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What changed in INSMED Inc's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of INSMED Inc's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+500 added−476 removedSource: 10-K (2025-02-20) vs 10-K (2024-02-22)

Top changes in INSMED Inc's 2024 10-K

500 paragraphs added · 476 removed · 395 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

140 edited+40 added−38 removed319 unchanged
Biggest changeA summary of our commercial and pipeline products is shown below: 6 Table of Contents The information below summarizes our achievements in 2023 and the anticipated near-term milestones for ARIKAYCE and our product candidates. ARIKAYCE • We announced positive topline results from the ARISE trial in the third quarter of 2023.
Biggest changeOur 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.
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.
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.
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.
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.
During the exclusivity period for an NCE, the FDA may not accept for review an abbreviated NDA, or 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.
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.
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. Core Values Five core values—collaboration, accountability, passion, respect, and integrity—set the tone for our culture and guide the actions we take each day.
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.
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.
Although the UK is no longer part of the EU, its medicinal product and medical device regulations remain broadly aligned with the EU requirements. 31 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 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 the reference product in terms of safety, purity, and potency.
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 25 the reference product in terms of safety, purity, and potency.
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.
Pediatric Information 30 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.
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 NTM lung disease. Orphan designated drugs are eligible for seven years of exclusivity for the orphan indication.
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.
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.
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 13 with greater consistency in pulmonary arterial pressure reduction over time.
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. Accordingly, manufacturers must continue to expend time, money and effort in the areas of production and quality control to maintain compliance with cGMP.
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. 27 Accordingly, manufacturers must continue to expend time, money and effort in the areas of production and quality control to maintain compliance with cGMP.
To date, we have been unable to reach an acceptable agreement of a nationally reimbursed price with the Italian Medicines Agency (AIFA); however, ARIKAYCE remains commercially available for physicians to prescribe in Italy under Class C, where we set the price and funding is agreed locally.
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.
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.
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.
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 products, including other formulations of treprostinil.
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 Phase 2, the drug is given to a 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 2, the drug is given to a 22 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.
If the PMOA is unclear or in dispute, a sponsor may file a Request for 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 the PMOA is unclear or in dispute, a sponsor may file a Request for 26 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.
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.
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. 32 Different pricing and reimbursement schemes exist in other countries.
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 NDA submissions) or the date of receipt (in the case of non-NME original NDA submissions).
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).
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 conversion by Month 12, which was the end of treatment.
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.
However, the orphan drug designations for 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.
However, the orphan drug designations for 20 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.
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 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.
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.
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 2 WILLOW study, with no significant drug-related findings.
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.
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, and 11,814,359, 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.
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.
As noted above, we will continue to advance the post-marketing confirmatory MAC lung disease clinical trial program for ARIKAYCE, through the ARISE and 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 Table of Contents 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.
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.
The WILLOW Study The WILLOW study was a randomized, double-blind, placebo-controlled, parallel-group, multi-center, multi-national, Phase 2 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 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.
We anticipate increasing our headcount in 2024. 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.
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.
We have worked with the German National Association of Statutory Health Insurance Funds (GKV-SV) towards an agreement on the 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.
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.
This Phase 2 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.
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.
Our key priorities are as follows: • Continue to provide ARIKAYCE to appropriate patients and expand our reliable revenue stream; • Produce topline clinical data readouts in the near and long term; • Advance commercial readiness activities to serve significantly more patients with serious and rare diseases; and • Control spending, prudently deploying capital to support the best return-generating opportunities.
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.
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 $104 million. Cystic Fibrosis Foundation Therapeutics, Inc. In 2004 and 2009, we entered into research funding agreements with Cystic Fibrosis Foundation Therapeutics, Inc.
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.
Under the terms of the agreement, upon exercise of this option, AstraZeneca is solely responsible for all aspects of the development of brensocatib up to and including Phase 2b clinical trials in 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.
Sponsors may seek to negotiate the terms of a written request during drug development. While the sponsor of an orphan-designated drug may 29 Table of Contents 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.
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.
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 450,000 European 5 400,000 Japan 150,000 Today, there are no approved therapies in the US, Europe, or Japan for the treatment of patients with bronchiectasis.
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.
The time required for the approval process varies depending on the product. PMDA's target review period (submission to approval) is one year (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 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.
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 long-term 14 Table of Contents anticipated commercial needs.
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.
Specifically, the first NDA or biologics license application (BLA) applicant 19 Table of Contents 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.
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.
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 23 Table of Contents treatment for the patient population. Such drugs might not have favorable benefit-risk profiles in a broader population.
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.
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 16 Table of Contents 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.
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.
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. 28 Table of Contents After a device is placed on the market, it remains subject to significant regulatory requirements.
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.
Intellectual Property We own or license rights to more than 900 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.
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.
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 8 Table of Contents such as survival or irreversible morbidity.
