as of October 5, 2015 (incorporated by reference from Exhibit 10.14.1 to
Insmed Incorporated's Annual Report on Form 10-K filed on February 25, 2016).
10.17.2*
Amendment No. 6 to License Agreement between Insmed Incorporated and PARI Pharma
GmbH, effective as of October 9, 2015 (incorporated by reference from Exhibit 10.14.2 to
Insmed Incorporated's Annual Report on Form 10-K filed on February 25, 2016).
10.17.3*
Amendment No. 7 to License Agreement between Insmed Incorporated and PARI Pharma
GmbH, effective as of July 21, 2017 (incorporated by reference from Exhibit 10.1 to Insmed
Incorporated’s Quarterly Report on Form 10-Q filed on November 2, 2017).
82
10.17.4*
Amendment No. 8 to License Agreement between Insmed Incorporated and PARI Pharma
GmbH, effective as of December 19, 2018 (incorporated by reference from Exhibit 10.15.4 to
Insmed Incorporated’s Annual Report on Form 10-K filed on February 22, 2019).
10.18*
Contract Manufacturing Agreement, dated February 7, 2014, between Insmed Incorporated
and Resilience Biotechnologies Inc. (successor to Therapure Biopharma Inc.) (incorporated
by reference from Exhibit 10.2.1 to Insmed Incorporated's Quarterly Report on Form 10-Q
filed on October 29, 2020).
10.18.1*
Amending Agreement, dated March 13, 2014, between Insmed Incorporated and Resilience
Biotechnologies Inc. (successor to Therapure Biopharma Inc.) (incorporated by reference
from Exhibit 10.2.2 to Insmed Incorporated's Quarterly Report on Form 10-Q filed on
October 29, 2020).
10.19*
Commercialization Agreement dated July 8, 2014 between Insmed Incorporated and PARI
Pharma GmbH (incorporated by reference from Exhibit 10.5 to Insmed Incorporated's
Quarterly Report on Form 10-Q filed on August 8, 2024).
10.19.1*
Amendment No. 1 to Commercialization Agreement between Insmed Incorporated and PARI
Pharma GmbH, effective as of July 21, 2017 (incorporated by reference from Exhibit 10.5.1
to Insmed Incorporated’s Quarterly Report on Form 10-Q filed on August 8, 2024).
10.19.2*
Amendment No. 2 to Commercialization Agreement between Insmed Incorporated and PARI
Pharma GmbH, effective as of July 20, 2018 (filed herewith).
10.20*
Manufacturing and Supply Agreement between Insmed Incorporated and Patheon UK
Limited, dated as of October 20, 2017 (incorporated by reference from Exhibit 10.39 to
Insmed Incorporated's Annual Report on Form 10-K filed February 23, 2018).
10.21*
Technology Transfer Agreement between Insmed Incorporated and Patheon UK Limited,
dated as of October 20, 2017 (incorporated by reference from Exhibit 10.40 to Insmed
Incorporated's Annual Report on Form 10-K filed February 23, 2018).
10.21.1*
Amendment to the Technology Transfer Agreement and to the Manufacturing and Supply
Agreement, by and between Insmed Incorporated and Patheon UK Limited, dated as of
March 11, 2021 (incorporated by reference from Exhibit 10.3 to Insmed Incorporated’s
Quarterly Report on Form 10-Q filed May 6, 2021).
10.22*
License Agreement, dated October 4, 2016, between Insmed Incorporated and AstraZeneca
AB (incorporated by reference from Exhibit 10.29 to Insmed Incorporated’s Annual Report
on Form 10-K filed February 23, 2017).
10.23
Lease Agreement, dated September 11, 2018, by and between Insmed Incorporated and
Bridgewater Biotech Center LLC (assumed from Exeter 700 Route 202/206, LLC)
(incorporated by reference from Exhibit 10.1 to Insmed Incorporated’s Current Report on
Form 8-K filed on September 17, 2018).
10.24*
Master Commercial Manufacturing Services Agreement, dated January 8, 2024, by and
between Insmed Incorporated and Patheon Inc. (filed herewith).
10.24.1*
Product Agreement pursuant to the Master Commercial Manufacturing Services Agreement,
dated September 29, 2024, by and between Insmed Incorporated and Patheon Inc. (filed
herewith).
10.25*
Revenue Interest Purchase Agreement, dated October 19, 2022, between Insmed Incorporated
and OrbiMed Royalty & Credit Opportunities III, LP (incorporated by reference from Exhibit
10.1 to Insmed Incorporated’s Quarterly Report on Form 10-Q filed on October 27, 2022).
10.25.1*
First Amendment to Revenue Interest Purchase Agreement, dated October 31, 2024, between
Insmed Incorporated and OrbiMed Royalty & Credit Opportunities III, LP (filed herewith).
10.26*
Amended and Restated Loan Agreement, dated October 31, 2024, between Insmed
Incorporated, BioPharma Credit PLC, BPCR Limited Partnership and BioPharma Credit
Investments V (Master) LP (filed herewith).
10.27*
Commercial Manufacturing and Supply Agreement, dated September 5, 2024, between
Insmed Incorporated and Esteve Química, S.A. (filed herewith).
19.1
Insmed Incorporated Insider Trading Policy (filed herewith).
83
21.1
Subsidiaries of Insmed Incorporated (filed herewith).
23.1
Consent of Ernst & Young LLP (filed herewith).
31.1
Certification of William H. Lewis, Chair and Chief Executive Officer (Principal Executive
Officer) of Insmed Incorporated, pursuant to Rules 13a-14(a) and 15d-14(a) promulgated
under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes Oxley Act of 2003 (filed herewith).
31.2
Certification of Sara Bonstein, Chief Financial Officer (Principal Financial Officer and
Principal Accounting Officer) of Insmed Incorporated, pursuant to Rules 13a-14(a) and
15d-14(a) promulgated under the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes Oxley Act of 2003 (filed herewith).
32.1
Certification of William H. Lewis, Chair and Chief Executive Officer (Principal Executive
Officer) of Insmed Incorporated, pursuant to 18 USC Section 1350, as adopted pursuant to
Section 906 of the Sarbanes Oxley Act of 2003 (filed herewith).
32.2
Certification of Sara Bonstein, Chief Financial Officer (Principal Financial Officer and
Principal Accounting Officer) of Insmed Incorporated, pursuant to 18 USC Section 1350, as
adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2003 (filed herewith).
97
Compensation Recovery Policy (incorporated by reference from Exhibit 97 to Insmed
Incorporated’s Annual Report on Form 10-K filed on February 22, 2024).
101
The following materials from Insmed Incorporated’s Annual Report on Form 10-K for the
year ended December 31, 2024 formatted in iXBRL (Inline eXtensible Business Reporting
Language): (i) Consolidated Balance Sheets as of December 31, 2024 and 2023,
(ii) Consolidated Statements of Comprehensive Loss for the years ended December 31, 2024,
2023 and 2022, (iii) Consolidated Statements of Shareholders' Equity for the years ended
December 31, 2024, 2023 and 2022, (iv) Consolidated Statements of Cash Flows for the
years ended December 31, 2024, 2023 and 2022, and (v) Notes to the Consolidated Financial
Statements, and (vi) Cover Page.
104
The cover page from the Annual Report on Form 10-K for the year ended December 31,
2024, formatted in iXBRL and contained in Exhibit 101.
*
Certain portions of this exhibit have been redacted.
**
Management contract or compensatory plan or arrangement.
ITEM 16. FORM 10-K SUMMARY
Not applicable.
84
SIGNATURES
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 its behalf by the undersigned, thereunto duly authorized on February 20, 2025.
INSMED INCORPORATED
a Virginia corporation
(Registrant)
By:
/s/ WILLIAM H. LEWIS
William H. Lewis
Chair and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities indicated on February 20, 2025.
Signature
Title
/s/ WILLIAM H. LEWIS
Chair and Chief Executive Officer
(Principal Executive Officer)
William H. Lewis
/s/ SARA BONSTEIN
Chief Financial Officer
(Principal Financial and Accounting Officer)
Sara Bonstein
/s/ DAVID R. BRENNAN
Lead Independent Director
David R. Brennan
/s/ ALFRED F. ALTOMARI
Director
Alfred F. Altomari
/s/ ELIZABETH MCKEE ANDERSON
Director
Elizabeth McKee Anderson
/s/ CLARISSA DESJARDINS, PH.D.
Director
Clarissa Desjardins, Ph.D.
/s/ LEO LEE
Director
Leo Lee
/s/ DAVID W.J. MCGIRR
Director
David W.J. McGirr
/s/ CAROL A. SCHAFER
Director
Carol A. Schafer
/s/ MELVIN SHAROKY, M.D.
Director
Melvin Sharoky, M.D.
85
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Insmed Incorporated
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Insmed Incorporated (the Company) as of December 31,
2024 and 2023, the related consolidated statements of comprehensive loss, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial
statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position
of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 2024, 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)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework), and our report dated February 20, 2025 expressed an unqualified opinion thereon.
Adoption of ASU No. 2020-06
As discussed in Note 10 to the consolidated financial statements, the Company changed its method of accounting for
convertible notes in 2022 due to the adoption of Accounting Standards Update (ASU) No. 2020-06, Debt—(Subtopic 470-20 &
815-40), and the related amendments.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken
as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the account or disclosure to which it relates.
86
Variable consideration in contracts with customers
Description of the
Matter
As discussed in Note 4 of the consolidated financial statements, the transaction price for product sales
is typically adjusted for variable consideration, which includes rebates paid to government agencies,
specifically Medicaid. The Company estimates Medicaid rebates based upon a range of possible
outcomes that are probability-weighted for the estimated payor mix.
Auditing the Company's estimate of Medicaid rebates was complex and judgmental due to uncertainty
about the estimated payor mix at the time of shipment to the specialty pharmacies as well as the
complexity of governmental pricing calculations. The transaction price is sensitive to assumptions
used in Medicaid rebate calculations.
How We Addressed the
Matter in Our Audit
We identified, evaluated and tested controls over management’s review of the calculated reductions to
gross product prices related to Medicaid rebates including management’s review of the significant
assumptions and the data utilized in its calculations.
To test the revenue adjustments related to Medicaid rebates our audit procedures included, among
others, using internal government pricing specialists to assist with our evaluation of management’s
methodology and calculations used to measure Medicaid rebates. We also tested the underlying data
and inputs used by the Company in its determination of the estimated payor mix. We compared the
inputs used by management to historical trends, evaluated the change in the estimated rebates
amounts recorded throughout the year and assessed the historical accuracy of management’s estimates
against actual results.
We have served as the Company’s auditor since at least 1999, but we are unable to determine the specific year.
/s/ Ernst & Young LLP
Iselin, New Jersey
February 20, 2025
87
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Insmed Incorporated
Opinion on Internal Control Over Financial Reporting
We have audited Insmed Incorporated’s internal control over financial reporting as of December 31, 2024, 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). In our opinion, Insmed Incorporated (the Company) maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated
statements of comprehensive loss, shareholders’ equity and cash flows for each of the three years in the period ended December
31, 2024, and the related notes and our report dated February 20, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report
on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized 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 of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Iselin, New Jersey
February 20, 2025
88
As of December 31,
2024
2023
Assets
Current assets:
Cash and cash equivalents
$ 555,030 $ 482,374
Marketable securities
878,796
298,073
Accounts receivable
52,012
41,189
Inventory
98,578
83,248
Prepaid expenses and other current assets
37,245
24,179
Total current assets
1,621,661
929,063
Fixed assets, net
80,052
65,384
Finance lease right-of-use assets
18,273
20,985
Operating lease right-of-use assets
17,257
18,017
Intangibles, net
58,652
63,704
Goodwill
136,110
136,110
Other assets
93,226
96,574
Total assets
$ 2,025,231 $ 1,329,837
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued liabilities
$ 285,209 $ 214,987
Finance lease liabilities
2,961
2,610
Operating lease liabilities
9,358
8,032
Total current liabilities
297,528
225,629
Debt, long-term
1,103,382 1,155,313
Royalty financing agreement
161,067
155,034
Contingent consideration
144,200
84,600
Finance lease liabilities, long-term
24,064
27,026
Operating lease liabilities, long-term
9,112
11,013
Other long-term liabilities
499
3,145
Total liabilities
1,739,852 1,661,760
Shareholders' equity:
Common stock, $0.01 par value; 500,000,000 authorized shares, 179,382,635
and 147,977,960 issued and outstanding shares at December 31, 2024 and
December 31, 2023, respectively
1,794
1,480
Additional paid-in capital
4,645,791 3,113,487
Accumulated deficit
(4,359,917) (3,446,145)
Accumulated other comprehensive loss
(2,289)
(745)
Total shareholders' equity (deficit)
285,379
(331,923)
Total liabilities and shareholders' equity (deficit)
$ 2,025,231 $ 1,329,837
See accompanying notes to consolidated financial statements
INSMED INCORPORATED
Consolidated Balance Sheets
(in thousands, except par value and share data)
89
Years Ended December 31,
2024
2023
2022
Product revenues, net
$ 363,707 $ 305,208 $ 245,358
Operating expenses:
Cost of product revenues (excluding amortization of intangible assets)
85,742
65,573
55,126
Research and development
598,367
571,011
397,518
Selling, general and administrative
461,116
344,501
265,784
Amortization of intangible assets
5,052
5,052
5,053
Change in fair value of deferred and contingent consideration
liabilities
91,682
28,697
(20,802)
Total operating expenses
1,241,959 1,014,834
702,679
Operating loss
(878,252)
(709,626)
(457,321)
Investment income
53,307
42,132
11,081
Interest expense
(84,913)
(81,694)
(26,446)
Change in fair value of interest rate swap
(236)
320
(1,526)
Other income (expense), net
29
1,856
(5,939)
Loss before income taxes
(910,065)
(747,012)
(480,151)
Provision for income taxes
3,707
2,555
1,383
Net loss
$ (913,772) $ (749,567) $ (481,534)
Basic and diluted net loss per share
$
(5.57) $
(5.34) $
(3.91)
Weighted average basic and diluted common shares outstanding
164,043
140,433
123,035
Net loss
$ (913,772) $ (749,567) $ (481,534)
Other comprehensive income (loss):
Foreign currency translation and other (losses) gains
(1,855)
(2,214)
303
Unrealized gain (loss) on marketable securities
311
713
(515)
Total comprehensive loss
$ (915,316) $ (751,068) $ (481,746)
See accompanying notes to audited consolidated financial statements
INSMED INCORPORATED
Consolidated Statements of Comprehensive Loss
(in thousands, except per share data)
90
Common Stock
Additional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Shares
Amount
Balance at December 31, 2021
118,738 $ 1,187 $ 2,673,556 $ (2,265,243) $
968 $ 410,468
Cumulative impact of ASU 2020-06 adoption
(264,609)
50,199
(214,410)
Comprehensive loss:
Net loss
(481,534)
(481,534)
Other comprehensive loss
(212)
(212)
Exercise of stock options and ESPP shares
1,328
14
19,486
19,500
Net proceeds from issuance of common stock
15,040
150
292,003
292,153
Issuance of common stock for vesting of RSUs
377
4
4
Deferred payments for Business Acquisition
171
2
4,294
4,296
Stock-based compensation expense
57,686
57,686
Balance at December 31, 2022
135,654
1,357 2,782,416
(2,696,578)
756 $
87,951
Comprehensive loss:
Net loss
(749,567)
(749,567)
Other comprehensive loss
(1,501)
(1,501)
Exercise of stock options and ESPP shares
1,142
12
18,387
18,399
Net proceeds from issuance of common stock
6,531
65
152,410
152,475
Issuance of common stock for vesting of RSUs
543
5
5
Deferred payments for Business Acquisition
177
2
3,895
3,897
Issuance of common stock for asset acquisitions
3,931
39
81,601
81,640
Stock-based compensation expense
74,778
74,778
Balance at December 31, 2023
147,978 $ 1,480 $ 3,113,487 $ (3,446,145) $
(745) $ (331,923)
Comprehensive loss:
Net loss
(913,772)
(913,772)
Other comprehensive loss
(1,544)
(1,544)
Exercise of stock options and ESPP shares
5,026
50
113,193
113,243
Issuance of common stock upon conversion of
convertible notes
5,744
58
224,267
224,325
Net proceeds from issuance of common stock
19,537
195 1,083,929
1,084,124
Issuance of common stock for vesting of RSUs
901
9
9
Deferred payments for Business Acquisition and
Vertuis Bio, Inc.
