SEC Form 10-Q filed by Insmed Incorporated

5/8/25 6:59:51 AM ET

Biotechnology: Pharmaceutical Preparations

Health Care

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insm-20250331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-30739

INSMED INCORPORATED

(Exact name of registrant as specified in its charter)


Virginia						54-1972729
(State or other jurisdiction of incorporation or organization)						(I.R.S. employer identification no.)

700 US Highway 202/206,
Bridgewater, New Jersey						08807
(Address of principal executive offices)						(Zip Code)

(908) 977-9900

(Registrant’s telephone number including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section12(b) of the Act:


Title of each class	Trading symbols	Name of each exchange on which registered
Common stock, par value $0.01 per share	INSM	Nasdaq Global Select Market

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer x						Accelerated filer o

Non-accelerated filer o						Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of May 2, 2025, there were 182,138,923 shares of the registrant’s common stock outstanding.

INSMED INCORPORATED

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2025

INDEX


PART I. FINANCIAL INFORMATION

ITEM 1	Consolidated Financial Statements

	Consolidated Balance Sheet s as of March 31, 2025 (unaudited) and December 31, 2024	3

	Consolidated Statements of Comprehensive Loss (unaudited) for the three months ended March 31, 2025 and 2024	4

	Consolidated Statements of Shareholders' Equit y (unaudited) for the three months ended March 31, 2025 and 2024	5

	Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2025 and 2024	6

	Notes to Consolidated Financial Statements (unaudited)	7

ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
ITEM 3	Quantitative and Qualitative Disclosures about Market Risk	41
ITEM 4	Controls and Procedures	41

PART II. OTHER INFORMATION

ITEM 1	Legal Proceedings	41
ITEM 1A	Risk Factors	41
ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	42
ITEM 5	Other Information	42
ITEM 6	Exhibits	43

SIGNATURE		44

Unless the context otherwise indicates, references in this Form 10-Q to “Insmed Incorporated” refers to Insmed Incorporated, a Virginia corporation, and the “Company,” “Insmed,” “we,” “us” and “our” refer to Insmed Incorporated together with its consolidated subsidiaries. INSMED, PULMOVANCE, and ARIKAYCE are trademarks of Insmed Incorporated. This Form 10-Q also contains trademarks of third parties. Each trademark of another company appearing in this Form 10-Q is the property of its owner.

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

INSMED INCORPORATED

Consolidated Balance Sheets

(in thousands, except par value and share data)


	As of		As of
	March 31, 2025		December 31, 2024
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	403,247	$	555,030
Marketable securities	796,204		878,796
Accounts receivable	47,746		52,012
Inventory	100,713		98,578
Prepaid expenses and other current assets	54,782		37,245
Total current assets	1,402,692		1,621,661

Fixed assets, net	88,358		80,052
Finance lease right-of-use assets	17,595		18,273
Operating lease right-of-use assets	10,832		17,257
Intangibles, net	57,389		58,652
Goodwill	136,110		136,110
Other assets	89,759		93,226
Total assets	$	1,802,735	$	2,025,231

Liabilities and shareholders’ equity
Current liabilities:
Accounts payable and accrued liabilities	$	232,674	$	285,209


Finance lease liabilities	3,054		2,961
Operating lease liabilities	3,505		9,358

Total current liabilities	239,233		297,528

Debt, long-term	1,105,068		1,103,382
Royalty financing agreement	162,508		161,067
Contingent consideration	159,900		144,200
Finance lease liabilities, long-term	23,266		24,064
Operating lease liabilities, long-term	8,480		9,112
Other long-term liabilities	5,121		499
Total liabilities	1,703,576		1,739,852

Shareholders’ equity:
Common stock, $0.01 par value; 500,000,000 authorized shares, 181,900,074 and 179,382,635 issued and outstanding shares at March 31, 2025 and December 31, 2024, respectively	1,819		1,794
Additional paid-in capital	4,714,742		4,645,791
Accumulated deficit	(4,616,500)		(4,359,917)
Accumulated other comprehensive loss	(902)		(2,289)
Total shareholders’ equity	99,159		285,379
Total liabilities and shareholders’ equity	$	1,802,735	$	2,025,231