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.
An additional period of reference product exclusivity is not available upon approval of a 24 Table of Contents 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).
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).
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. 33 Table of Contents
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
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).
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).
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 30 Table of Contents has yet been authorized.
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.
However, an ANDA or 505(b)(2) NDA may be submitted after four years if it contains a patent certification for each patent listed with the FDA for the NCE drug (e.g., a certification of patent invalidity or non-infringement with respect to a patent listed with the FDA for 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.
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 will now include 41 adolescent patients between ages 12 to 17, which will fulfill the pediatric study requirements to support marketing applications in this patient population in the US, Europe and Japan.
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.
ARIKAYCE received accelerated approval in the US in September 2018 for the treatment of Mycobacterium avium complex (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.
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.
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 $104 million.
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.
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 pre-requisite to validation of an MAA.
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.
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 22 Table of Contents measure of clinical benefit.
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.
More than 60 patents have also been issued 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 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.
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.
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.
The "Drug Pricing Organization," which is a division of the Central Social Insurance 31 Table of Contents 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.
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.
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 and TPIP, as well as other early-stage research programs.
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.
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 $7.4 million has been paid as of December 31, 2023 .
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. PPD Development, L.P.
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.
(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. We continue to progress our early-stage 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.
(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. 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.
ARIKAYCE Patents Of the patents and applications related to ARIKAYCE, there are 12 issued US patents that cover the ARIKAYCE composition and its use in treating NTM that are listed in the FDA Orange Book.
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.
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 9 Table of Contents who had received ARIKAYCE plus GBT in the CONVERT study (7/57) achieving culture conversion by Month 6 of the 312 study.
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.
European Patent Nos. 3142643, 3466432 and 3766501 each expires May 15, 2035 and include claims related to ARIKAYCE and its use for treating MAC lung infections.
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.
The prevalence of NTM lung disease has increased over the past two decades, and we believe it is an emerging public health concern worldwide.
The prevalence of NTM lung disease has increased over the past two decades, and we believe it is an emerging public hea lth concern worldwide.
Regulatory Pathway 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 patients across the European Union (EU) countries as well as in the UK.
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).
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 and rare diseases with significant unmet need. We are focused broadly on serious and rare disease therapeutics and prioritizing those areas that best align with our core competencies.
Corporate Development 14 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.
July 19, 2026), also include claims related to ARIKAYCE and its use in treating NTM lung disease. European Patent No. 2852391 expires May 21, 2033 and includes claims related ARIKAYCE together with a vibrating mesh nebulizer having certain properties.
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.
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 an obligation to use commercially reasonable efforts to initiate a Phase 3 trial for bronchiectasis by a set deadline.
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.
Finally, we are driven by integrity and believe good corporate governance is important and necessary to maintain ethical and compliant business practices. In 2023, we published our inaugural Responsibility Report.
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.
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.
Further post-approval requirements are discussed below. 23 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.
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).
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 products.
We strive to ensure that these values drive all of our human capital endeavors, including our annual employee feedback process, our Leadership Competencies, our Recognition Program, and our new employee onboarding initiatives. Diversity and Inclusion We are focused on maintaining an inclusive work environment that best supports the diverse needs of the patient communities we serve.
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.
Our product candidates are brensocatib, our Phase 3 product candidate which we are developing for patients with bronchiectasis and other neutrophil-mediated diseases, and TPIP, our Phase 2 product candidate that may offer a differentiated product profile for patients with PH-ILD and PAH.
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.
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 Food and Drug Omnibus Reform Act of 2022.
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 agreement has an initial term of five years, which began in 17 Table of Contents October 2018, and will renew 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.
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.
Based on an analysis conducted in 2017, using information from external sources, including market research funded by us and third parties, and internal analyses and calculations, we estimated the potential patient population s i n the US, the European 5 (comprised of France, Germany, Italy, Spain and the United Kingdom (UK)) and Japan in 2019 were as follows: Potential Market Estimated Number of Patients with Diagnosed NTM Lung Disease Estimated Number of Patients Treated for MAC Lung Disease Estimated Number of MAC lung disease Patients Refractory to Treatment United States 95,000-115,000 48,000-55,000 12,000-17,000 European 5 14,000 4,400 1,400 Japan 125,000-145,000 60,000-70,000 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 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.
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.
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.
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 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.
We are also advancing our early-stage research programs encompassing a wide range of technologies and modalities, including gene therapy, artificial intelligence-driven protein engineering, protein manufacturing, RNA-end joining, and synthetic rescue.
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.
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.
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. 28 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.
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) as optimized for use with ARIKAYCE.
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.
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.