197
2
14,080
14,082
Stock-based compensation expense
96,835
96,835
Balance at December 31, 2024
179,383 $ 1,794 $ 4,645,791 $ (4,359,917) $
(2,289) $ 285,379
See accompanying notes to audited consolidated financial statements
INSMED INCORPORATED
Consolidated Statements of Shareholders' Equity
(in thousands)
91
Years Ended December 31,
2024
2023
2022
Operating activities
Net loss
$ (913,772) $ (749,567) $ (481,534)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation
5,961
5,527
5,278
Amortization of intangible assets
5,052
5,052
5,053
Stock-based compensation expense
96,835
74,778
57,686
Amortization of debt issuance costs
6,884
7,320
3,991
Paid-in-kind interest capitalized
19,233
23,372
4,165
Royalty financing non-cash interest expense
20,044
18,846
3,687
Accretion of discount on marketable securities, net
(19,160)
(9,383)
—
Finance lease amortization expense
2,712
2,712
1,960
Non-cash operating lease expense
3,588
9,206
11,976
Change in fair value of deferred and contingent consideration liabilities
91,682
28,697
(20,802)
Change in fair value of interest rate swap
236
(320)
1,526
Vertuis acquisition
—
10,250
—
Adrestia acquisition
—
76,481
—
Changes in operating assets and liabilities:
Accounts receivable
(12,932)
(11,963)
(6,423)
Inventory
(17,044)
(13,613)
(1,714)
Prepaid expenses and other current assets
(14,182)
2,265
2,528
Other assets
8,335
(20,074)
(25,243)
Accounts payable and accrued liabilities
44,592
15,155
50,011
Other liabilities
(11,946)
(10,988)
(12,584)
Net cash used in operating activities
(683,882) (536,247) (400,439)
Investing activities
Purchase of fixed assets
(21,923)
(13,288)
(9,878)
Purchase of marketable securities
(1,577,252) (588,733)
(99,706)
Cash acquired in asset acquisition
—
3,417
—
Maturities of marketable securities
1,016,000
375,000
75,000
Net cash used in investing activities
(583,175) (223,604)
(34,584)
Financing activities
Proceeds from exercise of stock options and ESPP
113,243
18,399
19,504
Proceeds from issuance of common stock, net
1,084,124
152,475
292,153
Proceeds from issuance of Term Loans
150,000
—
350,000
INSMED INCORPORATED
Consolidated Statements of Cash Flows
(in thousands)
92
Proceeds from issuance Royalty Financing Agreement
—
—
150,000
Payment of debt issuance costs
(3,737)
(1,218)
(17,783)
Payments of finance lease principal
(2,610)
(1,217)
(601)
Net cash provided by financing activities
1,341,020
168,439
793,273
Effect of exchange rates on cash and cash equivalents
(1,307)
(250)
(996)
Net increase (decrease) in cash and cash equivalents
72,656 (591,662)
357,254
Cash and cash equivalents at beginning of period
482,374 1,074,036
716,782
Cash and cash equivalents at end of period
$ 555,030 $ 482,374 $ 1,074,036
Supplemental disclosures of cash flow information:
Cash paid for interest
$
40,567 $
35,787 $
10,157
Cash paid for income taxes
$
2,499 $
1,955 $
1,717
See accompanying notes to audited consolidated financial statements
INSMED INCORPORATED
Consolidated Statements of Cash Flows
(in thousands)
93
1. The Company and Basis of Presentation
Insmed is a people-first global biopharmaceutical company striving to deliver first- and best-in-class therapies to
transform the lives of patients facing serious diseases. The Company's first commercial product, ARIKAYCE, is approved in
the US as ARIKAYCE® (amikacin liposome inhalation suspension), in Europe as ARIKAYCE Liposomal 590 mg Nebuliser
Dispersion and in Japan as ARIKAYCE inhalation 590 mg (amikacin sulfate inhalation drug product). ARIKAYCE received
accelerated approval in the US in September 2018 for the treatment of MAC lung disease as part of a combination antibacterial
drug regimen for adult patients with limited or no alternative treatment options in a refractory setting. In October 2020, the EC
approved ARIKAYCE for the treatment of NTM lung infections caused by MAC in adults with limited treatment options who
do not have CF. In March 2021, Japan's MHLW approved ARIKAYCE for the treatment of patients with NTM lung disease
caused by MAC who did not sufficiently respond to prior treatment with a multidrug regimen. NTM lung disease caused by
MAC (which the Company refers to as MAC lung disease) is a rare and often chronic infection that can cause irreversible lung
damage and can be fatal.
The Company's pipeline includes clinical-stage programs, brensocatib, TPIP, and INS1201, as well as pre-clinical
research programs. Brensocatib is a small molecule, oral, reversible inhibitor of DPP1, which the Company is developing for
the treatment of patients with bronchiectasis and other neutrophil-mediated diseases, including CRSsNP and HS. TPIP is an
inhaled formulation of the treprostinil prodrug treprostinil palmitil which may offer a differentiated product profile for PH-ILD
and PAH. INS1201 is an intrathecally delivered gene therapy for patients with DMD. The Company's pre-clinical research
programs encompass a wide range of technologies and modalities, including gene therapy, artificial intelligence-driven protein
engineering, protein manufacturing, RNA end-joining, and synthetic rescue.
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 US, France, Germany, Ireland, Italy, the
Netherlands, Switzerland, the UK, and Japan.
The Company had $555.0 million of cash and cash equivalents and $878.8 million of marketable securities as of
December 31, 2024 and reported a net loss of $913.8 million for the year ended December 31, 2024. The Company has funded
its operations through public offerings of equity securities, debt financings and revenue interest financings. The Company
expects to continue to incur consolidated operating losses, including losses in its US and certain international entities, while
funding R&D activities for ARIKAYCE, brensocatib, TPIP, INS1201, and its other pipeline programs, continuing
commercialization and regulatory activities for ARIKAYCE and pre-commercial, regulatory and, if approved,
commercialization activities for brensocatib, and funding other general and administrative activities.
The Company expects its future cash requirements to be substantial. While the Company currently has sufficient funds
to meet its financial needs for at least the next 12 months, the Company may raise additional capital in the future to fund its
operations, its ongoing commercialization and clinical trial activities, and its future product candidates, and to develop, acquire,
in-license or co-promote other products or product candidates, including those that address orphan or serious diseases. The
source, timing and availability of any future financing or other transaction will depend principally upon continued progress in
the Company’s commercial, regulatory and development activities. Any future financing will also be contingent upon market
conditions. If the Company is unable to obtain sufficient additional funds when required, the Company may be forced to delay,
restrict or eliminate all or a portion of its development programs or commercialization efforts.
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Celtrix
Pharmaceuticals, Inc., Insmed France SAS, Insmed Gene Therapy LLC, Insmed Germany GmbH, Insmed Godo Kaisha,
Insmed Holdings Limited, Insmed Innovation UK Limited, Insmed Ireland Limited, Insmed Italy S.R.L., Insmed Limited,
Insmed Netherlands B.V., Insmed Netherlands Holdings B.V., and Insmed Switzerland GmbH.
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
94
2. Summary of Significant Accounting Policies
Use of Estimates—The preparation of the consolidated financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and
accompanying notes. The Company bases its estimates and judgments on historical experience and on various other
assumptions. The amounts of assets and liabilities reported in the Company's balance sheets and the amounts of revenues and
expenses reported for each period presented are affected by estimates and assumptions, which are used for, but not limited to,
the accounting for revenue allowances, stock-based compensation, income taxes, loss contingencies, acquisition related
intangibles including in process research and development (IPR&D) and goodwill, fair value of contingent consideration, the
Royalty Financing Agreement, and accounting for research and development costs. Actual results could differ from those
estimates.
Cash and Cash Equivalents—The Company considers cash equivalents to be highly liquid investments with
maturities of three months or less from the date of purchase.
Accounts Receivable—Accounts receivable are recorded net of customer allowances for prompt pay discounts,
chargebacks, and any estimated expected credit losses. The Company's measurement of expected credit losses is based on
relevant information about past events, including historical experience, current conditions, and reasonable and supportable
forecasts that affect the collectability of the reported amount. To date, credit losses have not been material.
Concentration of Credit Risk—Financial instruments that potentially subject the Company to concentrations of credit
risk consist primarily of cash and cash equivalents and marketable securities. The Company places its cash equivalents and
marketable securities with high credit-quality financial institutions and may invest its investments in US treasury securities,
mutual funds and government agency bonds. The Company has established guidelines relative to credit ratings and maturities
that seek to maintain safety and liquidity.
The Company is exposed to risks associated with extending credit to customers related to the sale of products. The
Company does not require collateral to secure amounts due from its customers. The Company uses an expected loss
methodology to calculate allowances for trade receivables. The Company's measurement of expected credit losses is based on
relevant information about past events, including historical experience, current conditions, and reasonable and supportable
forecasts that affect the collectability of the reported amount. The Company does not currently have a material allowance for
uncollectible trade receivables. The following table presents the percentage of gross product revenue represented by the
Company's three largest customers for the year ended December 31, 2024 and their respective percentages for the year ended
December 31, 2023.
Years Ended December 31,
2024
2023
Customer A
34%
35%
Customer B
30%
34%
Customer C
21%
19%
The Company relies on third-party manufacturers and suppliers for manufacturing and supply of its products. The
inability of the suppliers or manufacturers to fulfill supply requirements of the Company could materially impact future
operating results. A change in the relationship with the suppliers or manufacturers, or an adverse change in their business, could
materially impact future operating results.
Marketable Securities—Marketable securities consist of available-for-sale investments in US Treasury Notes.
Marketable securities under this classification are recorded at fair value and unrealized gains and losses are recorded within
accumulated other comprehensive loss. The estimated fair value of available-for-sale marketable securities is determined based
on quoted market prices. Marketable securities maturing in one year or less are classified as current assets and marketable
securities maturing in more than one year are classified as non-current assets. The Company did not have available-for-sale
securities with a maturity of more than one year as of December 31, 2024 and December 31, 2023.
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. Estimated useful lives of three years to five years are used for computer hardware and software.
Estimated useful lives of seven years are used for laboratory equipment, office equipment, manufacturing equipment and
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
95
furniture and fixtures. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of
the asset.
Finite-lived Intangible Assets—Finite-lived intangible assets are measured at their respective fair values on the date
they were recorded. The fair values assigned to the Company's intangible assets are based on reasonable estimates and
assumptions given available facts and circumstances. See Note 6 - Intangibles, Net and Goodwill for further details.
Impairment Assessment—The Company reviews the recoverability of its finite-lived intangible assets and long-lived
assets for indicators of impairments. Events or circumstances that may require an impairment assessment include negative
clinical trial results, a significant decrease in the market price of the asset, or a significant adverse change in legal factors or the
manner in which the asset is used. If such indicators are present, the Company assesses the recoverability of affected assets by
determining if the carrying value of such assets is less than the sum of the undiscounted future cash flows of the assets. If such
assets are found to not be recoverable, the Company measures the amount of the impairment by comparing the carrying value
of the assets to the fair value of the assets. The Company determined that no indicators of impairment of finite-lived intangible
assets or long-lived assets existed at December 31, 2024.
Business Combinations and Asset Acquisitions—The Company evaluates acquisitions of assets and other similar
transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by
first applying a screen to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single
identifiable asset or group of similar identifiable assets. If the screen is met, the transaction is accounted for as an asset
acquisition. If the screen is not met, further determination is required as to whether or not the Company has acquired inputs and
processes that have the ability to create outputs, which would meet the requirements of a business. If determined to be a
business combination, the Company accounts for the transaction under the acquisition method of accounting as indicated in
ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which requires the acquiring entity
in a business combination to recognize the fair value of all assets acquired, liabilities assumed, and any non-controlling interest
in the acquiree and establishes the acquisition date as the fair value measurement point. Accordingly, the Company recognizes
assets acquired and liabilities assumed in business combinations, including contingent assets and liabilities, and non-controlling
interest in the acquiree based on the fair value estimates as of the date of acquisition. In accordance with ASC 805, Business
Combinations, the Company recognizes and measures goodwill as of the acquisition date, as the excess of the fair value of the
consideration paid over the fair value of the identified net assets acquired.
The consideration for the Company’s business acquisitions may include future payments that are contingent upon the
occurrence of a particular event or events. The obligations for such contingent consideration payments are recorded at fair value
on the acquisition date. The contingent consideration obligations are then evaluated each reporting period. Changes in the fair
value of contingent consideration, other than changes due to payments, are recognized as a gain or loss and recorded within
change in the fair value of deferred and contingent consideration liabilities in the consolidated statements of comprehensive
loss.
If determined to be an asset acquisition, the Company accounts for the transaction under ASC 805-50, which requires
the acquiring entity in an asset acquisition to recognize assets acquired and liabilities assumed based on the cost to the acquiring
entity on a relative fair value basis, which includes transaction costs in addition to consideration given. No gain or loss is
recognized as of the date of acquisition unless the fair value of non-cash assets given as consideration differs from the assets’
carrying amounts on the acquiring entity’s books. Consideration transferred that is non-cash will be measured based on either
the cost (which shall be measured based on the fair value of the consideration given) or the fair value of the assets acquired and
liabilities assumed, whichever is more reliably measurable. Goodwill is not recognized in an asset acquisition and any excess
consideration transferred over the fair value of the net assets acquired is allocated to the identifiable assets based on relative fair
values. If the in-licensed agreement for IPR&D does not meet the definition of a business and the assets have not reached
technological feasibility and therefore have no alternative future use, the Company expenses payments made under such license
agreements as acquired IPR&D expense within R&D expense in its consolidated statements of comprehensive loss.
Contingent consideration payments in asset acquisitions are recognized when the contingency is resolved and the
consideration is paid or becomes payable, unless the contingent consideration meets the definition of a derivative, in which case
the amount becomes part of the basis in the asset acquired. None of the Company's contingent consideration met the definition
of a derivative. Upon recognition of the contingent consideration payment, the amount is included in the cost of the acquired
asset or group of assets.
Indefinite-lived Intangible Assets—Indefinite-lived intangible assets consist of IPR&D. IPR&D acquired directly in a
transaction other than a business combination is capitalized if the projects will be further developed or have an alternative future
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies (Continued)
96
use; otherwise, they are expensed. The fair values of IPR&D project assets acquired in business combinations are capitalized.
The Company generally utilizes the Multi-Period Excess Earning Method to determine the estimated fair value of the IPR&D
assets acquired in a business combination. The projections used in this valuation approach are based on many factors, such as
relevant market size, patent protection, and expected pricing and industry trends. The estimated future net cash flows are then
discounted to the present value using an appropriate discount rate. These assets are treated as indefinite-lived intangible assets
until completion or abandonment of the projects, at which time the assets are amortized over the remaining useful life or written
off, as appropriate. Intangible assets with indefinite lives, including IPR&D, are tested for impairment if impairment indicators
arise and, at a minimum, annually. However, an entity is permitted to first assess qualitative factors to determine if a
quantitative impairment test is necessary. Further testing is only required if the entity determines, based on the qualitative
assessment, that it is more likely than not that an indefinite-lived intangible asset’s fair value is less than its carrying amount.
The indefinite-lived intangible asset impairment test consists of a one-step analysis that compares the fair value of the
intangible asset with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss
is recognized in an amount equal to that excess. The Company considers many factors in evaluating whether the value of its
intangible assets with indefinite lives may not be recoverable, including, but not limited to, expected growth rates, the cost of
equity and debt capital, general economic conditions, the Company’s outlook and market performance of the Company’s
industry and recent and forecasted financial performance. The Company performs a qualitative test for its indefinite-lived
intangible assets annually as of October 1. During the year ended December 31, 2024, the Company concluded that no
impairment exists.