See accompanying notes to the unaudited consolidated financial statements

INSMED INCORPORATED

Consolidated Statements of Comprehensive Loss (unaudited)

(in thousands, except per share data)


	Three Months Ended March 31,
		2025		2024

Product revenues, net		$	92,823	$	75,500

Operating expenses:
Cost of product revenues (excluding amortization of intangible assets)		21,278		17,457
Research and development		152,577		121,083
Selling, general and administrative		147,545		93,102
Amortization of intangible assets		1,263		1,263
Change in fair value of deferred and contingent consideration liabilities		18,300		(11,900)
Total operating expenses		340,963		221,005

Operating loss		(248,140)		(145,505)

Investment income		13,906		8,783
Interest expense		(21,569)		(21,042)
Change in fair value of interest rate swap		—		2,362

Other income (expense), net		132		(1,100)
Loss before income taxes		(255,671)		(156,502)

Provision for income taxes		912		589

Net loss		$	(256,583)	$	(157,091)

Basic and diluted net loss per share		$	(1.42)	$	(1.06)

Weighted average basic and diluted common shares outstanding		180,860		148,456

Net loss		$	(256,583)	$	(157,091)
Other comprehensive income (loss):
Foreign currency translation gains (losses)		1,828		(855)
Unrealized loss on marketable securities		(441)		(36)
Total comprehensive loss		$	(255,196)	$	(157,982)

See accompanying notes to the unaudited consolidated financial statements

INSMED INCORPORATED

Consolidated Statements of Shareholders' Equity (Deficit) (unaudited)

(in thousands)


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total
	Shares	Amount
Balance at December 31, 2023	147,978	$	1,480	$	3,113,487	$	(3,446,145)	$	(745)	$	(331,923)
Comprehensive loss:
Net loss						(157,091)				(157,091)
Other comprehensive loss								(891)		(891)
Exercise of stock options and ESPP share issuance	217	2		4,050						4,052
Net proceeds from issuance of common stock				(409)						(409)
Issuance of common stock for vesting of RSUs	366	4								4


Stock-based compensation expense				21,450						21,450
Balance at March 31, 2024	148,561	$	1,486	$	3,138,578	$	(3,603,236)	$	(1,636)	$	(464,808)

Balance at December 31, 2024	179,383	$	1,794	$	4,645,791	$	(4,359,917)	$	(2,289)	$	285,379
Comprehensive loss:
Net loss						(256,583)				(256,583)
Other comprehensive income								1,387		1,387
Exercise of stock options and ESPP share issuance	2,063	20		29,684						29,704

Issuance of common stock for vesting of RSUs	454	5								5

Issuance of common stock upon conversion of convertible notes				5						5

Stock-based compensation expense				39,262						39,262
Balance at March 31, 2025	181,900	$	1,819	$	4,714,742	$	(4,616,500)	$	(902)	$	99,159

See accompanying notes to the unaudited consolidated financial statements

INSMED INCORPORATED

Consolidated Statements of Cash Flows (unaudited)

(in thousands)


	Three Months Ended March 31,
	2025		2024
Operating activities
Net loss	$	(256,583)	$	(157,091)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	1,883		1,588
Amortization of intangible assets	1,263		1,263
Stock-based compensation expense	39,262		21,450

Amortization of debt issuance costs	1,822		1,851
Paid-in-kind interest capitalized	—		6,242
Royalty financing non-cash interest expense	5,023		4,822
Accretion of discount on marketable securities, net	(8,332)		(1,963)
Finance lease amortization expense	678		678
Non-cash operating lease expense	686		6,516
Change in fair value of deferred and contingent consideration liabilities	18,300		(11,900)
Change in fair value of interest rate swap	—		(2,362)