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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

160 edited+39 added−24 removed249 unchanged
Biggest changeAny such failure to obtain regulatory approvals, particularly for brensocatib in the US, may materially adversely affect us. • 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 we are unable to obtain or maintain acceptable prices for ARIKAYCE, our prospects for generating revenue and achieving profitability will be materially adversely affected. • ARIKAYCE could develop unexpected safety or efficacy concerns, which would 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 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 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 early-stage research activities include the research and development of novel gene therapy product candidates.
Biggest changeAny 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.
Under the Royalty Financing Agreement, OrbiMed paid us $150 million in exchange for the right to receive, on a quarterly basis, royalties (the Royalty Financing) in an amount equal to 4% 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).
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).
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 2028 (the 2028 Convertible Notes).
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).
Reliance on these third parties poses a number of risks, including the following: • 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.
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.
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; • Withdrawal or reduced enrollment of clinical trial participants; and • Reputational harm and significant negative media attention.
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; 49 • Withdrawal or reduced enrollment of clinical trial participants; and • Reputational harm and significant negative media attention.
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 49 Table of Contents • 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.
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.
ARIKAYCE was approved in the US 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 cultures after a minimum of six consecutive months of a multidrug background regimen therapy.
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.
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; • 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; and • Voluntary or mandatory product recalls or withdrawals from the market and costly product liability claims.
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.
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 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.
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.
A pandemic, including a resurgence of COVID-19, may also have an adverse impac t 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 one or more COVID-19 vaccines, which could cause disruptions or delays in our ability to distribute ARIKAYCE due to lack of sufficient cold-chain storage and shipping capacity.
A pandemic, including a resurgence of COVID-19, may also have an adverse impac t 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.
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 proprietary technology and to obtain and maintain patent protection for our products, prevent third parties from infringing our patents, both domestically and internationally.
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 53 proprietary technology and to obtain and maintain patent protection for our products, prevent third parties from infringing our patents, both domestically and internationally.
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 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.
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.
If we are unable 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.
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.
Unauthorized disclosure of 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 unauthorized access to or through our information systems and networks, whether by our employees or third parties, could result in negative publicity, legal liability and damage to our reputation.
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.
An inadequate supply of ARIKAYCE, Lamira, brensocatib 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.
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.
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 demands than expected.
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.
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 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.
These understandings and assessments necessarily require assumptions subject to significant judgment and may prove to be inaccurate. As a result, our estimates of the size of these potential markets for ARIKAYCE could prove to be overstated, perhaps materially.
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 these countries, patents may provide limited or no benefit. This legal environment could make it difficult for us to stop the infringement of our patents or in-licensed patents or the misappropriation of our other intellectual property rights.
In these countries, patents may provide limited or no benefit. This legal environment could make it 54 difficult for us to stop the infringement of our patents or in-licensed patents or the misappropriation of our other intellectual property rights.
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 product.
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.
The potential for the issuance of a significant amount of our common stock pursuant to the 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 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.
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 Convertible Notes.
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 addition, we may issue shares of our common stock upon the conversion of our Convertible Notes. The conversion of some or all of the Convertible Notes will dilute the ownership interests of our existing shareholders to the extent we deliver shares upon their conversion.
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.
In the event PARI cannot provide us with sufficient quantities of the nebulizer, replication of the optimized device by another party would likely require considerable time and additional regulatory approval.
In the event PARI cannot provide us with sufficient quantities of the 47 nebulizer, replication of the optimized device by another party would likely require considerable time and additional regulatory approval.
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; 40 Table of Contents • 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.
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.
The 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 Loan Agreement.
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.
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; 37 Table of Contents • 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, or any of our other product candidates; and • Negative publicity, including communications issued by regulatory authorities, which could negatively impact the perception of us or ARIKAYCE, brensocatib, TPIP, or any of our other product candidates by patients, physicians, third-party payors or the healthcare community.
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.
While we have experienced no disruption to date in our supply chain due to the COVID-19 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.
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.
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; 57 Table of Contents • 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 Loan Agreement, Revenue Interest Payments under the Royalty Financing Agreement and the principal amounts of the 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 Convertible Notes, which would reduce our available cash.
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.
In the event that OrbiMed has not received aggregate Revenue Interest Payments equal to or greater than $150 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 million.
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.
We currently have only 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.
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.
In addition, based in part on our successful phase 2 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.
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.
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 54 Table of Contents payment) and teaching hospitals, which is posted in searchable form on a public website.
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.
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, expected to be implemented in 2024.
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.
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 52 Table of Contents present time whether and how the FDA’s disclosure policies may change in the future.
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.
In addition, the existence of the Convertible Notes may encourage short selling by market participants because the conversion of the Convertible Notes could be used to satisfy short positions, or the anticipated conversion of the Convertible Notes into shares of our common stock could depress the price 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.
Any triggering of the Put Option or other event of default under the 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.
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.
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; 43 Table of Contents • Discontinuation rates; and • Competition from other companies’ potential clinical trials for the same patient population.