Goodwill—Goodwill represents the amount of consideration paid in excess of the fair value of net assets acquired as a
result of the Company’s business acquisitions accounted for using the acquisition method of accounting. Goodwill is not
amortized and is subject to impairment testing at a reporting unit level on an annual basis or when a triggering event occurs that
may indicate the carrying value of the goodwill is impaired. An entity is permitted to first assess qualitative factors to determine
if a quantitative impairment test is necessary. Further testing is only required if the entity determines, based on the qualitative
assessment, that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. The Company
reassesses its reporting units as part of its annual segment review. As of December 31, 2024, the Company concluded that it
continues to operate as one reporting unit. As of October 1, 2024, the Company performed a qualitative impairment test for
goodwill and concluded that no impairment exists.
Leases—A lease is a contract, or part of a contract, that conveys the right to control the use of explicitly or implicitly
identified property, plant or equipment in exchange for consideration. Control of an asset is conveyed to the Company if the
Company obtains the right to obtain substantially all of the economic benefits of the asset or the right to direct the use of the
asset. The Company recognizes right-of-use (ROU) assets and lease liabilities at the lease commencement date based on the
present value of future, fixed lease payments over the term of the arrangement. ROU assets are amortized on a straight-line
basis over the term of the lease or are amortized based on consumption, if this approach is more representative of the pattern in
which benefit is expected to be derived from the underlying asset. Lease liabilities accrete to yield and are reduced at the time
when the lease payment is payable to the vendor. Variable lease payments are recognized at the time when the event giving rise
to the payment occurs and are recognized in the consolidated statements of comprehensive loss in the same line item as
expenses arising from fixed lease payments.
Leases are measured at present value using the rate implicit in the lease or, if the implicit rate is not determinable, the
lessee's implicit borrowing rate. As the implicit rate is not typically available, the Company uses its implicit borrowing rate
based on the information available at lease commencement date to determine the present value of future lease payments. The
implicit borrowing rate approximates the rate the Company would pay to borrow on a collateralized basis over a similar term an
amount equal to the lease payments. See Note 9 - Leases for further details.
Debt Issuance Costs—Debt issuance costs are amortized to interest expense using the effective interest rate method
over the term of the debt. Unamortized debt issuance costs paid to the lender and third parties are reflected as a discount to the
debt in the consolidated balance sheets. Unamortized debt issuance costs associated with extinguished debt are expensed in the
period of the extinguishment.
Foreign Currency—The Company has operations in the US, France, Germany, Ireland, Italy, the Netherlands,
Switzerland, the UK, and Japan. The results of the Company's non-US dollar based functional currency operations are
translated to US dollars at the average exchange rates during the period. Assets and liabilities are translated at the exchange rate
prevailing at the balance sheet date. Equity is translated at the prevailing exchange rate at the date of the equity transaction.
Translation adjustments are included in total shareholders' equity (deficit), as a component of accumulated other comprehensive
loss.
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies (Continued)
97
The Company realizes foreign currency transaction gains and losses in the normal course of business based on
movements in the applicable exchange rates. These gains and losses are included as a component of other income (expense),
net.
Derivatives—In the normal course of business, the Company is exposed to the effects of interest rate changes. The
Company may enter into derivative instruments, including interest rate swaps and caps, to manage or hedge interest rate risk.
Derivative instruments are recorded at fair value on the balance sheet date. The Company did not elect hedge accounting
treatment for the changes in the fair value of derivatives. Changes in the fair value of derivatives were recorded each period and
were included in change in fair value of interest rate swap in the consolidated statements of comprehensive loss and
consolidated statements of cash flows.
Inventory and Cost of Product Revenues (excluding amortization of intangible assets)—Inventory is stated at the
lower of cost and net realizable value. Inventory is sold on a first-in, first-out (FIFO) basis. The Company periodically reviews
inventory for expiry and obsolescence and, if necessary, writes down accordingly. If quality specifications are not met during
the manufacturing process, such inventory is written off to cost of product revenues (excluding amortization of intangible
assets) in the period identified.
Cost of product revenues (excluding amortization of intangible assets) consist primarily of direct and indirect costs
related to the manufacturing of ARIKAYCE sold, including third-party manufacturing costs, packaging services, freight, and
allocation of overhead costs, in addition to royalty expenses. Cost is determined using a standard cost method, which
approximates actual cost, and assumes a FIFO flow of goods. Inventory used for clinical development purposes is expensed to
R&D expense when consumed.
Research and Development—R&D expenses consist primarily of salaries, benefits and other related costs, including
stock-based compensation, for personnel serving in the Company's research and development functions. R&D expense also
includes other internal operating expenses, the cost of manufacturing a product candidate, including the medical devices for
drug delivery, for clinical study, the cost of conducting clinical studies, and the cost of conducting preclinical and research
activities. In addition, R&D expenses include payments to third parties for the license rights to products in development (prior
to marketing approval), such as brensocatib, and may include the cost of asset acquisitions (as described further above). The
Company's expenses related to manufacturing its product candidates and medical devices for clinical study are primarily related
to activities at CMOs that manufacture its clinical product supply of ARIKAYCE, brensocatib, TPIP, INS1201, and pre-clinical
research. The Company's expenses related to clinical trials are primarily related to activities at CROs that conduct and manage
clinical trials on the Company's behalf. These contracts set forth the scope of work to be completed at a fixed fee or amount per
patient enrolled. Payments under these contracts primarily depend on performance criteria 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 contracted
amounts applied to the level of patient enrollment and to activity according to the clinical trial protocol. Deposits for goods or
services that will be used or rendered for future research and development activities are deferred and capitalized. Such amounts
are then recognized as an expense as the related goods are delivered or the services are performed.
Stock-based Compensation—The Company recognizes stock-based compensation expense for awards of equity
instruments to employees and directors based 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 service period, which generally equals the vesting
period of the award. The Company may also grant performance-based stock options and performance stock units (PSUs) to
employees from time to time. The grant-date fair value of performance-based stock options is recognized as compensation
expense over the implicit service period using the accelerated attribution method once it is probable that the performance
condition will be achieved. The grant-date fair value of PSUs is recognized as compensation expense on the date the
performance conditions become probable, with an initial recording of the cumulative expense that would have been recognized
if the PSU expense had been recognized on a straight-line basis since the date of grant. The remaining unamortized fair value of
the awards will then be expensed prospectively on a straight-line basis over the remaining service period. Stock-based
compensation expense is included in both R&D and SG&A expenses in the consolidated statements of comprehensive loss.
Investment Income and Interest Expense—Investment income consists of interest income earned on the Company's
cash and cash equivalents and marketable securities. Interest expense consists primarily of contractual interest costs related to
the Company's debt, non-cash interest expense related to the Company's Royalty Financing Agreement (see Note 11 - Royalty
Financing Agreement), and amortization of debt issuance costs related to the Company's debt.
Income Taxes—The Company accounts for income taxes under the asset and liability method. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies (Continued)
98
amounts of existing assets and liabilities and their respective tax bases and 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 which those 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 income in 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 valuation allowance, the Company takes into account various factors, including the expected level of
future taxable income and available tax planning strategies. If actual results differ from the assumptions made in the evaluation
of a valuation allowance, the Company records a change in valuation allowance through income tax expense in the period such
determination is made.
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 on examination by taxing authorities, based solely on the technical merits of the position. The tax
benefits recognized in the financial statements from such a position should be measured based on the largest benefit that is more
likely than not to be sustained upon ultimate settlement. As any adjustment to the Company’s uncertain tax positions would not
result in a cash tax liability, it has not recorded any accrued interest or penalties related to its uncertain tax positions.
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 tax provision in the consolidated statements of comprehensive loss.
Net Loss Per Share—Basic net loss per share is computed by dividing net loss by the weighted average number of
common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted
average number of common shares and other dilutive securities outstanding during the period. Potentially dilutive securities
from stock options, restricted stock (RS), restricted stock units (RSUs), PSUs and convertible debt securities would be anti-
dilutive as the Company incurred a net loss. Potentially dilutive common shares resulting from the assumed exercise of
outstanding stock options and from the assumed conversion of the Company's convertible notes 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 the years ended December 31, 2024, 2023 and 2022.
Years Ended December 31,
2024
2023
2022
(in thousands, except per share amounts)
Numerator:
Net loss
$
(913,772) $
(749,567) $
(481,534)
Denominator:
Weighted average common shares used in calculation of basic net loss
per share:
164,043
140,433
123,035
Effect of dilutive securities:
Common stock options
—
—
—
RS and RSUs
—
—
—
PSUs
—
—
—
Convertible debt securities
—
—
—
Weighted average common shares outstanding used in calculation of
diluted net loss per share
164,043
140,433
123,035
Net loss per share:
Basic and diluted
$
(5.57) $
(5.34) $
(3.91)
The following potentially dilutive securities have been excluded from the computations of diluted weighted average
common shares outstanding as of December 31, 2024, 2023 and 2022 as their effect would have been anti-dilutive (in
thousands).
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies (Continued)
99
As of December 31,
2024
2023
2022
Common stock options
21,927
22,513
17,525
Unvested RS and RSUs
3,320
2,750
1,520
PSUs
660
666
671
Convertible debt securities
17,690
23,438
23,438
Recently Adopted Accounting Pronouncements—In November 2023, the Financial Accounting Standards Board
(FASB) issued ASU 2023-07, Segment Reporting (Topic 280)–Improvements to Reportable Segment Disclosures, which
updates reportable segment disclosure requirements primarily through enhanced disclosures about significant expenses. The
amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years
beginning after December 15, 2024, with early adoption permitted. These amendments have been applied retrospectively to all
prior periods presented in the financial statements. The adoption of ASU 2023-07 did not have a material impact on the
Company's consolidated financial statements and additional required disclosures have been included in Note 19 - Segment
Reporting.
Recent Accounting Pronouncements (Not Yet Adopted)—In December 2023, the FASB issued ASU 2023-09,
Income Taxes (Topic 740)—Improvements to Income Tax Disclosures, in order to enhance the transparency and decision
usefulness of income tax disclosures. ASU 2023-09 requires greater disaggregation of income tax disclosures related to the
income tax rate reconciliation and income taxes paid. ASU 2023-09 will be effective for fiscal years beginning after December
15, 2024. The Company is currently evaluating the impact of adoption of ASU 2023-09 on its consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement (Subtopic 220-40)—Expense Disaggregation
Disclosures, which requires disclosure of disaggregated income statement expense information about specific categories
(including purchases of inventory, employee compensation, depreciation, and intangible asset amortization) in the notes to
financial statements. ASU 2024-03 will be effective for fiscal years beginning after December 15, 2026 and interim periods
beginning after December 15, 2027. The guidance is applied on a prospective basis, with a retrospective option, and early
adoption is permitted. The Company is currently evaluating the impact of adoption of ASU 2024-03 on its consolidated
financial statements.
3. Fair Value Measurements
The Company categorizes its financial assets and liabilities measured and reported at fair value in the financial
statements on a recurring basis based upon the level of judgment associated with the inputs used to measure their fair value.
Hierarchical levels, which are 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 through correlation 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 significant input 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 when measuring fair value. Financial instruments in Level 1
generally include US treasuries and mutual funds listed in active markets. The Company's cash and cash equivalents permit
daily redemption and the fair values of these investments are based upon the quoted prices in active markets provided by the
holding financial institutions.
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies (Continued)
100
The following table shows assets and liabilities that are measured at fair value on a recurring basis and their carrying
value (in millions):
As of December 31, 2024
Fair Value
Carrying
Value
Level 1
Level 2
Level 3
Assets
Cash and cash equivalents
$
555.0
$
555.0
$
—
$
—
Marketable securities
$
878.8
$
878.8
$
—
$
—
Liabilities
Contingent consideration
$
168.9
$
—
$
—
$
168.9
As of December 31, 2023
Fair Value
Carrying
Value
Level 1
Level 2
Level 3
Assets
Cash and cash equivalents
$
482.4
$
482.4
$
—
$
—
Marketable securities
$
298.1
$
298.1
$
—
$
—
Collateral for interest rate swap
$
6.0
$
6.0
$
—
$
—
Liabilities
Interest rate swap
$
1.2
$
—
$
1.2
$
—
Deferred consideration
$
5.7
$
—
$
5.7
$
—
Contingent consideration
$
84.6
$
—
$
—
$
84.6
During the year ended December 31, 2024, the Company purchased $1.6 billion of marketable securities consisting of
US Treasury Notes.
As of December 31, 2024, the Company held $878.8 million of available-for-sale securities, including an unrealized
gain of $0.3 million recorded in accumulated other comprehensive loss. As of December 31, 2023, the Company held
$298.1 million of available-for-sale securities, net of an unrealized loss of $0.7 million that were in an unrealized gain or loss
position.
During the year ended December 31, 2022, the Company entered into an interest rate swap in connection with the
Company's Term Loan. The Company entered into the interest rate swap to hedge its variable interest rate in an exchange for a
fixed interest rate. The collateral for interest rate swap and the interest rate swap were recorded in other assets and accounts
payable and accrued liabilities, respectively, in the consolidated balance sheet as of December 31, 2023. The collateral for
interest rate swap was cash, a Level 1 asset. The interest rate swap was a Level 2 liability as it used observable inputs other than
quoted market prices in an active market. In connection with the Amended and Restated Loan Agreement, the Company settled
and terminated the interest rate swap contract and collected the collateral during the fourth quarter of 2024.
There were no transfers in or out of Level 1, Level 2 or Level 3 during the years ended December 31, 2024 and 2023.
The Company reviews the status of each security quarterly to determine whether an other-than-temporary impairment
has occurred. In making its determination, the Company considers a number of factors, including: (1) the significance of the
decline; (2) whether the security was rated below investment grade; (3) failure of the issuer to make scheduled interest or
principal payments; and (4) the Company's ability and intent to retain the investment for a sufficient period of time for it to
recover. The Company has determined that there were no other-than-temporary impairments during the year ended
December 31, 2024.
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. Fair Value Measurements (Continued)
101
Deferred Consideration
The deferred consideration arose from the Business Acquisition in August 2021 (see Note 18 - Acquisitions). The
Company was obligated to issue to Motus equityholders an aggregate of 184,433 shares of the Company’s common stock on
each of the first, second and third anniversaries of the closing date, subject to certain reductions. During August 2022, August
2023, and August 2024, the Company fulfilled the payments due on the first, second and third anniversary of the closing date
by issuing 171,427 shares, 177,203 shares, and 182,182 shares of the Company's common stock, respectively, after certain
reductions. A valuation of the deferred consideration was performed quarterly with gains and losses included within change in
fair value of deferred and contingent consideration liabilities in the consolidated statements of comprehensive loss. As the
deferred consideration was settled in shares, no discount rate was applied in the fair value calculation.
The deferred consideration was classified as a Level 2 recurring liability as its valuation utilized an input, the Insmed
share price, which was a directly observable input at the measurement date and for the duration of the liabilities' lives. Deferred
consideration expected to be settled within twelve months or less was classified as a current liability within accounts payable
and accrued liabilities. As of December 31, 2024, there is no deferred consideration.
The following observable input was used in the valuation of the deferred consideration as of December 31, 2023:
Fair Value as of
December 31, 2023
(in millions)
Observable Input
Input Value
Deferred consideration
$5.7
Insmed share price on
December 31, 2023
$30.99
Contingent Consideration Liabilities
The contingent consideration liabilities arose from the Business Acquisition in August 2021 (see Note 18 -
Acquisitions). The contingent consideration liabilities consist of developmental and regulatory milestones, a priority review
voucher milestone and net sales milestones. Upon the achievement of certain development and regulatory milestone events, the
Company is obligated to issue to Motus equityholders up to 5,348,572 shares in the aggregate and AlgaeneX equityholders up
to 368,867 shares in the aggregate. The fair value of the development and regulatory milestones are estimated utilizing a
probability-adjusted approach. At December 31, 2024, the weighted average probability of success of the remaining milestones
was 42%. The development and regulatory milestones will be settled in shares of the Company's common stock. As such, there
is no discount rate applied in the fair value calculation.