Changes in operating assets and liabilities:
Accounts receivable	5,361		2,955
Inventory	(1,021)		(598)
Prepaid expenses and other current assets	(16,941)		(19,330)
Other assets	10,168		333
Accounts payable and accrued liabilities	(61,490)		(32,345)
Other liabilities	(2,167)		(6,144)

Net cash used in operating activities	(262,088)		(184,035)
Investing activities
Purchase of fixed assets	(10,070)		(4,679)
Purchase of marketable securities	(630,518)		—

Maturities of marketable securities	721,000		300,000
Net cash provided by investing activities	80,412		295,321
Financing activities
Proceeds from exercise of stock options and ESPP	29,704		4,052
Payments of equity issuance costs	—		(409)




Payments of finance lease principal	(706)		(621)


Net cash provided by financing activities	28,998		3,022
Effect of exchange rates on cash and cash equivalents	895		(953)
Net (decrease) increase in cash and cash equivalents	(151,783)		113,355
Cash and cash equivalents at beginning of period	555,030		482,374
Cash and cash equivalents at end of period	$	403,247	$	595,729
Supplemental disclosures of cash flow information:
Cash paid for interest	$	13,122	$	8,210
Cash paid for income taxes	$	2,176	$	1,208

See accompanying notes to the unaudited consolidated financial statements

Table of Contents

INSMED INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. The Company and Basis of Presentation

Insmed is a people-first global biopharmaceutical company striving to deliver first- and best-in-class therapies to transform the lives of patients facing serious diseases. The Company's first commercial product, ARIKAYCE, is approved in the United States (US) as ARIKAYCE® (amikacin liposome inhalation suspension), in Europe as ARIKAYCE Liposomal 590 mg Nebuliser Dispersion and in Japan as ARIKAYCE inhalation 590 mg (amikacin sulfate inhalation drug product). ARIKAYCE received accelerated approval in the US in September 2018 for the treatment of 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. In October 2020, the European Commission (EC) approved ARIKAYCE for the treatment of nontuberculous mycobacterial (NTM) lung infections caused by MAC in adults with limited treatment options who do not have cystic fibrosis (CF). In March 2021, Japan's Ministry of Health, Labour and Welfare (MHLW) approved ARIKAYCE for the treatment of patients with NTM lung disease caused by MAC who did not sufficiently respond to prior treatment with a multidrug regimen. NTM lung disease caused by MAC (which the Company refers to as MAC lung disease) is a rare and often chronic infection that can cause irreversible lung damage and can be fatal.

The Company's pipeline includes clinical-stage programs, brensocatib, treprostinil palmitil inhalation powder (TPIP), and INS1201, as well as pre-clinical research programs. Brensocatib is a small molecule, oral, reversible inhibitor of dipeptidyl peptidase 1 (DPP1), which the Company is developing for the treatment of patients with bronchiectasis and other neutrophil-mediated diseases, including chronic rhinosinusitis without nasal polyps (CRSsNP) and hidradenitis suppurativa (HS). TPIP is an inhaled formulation of the treprostinil prodrug treprostinil palmitil which may offer a differentiated product profile for pulmonary hypertension associated with interstitial lung disease (PH-ILD) and pulmonary arterial hypertension (PAH). INS1201 is an intrathecally delivered gene therapy for patients with Duchenne muscular dystrophy (DMD). The Company's pre-clinical research programs encompass a wide range of technologies and modalities, including gene therapy, artificial intelligence-driven protein engineering, protein manufacturing, RNA end-joining, and synthetic rescue.

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

The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and disclosures required by accounting principles generally accepted in the US (GAAP) for complete consolidated financial statements are not included herein. The unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024. Any references in these notes to applicable accounting guidance are meant to refer to GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Updates (ASU) of the Financial Accounting Standards Board (FASB).

The results of operations of any interim period are not necessarily indicative of the results of operations for the full year. The unaudited interim consolidated financial information presented herein reflects all normal adjustments that are, in the opinion of management, necessary for a fair statement of the financial position, results of operations and cash flows for the periods presented. All intercompany transactions and balances have been eliminated in consolidation.