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.
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.
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.
In addition, only a small number of gene therapy products have been approved in the US, Europe or elsewhere, and regulatory requirements governing gene and cell therapy products have changed frequently and may continue to change in the future.
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.
Any of these factors may prevent us from completing our preclinical studies or clinical trials or commercializing any gene therapy product candidates we may develop on a timely or profitable basis, if at all.
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.
Changes in our effective income tax rates 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.
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.
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 48 Table of Contents organizations, or hostile foreign governments or agencies.
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.
Risks Related to the Commercialization and Continued Approval of ARIKAYCE 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).
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).
We currently rely, and expect to continue to rely, on third parties for significant research, analytical services, preclinical development, clinical development and manufacturing of our product candidates and commercial scale manufacturing of ARIKAYCE and Lamira.
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.
Subsequently, ARIKAYCE was approved in Europe for the treatment of NTM lung infections caused by 35 Table of Contents 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.
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.
Our ability to pay principal or interest on or, if desired, to refinance our indebtedness, including the Loan Agreement, the Royalty Financing Agreement and the 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 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.
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 36 Table of Contents clinical benefit, rather than a clinical endpoint such as survival or irreversible morbidity.
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.
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 45 Table of Contents candidates on a clinical or commercial scale.
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.
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 the COVID-19 pandemic and other 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.
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.
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, 2023, our accumulated deficit was $3.4 billion.
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.
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. 59 Table of Contents 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.
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.
Despite our 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, including our Phase 3 ASPEN trial; • Complete a post-marketing clinical trial of ARIKAYCE, consisting of the ARISE and 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 and potential commercial launch of brensocatib in the US and other markets; • Seek the approval and potential commercial launch of TPIP and other product candidates in various markets; • File, prosecute, defend, and enforce patent claims related to ARIKAYCE, brensocatib, TPIP 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.
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.
We have limited experience with 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.
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.
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. 60 Table of Contents
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
Upon conversion of the 2025 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.
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.
Various factors may have favorable or unfavorable impacts on our effective tax rate, including changes in tax rates and laws, 58 Table of Contents interpretations of existing laws, changes in accounting standards, changes in the jurisdiction of our pre-tax earnings and examinations of our tax filings.
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.
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 early-stage research efforts.
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.
For example, 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.
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.
Our business may not generate cash flow from operations in the future sufficient to satisfy any obligations under the Loan Agreement, the Royalty Financing Agreement or the Convertible Notes or our obligations under any future indebtedness we may incur.
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.
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 to provide our clinical and commercial supply of ARIKAYCE, and intend to also rely on Patheon in the future.
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.
For additional information regarding the 53 Table of Contents terms of these agreements, see Business—License and Other Agreements in Item 1 of Part I of this Annual Report on Form 10-K.
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.
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 could develop unexpected safety or efficacy concerns, which would likely have a material adverse effect on us.
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.
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 early-stage research activities include the research and development of novel gene therapy product candidates.
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.
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 will face substantial competition with respect to future product candidates we may develop in these and other disease areas.
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.
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, Vertuis in January 2023, and Adrestia in June 2023, each a privately-held, preclinical stage company.
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.
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 any 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.
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. • 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. 34 Table of Contents • 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 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. • 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 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. • 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, but we face uncertainties with respect to our ability to access capital. • 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 Convertible Notes. • The market price of our stock has been and may continue to be highly volatile, which could lead to shareholder litigation against us. • 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.
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.
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.
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.
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 new markets. Any such failure to obtain regulatory approvals, particularly for brensocatib, may materially adversely affect us.
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.
These final guidance documents pertain to the development of gene therapies for the treatment of specific disease categories, including rare diseases, and to manufacturing and long-term follow-up issues relevant to gene therapy, among other topics.
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.
CBER works closely with the National Institutes of Health (the NIH) to accelerate the development of gene therapy. The FDA has published guidance documents with respect to the development and approval of gene therapy products.
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.
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.
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 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 now commercialize ARIKAYCE in the US, Europe and Japan.
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.
Our three largest customers as of December 31, 2023 accounted for 88% and 90% of our total gross product revenue for the years ended December 31, 2023 and 2022, respectively.
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.
In addition, we are conducting a confirmatory trial to assess and describe the clinical benefit of ARIKAYCE in patients with MAC lung disease and may conduct additional trials in connection with lifecycle management programs for ARIKAYCE.
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.
If we ultimately receive approval for ARIKAYCE in jurisdictions other than the US, EU, 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.
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.
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. 47 Table of Contents We also may enter into collaborative relationships that would involve our collaborators conducting proprietary development programs.
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.
If we are unable to obtain adequate reimbursement from government or third-party payors for ARIKAYCE or if we are unable to obtain acceptable prices for ARIKAYCE, our prospects for generating revenue and achieving profitability will be materially adversely affected.