If the Company were to receive a priority review voucher from the FDA, the Company would be obligated to pay to
the Motus equityholders a portion of the value of the priority review voucher, subject to certain reductions. The potential payout
would be either 50% of the after-tax net proceeds received by the Company from a sale of the priority review voucher or 50%
of the average of the sales prices for the last three publicly disclosed priority review voucher sales, less certain adjustments. The
fair value of the priority review voucher milestone is estimated utilizing a probability-adjusted discounted cash flow approach.
This obligation would be settled in cash. On December 20, 2024, the FDA's priority review voucher program expired. As of
December 31, 2024, the Company determined that the likelihood of receiving a priority review voucher was remote and the
milestone had no fair value.
The contingent consideration liabilities for net sales milestones were valued using an option pricing model with Monte
Carlo simulation. As of December 31, 2024, the fair value of these net sales milestones were deemed immaterial to the overall
fair value of the contingent consideration.
The contingent consideration liabilities have been classified as a Level 3 recurring liability as its valuation requires
substantial judgment and estimation of factors that are not currently observable in the market. If different assumptions were
used for the inputs to the valuation approach, the estimated fair value could be significantly different than the fair value the
Company determined. Contingent consideration liabilities expected to be settled within twelve months are classified as a current
liability within accounts payable and accrued liabilities in the consolidated balance sheet. Contingent consideration expected to
be settled in more than twelve months is classified as a non-current liability. As of December 31, 2024, the fair value of the
current and non-current contingent consideration was $24.7 million and $144.2 million, respectively.
A valuation of the contingent consideration liabilities is performed quarterly with gains and losses included within
change in fair value of deferred and contingent consideration liabilities in the consolidated statements of comprehensive loss.
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. Fair Value Measurements (Continued)
102
The following significant unobservable inputs were used in the valuation of the contingent consideration liabilities as of
December 31, 2024 and 2023:
Contingent
Consideration
Liabilities
Fair Value as of
December 31, 2024
(in millions)
Valuation Technique
Unobservable Inputs
Values
Development and
regulatory milestones
$166.7
Probability-adjusted
Probabilities of success
14% - 97%
Contingent
Consideration
Liabilities
Fair Value as of
December 31, 2023
(in millions)
Valuation Technique
Unobservable Inputs
Values
Development and
regulatory milestones
$74.8
Probability-adjusted
Probabilities of success
14% - 97%
Priority review voucher
milestone
$6.0
Probability-adjusted
discounted cash flow
Probability of success
16.4%
Discount rate
10.0%
A rollforward of the Company's valuations deferred and contingent consideration liabilities for the years ended
December 31, 2024 and 2023 follows (in thousands):
Deferred Consideration
(Level 2 Liabilities)
Contingent
Consideration
(Level 3 Liabilities)
Balance as of December 31, 2022
$
7,400
$
58,100
Additions
—
—
Change in fair value
2,197
26,500
Payments
(3,897)
—
Balance as of December 31, 2023
5,700
84,600
Additions
—
—
Change in fair value
7,400
84,300
Payments
(13,100)
—
Balance as of December 31, 2024
$
—
$
168,900
The change in fair value of deferred and contingent consideration liabilities are due to changes in factors such as the
probability of achieving milestones, the Company's stock price, or certain other estimated assumptions. Payments are made in
shares of the Company's common stock.
Convertible Notes
The fair value of the Company's 2028 Convertible Notes, which differs from their carrying value, is influenced by
interest rates, the Company's stock price and stock price volatility (collectively, the Current Market Factors), and is determined
by prices for the convertible notes observed in market trading which are Level 2 inputs.
The estimated fair value of the 2028 Convertible Notes (categorized as a Level 2 liability for fair value measurement
purposes) as of December 31, 2024 was $1.2 billion, determined using the Current Market Factors and the ability of the
Company to obtain debt on comparable terms to the 2028 Convertible Notes.
Royalty Financing Agreement
The fair value of the Royalty Financing Agreement at the time of the transaction was based on the Company’s
estimates of future royalties expected to be paid to OrbiMed over the life of the arrangement, which was determined using
forecasts from market data sources, which are considered Level 3 inputs. This liability is being amortized using the effective
interest method over the life of the arrangement, in accordance ASC 470, Debt and ASC 835, Interest. The Company will
utilize the prospective method to account for subsequent changes in the estimated future payments to be made to OrbiMed and
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. Fair Value Measurements (Continued)
103
will update the effective interest rate on a quarterly basis. The carrying value of the Royalty Financing Agreement approximates
fair value. For more information, see Note - 11 Royalty Financing Agreement.
Secured Senior Term Loan
The carrying value of the Term Loans are measured at amortized cost using the effective interest method and the
carrying value approximates fair value. For more information, see Note - 10 Debt.
4. Product Revenues, Net
In accordance with ASC 606, Revenue from Contracts with Customers, the Company recognizes revenue when a
customer obtains control of promised goods or services, in an amount that reflects the consideration the Company expects to
receive in exchange for the goods or services provided. To determine revenue recognition for arrangements within the scope of
ASC 606, the Company performs the following five steps: (1) identify the contracts with a customer; (2) identify the
performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance
obligations in the contract; and (5) recognize revenue when or as the entity satisfies a performance obligation. At contract
inception, the Company assesses the goods or services promised within each contract to determine which are performance
obligations and to assess whether each promised good or service is distinct. The Company then recognizes as revenue the
amount of the transaction price that is allocated to the respective performance obligation when or as the performance obligation
is satisfied. For all contracts that fall into the scope of ASC 606, the Company has identified one performance obligation: the
sale of ARIKAYCE to its customers. The Company has not incurred or capitalized any incremental costs associated with
obtaining contracts with customers.
Product revenues, net consist of net sales of ARIKAYCE. The Company's customers in the US include specialty
pharmacies and specialty distributors. In December 2020, the Company began recognizing product revenue from commercial
sales of ARIKAYCE in Europe. In July 2021, the Company began recognizing product revenue from commercial sales of
ARIKAYCE in Japan. Globally, product revenues are recognized once the Company performs and satisfies all five steps of the
revenue recognition criteria mentioned above.
The following table presents a geographic summary of the Company's product revenues, net for the years ended
December 31, 2024, 2023 and 2022 (in thousands).
Years Ended December 31,
2024
2023
2022
US
$
254,800 $
224,195 $
185,994
Japan
87,699
65,733
56,506
Europe and rest of world
21,208
15,280
2,858
Total product revenues, net
$
363,707 $
305,208 $
245,358
The Company also recognizes revenue related to various EAPs in Europe. EAPs are intended to make products
available on a named-patient basis before they are commercially available in accordance with local regulations. During the
fourth quarter of 2022, the Company agreed with French authorities on the final reimbursement price related to the temporary
authorization for use (Autorisation Temporaire d'Utilisation or ATU) program in France. This final pricing resulted in a change
in estimate that reduced revenue by approximately $5.8 million in the fourth quarter of 2022, which related to periods prior to
2022. The accrued France ATU reimbursement payable as of December 31, 2024 relates to current year sales. The accrued
France ATU reimbursement payable is recorded within accounts payable and accrued liabilities in the consolidated balance
sheets (see Note 8 - Accounts Payable and Accrued Liabilities).
Revenue is recorded at net selling price (transaction price), which includes estimates of variable consideration for
which reserves are established for (a) customer credits, such as invoice discounts for prompt pay, (b) estimated government
rebates, such as Medicaid and Medicare Part D reimbursements, and estimated managed care rebates, (c) estimated
chargebacks, and (d) estimated costs of co-payment assistance. These reserves are based on the amounts earned or to be claimed
on the related sales and are classified as reductions of accounts receivable (prompt pay discounts and chargebacks), prepaid
expenses (co-payment assistance), or as a current liability (rebates). Where appropriate, these estimates take into consideration a
range of possible outcomes which are probability-weighted for relevant factors such as the Company's historical experience,
current contractual and statutory requirements, and forecasted customer buying and payment patterns. Overall, these reserves
reflect the Company's best estimates of the amount of consideration to which it is entitled based on the terms of the applicable
contract. The amount of variable consideration included in the transaction price may be constrained and is included in the net
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. Fair Value Measurements (Continued)
104
sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized
will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Company's estimates.
If actual results in the future vary from estimates, the Company adjusts these estimates, which would affect net product revenue
and earnings in the period such variances become known.
Customer credits: Certain of the Company's customers are offered various forms of consideration, including prompt
payment discounts. The payment terms for sales to specialty pharmacies and specialty distributors for prompt payment
discounts are based on contractual rates agreed with the respective specialty pharmacies and distributors. The Company
anticipates that its customers will earn these discounts and, therefore, deducts the full amount of these discounts from total
gross product revenues at the time such revenues are recognized.
Rebates: The Company contracts with certain government agencies and managed care organizations, or collectively,
third-party payors, so that ARIKAYCE will be eligible for purchase by, or partial or full reimbursement from, such third-party
payors. The Company estimates the rebates it will provide to third-party payors and deducts these estimated amounts from total
gross product revenues at the time the revenues are recognized. These reserves are recorded in the same period in which the
revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability. The current
liability is included in accounts payable and accrued liabilities on the consolidated balance sheets. The Company estimates the
rebates that it will provide to third-party payors based upon (i) the Company's contracts with these third-party payors, (ii) the
government mandated discounts applicable to government-funded programs, (iii) a range of possible outcomes that are
probability-weighted for the estimated payor mix, and (iv) information obtained from the Company's specialty pharmacies.
Chargebacks: Chargebacks are discounts that occur when certain contracted customers, currently public health service
institutions and federal government entities purchasing via the Federal Supply Schedule, purchase directly from the Company's
specialty distributor. Contracted customers generally purchase the product at a discounted price and the specialty distributor, in
turn, charges back to the Company the difference between the price the specialty distributor initially paid and the discounted
price paid by the contracted customers. The Company estimates chargebacks provided to the specialty distributor and deducts
these estimated amounts from gross product revenues, and from accounts receivable, at the time revenues are recognized.
Co-payment assistance: Patients who have commercial insurance and meet certain eligibility requirements may receive
co-payment assistance. Based upon the terms of the program and information regarding programs provided for similar specialty
pharmaceutical products, the Company estimates the average co-pay mitigation amounts and the percentage of patients that it
expects to participate in the program in order to establish accruals for co-payment assistance. These reserves are recorded in the
same period in which the related revenue is recognized, resulting in a reduction of product revenue. The Company adjusts its
accruals for co-pay assistance based on actual redemption activity and estimates of future redemptions related to sales in the
current period.
If any or all of the Company's actual experience varies from its estimates, the Company may need to adjust prior
period accruals, affecting revenue in the period of adjustment.
The following table provides a summary rollforward of the Company's sales allowances and related accruals for the
years ended December 31, 2024 and 2023, which have been deducted in arriving at product revenues, net (in thousands).
Customer Credits,
Fees and Discounts
Rebates,
Chargebacks and
Co-pay Assistance
Total
Balance as of December 31, 2022
$
14,232 $
5,564 $
19,796
Allowances for current period sales
12,494
33,834
46,328
Allowances for prior period sales
—
(118)
(118)
Payments and credits
(11,244)
(29,103)
(40,347)
Balance as of December 31, 2023
$
15,482 $
10,177 $
25,659
Allowances for current period sales
14,410
41,082
55,492
Allowances for prior period sales
100
3,380
3,480
Payments and credits
(22,415)
(39,958)
(62,373)
Balance as of December 31, 2024
$
7,577 $
14,681 $
22,258
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Product Revenues, Net (Continued)
105
5. Inventory
The Company's inventory balance consists of the following (in thousands):
As of December 31,
2024
2023
Raw materials
$
19,682 $
24,562
Work-in-process
39,932
33,480
Finished goods
38,964
25,206
$
98,578 $
83,248
Inventory is stated at the lower of cost and net realizable value and consists of raw materials, work-in-process, and
finished goods. The Company has not recorded any significant inventory write-downs. The Company currently uses a limited
number of third-party CMOs to produce its inventory.
6. Intangibles, Net and Goodwill
Intangibles, Net
Finite-lived Intangible Assets
As of December 31, 2024, the Company's finite-lived intangible assets consisted of acquired ARIKAYCE R&D and
the milestones paid to PARI for the license to use Lamira for the delivery of ARIKAYCE to patients as a result of the FDA and
EC approvals of ARIKAYCE in September 2018 and October 2020, respectively. The Company began amortizing its acquired
ARIKAYCE R&D and PARI milestones intangible assets in October 2018, over ARIKAYCE's initial regulatory exclusivity
period of 12 years. Amortization of these assets during each of the next five years is estimated to be approximately $5.1 million
per year.
Indefinite-lived Intangible Assets
As of December 31, 2024, the Company's indefinite-lived intangible assets consisted of acquired IPR&D from the
Business Acquisition (see Note 18 - Acquisitions). Indefinite-lived intangible assets are not amortized.
A rollforward of the Company's intangible assets for the years ended December 31, 2024 and 2023 follows (in
thousands):
Intangible Asset
December 31, 2023
Additions
Amortization
December 31, 2024
Acquired ARIKAYCE R&D
$
32,738 $
— $
(4,850) $
27,888
Acquired IPR&D
29,600
—
—
29,600
PARI milestones
1,366
—
(202)
1,164
$
63,704 $
— $
(5,052) $
58,652
Intangible Asset
December 31, 2022
Additions
Amortization
December 31, 2023
Acquired ARIKAYCE R&D
$
37,588 $
— $
(4,850) $
32,738
Acquired IPR&D
29,600
—
—
29,600
PARI milestones
1,568
—
(202)
1,366
$
68,756 $
— $
(5,052) $
63,704
Goodwill
The Company's goodwill balance of $136.1 million as of December 31, 2024 and 2023 resulted from the August 2021
Business Acquisition (see Note 18 - Acquisitions).
7. Fixed Assets, Net
Fixed assets are stated at cost and depreciated using the straight-line method, based on useful lives as follows (in
thousands):
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
106
Estimated
Useful Life (years)
As of December 31,
Asset Description
2024
2023
Laboratory equipment
7
$
26,753 $
22,660
Furniture and fixtures
7
6,428
6,428
Computer hardware and software
3 - 5
6,485
6,001
Office equipment
7
171
89
Manufacturing equipment
7
1,336
1,336
Leasehold improvements
2 - 10
38,058
38,049
Construction in progress
—
51,127
35,449
130,358
110,012
Less accumulated depreciation
(50,306)
(44,628)
$
80,052 $
65,384
Depreciation expense was $6.0 million, $5.5 million and $5.3 million for the years ended December 31, 2024, 2023
and 2022, respectively.
8. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of the following (in thousands):
As of December 31,
2024
2023
Accounts payable and other accrued operating expenses
$
73,033 $
65,393
Accrued clinical trial expenses
26,068
23,711
Accrued professional fees
17,895
13,885
Accrued technical operation expenses
18,388
9,187
Accrued compensation and employee related costs
80,312
48,933
Accrued royalty and milestones payable
6,324
5,674
Accrued interest payable
359
2,175
Revenue Interest Payments payable
4,177
3,347
Accrued sales allowances and related costs
16,762
10,937
Accrued France ATU reimbursement payable
5,988
14,685
Deferred and contingent consideration
24,700
6,700
Other accrued liabilities
11,203
10,360
$
285,209 $
214,987
9. Leases
The Company's lease portfolio consists primarily of office and laboratory space, manufacturing facilities, research
equipment, and fleet vehicles. All of the Company's leases are classified as operating leases, except for the Company's leases of
its corporate headquarters and a research facility in San Diego, which are classified as finance leases. The terms of the
Company's lease agreements that have commenced range from less than one year to ten years, ten months. In its assessment of
the term of each such lease, the Company has not included any options to extend or terminate the lease due to the absence of
economic incentives in its lease agreements. Leases that qualify for treatment as a short-term lease are expensed as incurred.
These short-term leases are not material to the Company's financial position. Furthermore, the Company does not separate lease
and non-lease components for all classes of underlying assets. The Company's leases do not contain residual value guarantees
and it does not sublease any of its leased assets.