The Company had $403.2 million in cash and cash equivalents and $796.2 million in marketable securities as of March 31, 2025 and reported a net loss of $256.6 million for the three months ended March 31, 2025. The Company has funded its operations through public offerings of equity securities, debt financings and revenue interest financings. The Company expects to continue to incur consolidated operating losses, including losses in its US and certain international entities, while funding research and development (R&D) activities for ARIKAYCE, brensocatib, TPIP, INS1201, and its other pipeline programs, continuing commercialization and regulatory activities for ARIKAYCE and pre-commercial, regulatory and, if approved, commercialization activities for brensocatib, and funding other general and administrative activities.

The Company expects its future cash requirements to be substantial. While the Company currently has sufficient funds to meet its financial needs for at least the next 12 months, the Company may raise additional capital in the future to fund its operations, its ongoing commercialization and clinical trial activities, and its future product candidates, and to develop, acquire, in-license or co-promote other products or product candidates, including those that address orphan or serious diseases. The source, timing and availability of any future financing or other transaction will depend principally upon continued progress in the Company’s commercial, regulatory and development activities. Any future financing will also be contingent upon market

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INSMED INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. The Company and Basis of Presentation (Continued)

conditions. If the Company is unable to obtain sufficient additional funds when required, the Company may be forced to delay, restrict or eliminate all or a portion of its development programs or commercialization efforts.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Celtrix Pharmaceuticals, Inc., Insmed France SAS, Insmed Gene Therapy LLC, Insmed Germany GmbH, Insmed Godo Kaisha, Insmed Holdings Limited, Insmed Innovation UK Limited, Insmed Ireland Limited, Insmed Italy S.R.L., Insmed Limited, Insmed Netherlands B.V., Insmed Netherlands Holdings B.V., and Insmed Switzerland GmbH.

2. Summary of Significant Accounting Policies

The Company’s complete listing of significant accounting policies is set forth in Note 2 of the notes to the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2024. Selected significant accounting policies are discussed in detail below.

Use of Estimates—The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company bases its estimates and judgments on historical experience and on various other assumptions. The amounts of assets and liabilities reported in the Company's balance sheets and the amounts of revenues and expenses reported for each period presented are affected by estimates and assumptions, which are used for, but not limited to, the accounting for revenue allowances, stock-based compensation, income taxes, loss contingencies, acquisition related intangibles including in process research and development (IPR&D) and goodwill, fair value of contingent consideration, the revenue interest purchase agreement (the Royalty Financing Agreement), and accounting for R&D costs. Actual results could differ from those estimates.

Concentration of Credit Risk—Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and marketable securities. The Company places its cash equivalents and marketable securities with high credit-quality financial institutions and may invest its investments in US treasury securities, mutual funds and government agency bonds. The Company has established guidelines relative to credit ratings and maturities that seek to maintain safety and liquidity.

The Company is exposed to risks associated with extending credit to customers related to the sale of products. The Company does not require collateral to secure amounts due from its customers. The Company uses an expected loss methodology to calculate allowances for trade receivables. The Company's measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The Company does not currently have a material allowance for uncollectible trade receivables.

The following table presents the percentage of gross product revenue represented by the Company's three largest customers for the three months ended March 31, 2025 and their respective percentages for the three months ended March 31, 2024.


	Three Months Ended March 31,
	2025	2024
Customer A	31%	35%
Customer B	29%	34%
Customer C	20%	16%

The Company relies on third-party manufacturers and suppliers for manufacturing and supply of its products. The inability of the suppliers or manufacturers to fulfill supply requirements of the Company could materially impact future operating results. A change in the relationship with the suppliers or manufacturers, or an adverse change in their business, could materially impact future operating results.

Finite-lived Intangible Assets—Finite-lived intangible assets are measured at their respective fair values on the date they were recorded. The fair values assigned to the Company's intangible assets are based on reasonable estimates and assumptions given available facts and circumstances. See Note 6 - Intangibles, Net and Goodwill for further details.