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.
Additionally, under the amendments to the FDCA made by the Food and Drug Omnibus Reform Act of 2022, 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.
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.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe 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, 2023, we are not aware of any material cybersecurity incidents. 61 Table of Contents
Biggest changeThe 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

Properties — owned and leased real estate

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Biggest changeThe 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.
Biggest changeWe 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.
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, provides 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.
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 also lease facilities in California totaling 54,478 square feet and a facility in New Hampshire. In addition, we lease office space outside of the US in France, Ireland, the Netherlands, Switzerland and Japan.
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 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAny 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. 63 Table of Contents 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 12/31/18 in stock or index, including reinvestment of dividends.
Biggest changeAny 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.
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 19, 2024, there were approximatel y 176 holders of record of our common stock.
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 approximatel y 148 holders of record of our common stock.
Fiscal year ending December 31. Copyright© 2022 Standard & Poor's, a division of S&P Global. All rights reserved. 64 Table of Contents
Fiscal year ending December 31. Copyright© 2025 Standard & Poor's, a division of S&P Global. All rights reserved. 65

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

82 edited+26 added−19 removed45 unchanged
Biggest changeRESULTS OF OPERATIONS Comparison of the Years Ended December 31, 2023 and 2022 Overview - Operating Results Our operating results for the year ended December 31, 2023, included the following: 67 Table of Contents • Product revenues, net, increased $59.9 million, or 24.4%, as compared to the prior year as a result of the growth in ARIKAYCE sales; • Cost of product revenues (excluding amortization of intangibles) increased $10.4 million as compared to the prior year as a result of the increase in sales of ARIKAYCE; • R&D expenses increased $173.5 million as compared to the prior year primarily resulting from the non-cash costs of the Adrestia and Vertuis acquisitions; • SG&A expenses increased $78.7 million as compared to the prior year primarily resulting from increases in professional fees and other external expenses; • Amortization of intangible assets was consistent with the prior year; • Change in fair value of deferred and contingent consideration liabilities increased $49.5 million primarily as a result of the change in our share price; and • Interest expense increased $55.2 million as compared to the prior year due to entering into the Term Loan and Royalty Financing Agreement in the fourth quarter of 2022.
Biggest changeRESULTS 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: • 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; 68 • 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.
In October 2022, we entered into the Royalty Financing Agreement with OrbiMed, whereby OrbiMed paid us $150 million in exchange for the right to receive, on a quarterly basis, royalties in an amount equal to 4% 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 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.
Under the Royalty Financing Agreement, OrbiMed will be entitled to receive royalties of 4% 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.
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.
In the event that OrbiMed has not received aggregate Revenue Interest Payments equal to or greater than $150 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 million.
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.
The total royalty payable to OrbiMed is capped at 1.8x of the $150 million purchase price or up to a maximum of 1.9x of the $150 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.
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.
Under the licensing agreement, we have rights under several US and 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.
Under the licensing agreement, we have rights under several US and 74 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.
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 in research funding for the development of ARIKAYCE.
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.
In the fourth quarter of 2022, we entered into an interest rate swap contract (the Swap Contract) with a notional value of $350 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.
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.
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 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.
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.
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. 76
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, including our Phase 3 ASPEN trial; • The timing and cost of our current and future clinical trials of ARIKAYCE for the treatment of patients with NTM lung infections, including the ARISE and ENCORE trials; • 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; • 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 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.
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, 2023 will enable us to fund our operations for at least the next 12 months.
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.
Comparison of the Years Ended December 31, 2022 and 2021 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, 2022 for a comparative discussion of our fiscal years ended December 31, 2022 and December 31, 2021.
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.
The net cash used in operating activities during the years ended December 31, 2023 and 2022 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 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 income tax provision for the years ended December 31, 2023 and 2022 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.
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.
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 accrued liabilities on the consolidated balance sheets.
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.
R&D expenses also includes 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.
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.
Subsequent to this milestone, we are also obligated to make a series of additional contingent milestone payments totaling up to an additional $60.0 million upon the achievement of regulatory filing milestones.
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.
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 pre-commercialization activities for brensocatib, and engage in other general and administrative activities.
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.
The agreement has an initial term of five years, which began in October 2018, and will renew 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.
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.
In 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 acts as sales agent.
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.
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 and revenue-based milestones.
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.
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 $104 million.
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.
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 $17.9 million.
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.
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 72 Table of Contents commence once certain technology transfer and construction services are completed.
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.
In September 2018, we entered into an agreement (the Lease) with Exeter 700 Route 202/206, LLC to lease 117,022 square feet of office space located in Bridgewater, New Jersey for our corporate headquarters.
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.
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 $7.4 million has been paid as of December 31, 2023.
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.
Our cash requirements for the next 12 months will be impacted by a number of factors, the most significant of which we expect to be the ASPEN trial, 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 our early-research programs.