The Company outsources its manufacturing operations to CMOs. Upon review of the agreements with its CMOs, the
Company determined that these contracts contain embedded leases for dedicated manufacturing facilities. The Company obtains
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
107
substantially all of the economic benefits from the use of the manufacturing facilities, the Company has the right to direct how
and for what purpose the facility is used throughout the period of use, and the supplier does not have the right to change the
operating instructions of the facility. The operating lease right-of-use assets and corresponding lease liabilities associated with
the manufacturing facilities is the sum of the minimum guarantees over the life of the production contracts.
The Company records variable consideration for variable lease payments in excess of fixed fees or minimum
guarantees. Variable costs related to CMO manufacturing agreements are direct costs related to the manufacturing of
ARIKAYCE and are capitalized within inventory in the Company's consolidated balance sheet, while the variable costs related
to other leasing arrangements, not related to the manufacturing of ARIKAYCE, have been classified within operating expenses
in the Company's consolidated statements of comprehensive loss. The table below summarizes the Company's total lease costs
included in its consolidated financial statements, as well as other required quantitative disclosures (in thousands).
As of December 31, 2024
As of December 31, 2023
Finance lease cost:
Amortization of right-of-use assets
$
2,712
$
2,712
Interest on lease liabilities
2,230
2,417
Total finance lease cost
$
4,942
$
5,129
Operating lease cost
10,415
10,385
Variable lease cost
25,818
14,148
Total lease cost
$
41,175
$
29,662
Other information:
Cash paid for amounts included in the measurement of lease
liabilities
Operating cash flows for finance leases
$
2,230
$
2,417
Operating cash flows for operating leases
$
10,389
$
9,098
Financing cash flows for finance leases
$
2,610
$
1,217
Right-of-use assets obtained in exchange for new finance
lease liabilities
$
—
$
—
Right-of-use assets obtained in exchange for new operating
lease liabilities
$
8,995
$
5,329
Weighted average remaining lease term - finance leases
6.6 years
7.6 years
Weighted average remaining lease term - operating leases
2.9 years
2.5 years
Weighted average discount rate - finance leases
7.9 %
7.9 %
Weighted average discount rate - operating leases
9.0 %
7.6 %
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Leases (Continued)
108
The table below presents the maturity of lease liabilities on an annual basis for the remaining years of the Company's
commenced lease agreements (in thousands).
Year Ending December 31,
Finance Leases
Operating Leases
2025
$
4,967 $
10,647
2026
5,097
4,244
2027
5,228
2,703
2028
5,361
2,457
2029
5,496
925
Thereafter
8,661
—
Total
34,810
20,976
Less: present value discount
7,785
2,506
Present value of lease liabilities
$
27,025 $
18,470
Balance Sheet Classification at December 31, 2024:
Current lease liabilities
$
2,961 $
9,358
Long-term lease liabilities
24,064
9,112
Total lease liabilities
$
27,025 $
18,470
The Company entered into certain agreements with Patheon related to increasing its long-term production capacity for
ARIKAYCE commercial inventory. The Company has determined that these agreements with Patheon contain an embedded
lease for the manufacturing facility and the specialized equipment contained therein. As of December 31, 2024, costs of $59.0
million incurred by the Company under these additional agreements have been classified within other assets in the Company's
consolidated balance sheet. Upon the commencement date, prepaid costs and minimum guarantees specified in the agreement
will be combined to establish an operating lease ROU asset and operating lease liability.
10. Debt
Debt, long-term consists of the following commitments as of December 31, 2024 and 2023 (in thousands):
As of December 31,
2024
2023
Convertible notes
$
567,164
$
788,909
Term Loans
536,218
366,404
Debt, long-term
$
1,103,382
$
1,155,313
In May 2021, the Company completed an underwritten public offering of $575.0 million aggregate principal amount of
the 2028 Convertible Notes, including the exercise in full of the underwriters' option to purchase an additional $75.0 million in
aggregate principal amount of 2028 Convertible Notes. The Company's net proceeds from the offering, after deducting
underwriting discounts and commissions and other offering expenses of $15.7 million, were approximately $559.3 million. The
2028 Convertible Notes bear interest payable semiannually in arrears on June 1 and December 1 of each year, beginning on
December 1, 2021. The 2028 Convertible Notes mature on June 1, 2028, unless earlier converted, redeemed, or repurchased.
In January 2018, the Company completed an underwritten public offering of $450.0 million aggregate principal of the
2025 Convertible Notes, including the exercise in full of the underwriters' option to purchase an additional $50.0 million in
aggregate principal amount of 2025 Convertible Notes. The Company's net proceeds from the offering, after deducting
underwriting discounts and commissions and other offering expenses of $14.2 million, were approximately $435.8 million. The
2025 Convertible Notes bore interest payable semiannually in arrears on January 15 and July 15 of each year, beginning on July
15, 2018. The 2025 Convertible Notes would have matured on January 15, 2025 but on June 27, 2024, the Company called the
outstanding 2025 Convertible Notes for redemption, which was completed on August 9, 2024. See Redemption and Conversion
of the 2025 Convertible Notes below for further details.
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Leases (Continued)
109
A portion of the net proceeds from the 2028 Convertible Notes was used to repurchase $225.0 million of the
Company's outstanding 2025 Convertible Notes. The Company recorded a loss on early extinguishment of debt of $17.7
million, primarily related to the premium paid on extinguishment of a portion the 2025 Convertible Notes.
On or after March 1, 2028, until the close of business on the second scheduled trading day immediately preceding June
1, 2028, holders may convert their 2028 Convertible Notes at any time. The initial conversion rate for the 2028 Convertible
Notes is 30.7692 shares of common stock per $1,000 principal amount of 2028 Convertible Notes (equivalent to an initial
conversion price of approximately $32.50 per share of common stock). Upon conversion of either the 2025 Convertible Notes
or the 2028 Convertible Notes, holders may receive cash, shares of the Company's common stock or a combination of cash and
shares of the Company's common stock, at the Company's option. The conversion rates will be subject to adjustment in some
events but will not be adjusted for any accrued and unpaid interest.
Holders may convert their 2028 Convertible Notes prior to March 1, 2028, only under the following circumstances,
subject to the conditions set forth in the applicable indenture: (i) during the five business day period immediately after any five
consecutive trading day period (the measurement period) in which the trading price per $1,000 principal amount of 2028
Convertible Notes, as determined following a request by a holder of such convertible notes, for each trading day of the
measurement period was less than 98% of the product of the last reported sale price of the common stock and the conversion
rate on such trading day, (ii) the Company elects to distribute to all or substantially all holders of the common stock (a) any
rights, options or warrants (other than in connection with a stockholder rights plan for so long as the rights issued under such
plan have not detached from the associated shares of common stock) entitling them, for a period of not more than 45 days from
the declaration date for such distribution, to subscribe for or purchase shares of common stock at a price per share that is less
than the average of the last reported sale prices of the common stock for the 10 consecutive trading day period ending on, and
including, the trading day immediately preceding the declaration date for such distribution, or (b) the Company's assets, debt
securities or rights to purchase securities of the Company, which distribution has a per share value, as reasonably determined by
the board of directors, exceeding 10% of the last reported sale price of the common stock on the trading day immediately
preceding the declaration date for such distribution, (iii) if a transaction or event that constitutes a fundamental change or a
make-whole fundamental change occurs, or if the Company is a party to (a) a consolidation, merger, combination, statutory or
binding share exchange or similar transaction, pursuant to which the common stock would be converted into, or exchanged for,
cash, securities or other property or assets, or (b) any sale, conveyance, lease or other transfer or similar transaction in one
transaction or a series of transactions of all or substantially all of the consolidated assets of the Company and its subsidiaries,
taken as a whole, all or any portion of the 2028 Convertible Notes may be surrendered by a holder for conversion at any time
from or after the date that is 30 scheduled trading days prior to the anticipated effective date of the transaction, (iv) if during
any calendar quarter commencing after the calendar quarter ending on June 30, 2021 (and only during such calendar quarter),
the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the period of 30
consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to
130% of the conversion price on each applicable trading day (each, a Stock Price Convertibility Trigger), or (v) if the Company
sends a notice of redemption, a holder may surrender all or any portion of its 2028 Convertible Notes to which the notice of
redemption relates for conversion at any time on or after the date the applicable notice of redemption was sent until the close of
business on (a) the second business day immediately preceding the related redemption date or (b) if the Company fails to pay
the redemption price on the redemption date as specified in such notice of redemption, such later date on which the redemption
price is paid.
The 2028 Convertible Notes can be settled in cash, common stock, or a combination of cash and common stock at the
Company's option, and thus, the Company determined the embedded conversion option in the 2028 Convertible Notes is not
required to be separately accounted for as a derivative. However, since the 2028 Convertible Notes are within the scope of the
accounting guidance for cash convertible instruments, the Company is required to separate the 2028 Convertible Notes into
liability and equity components. The carrying amount of the liability component of the 2028 Convertible Notes as of the date of
issuance was calculated by measuring the fair value of a similar liability that did not have an associated equity component. The
fair value was based on data from readily available pricing sources which utilize market observable inputs and other
characteristics for similar types of instruments. The carrying amount of the equity component representing the embedded
conversion option of the 2028 Convertible Notes was determined by deducting the fair value of the liability component from
the gross proceeds of the 2028 Convertible Notes. The excess of the principal amount of the liability component over its
carrying amount is amortized to interest expense over the expected life of a similar liability that does not have an associated
equity component using the effective interest method. The equity component is not remeasured as long as it continues to meet
the conditions for equity classification in the accounting guidance for contracts in an entity’s own equity. The same accounting
approach was taken for the 2025 Convertible Notes, which are no longer outstanding.
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. Debt (Continued)
110
The fair value of the liability component of the 2025 Convertible Notes on the date of issuance was estimated at
$309.1 million using an effective interest rate of 7.6% and, accordingly, the residual equity component on the date of issuance
was $140.9 million. The fair value of the liability component of the 2028 Convertible Notes on the date of issuance was
estimated at $371.6 million using an effective interest rate of 7.1% and, accordingly, the residual equity component on the date
of issuance was $203.4 million. The respective discounts were amortized to interest expense over the term of the applicable
series of convertible notes through December 31, 2021, prior to the adoption of ASU 2020-06. The 2028 Convertible Notes
have a remaining term of approximately 3.42 years.
The $567.2 million carrying value of the 2028 Convertible Notes as of December 31, 2024 is net of $7.8 million of
unamortized debt issuance costs. The 2025 Convertible Notes were fully converted or redeemed by the Company on August 9,
2024, such that none were outstanding as of December 31, 2024. The following table presents the carrying value of the
Company’s convertible notes balance (in thousands):
As of December 31,
2024
2023
Face value of outstanding convertible notes
$
574,923
$
800,000
Debt issuance costs, unamortized
(7,759)
(11,091)
Convertible notes
$
567,164
$
788,909
Redemption and Conversion of the 2025 Convertible Notes
On June 27, 2024, the Company issued a redemption notice for its 2025 Convertible Notes with a redemption date of
August 9, 2024 (the Redemption Date). The Company elected to settle any conversions of the 2025 Convertible Notes that
occurred on or before the business day prior to the Redemption Date in shares of the Company’s common stock. Holders of
$224.8 million aggregate principal amount of the then outstanding 2025 Convertible Notes elected to convert their notes into
shares of the Company's common stock at a conversion rate of 25.5384 shares of common stock per $1,000 principal amount of
2025 Convertible Notes (equivalent to an initial conversion price of approximately $39.16 per share of common stock). These
conversions resulted in the issuance of an aggregate of 5,741,063 shares of the Company’s common stock.
The remaining $0.2 million aggregate principal amount of 2025 Convertible Notes outstanding were redeemed by the
Company on the Redemption Date at a redemption price equal to 100% of the principal amount of the 2025 Convertible Notes,
plus accrued and unpaid interest on the 2025 Convertible Notes to, but excluding, the Redemption Date (the Redemption Price).
For each $1,000 principal amount of 2025 Convertible Notes, the Redemption Price was approximately $1,001.17.
Conversions of 2028 Convertible Notes
On July 1, 2024 and October 1, 2024, the 2028 Convertible Notes became convertible, through the end of the third
quarter of 2024 and fourth quarter of 2024, respectively, by the holders of such notes due to the satisfaction of the Stock Price
Convertibility Trigger applicable to such notes. The current conversion rate for the 2028 Convertible Notes is 30.7692 shares of
common stock per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $32.50 per share
of common stock). The Company has elected to settle any conversions of the 2028 Convertible Notes in shares of common
stock. As of December 31, 2024, holders of seventy-seven thousand dollars of aggregate principal amount of 2028 Convertible
Notes elected to convert their notes, resulting in an issuance of an aggregate of 2,362 shares of the Company’s common stock.
The 2028 Convertible Notes may be convertible in subsequent quarters if another convertibility-triggering event occurs.
Secured Senior Term Loan
In October 2022, the Company entered into the $350.0 million Tranche A Term Loan with Pharmakon that would have
matured on October 19, 2027. The Tranche A Term Loan originally bore interest at a rate based upon the SOFR, subject to a
SOFR floor of 2.5%, in addition to a margin of 7.75% per annum. Up to 50% of the interest payable during the first 24 months
from the closing of the Tranche A Term Loan could have been paid-in-kind at the Company's election. If elected, paid-in-kind
interest would have been capitalized and added to the principal amount of the Tranche A Term Loan. The Tranche A Term
Loan, including the paid-in-kind interest, would have been repaid in eight equal quarterly payments starting in the 13th quarter
following the closing of the Tranche A Term Loan (i.e., the quarter ending March 31, 2026), except that the repayment start
date could have been extended at the Company's option for an additional four quarters, so that repayments start in the 17th
quarter following the closing of the Tranche A Term Loan, subject to the achievement of specified ARIKAYCE data thresholds
and certain other conditions. Net proceeds from the Tranche A Term Loan, after deducting the lenders fees and deal expenses of
$15.1 million, were $334.9 million.
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. Debt (Continued)
111
Amended and Restated Loan Agreement
In October 2024, the Company entered into the A&R Loan Agreement with BioPharma Credit PLC, BPCR Limited
Partnership and BioPharma Credit Investments V (Master) LP, which are funds managed by Pharmakon, and the guarantors
party to such agreement. The A&R Loan Agreement amends and restates the Loan Agreement, dated as of October 19, 2022,
pursuant to which the Tranche A Term Loan was provided. The A&R Loan Agreement, among other items, provides an
additional $150.0 million senior secured term loan tranche. The A&R Loan Agreement extends the maturity of the Term Loans
to September 30, 2029, subject to acceleration to February 1, 2028 on the occurrence of certain prespecified events, and amends
the interest rate on the Term Loans to a fixed rate of 9.6% per annum. As consideration for the provision of the Tranche B Term
Loan, the Company agreed to pay Pharmakon a fee equal to 2.0% of the Tranche B Term Loan at the closing date of the
Tranche B Term Loan and an additional exit fee of 2.0% of the amount of each prepayment or repayment of the Term Loans.
The Term Loans will be repaid in eight equal quarterly payments starting on January 3, 2028. Net proceeds from the Tranche B
Term Loan, after deducting the lenders fees and administrative expenses of $3.7 million, were $146.3 million.
The Company evaluated whether the A&R Loan Agreement represented a debt modification or extinguishment in
accordance with ASC 470-50, Debt – Modifications and Extinguishments. As the present value of the cash flows under the
terms of the A&R Loan Agreement was less than 10% different from the remaining cash flows under the terms of the Tranche
A Term Loan, the A&R Loan Agreement was accounted for as a debt modification. The unamortized balance of debt issuance
costs incurred in connection with the Term Loans are being amortized through September 2029 utilizing the effective interest
rate method. The effective interest rate of the Term Loans was 10.6% at modification.