Impairment Assessment—The Company reviews the recoverability of its finite-lived intangible assets and long-lived assets for indicators of impairments. Events or circumstances that may require an impairment assessment include negative

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INSMED INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

clinical trial results, a significant decrease in the market price of the asset, or a significant adverse change in legal factors or the manner in which the asset is used. If such indicators are present, the Company assesses the recoverability of affected assets by determining if the carrying value of such assets is less than the sum of the undiscounted future cash flows of the assets. If such assets are found to not be recoverable, the Company measures the amount of the impairment by comparing the carrying value of the assets to the fair value of the assets.

Business Combinations and Asset Acquisitions—The Company evaluates acquisitions of assets and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If the screen is met, the transaction is accounted for as an asset acquisition. If the screen is not met, further determination is required as to whether or not the Company has acquired inputs and processes that have the ability to create outputs, which would meet the requirements of a business. If determined to be a business combination, the Company accounts for the transaction under the acquisition method of accounting as indicated in ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which requires the acquiring entity in a business combination to recognize the fair value of all assets acquired, liabilities assumed, and any non-controlling interest in the acquiree and establishes the acquisition date as the fair value measurement point. Accordingly, the Company recognizes assets acquired and liabilities assumed in business combinations, including contingent assets and liabilities, and non-controlling interest in the acquiree based on the fair value estimates as of the date of acquisition. In accordance with ASC 805, Business Combinations, the Company recognizes and measures goodwill as of the acquisition date, as the excess of the fair value of the consideration paid over the fair value of the identified net assets acquired.

The consideration for the Company’s business acquisitions may include future payments that are contingent upon the occurrence of a particular event or events. The obligations for such contingent consideration payments are recorded at fair value on the acquisition date. The contingent consideration obligations are then evaluated each reporting period. Changes in the fair value of contingent consideration, other than changes due to payments, are recognized as a gain or loss and recorded within change in the fair value of deferred and contingent consideration liabilities in the consolidated statements of comprehensive loss.

If determined to be an asset acquisition, the Company accounts for the transaction under ASC 805-50, which requires the acquiring entity in an asset acquisition to recognize assets acquired and liabilities assumed based on the cost to the acquiring entity on a relative fair value basis, which includes transaction costs in addition to consideration given. No gain or loss is recognized as of the date of acquisition unless the fair value of non-cash assets given as consideration differs from the assets’ carrying amounts on the acquiring entity’s books. Consideration transferred that is non-cash will be measured based on either the cost (which shall be measured based on the fair value of the consideration given) or the fair value of the assets acquired and liabilities assumed, whichever is more reliably measurable. Goodwill is not recognized in an asset acquisition and any excess consideration transferred over the fair value of the net assets acquired is allocated to the identifiable assets based on relative fair values. If the in-licensed agreement for IPR&D does not meet the definition of a business and the assets have not reached technological feasibility and therefore have no alternative future use, the Company expenses payments made under such license agreements as acquired IPR&D expense within R&D expense in its consolidated statements of comprehensive loss.

Contingent consideration payments in asset acquisitions are recognized when the contingency is resolved and the consideration is paid or becomes payable, unless the contingent consideration meets the definition of a derivative, in which case the amount becomes part of the basis in the asset acquired. None of the Company's contingent consideration met the definition of a derivative as of March 31, 2025. Upon recognition of the contingent consideration payment, the amount is included in the cost of the acquired asset or group of assets.