Our cash requirements for the 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.
We may need to raise additional capital to fund our operations, the continued commercialization of ARIKAYCE, launch readiness activities for the potential launch of brensocatib for the treatment of patients with bronchiectasis, if approved, clinical trials for brensocatib, TPIP, and our future product candidates, and to develop, acquire, in-license or co-promote other products or product candidates, including those that address orphan or rare diseases.
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.
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 and early-stage 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.
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.
The increase in cash used in operating activities for the year ended December 31, 2023 compared to 2022 was primarily due to the increase in net loss, excluding the adjustments to reconcile net loss to net cash used in operating activities.
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.
Subject to certain conditions, we have 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.
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.
We began capitalizing inventory upon FDA approval of ARIKAYCE in September 2018. Research and Development (R&D) Expenses 66 Table of Contents R&D expenses consist of salaries, benefits and other related costs, including stock-based compensation, for personnel serving in our research and development functions, including medical affairs and program management.
We began capitalizing ARIKAYCE related inventory upon FDA approval of ARIKAYCE in September 2018. Research and Development (R&D) Expenses 67 R&D expenses consist of salaries, benefits and other related costs, including stock-based compensation, for personnel serving in our research and development functions.
We expect SG&A expenses to continue to increase in 2024 relative to 2023 due, in part, to commercial readiness activities for brensocatib. 69 Table of Contents Amortization of Intangible Assets Amortization of intangible assets for the years ended December 31, 2023 and 2022 was $5.1 million and $5.1 million, respectively.
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.
Product Revenues, Net Product revenues, net, consists of net sales of ARIKAYCE.
Product Revenues, Net Product revenues, net, consist of net sales of ARIKAYCE.
Provision for Income Taxes The income tax provision was $2.6 million for the year ended December 31, 2023 as compared to $1.4 million for the year ended December 31, 2022.
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.
For all contracts that fall into the scope of ASC 606, we have identified one performance obligation: the sale of ARIKAYCE to its customers. We have not incurred or capitalized any incremental costs associated with obtaining contracts with customers. 74 Table of Contents Product revenues, net, consist of net sales of ARIKAYCE.
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.
"Business" for a summary of our ongoing commercial and clinical programs for ARIKAYCE and our ongoing clinical activities for brensocatib, TPIP and early-stage research programs. Prior to 2019, we had not generated significant revenue and through December 31, 2023, we had an accumulated deficit of $3.4 billion.
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.
In July 2014, we entered into a Commercialization Agreement with PARI for the manufacture and supply of Lamira as optimized for use with ARIKAYCE.
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.
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.
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.
We also expect to continue to incur significant costs related to the commercialization of ARIKAYCE and our pre-commercialization activities related to brensocatib. 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.
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.
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.
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.
Through December 31, 2023, we have met and paid $1.7 million of these additional global sales milestone payments. 73 Table of Contents 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 rare diseases.
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.
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 global biopharmaceutical company on a mission to transform the lives of patients with serious and rare diseases.
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.
Additionally, our continued success also depends on bringing additional clinical stage products to market, such as brensocatib, TPIP and our early-stage research programs.
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 have entered into project addenda with PPD to perform clinical development services over several years for, but not limited to, our ARISE, ENCORE, ASPEN studies and other brensocatib and TPIP studies. We currently expect to incur approximately $430.1 million of costs related to these project addenda.
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.
Debt issuance costs are amortized to interest expense using the effective interest rate method over the term of the debt. Our balance sheet reflects debt, net of the debt discount, debt issuance costs paid to the lender, and other third-party costs. Unamortized debt issuance costs associated with extinguished debt are expensed in the period of the extinguishment.
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.
Our interest rate swap has not been designated as a hedging instrument for accounting purposes. Consequently, all changes in the fair value of the Swap Contract are reported as a component of net loss in the consolidated statements of comprehensive loss.
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.
The increase in cash used for investing activities in 2023 is due to the purchases of marketable securities, partially offset by maturity of certain marketable securities. 71 Table of Contents Net cash provided by financing activities was $168.4 million and $793.3 million for the years ended December 31, 2023 and 2022, respectively.
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.
For more information, see Note 10 - Debt in our notes to the consolidated financial statements. In January 2018, we completed an underwritten public offering of $450.0 million aggregate principal amount of the 2025 Convertible Notes pursuant to the Indenture.
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).
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.
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.