The following table presents the carrying value of the Company’s Term Loans balance as of December 31, 2024 and
2023 (in thousands):
As of December 31,
2024
2023
Principal
$
500,000
$
350,000
Paid-in-kind interest capitalized
46,770
27,537
Debt discount, net
(10,552)
(11,133)
Term Loans
$
536,218
$
366,404
As of December 31, 2024, future principal repayments of debt for each of the fiscal years through maturity were as
follows (in thousands):
Year Ending December 31:
2025
$
—
2026
—
2027
—
2028
916,654
2029
205,039
2030 and thereafter
—
$
1,121,693
The estimated fair value of the debt (categorized as a Level 2 liability for fair value measurement purposes) is
determined using current market factors and the ability of the Company to obtain debt at comparable terms to those that are
currently in place.
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. Debt (Continued)
112
Interest expense for the years ended December 31, 2024, 2023, and 2022, is as follows (in thousands):
Years Ended December 31,
2024
2023
2022
Convertible debt contractual interest expense
$
6,397 $
8,250 $
8,250
Term Loans contractual interest expense
51,587
46,743
8,330
Royalty Financing Agreement non-cash interest expense
20,044
18,846
3,687
Amortization of debt issuance costs
6,884
7,320
3,991
Swap interest (income) expense
(2,229)
(1,882)
380
Total debt interest expense
$
82,683 $
79,277 $
24,638
Finance lease interest expense
2,230
2,417
1,808
Total interest expense
$
84,913 $
81,694 $
26,446
In accordance with the Company's transition using the modified retrospective method upon adopting ASU 2020-06 on
January 1, 2022, the Company ceased accreting debt discount. The impact of adopting ASU 2020-06 on January 1, 2022
resulted in an opening balance sheet adjustment increasing debt by approximately $221.9 million and issuance costs classified
to debt by approximately $6.1 million, decreasing the deferred tax liability by $1.4 million, as well as an increase to retained
earnings of approximately $50.2 million, with an offsetting reduction to additional paid-in-capital of $264.6 million, net of tax.
11. Royalty Financing Agreement
In October 2022, the Company entered into the Royalty Financing Agreement with OrbiMed. Under the Royalty
Financing Agreement, OrbiMed paid the Company $150.0 million in exchange for the right to receive, on a quarterly basis,
royalties in an amount equal to 4.0% of ARIKAYCE global net sales prior to September 1, 2025 and 4.5% of ARIKAYCE
global net sales on or after September 1, 2025, as well as 0.75% of brensocatib global net sales, if approved. In the event that
OrbiMed has not received aggregate Revenue Interest Payments of at least $150.0 million on or prior to March 31, 2028, the
Company must make a one-time payment to OrbiMed for the difference between the $150.0 million and the aggregated
Revenue Interest Payments that have been paid. In addition, the royalty rate for ARIKAYCE will be increased beginning March
31, 2028 to the rate which would have resulted in aggregate Revenue Interest Payments as of March 31, 2028 equaling
$150.0 million. The total Revenue Interest Payments payable by the Company to OrbiMed are capped at 1.8x of the purchase
price or up to a maximum of 1.9x of the purchase price under certain conditions. Net proceeds from the Royalty Financing
Agreement, after deducting the lenders fees and deal expenses of $3.6 million, were $146.4 million. The Royalty Financing
Agreement was amended in October 2024 to, among other things, amend certain restrictions on the Company’s ability to incur
indebtedness.
The fair value of the Royalty Financing Agreement at the time of the transaction was based on the Company’s
estimates of future royalties expected to be paid to OrbiMed over the life of the arrangement, which was determined using
forecasts from market data sources, which are considered Level 3 inputs. This liability is being amortized using the effective
interest method over the life of the arrangement, in accordance ASC 470, Debt and ASC 835, Interest. The initial annual
effective interest rate was determined to be 12.4%. The Company is utilizing the prospective method to account for subsequent
changes in the estimated future payments to be made to OrbiMed and updates the effective interest rate on a quarterly basis.
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. Debt (Continued)
113
The following table presents the activity of the Company’s Royalty Financing Agreement balance for the years ended
December 31, 2024 and 2023 (in thousands):
As of December 31,
2024
2023
Royalty financing agreement liability - beginning balance
$
158,162
$
151,538
Revenue Interest Payments paid and payable
(14,535)
(12,222)
Interest expense recognized
20,044
18,846
Royalty financing agreement liability - ending balance
$
163,671
$
158,162
Royalty financing issuance costs, unamortized - beginning balance
$
(3,128)
$
(3,523)
Amortization of issuance costs
524
521
Other
—
(126)
Deferred issuance costs, unamortized - ending balance
$
(2,604)
$
(3,128)
Royalty Financing Agreement
$
161,067
$
155,034
The Revenue Interest Payments payable in connection with the royalty financing agreement were $4.2 million and
$3.3 million as of December 31, 2024 and 2023, respectively, which were recorded within accounts payable and accrued
expenses on the consolidated balance sheets. Non-cash interest expense is recorded within interest expense in the consolidated
statements of comprehensive loss.
12. Shareholders' Equity
Common Stock—As of December 31, 2024, the Company had 500,000,000 shares of common stock authorized with a
par value of $0.01 per share and 179,382,635 shares of common stock issued and outstanding. In addition, as of December 31,
2024, the Company had reserved 21,927,128 shares of common stock for issuance upon the exercise of outstanding common
stock options, 3,320,341 shares of common stock for issuance upon the vesting of RSUs and 660,466 shares for issuance upon
the vesting of PSUs. The Company has also reserved 17,689,921 shares of common stock in the aggregate for issuance upon
conversion of the remaining 2028 Convertible Notes, subject to adjustment in accordance with the applicable indentures. In
connection with the Business Acquisition, the Company reserved 9,406,112 shares of the Company’s common stock, subject to
certain closing-related reductions. The shares of the Company’s common stock reserved in connection with the Motus
acquisition were partly issued as acquisition consideration at closing and on the first, second and third anniversaries of the
closing date of the acquisition, and will also be issued upon the achievement of certain development and regulatory milestone
events, subject to certain reductions. The shares of the Company’s common stock reserved in connection with the AlgaeneX
acquisition will be issued upon the achievement of a development milestone event, subject to certain reductions.
Of the 9,406,112 shares reserved, subject to certain closing-related reductions, the Company issued 3,420,149 shares
of the Company's common stock in connection with the Business Acquisition (see Note 18 - Acquisitions) in the third quarter of
2021, after certain closing-related deductions. In the third quarter of 2022, the Company issued 171,427 shares of the
Company's common stock to fulfill the payment required to Motus equityholders on the first anniversary of the Business
Acquisition. In the third quarter of 2023, the Company issued 177,203 shares of the Company's common stock to fulfill the
payment required to Motus equityholders on the second anniversary of the Business Acquisition. In the third quarter of 2024,
the Company issued 182,182 shares of the Company's common stock to fulfill the payment required to Motus equityholders on
the third anniversary of the Business Acquisition.
In the third quarter of 2024, in connection with the redemption and conversions of the 2025 Convertible Notes, the
Company issued 5,741,063 shares of the Company's common stock. In the third and fourth quarter of 2024, in connection with
the conversions of the 2028 Convertible Notes, the Company issued 2,362 shares of the Company's common stock.
In May 2024, the Company completed an underwritten offering of 14,514,562 shares of the Company's common stock
at a public offering price of $51.50 per share. 1,893,203 of the shares of common stock were issued pursuant to the exercise in
full of the underwriters' option to purchase additional shares. The Company's net proceeds from the sale of the shares, after
deducting the underwriting discounts and estimated offering expenses of $34.3 million, were $713.2 million.
In the second quarter of 2023, in connection with the Company's acquisition of Adrestia, the Company issued
3,430,867 shares of the Company's common stock as consideration at closing. See Note 18 - Acquisitions for further details.
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. Royalty Financing Agreement (Continued)
114
In connection with the Company’s acquisition of Vertuis, the Company reserved 550,000 shares of the Company’s
common stock, subject to future adjustment. An aggregate of 500,000 of the reserved shares were issued as acquisition
consideration at closing. In July 2024, the Company issued the Vertuis equityholders an additional 14,773 shares of common
stock. See Note 18 - Acquisitions for further details.
In the fourth quarter of 2022, the Company completed an underwritten offering of 13,750,000 shares of the Company's
common stock, at an offering price of $20.00 per share. The Company's net proceeds from the sale of the shares, after deducting
the underwriting discounts and offering expenses of approximately $16.2 million, were approximately $258.8 million.
In the first quarter of 2021, the Company entered into a sales agreement with Leerink Partners, to sell shares of the
Company's common stock, with aggregate gross sales proceeds of up to $250.0 million, from time to time, through the ATM
program, under which Leerink Partners acts as sales agent. During the year ended December 31, 2023, the Company issued and
sold an aggregate of 6,503,041 shares of common stock through the ATM program at a weighted-average public offering price
of $24.12 per share and received net proceeds of $152.2 million. In the first quarter of 2024, the Company entered into the new
sales agreement with Leerink Partners to sell shares of the Company's common stock, with aggregate gross sales proceeds of up
to $500.0 million, from time to time, through the new ATM program, under which Leerink Partners acted as sales agent. In
connection with entering into the new ATM program, the Company terminated the ATM program. During the third quarter of
2024, the Company issued and sold an aggregate of 5,022,295 shares of common stock through the new ATM program at a
weighted-average public offering price of $75.64 per share and received net proceeds of $371.3 million. On November 18,
2024, the Company terminated the new sales agreement.
Preferred Stock—As of December 31, 2024 and 2023, the Company had 200,000,000 shares of preferred stock
authorized with a par value of $0.01 and no shares of preferred stock were issued and outstanding.
13. Stock-Based Compensation
The Company's current equity compensation plan, the Insmed Incorporated Amended and Restated 2019 Incentive
Plan (the 2019 Incentive Plan), was approved by shareholders at the Company's Annual Meeting of Shareholders on May 13,
2023. The 2019 Incentive Plan replaced the Insmed Incorporated 2019 Incentive Plan, as amended, pursuant to which the
Company was authorized to grant incentive awards up to an aggregate of 13,750,000 shares. At the Company’s 2023 Annual
Meeting of Shareholders, in connection with approval of the 2019 Incentive Plan, the Company's shareholders approved the
issuance of an additional 10,500,000 shares under the 2019 Incentive Plan. At the Company's 2024 Annual Meeting of
Shareholders, the Company's shareholders approved Amendment No. 1 to the 2019 Incentive Plan, which provides for the
issuance of an additional 3,000,000 shares under the plan. As of December 31, 2024, 5,051,894 shares remained for future
issuance under the 2019 Incentive Plan.
The 2019 Incentive Plan is administered by the Compensation Committee of the Board of Directors of the Company.
Under the terms of the 2019 Incentive Plan, the Company is authorized to grant a variety of incentive awards based on its
common stock, including stock options (both incentive stock options and non-qualified stock options), RSUs, performance
options/shares and other stock awards to eligible employees and non-employee directors. The 2019 Incentive Plan will
terminate on May 16, 2029 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 to new hires, which awards are made pursuant to the Nasdaq's inducement
grant exception to the shareholder approval requirement for grants of equity compensation. During the years ended
December 31, 2024, 2023 and 2022, the Company granted inducement stock options covering 1,444,850, 2,674,290 and
1,068,310 shares, respectively, of the Company's common stock to new employees.
On May 15, 2018, the 2018 Employee Stock Purchase Plan was approved by shareholders at the Company's 2018
Annual Meeting of Shareholders. The ESPP allows eligible employees to acquire an ownership interest in the Company by
purchasing common stock, at a discount, through payroll deductions. The Company reserved an aggregate of 4,530,488 shares
of common stock for issuance under the ESPP. The ESPP is compensatory under GAAP and the Company recorded stock-
based compensation expense of $3.3 million, $1.9 million and $1.3 million for the years ended December 31, 2024, 2023 and
2022, respectively.
Stock Options—The Company calculates the fair value of stock options granted using the Black-Scholes valuation
model. The following table summarizes the grant date fair value and assumptions used in determining the fair value of all stock
options granted, including grants of inducement options, during the years ended December 31, 2024, 2023 and 2022.
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. Shareholders' Equity (Continued)
115
2024
2023
2022
Volatility
61% - 69%
62% - 70%
69% - 70%
Risk-free interest rate
3.51% - 4.64%
3.36% - 4.72%
1.37% - 4.27%
Dividend yield
0.0%
0.0%
0.0%
Expected option term (in years)
6.11
6.05
5.93
Weighted average fair value of stock options granted
$20.11
$13.12
$13.19
The volatility factor was based on the Company’s historical volatility during the expected option term. The Company
accounts for forfeitures as they occur.
From time to time, the Company has granted performance-conditioned options to certain of its employees. Vesting of
these options is subject to the Company achieving certain performance criteria established at the date of grant and the grantees
fulfilling a service condition (continued employment). As of December 31, 2024 and December 31, 2023, the Company had
performance-conditioned options covering 114,780 shares outstanding. As of December 31, 2024 and December 31, 2023, the
performance conditions are not probable and therefore, no stock-based compensation was recorded in the consolidated
statements of comprehensive loss.
The following table summarizes stock option activity for stock options granted for the years ended December 31,
2024, 2023 and 2022 as follows:
Number of
Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life in Years
Aggregate
Intrinsic
Value
(in '000)
Options outstanding at December 31, 2021
14,088,960 $
22.00
Granted
5,614,220 $
20.89
Exercised
(1,151,341) $
14.41
Forfeited and expired
(1,026,543) $
25.70
Options outstanding at December 31, 2022
17,525,296 $
21.93
Exercisable at December 31, 2022
8,587,820 $
20.35
Granted
6,650,880 $
20.20
Exercised
(871,933) $
16.03
Forfeited and expired
(791,674) $
24.01
Options outstanding at December 31, 2023
22,512,569 $
21.58
Exercisable at December 31, 2023
11,125,232 $
21.41
Granted
4,963,628 $
32.59
Exercised
(4,813,336) $
22.10
Forfeited and expired
(735,733) $
23.48
Options outstanding at December 31, 2024
21,927,128 $
23.89
6.99
$
991,993
Exercisable at December 31, 2024
10,772,458 $
21.41
5.45
$
512,988
The total intrinsic value of stock options exercised during the years ended December 31, 2024, 2023 and 2022 was
$173.4 million, $6.0 million and $11.1 million, respectively.
As of December 31, 2024, there was $153.9 million of unrecognized compensation expense related to unvested stock
options, which is expected to be recognized over a weighted average period of 2.5 years.
Restricted Stock and Restricted Stock Units—The Company may grant RS and 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 a specific period of continued service.
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. Stock-Based Compensation (Continued)
116
RS and RSU awards granted are valued at the market price of the Company's common stock on the date of grant. The
Company recognizes non-cash compensation expense for the fair values of these RS and RSUs on a straight-line basis over the
requisite service period of these awards.
The following table summarizes RSU awards granted during the years ended December 31, 2024, 2023 and 2022:
Number of
RSUs
Weighted
Average
Grant Price
Outstanding at December 31, 2021
1,019,714 $
27.33
Granted
1,021,219 $
20.34
Released
(417,894) $
26.79
Forfeited
(103,139) $
24.04
Outstanding at December 31, 2022
1,519,900 $
23.00
Granted
1,934,822 $
19.26
Released
(574,219) $
22.89
Forfeited
(130,209) $
20.87
Outstanding at December 31, 2023
2,750,294 $
20.50
Granted
1,679,702 $
27.37
Released
(926,933) $
21.14
Forfeited
(182,722) $
22.82
Outstanding at December 31, 2024
3,320,341 $
23.67
As of December 31, 2024, there was $56.7 million of unrecognized compensation expense related to unvested awards,
which is expected to be recognized over a weighted average period of 2.5 years.