Indefinite-lived Intangible Assets—Indefinite-lived intangible assets consist of IPR&D. IPR&D acquired directly in a transaction other than a business combination is capitalized if the projects will be further developed or have an alternative future use; otherwise, they are expensed. The fair values of IPR&D project assets acquired in business combinations are capitalized. The Company generally utilizes the Multi-Period Excess Earning Method to determine the estimated fair value of the IPR&D assets acquired in a business combination. The projections used in this valuation approach are based on many factors, such as relevant market size, patent protection, and expected pricing and industry trends. The estimated future net cash flows are then discounted to the present value using an appropriate discount rate. These assets are treated as indefinite-lived intangible assets until completion or abandonment of the projects, at which time the assets are amortized over the remaining useful life or written off, as appropriate. Intangible assets with indefinite lives, including IPR&D, are tested for impairment if impairment indicators arise and, at a minimum, annually. However, an entity is permitted to first assess qualitative factors to determine if a quantitative impairment test is necessary. Further testing is only required if the entity determines, based on the qualitative

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INSMED INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

assessment, that it is more likely than not that an indefinite-lived intangible asset’s fair value is less than its carrying amount. The indefinite-lived intangible asset impairment test consists of a one-step analysis that compares the fair value of the intangible asset with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The Company considers many factors in evaluating whether the value of its intangible assets with indefinite lives may not be recoverable, including, but not limited to, expected growth rates, the cost of equity and debt capital, general economic conditions, the Company’s outlook and market performance of the Company’s industry and recent and forecasted financial performance. The Company performs a qualitative test for its indefinite-lived intangible assets annually as of October 1. During the three months ended March 31, 2025, the Company concluded that no impairment exists.

Goodwill—Goodwill represents the amount of consideration paid in excess of the fair value of net assets acquired as a result of the Company’s business acquisitions accounted for using the acquisition method of accounting. Goodwill is not amortized and is subject to impairment testing at a reporting unit level on an annual basis or when a triggering event occurs that may indicate the carrying value of the goodwill is impaired. An entity is permitted to first assess qualitative factors to determine if a quantitative impairment test is necessary. Further testing is only required if the entity determines, based on the qualitative assessment, that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. As of March 31, 2025, the Company continues to operate as one reporting unit. The Company performs an impairment test for goodwill annually as of October 1. See Note 6 - Intangibles, Net and Goodwill for further details.

Leases—A lease is a contract, or part of a contract, that conveys the right to control the use of explicitly or implicitly identified property, plant or equipment in exchange for consideration. Control of an asset is conveyed to the Company if the Company obtains the right to obtain substantially all of the economic benefits of the asset or the right to direct the use of the asset. The Company recognizes right-of-use (ROU) assets and lease liabilities at the lease commencement date based on the present value of future, fixed lease payments over the term of the arrangement. ROU assets are amortized on a straight-line basis over the term of the lease or are amortized based on consumption, if this approach is more representative of the pattern in which benefit is expected to be derived from the underlying asset. Lease liabilities accrete to yield and are reduced at the time when the lease payment is payable to the vendor. Variable lease payments are recognized at the time when the event giving rise to the payment occurs and are recognized in the consolidated statements of comprehensive loss in the same line item as expenses arising from fixed lease payments.

Leases are measured at present value using the rate implicit in the lease or, if the implicit rate is not determinable, the lessee's incremental borrowing rate. As the implicit rate is not typically available, the Company uses its incremental borrowing rate based on the information available at the lease commencement date to determine the present value of future lease payments. The incremental borrowing rate approximates the rate the Company would pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments. See Note 9 - Leases for further details.

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

Foreign Currency—The Company has operations in the US, France, Germany, Ireland, Italy, the Netherlands, Switzerland, the UK, and Japan. The results of the Company's non-US dollar based functional currency operations are translated to US dollars at the average exchange rates during the period. Assets and liabilities are translated at the exchange rate prevailing at the balance sheet date. Equity is translated at the prevailing exchange rate at the date of the equity transaction. Translation adjustments are included in total shareholders' equity, as a component of accumulated other comprehensive loss.

The Company realizes foreign currency transaction gains and losses in the normal course of business based on movements in the applicable exchange rates. These gains and losses are included as a component of other income (expense), net.