External R&D expenses by product for the years ended December 31, 2023 and 2022 were comprised of the following (in thousands): For the Year Ended December 31, Increase (decrease) 2023 2022 $ % ARIKAYCE external R&D expenses $ 62,418 $ 61,024 $ 1,394 2.3% Brensocatib external R&D expenses 108,556 102,530 6,026 5.9% TPIP external R&D expenses 50,185 39,220 10,965 28.0% Non-cash asset acquisitions 86,747 — 86,747 NA Other external R&D expenses 45,905 34,199 11,706 34.2% Total external R&D expenses $ 353,811 $ 236,973 $ 116,838 49.3% We expect R&D expenses to increase in 2024 relative to 2023 primarily due to our clinical trial activities and related spend including our Phase 3 ASPEN trial of brensocatib, our confirmatory clinical trial of ARIKAYCE in a treatment setting for patients with MAC lung disease, our TPIP clinical trials and other research efforts for future product candidates.
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 d ue 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.
In May 2021, we also completed an underwritten public offering of 11,500,000 shares of our common stock, including 1,500,000 shares issued pursuant to the exercise in full of the underwriters' option to purchase additional shares, a t a public offering price of $25.00 per share.
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.
Cost of Product Revenues (Excluding Amortization of Intangibles) Cost of product revenues (excluding amortization of intangibles) for the years ended December 31, 2023 and 2022 were comprised of the following (in thousands): For the Year Ended December 31, Increase (decrease) 2023 2022 $ % Cost of product revenues (excluding amortization of intangibles) $ 65,573 $ 55,126 $ 10,447 19.0% Cost of product revenues, as % of revenues 21.5 % 22.5 % Cost of product revenues (excluding amortization of intangibles) increased by $10.4 million, or 19.0%, to $65.6 million for the year ended December 31, 2023 as compared to $55.1 million in 2022.
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%.
The $78.7 million increase was primarily due to commercial readiness activities for brensocatib, including a $32.8 million increase in professional fees and other external expenses and a $32.8 million increase in compensation and benefit-related expenses and stock-based compensation costs due to an increase in headcount.
This increase was primarily due to a $60.8 million 70 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 expens es.
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.
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 have raised $1.8 billion in net proceeds from securities offerings since 2021. 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.
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.
We expect to continue to incur substantial expenses related to our research and development activities as we continue the ARIKAYCE confirmatory clinical program, conduct the Phase 3 ASPEN trial for brensocatib, continue the trials for TPIP, and fund development of our early-stage 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 brensoca tib in additional neutrophil-mediated diseases, inc luding CRSsNP and HS, continue the trials for TPIP, and fund development of our pre-clinical research programs.
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.
However, our business strategy may require us to raise additional capital at any time through equity or debt financing(s), strategic transactions or otherwise. 75 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.
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, 2023 was $28.7 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.
Net cash used in operating activities was $536.2 million and $400.4 million for the years ended December 31, 2023 and 2022, respectively.
Our working capital was $1.3 billion as of December 31, 2024 as compared to $703.4 million as of December 31, 2023. 72 Net cash used in operating activities was $683.9 million and $536.2 million for the years ended December 31, 2024 and 2023, respectively.
Change in Fair Value of Interest Rate Swap The change in fair value of interest rate swap for the year ended December 31, 2023 was $0.3 million. Adjustments to the fair value are due to changes in interest rates as of December 31, 2023 relative to the interest rate of our Swap Contract as of December 31, 2022.
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.
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.
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.
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. TPIP is an inhaled formulation of the treprostinil prodrug treprostinil palmitil which may offer a differentiated product profile for PH-ILD and PAH.
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.
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.
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.
Cash Flows As of December 31, 2023, we had cash and cash equivalents of $482.4 million, as compared with $1,074.0 million as of December 31, 2022. In addition, as of December 31, 2023, we had marketable securities of $298.1 million as compared with $74.2 million as of December 31, 2022.
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.
The $31.1 million increase in investment income for the year ended December 31, 2023 as compared to the prior year period is primarily due to an increase in the marketable securities balance and interest rates in 2023 relative to 2022.
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.
SG&A Expenses SG&A expenses for the years ended December 31, 2023 and 2022 were comprised of the following (in thousands): For the Years Ended December 31, Increase (decrease) 2023 2022 $ % Compensation and benefit-related expenses $ 117,926 $ 92,709 $ 25,217 27.2% Stock-based compensation 38,898 31,307 7,591 24.2% Professional fees and other external expenses 138,151 105,352 32,799 31.1% Facility related and other internal expenses 49,526 36,416 13,110 36.0% Total SG&A expenses $ 344,501 $ 265,784 $ 78,717 29.6% SG&A expenses increased to $344.5 million during the year ended December 31, 2023 from $265.8 million in 2022.
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%.
The following table summarizes revenue by geography for the years ended December 31, 2023 and 2022 (in thousands): For the Year Ended December 31, Increase (decrease) 2023 2022 $ % US $ 224,195 $ 185,994 $ 38,201 20.5% Japan 65,733 56,506 9,227 16.3% Europe and rest of world 15,280 2,858 12,422 NM Total product revenues, net $ 305,208 $ 245,358 $ 59,850 24.4% Product revenues, net, for the year ended December 31, 2023 increased to $305.2 million as compared to $245.4 million in 2022 as a result of the growth in sales of ARIKAYCE in the US, Japan and Europe and the rest of the world.