Performance Stock Units—In January 2022, the Company issued 271,612 PSUs. For these PSUs, there are two
performance conditions, a service condition, and a market condition. The performance conditions are the issuance of a press
release announcing certain top-line results from a clinical trial and the acceptance of an NDA by the FDA for brensocatib. The
service condition is continuous employment with the Company through the later of the third anniversary of the grant date of the
PSU award and the date an NDA for brensocatib is accepted by the FDA. The potential payout of the awards ranges from 0% to
250% of the target, dependent on a market condition that is based on the Company's total shareholder return compared to the
NASDAQ Biotechnology Index, subject to certain adjustments (the Peer Group). Due to the multiple vesting conditions,
uncertain timing and variable payout of these PSUs, a Monte Carlo simulation was performed to determine the fair value of the
awards. Compensation cost will be recognized on the date the performance conditions become probable, with an initial
recording of the cumulative expense that would have been recognized if the PSU expense had been recognized on a straight-line
basis since the date of grant. The remaining unamortized fair value of the awards will then be expensed prospectively on a
straight-line basis over the remaining service period. Since the market condition is reflected in the grant-date fair value and is
not a condition for the award to vest, it does not impact the requisite service period. The volatility, risk-free interest rate and
weighted-average grant date fair value of the PSUs granted are 65.4%, 1.03% and $39.12, respectively. Any forfeitures that
occur after compensation cost recognition commences will result in the cumulative reversal of expense in the period in which
the forfeiture occurs.
The Company achieved the first performance condition for the PSUs by issuing a press release announcing certain
topline results from the ASPEN trial by June 30, 2024, and achieved the second performance condition, the acceptance of an
NDA by the FDA for brensocatib, in February 2025. During the second quarter of 2024, the Company's total shareholder return
was compared to the Company's Peer Group and the potential payout of the awards was determined to be 250% of the target.
As of December 31, 2024, there were 660,466 PSUs outstanding with an unrecognized compensation expense of $10.3 million.
In the first quarter of 2025, the PSUs vested and the Company recognized the compensation expense.
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. Stock-Based Compensation (Continued)
117
The following table summarizes the aggregate stock-based compensation expense recorded in the consolidated
statements of comprehensive loss related to stock options, RSUs and ESPP during the years ended December 31, 2024, 2023
and 2022 (in thousands):
Years Ended December 31,
2024
2023
2022
Research and development expenses
$
47,674 $
35,880 $
26,379
Selling, general and administrative expenses
49,161
38,898
31,307
Total stock-based compensation expense
$
96,835 $
74,778 $
57,686
There was no stock-based compensation expense recorded in the consolidated statements of comprehensive loss
related to PSUs during the years ended December 31, 2024, 2023 and 2022, as the performance conditions associated with the
PSU awards were not probable as of these dates.
14. Income Taxes
For the years ended December 31, 2024, 2023 and 2022, the Company recorded a provision for income taxes of $3.7
million, $2.6 million and $1.4 million, respectively, and the effective rate was approximately 0% for each of these years. The
provisions recorded are primarily a result of certain of the Company's international subsidiaries, which had taxable income
during the periods and certain state taxes in the US which effectively impose income tax on modified gross revenues. In
jurisdictions where the Company had net losses, there was a full valuation allowance recorded against the Company's deferred
tax assets and therefore no tax benefit was recorded.
The Company's loss before income taxes in the US and globally was as follows (in thousands):
Years Ended December 31,
2024
2023
2022
US
$
(814,531) $
(666,181) $
(406,262)
Foreign
(95,534)
(80,831)
(73,889)
Total
$
(910,065) $
(747,012) $
(480,151)
The Company's income tax provision consisted of the following (in thousands):
Years Ended December 31,
2024
2023
2022
Current:
Federal
$
— $
— $
—
State
356
378
269
Foreign
3,380
2,231
1,345
3,736
2,609
1,614
Deferred:
Federal
—
(13)
13
State
(29)
(41)
(244)
Foreign
—
—
—
(29)
(54)
(231)
Total
$
3,707 $
2,555 $
1,383
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. Stock-Based Compensation (Continued)
118
The reconciliation between the federal statutory tax rates and the Company's effective tax rate is as follows:
Years Ended December 31,
2024
2023
2022
Statutory federal tax rate
21 %
21 %
21 %
Permanent items
(1) %
(1) %
— %
State income taxes, net of federal benefit
3 %
3 %
1 %
R&D and other tax credits
3 %
3 %
3 %
Foreign income taxes
(1) %
(1) %
— %
Change in valuation allowance
(25) %
(21) %
(22) %
Asset acquisitions (see Note 18 - Acquisitions)
— %
(3) %
— %
Change in fair value of contingent consideration
(2) %
— %
— %
Stock-based compensation
2 %
(1) %
(2) %
Other
— %
— %
(1) %
Effective tax rate
— %
— %
— %
Deferred tax assets and liabilities are determined based on the difference between financial statement and tax bases
using enacted tax rates in effect for the year in which the differences are expected to reverse. The components of the deferred
tax assets and liabilities consist of the following:
As of December 31,
2024
2023
Deferred tax assets:
Net operating loss and other carryforwards
$
672,735 $
563,869
General business credits
217,859
182,006
Inventory
2,276
2,341
Lease liabilities
9,341
12,000
Stock-based compensation
30,701
27,916
Capitalized R&D
178,021
115,299
Other
26,916
19,286
Deferred tax assets
1,137,849
922,717
Valuation allowance
(1,125,370)
(904,078)
Deferred tax assets, net of valuation allowance
$
12,479 $
18,639
Deferred tax liabilities:
Intangibles
$
(5,581) $
(9,139)
Right-of-use assets
(6,953)
(9,585)
Deferred tax liabilities
$
(12,534) $
(18,724)
Net deferred tax liabilities
$
(55) $
(85)
The deferred tax assets, net of valuation allowance of $12.5 million and $18.6 million at December 31, 2024 and 2023,
respectively, primarily consist of net operating loss, tax credit carryforwards and capitalized R&D for income tax purposes. As
required by the 2017 Tax Cuts and Jobs Act, effective January 1, 2022, the Company's research and development expenditures
were capitalized, resulting in a deferred tax asset. Due to the Company's history of operating losses, the Company recorded a
valuation allowance on its net deferred tax assets by increasing the valuation allowance by $221.3 million and $158.9 million in
2024 and 2023, respectively, as it was more likely than not that such tax benefits will not be realized. In 2023, an immaterial
amount was reclassified within the intangibles deferred tax liability to conform with the current year presentation.
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. Income Taxes (Continued)
119
At December 31, 2024, the Company had federal net operating loss (NOL) carryforwards for income tax purposes of
approximately $2.2 billion and federal tax credit carryforwards of $224.3 million. Due to the limitation on NOLs as more fully
discussed below, $2.0 billion of the NOLs are available to offset future taxable income, if any. The NOL carryovers and general
business tax credits expire in various years beginning in 2025. For state tax purposes, the Company has approximately $1.4
billion of NOLs in various states available to offset against future taxable income and state tax credit carryforwards of $11.9
million, expiring in various years beginning in 2025. The Company has $334.0 million of non-trading loss carryforwards in
Ireland and loss carryforwards in the United Kingdom and Switzerland of $48.9 million and $144.3 million, respectively. The
loss carryforwards in Ireland and the United Kingdom carry forward indefinitely while the loss carryforward in Switzerland
begins to expire in 2030. The Company has disallowed interest expense carryover of $40.9 million which carries forward
indefinitely.
The Company completed an Internal Revenue Code Section 382 (Section 382) analysis in order to determine the
amount of losses that are currently available for potential offset against future taxable income, if any. It was determined that the
utilization of the Company's NOL and general business tax credit carryforwards generated in tax periods up to and including
December 2010 were subject to substantial limitations under Section 382 due to ownership changes that occurred at various
points from the Company's original organization through December 2010. In general, an ownership change, as defined by
Section 382, results from transactions 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 more than 50 percentage points over a testing period (usually 3 years).
Since the Company's formation in 1999, it has raised capital through the issuance of common stock on several occasions which,
combined with the purchasing shareholders' subsequent disposition of those shares, have resulted in multiple changes in
ownership, as defined by Section 382. These ownership changes resulted in substantial limitations on the use of the Company's
NOLs and general business tax credit carryforwards up to and including December 2010. The Company continues to track all of
its NOLs and tax credit carryforwards but has provided a full valuation allowance to offset those amounts.
Law Changes
On August 16, 2022, the IRA was enacted into law containing corporate income tax provisions such as the corporate
alternative minimum tax and an excise tax on the repurchase of corporate stock. These provisions are not expected to have a
material impact on the Company’s income taxes in the near term.
The Organisation for Economic Co-operation and Development recently published a framework to implement a global
corporate minimum income tax rate of 15% on income arising in low-tax jurisdictions (Pillar Two). The Pillar Two proposed
legislation is applicable to multinational corporations with global revenue exceeding €750 million for at least two years of the
preceding four years. Over 140 countries have agreed in principle to implement Pillar Two and many have, or are in the process
of, enacting related legislation. The Pillar Two legislation is not anticipated to be effective for the Company until the
Company’s annual global revenues have exceeded the €750 million threshold. The Company is still evaluating the potential
consequences of Pillar Two on its longer-term financial position.
The financial statement recognition of the benefit for a tax position is dependent upon the benefit being more likely
than not to be sustainable upon audit by the applicable taxing authority. If this threshold is met, the tax benefit is then measured
and recognized at the largest amount that is greater than 50% likely of being realized upon ultimate settlement. If such
unrecognized tax benefits were realized and not subject to valuation allowances, the Company would recognize a tax benefit of
$19.0 million. The following table summarizes the gross amounts of unrecognized tax benefits (in thousands):
2024
2023
Balance as of January 1,
$
14,753
$
11,539
Additions related to prior period tax positions
—
230
Additions related to current period tax positions
4,261
2,984
Balance as of December 31,
$
19,014
$
14,753
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 years ended 2021 and later, and is generally open for certain states for the years 2020 and later. The
Company has incurred net operating losses since inception, except for the year ended December 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 has recorded no such expense. As of December 31, 2024 and 2023, the Company has recorded reserves
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. Income Taxes (Continued)
120
for unrecognized income tax benefits of $19.0 million and $14.8 million, respectively. As any adjustment to the Company’s
uncertain tax positions would not result in a cash tax liability, it has not recorded any accrued interest or penalties related to its
uncertain tax positions. If any of these unrecognized tax benefits were released, there would be no impact to the Company's
effective tax rate. The Company does not anticipate any material changes in the amount of unrecognized tax positions over the
next 12 months.
15. License and Other Agreements
In-License Agreements
PARI Pharma GmbH—In April 2008, the Company entered into a licensing agreement with PARI for use of the
optimized Lamira Nebulizer System for delivery of ARIKAYCE in treating patients with NTM lung infections, CF and
bronchiectasis. Under the licensing agreement, the Company has rights under several US and foreign issued patents and patent
applications involving improvements to the optimized Lamira Nebulizer System, to exploit the system with ARIKAYCE for the
treatment of such indications, but the Company cannot manufacture the nebulizers except as permitted under the
commercialization agreement with PARI, which is described in further detail below. The Lamira Nebulizer System has been
approved for use in the US (in combination with ARIKAYCE), the EU and Japan. Under the licensing agreement, the Company
paid PARI an upfront license fee and certain milestone payments. Upon FDA acceptance of the Company's NDA and the
subsequent FDA and EMA approval of ARIKAYCE, the Company paid PARI additional milestone payments of €1.0 million,
€1.5 million and €0.5 million, respectively. In October 2017, the Company exercised an option to buy-down the royalties that
will be paid to PARI on ARIKAYCE net sales. As a result, PARI is entitled to receive royalty payments in the mid-single digits
on the annual global net sales of ARIKAYCE, pursuant to the licensing agreement, subject to certain specified annual minimum
royalties. See below for information related to the commercialization agreement with PARI.
Other Agreements
PPD Development, L.P.—In April 2020, the Company entered into a master services agreement with PPD pursuant to
which it retained PPD to perform clinical development services in connection with certain of its clinical research programs. The
master services agreement has an initial term of five years. Either party may terminate (i) any project addendum under the
master services agreement for any reason and without cause upon 30 days’ written notice, (ii) any project addendum in the
event of the other party’s breach of the master services agreement or such project addendum upon 30 days’ written notice,
provided that such breach is not cured within such 30-day period, (iii) the master services agreement or any project addendum
immediately upon the occurrence of an insolvency event with respect to the other party or (iv) any project addendum upon 30
days’ written notice if (a) the continuation of the services under such project addendum would post material ethical or safety
risks to study participants, (b) any approval from a regulatory authority necessary to perform the applicable study is revoked,
suspended or expires without renewal or (c) in the reasonable opinion of such party, continuation of the services provided under
such project addendum would be in violation of applicable law. The Company entered into project addenda with PPD to
perform clinical development services over several years for, but not limited to, its ARISE, ENCORE and ASPEN studies and
other trials involving brensocatib and TPIP.
Patheon UK Limited—In October 2017, the Company entered into certain agreements with Patheon related to the
increase of its long-term production capacity for ARIKAYCE commercial inventory. The agreements provide for Patheon to
manufacture and supply ARIKAYCE for its anticipated commercial needs. Under these agreements, the Company is required to
deliver to Patheon the required raw materials, including active pharmaceutical ingredients, and certain fixed assets needed to
manufacture ARIKAYCE. Patheon's supply obligations will commence once certain technology transfer and construction
services are completed. The Company's manufacturing and supply agreement with Patheon will remain in effect for a fixed
initial term, after which it will continue for successive renewal terms unless either party has given written notice of termination.
The technology transfer agreement will expire when the parties agree that the technology transfer services have been
completed. The agreements may also be terminated under certain other circumstances, including by either party due to a
material uncured breach of the other party or the other party’s insolvency. These early termination clauses may reduce the
amounts due to the relevant parties.
AstraZeneca AB—In October 2016, the Company entered into a license agreement (AZ License Agreement) with
AstraZeneca, a Swedish corporation. Pursuant to the terms of the AZ License Agreement, AstraZeneca granted the Company
exclusive global rights for the purpose of developing and commercializing AZD7986 (renamed brensocatib). In consideration
of the licenses and other rights granted by AstraZeneca, the Company made an upfront payment of $30.0 million, which was
included as research and development expense in the fourth quarter of 2016. In December 2020, the Company incurred a $12.5
million milestone payment obligation upon the first dosing in a Phase 3 clinical trial of brensocatib. In May 2024, upon the
INSMED INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. Income Taxes (Continued)
121
Company's release of an official public statement that the Company intended to file an NDA, the Company incurred an
additional $12.5 million milestone payment obligation. Upon regulatory approval by the FDA of an NDA, the Company will
owe AstraZeneca an additional $30.0 million. Subsequent to this milestone, the Company is also obligated to make a series of
additional contingent milestone payments totaling up to an additional $30.0 million upon the achievement of regulatory filing
milestones. If the Company elects to develop brensocatib for a second indication, the Company will be obligated to make an
additional series of contingent milestone payments to AstraZeneca totaling up to $42.5 million, the first of which occurs at the
initiation of a Phase 3 trial in the additional indication. The Company is not obligated to make any additional milestone
payments for additional indications. In addition, the Company will pay AstraZeneca tiered royalties ranging from a high single-
digit to mid-teens on net sales of any approved product based on brensocatib and one additional payment of $35.0 million upon
the first achievement of $1.0 billion in annual net sales. The AZ License Agreement provides AstraZeneca with the option to
negotiate a future agreement with the Company for commercialization of brensocatib in chronic obstructive pulmonary disease
or asthma.
PARI Pharma GmbH—In July 2014, the Company entered into the Commercialization Agreement for the manufacture
and supply of the Device, which is an e-Flow® nebulizer modified and optimized for use with ARIKAYCE. Under the
Commercialization Agreement, PARI manufactures 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 by third parties (but not certain third parties deemed under
the Commercialization Agreement to compete with PARI). The Commercialization Agreement has an initial term of fifteen
years from the first commercial sale of ARIKAYCE in October 2018. The term of the agreement may be extended by the
Company for an additional five years by providing written notice to PARI at least one year prior to the expiration of the Initial
Term. Notwithstanding the foregoing, the parties have certain rights and obligations under the agreement prior to the
commencement of the Initial Term.
Resilience Biotechnologies Inc. (successor to Therapure Biopharma Inc.)—In February 2014, the Company entered
into a contract manufacturing agreement with Therapure Biopharma Inc., which was assumed by Resilience for the manufacture
of ARIKAYCE, on a non-exclusive basis, at a 200 kg scale. Pursuant to the agreement, the Company and Resilience
collaborated to construct a production area for the manufacture of ARIKAYCE in Resilience's existing manufacturing facility in
Canada. The agreement had an initial term of five years, which began in October 2018, and renews automatically for successive
periods of two years each, unless terminated by either party by providing the required two years prior written notice to the other
party. Notwithstanding the foregoing, the parties have rights and obligations under the agreement prior to the commencement of
the initial term. Under the agreement, the Company is obligated to pay a minimum of $6.0 million, subject to inflation
increases, for commercial ARIKAYCE batches produced and certain manufacturing activities each calendar year.
Cystic Fibrosis Foundation Therapeutics, Inc.—In 2004 and 2009, the Company entered into research funding
agreements with CFFT whereby it received $1.7 million and $2.2 million, respectively, in research funding for the development
of ARIKAYCE. As a result of the US approval of ARIKAYCE and in accordance with the agreements, as amended, the
Company owes milestone payments to CFFT of $13.4 million in the aggregate payable through 2025, of which $10.4 million
has been paid through December 31, 2024. Furthermore, if certain global sales milestones were met within five years of the
commercialization of ARIKAYCE, the Company would have owed up to an additional $3.9 million. The Company met and
paid $1.7 million of these additional global sales milestone payments.
Patheon Inc.—In January 2024, the Company entered into certain agreements with Patheon Inc. related to the
manufacture and supply of brensocatib by Patheon Inc. for the Company’s anticipated long-term commercial needs. Under
these agreements, the Company is required to deliver to Patheon Inc. the active pharmaceutical ingredient needed to
manufacture brensocatib. The master commercial manufacturing services agreement with Patheon Inc. will remain in effect for
a fixed initial term, after which it will continue for successive renewal terms unless either the Company or Patheon Inc. has
given written notice of termination. The agreements may also be terminated under certain other circumstances, including by
either party due to a material uncured breach of the other party or the other party’s insolvency. Patheon Inc.'s supply obligations
are governed by individual product agreements entered into from time to time under the master commercial manufacturing
services agreement. The product agreements specify, among other things, the term and pricing for Patheon Inc.’s supply
obligations.
Esteve Química, S.A—In September 2024, the Company entered into a commercial manufacturing and supply
agreement with Esteve for the manufacture and supply of brensocatib's active pharmaceutical ingredient. The commercial
manufacturing and supply agreement has an initial term of three years, after which it will continue for successive 12-month
renewal terms unless either the Company or Esteve has given written notice of termination. The agreement may also be
terminated under certain other circumstances, including by either party due to a material uncured breach of the other party or
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. License and Other Agreements (Continued)
122
the other party’s insolvency, the discontinue of specified dosages or changes in the regulatory landscape. Esteve’s supply
obligations are based on rolling forecasts of the Company’s anticipated demand for brensocatib.
16. Commitments and Contingencies
Commitments
In September 2018, the Company entered into a lease for its new corporate headquarters in Bridgewater, New Jersey.
The initial lease term commenced in October 2019 and expires in September 2030. In July 2016, the Company signed an
operating lease for laboratory space, also located in Bridgewater, for which the initial lease term was extended through
December 2026. In July 2023, the Company signed an amendment to expand the laboratory space in Bridgewater until 2027. In
January 2022, the Company entered into a lease for research activities in San Diego, California. The lease term commenced in
February 2022 and expires in June 2032. In February 2023, the Company signed an agreement to lease warehouse space in San
Diego through March 2029. Future minimum rental payments under the Bridgewater leases and San Diego leases are
$18.9 million and $20.6 million, respectively.
Rent expense charged to operations was $11.9 million, $9.2 million and $8.0 million for the years ended December 31,
2024, 2023 and 2022, respectively. Rent expense is recorded on a straight-line basis over the term of the applicable leases.
In addition to rent, the Company has several firm purchase commitments, primarily related to the manufacturing of
ARIKAYCE and annual minimum royalties on global net sales of ARIKAYCE. Future firm purchase commitments under these
agreements, the last of which ends in 2034, total $66.6 million. These amounts do not represent the Company's entire
anticipated purchases in the future, but instead represent only purchases that are the subject of contractually obligated minimum
purchases. The minimum commitments disclosed are determined based on non-cancelable minimum spend amounts or
termination amounts. Additionally, the Company purchases products and services as needed with no firm commitment.
Legal Proceedings
From time to time, the Company is a party to various lawsuits, claims and other legal proceedings that arise in the
ordinary course of business. While the 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 the Company’s consolidated financial position, results of
operations or cash flows.
17. Retirement Plan
The Company has a 401(k) defined contribution plan for the benefit of most US employees and permits voluntary
contributions by employees subject to IRS-imposed limitations. During the years ended December 31, 2024, 2023 and 2022, the
Company matched 100% of eligible employee contributions on the first 4% of employee compensation (up to the IRS
maximum). Employer contributions for the year ended December 31, 2024, 2023 and 2022 were $7.4 million, $5.5 million and
$4.6 million, respectively. Effective January 1, 2025, the Company is matching 100% of eligible employee contributions on the
first 5% of employee compensation (up to the IRS maximum).
18. Acquisitions
Asset Acquisitions
Adrestia Therapeutics Ltd.
In June 2023, the Company acquired all of the issued and outstanding share capital of Adrestia, a privately held,
preclinical stage company. At the closing of the transaction, the Company issued an aggregate of 3,430,867 shares of the
Company’s common stock to Adrestia’s former shareholders (collectively, the Adrestia shareholders). The closing share price
on the date of the transaction was $21.10, resulting in a purchase price of $72.4 million. The Adrestia shareholders may also
become entitled to receive contingent payments up to an aggregate of $326.5 million in cash upon the achievement of certain
development, regulatory and commercial milestone events, as well as royalty payments based upon a low single-digit
percentage of net sales of certain products, both subject to the terms and conditions of the agreement.
The shares of the Company’s common stock issued to the Adrestia shareholders were issued pursuant to Section
4(a)(2) of the Securities Act of 1933 (and, with respect to certain Adrestia shareholders, in reliance on Regulation S
promulgated under the Securities Act of 1933). The Company did not receive any net proceeds from the issuance of common
stock to the Adrestia shareholders.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. License and Other Agreements (Continued)
123
The Company evaluated the acquisition under ASC 805 and ASU 2017-01 and concluded that substantially all of the
fair value of the gross assets acquired are concentrated in a single identifiable asset or a group of similar identifiable assets and
accounted for the transaction as an asset acquisition. The Company determined that the IPR&D acquired did not have any
future alternative use and, in accordance with ASC 730, Research and Development, expensed the assets within research and
development in the consolidated statement of comprehensive loss as of the date of the acquisition. The Company recognized
$76.5 million as IPR&D expense for the year ending December 31, 2023, after adjusting for working capital assumed in
connection with the asset acquisition.
Vertuis Bio, Inc.
In January 2023, the Company acquired Vertuis, a privately held, preclinical stage company. At the closing of the
transaction, the Company issued an aggregate of 500,000 shares of the Company’s common stock to Vertuis’ former
stockholders and an individual who are entitled to receive a portion of the acquisition consideration (collectively, the Vertuis
equityholders). The closing share price on the date of the transaction was $18.50. In July 2024, the Company issued the Vertuis
equityholders an additional $1.0 million of shares of the Company's common stock, or 14,773 shares of common stock, based
on the share price on June 28, 2024. The Company is obligated to pay the Vertuis equityholders up to an aggregate of
$23.0 million in cash upon the achievement of certain development and regulatory milestone events, and up to an aggregate of
$63.8 million in cash upon the achievement of certain net sales-based milestone events, in each case, subject to certain
reductions.
The shares of the Company’s common stock issued to the Vertuis equityholders were issued pursuant to Section
4(a)(2) of the Securities Act of 1933. The following table summarizes the purchase price (in millions).
Shares of Insmed common stock issued on closing
$
9.25
Shares of Insmed common stock issuable on July 1, 2024
1.00
Total purchase price
$
10.25
The Company evaluated the acquisition under ASC 805 and ASU 2017-01 and concluded that substantially all of the
fair value of the gross assets acquired are concentrated in a single identifiable asset or a group of similar identifiable assets and
accounted for the transaction as an asset acquisition. The Company determined that the assets acquired did not have any future
alternative use and, in accordance with ASC 730, Research and Development, expensed the assets within research and
development in the consolidated statement of comprehensive loss as of the date of the acquisition. The Company recognized
$10.3 million as IPR&D expense for the year ending December 31, 2023.
Business Combination
On August 4, 2021, the Company acquired all of the equity interests of Motus and AlgaeneX, each a privately held,
preclinical stage company. In connection with the closing of the Company’s acquisition of Motus, the Company issued an
aggregate of 2,889,367 shares of the Company’s common stock, following certain closing-related reductions, to Motus’s former
stockholders and option holders and certain individuals who are entitled to receive a portion of the acquisition consideration
(collectively, Motus equityholders), subject to certain adjustments. The Company was obligated to issue to Motus equityholders
an aggregate of 184,433 shares of the Company’s common stock on each of the first, second and third anniversaries of the
closing date. During August 2022, August 2023 and August 2024, the Company fulfilled the payments due on the first, second
and third anniversaries of the closing date by issuing 171,427 shares, 177,203 shares and 182,182 shares of the Company's
common stock, respectively, after certain reductions. The Company is obligated to issue to Motus equityholders up to 5,348,572
shares in the aggregate upon the achievement of certain development and regulatory milestone events, and to pay to the Motus
equityholders an aggregate of $35 million upon the achievement of certain net sales-based milestones and a portion of the value
of a priority review voucher (to the extent issued to the Company), in each case, subject to certain reductions.
At the closing of the Company’s acquisition of AlgaeneX, the Company paid $1.5 million in cash to AlgaeneX’s
former stockholders and certain individuals who are entitled to receive a portion of the acquisition consideration (collectively,
the AlgaeneX equityholders). The Company is obligated to issue to AlgaeneX’s equityholders an aggregate of 368,867 shares
of the Company’s common stock upon the achievement of a development milestone event and pay to AlgaeneX equityholders a
mid-single digits licensing fee on certain future payments received by the Company in licensing transactions for AlgaeneX’s
manufacturing technology, in each case, subject to certain reductions.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. Acquisitions (Continued)
124
The shares of the Company’s common stock issued to the Motus equityholders and the AlgaeneX equityholders were
issued, and the shares issuable in the future will be issued, pursuant to Section 4(a)(2) of the Securities Act of 1933, and the
numbers of such issued and issuable shares was calculated based on a per share value of $27.11, which was the weighted
average price per share of the Company's common stock preceding the closing of the Business Acquisition for the 45
consecutive trading day period beginning on May 24, 2021. The Company will not receive any proceeds from the issuance of
common stock to the Motus equityholders or the AlgaeneX equityholders.
The Company evaluated the Business Acquisition under ASC 805 and ASU 2017-01. The Company concluded that
substantially all of the fair value of the gross assets acquired is not concentrated in a single identifiable asset or a group of
similar identifiable assets. The transaction does not pass the screen test and thus management performed a full assessment to
determine if the acquired entities met the definition of a business. For the full assessment, management considered whether it
has acquired (a) inputs, (b) substantive processes, and (c) outputs. Under ASC 805, to be considered a business, a set of
activities and assets is required to have only the first two of the three elements, which together are or will be used in the future
to create outputs. Management determined that the acquired entities met the definition of a business since the Company
acquired inputs and substantive processes capable of producing outputs.
Therefore, the transaction has been accounted for under the acquisition method of accounting. Under the acquisition
method, the total purchase price of the acquisition is allocated to the net tangible and identifiable intangible assets acquired and
liabilities assumed based on the fair values as of the date of the acquisition.
The fair value of the consideration totaled approximately $165.5 million, summarized as follows (in thousands):
Fair Value of
Consideration
Cash consideration
$
10,500
Fair value of Insmed common stock issued
71,570
Estimated fair value of contingent consideration liabilities
69,706
Estimated fair value of deferred consideration
13,700
$
165,476
The Company recorded the assets acquired and liabilities assumed as of the date of the acquisition based on the
information available at that date. As of December 31, 2021, the Company finalized the fair values of the assets acquired and
liabilities assumed. No purchase price adjustments were recorded during the measurement period, which is the period from the
acquisition date through the period ended December 31, 2021. The following table presents the allocation of the purchase price
to the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date (in thousands).
Purchase Price
Allocation
Cash and cash equivalents
$
3,580
Intangible assets - IPR&D
29,600
Fixed assets
228
Other assets
17
Liabilities assumed
(558)
Deferred tax liability
(3,501)
Fair value of net assets acquired
29,366
Goodwill
136,110
$
165,476
The Company incurred approximately $0.6 million in acquisition-related expenses, which were included in selling,
general and administrative expenses in the consolidated statements of comprehensive loss for the period ended December 31,
2021. The results of Motus's and AlgaeneX's operations have been included in the consolidated statements of comprehensive
loss beginning on the acquisition date.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
18. Acquisitions (Continued)
125
The fair value of IPR&D was capitalized as of the acquisition date and accounted for as indefinite-lived intangible
assets until completion or disposition of the assets or abandonment of the associated research and development efforts. Upon
successful completion of the development efforts, the useful lives of the IPR&D assets will be determined based on the
anticipated period of regulatory exclusivity and will be amortized within operating expenses. Until that time, the IPR&D assets
will be subject to impairment testing and will not be amortized. The goodwill recorded related to the acquisition is the excess of
the fair value of the consideration transferred by the acquirer over the fair value of the net identifiable assets acquired and
liabilities assumed at the date of acquisition. The goodwill recorded is not deductible for tax purposes.
19. Segment Reporting
The Company manages its business activities on a consolidated basis and operates as a single operating segment. The
Company derives its revenues from the development and commercialization of therapies for patients facing serious diseases.
The accounting policies of the segment are the same as those described in Note 2 – Summary of Significant Accounting
Policies.
The Company has a single management team that reports to the Chief Executive Officer, the chief operating decision
maker (CODM), who comprehensively manages the entire business. When evaluating the Company’s financial performance,
the CODM regularly reviews total revenues, total expenses, and expenses by function, and makes decisions using this
information on a global basis. The CODM uses net loss, as reported in the consolidated statements of comprehensive loss, in
evaluating the performance of the segment. Decisions regarding resource allocation are made primarily during the annual
budget planning process and augmented as needed throughout the year. The measure of segment assets is reported on the
balance sheet as total assets. The Company does not operate separate lines of business with respect to its products or product
candidates. Accordingly, the Company has one reportable segment.
Segment loss, including significant segment expenses, for the years ended December 31, 2024, 2023 and 2022 is as
follows (in thousands):
For the Years Ended December 31,
2024
2023
2022
Product revenues, net
$
363,707 $
305,208 $
245,358
Less:
Cost of product revenues (excluding amortization of
intangible assets)
85,742
65,573
55,126
ARIKAYCE external R&D expenses
60,269
62,418
61,024
Brensocatib external R&D expenses
98,569
108,556
102,530
TPIP external R&D expenses
65,935
50,185
39,220
Other external R&D expenses
90,604
132,652
34,199
R&D compensation and benefit-related expenses
194,907
140,861
104,094
SG&A compensation and benefit-related expenses
168,498
117,926
92,709
Other segment items(a)
374,947
295,211
231,713
Depreciation
5,961
5,527
5,278
Amortization of intangible assets
5,052
5,052
5,053
Change in fair value of deferred and contingent
consideration liabilities
91,682
28,697
(20,802)
Investment income
(53,307)
(42,132)
(11,081)
Interest expense
84,913
81,694
26,446
Provision for income taxes
3,707
2,555
1,383
Segment net loss
$
(913,772) $
(749,567) $
(481,534)
(a) Other segment items include stock-based compensation, professional fees, and facility-related expenses.
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18. Acquisitions (Continued)
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“should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “intends,” “potential,” “continues,” and similar expressions (as well as other words or
expressions referencing future events, conditions or circumstances) identify forward-looking statements. Forward-looking statements are based on 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. For additional information, see
Item 1A – Risk Factors of the Form 10-K included in this Annual Report. We undertake no obligation to update or revise publicly any forward-looking statements.
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