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%.
Upon the earlier of our notification to AstraZeneca that we intend to file an NDA or releasing an official public statement that we intend to file an NDA, we will owe AstraZeneca an additional $12.5 million.
In May 2024, u pon 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.
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.
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.
Net cash used in investing activities was $223.6 million and $34.6 million for the years ended December 31, 2023 and 2022, respectively.
Net cash provided by financing activities was $1.3 billion and $168.4 million for the years ended December 31, 2024 and 2023, respectively.
R&D Expenses R&D expenses for the years ended December 31, 2023 and 2022 were comprised of the following (in thousands): 68 Table of Contents For the Years Ended December 31, Increase (decrease) 2023 2022 $ % External Expenses Clinical development and research $ 166,448 $ 144,846 $ 21,602 14.9% Non-cash asset acquisitions 86,747 — 86,747 NA Manufacturing 73,614 71,998 1,616 2.2% Regulatory, quality assurance, and medical affairs 27,002 20,129 6,873 34.1% Subtotal—external expenses $ 353,811 $ 236,973 $ 116,838 49.3% Internal Expenses Compensation and benefit-related expenses $ 140,861 $ 104,094 $ 36,767 35.3% Stock-based compensation 35,880 26,379 9,501 36.0% Other internal operating expenses 40,459 30,072 10,387 34.5% Subtotal—internal expenses $ 217,200 $ 160,545 $ 56,655 35.3% Total R&D expenses $ 571,011 $ 397,518 $ 173,493 43.6% R&D expenses increased to $571.0 million during the year ended December 31, 2023 from $397.5 million in 2022.
R&D Expenses R&D expenses for the years ended December 31, 2024 and 2023 were comprised of the following (in thousands): 69 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%.
Net proceeds from the Term Loan, after deducting the lenders fees and deal expenses of $15.1 million, were $334.9 million.
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.
The decrease in 2023 is due to net cash proceeds from our Term Loan, Royalty Financing Agreement, and the issuance of our common stock in October 2022. Contractual Obligations In October 2022, we entered into financings resulting in aggregate gross proceeds of $500 million.
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.
Investment Income Investment income was $42.1 million for the year ended December 31, 2023 as compared to $11.1 million for 2022.
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 in cost of product revenues (excluding amortization of intangibles) in the year ended December 31, 2023 was directly attributable to the increase in total revenues discussed above.
This increase was primarily attributable to the growth in total revenues discussed above.
The 2025 Convertible Notes mature on January 15, 2025, unless earlier converted, redeemed, or repurchased. The 2025 Convertible Notes are convertible into common stock of the Company under certain circumstances described in the Indenture. For more information, see Note 10 - Debt in our notes to the consolidated financial statements.
The 2028 Convertible Notes are convertible into common stock of the Company under certain circumstances described in the Indenture.
The $55.2 million increase in interest expense for the year ended December 31, 2023 as compared to the prior year period is primarily due to entering into the Term Loan and Royalty Financing Agreement in the fourth quarter of 2022. See Note 10 - Debt and Note 11 - Royalty Financing Agreement for further details.
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.
The $173.5 million increase was primarily due to the $86.7 million one-time, non-cash asset acquisition costs of the Adrestia and Vertuis acquisitions, a $46.3 million increase in compensation and benefit-related expenses and stock-based compensation costs due to an increase in headcount, and a $21.6 million increase in clinical development and research expenses to support the Phase 3 ASPEN trial of brensocatib, the ARIKAYCE MAC lung disease clinical trial program, and the ongoing Phase 2 PAH and Phase 2 PH-ILD studies of TPIP.
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeOur 2025 Convertible Notes and our 2028 Convertible Notes bear interest at a coupon rate of 1.75% and 0.75%, respectively. In addition, as of December 31, 2023, we had our $350 million term loan and a $150.0 million Royalty Financing Agreement outstanding. The Term Loan accrues interest quarterly at the SOFR plus a margin of 7.75% per annum.
Biggest changeIn 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.
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, 2023, 2022 and 2021, our results of operations were not materially affected by fluctuations in foreign currency exchange rates.
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.
If a 10% change in interest rates had occurred on December 31, 2023, 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.
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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As of December 31, 2023, 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.
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.
We entered into the Swap Contract as a hedge to the Term Loan variable interest rate. The Royalty Financing Agreement pays interest at 4% 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.
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.
As of December 31, 2023, our marketable securities were invested in US treasury notes with an original maturity of 90 days. As of December 31, 2023, we had $225 million and $575 million of 2025 Convertible Notes and 2028 Convertible Notes outstanding, respectively.
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%.

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