Inventory and Cost of Product Revenues (excluding amortization of intangible assets)—Inventory is stated at the lower of cost and net realizable value. Inventory is sold on a first-in, first-out (FIFO) basis. The Company periodically reviews inventory for expiry and obsolescence and, if necessary, writes down accordingly. If quality specifications are not met during the manufacturing process, such inventory is written off to cost of product revenues (excluding amortization of intangible assets) in the period identified.

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INSMED INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

Cost of product revenues (excluding amortization of intangible assets) consist primarily of direct and indirect costs related to the manufacturing of ARIKAYCE sold, including third-party manufacturing costs, packaging services, freight, and allocation of overhead costs, in addition to royalty expenses. Cost is determined using a standard cost method, which approximates actual cost, and assumes a FIFO flow of goods. Inventory used for clinical development purposes is expensed to R&D expense when consumed. Prior to US Food and Drug Administration (FDA) approval of new products, the Company expenses all inventory related costs in the period incurred.

Net Loss Per Share—Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of common shares and other dilutive securities outstanding during the period. Potentially dilutive securities from stock options, restricted stock (RS), restricted stock units (RSUs), performance stock units (PSUs) and convertible debt securities would be anti-dilutive as the Company incurred a net loss. Potentially dilutive common shares resulting from the assumed exercise of outstanding stock options and from the assumed conversion of the Company's convertible notes are determined based on the treasury stock method.

The following table sets forth the reconciliation of the weighted average number of common shares used to compute basic and diluted net loss per share for the three months ended March 31, 2025 and 2024:


	Three Months Ended March 31,
		2025		2024

Numerator:
Net loss		$	(256,583)	$	(157,091)
Denominator:
Weighted average common shares used in calculation of basic net loss per share:		180,860		148,456
Effect of dilutive securities:
Common stock options		—		—
RS and RSUs		—		—
PSUs		—		—
Convertible debt securities		—		—
Weighted average common shares outstanding used in calculation of diluted net loss per share		180,860		148,456
Net loss per share:
Basic and diluted		$	(1.42)	$	(1.06)

The following potentially dilutive securities have been excluded from the computations of diluted weighted average common shares outstanding as of March 31, 2025 and 2024, respectively, as their effect would have been anti-dilutive (in thousands):


	As of March 31,
	2025	2024
Common stock options	21,227	24,098
Unvested RS and RSUs	3,647	3,059
PSUs	9	666
Convertible debt securities	17,690	23,438

Recent Accounting Pronouncements (Not Yet Adopted)—In December 2023, the FASB issued ASU 2023-09, Income Taxes—Improvements to Income Tax Disclosures, in order to enhance the transparency and decision usefulness of income tax disclosures. ASU 2023-09 requires greater disaggregation of income tax disclosures related to the income tax rate reconciliation and income taxes paid. The guidance is effective for fiscal years beginning after December 15, 2024. The Company expects to adopt this new standard for the year ending December 31, 2025. The Company is evaluating the impact of the required disclosure enhancements of ASU 2023-09 on its consolidated financial statements.

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INSMED INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

In November 2024, the FASB issued ASU 2024-03, Income Statement (Subtopic 220-40)—Expense Disaggregation Disclosures, which requires disclosure of disaggregated income statement expense information about specific categories (including purchases of inventory, employee compensation, depreciation, and intangible asset amortization) in the notes to financial statements. ASU 2024-03 will be effective for fiscal years beginning after December 15, 2026 and interim periods beginning after December 15, 2027. The guidance is applied on a prospective basis, with a retrospective option, and early adoption is permitted. The Company is currently evaluating the impact of adoption of ASU 2024-03 on its consolidated financial statements.

3. Fair Value Measurements

The Company categorizes its financial assets and liabilities measured and reported at fair value in the financial statements on a recurring basis based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, which are directly related to the amount of subjectivity associated with the inputs used to determine the fair value of financial assets and liabilities, are as follows:

•Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

•Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the assets or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

•Level 3—Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

Each major category of financial assets and liabilities measured at fair value on a recurring basis is categorized based upon the lowest level of significant input to the valuations. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Financial instruments in Level 1 generally include US treasuries and mutual funds listed in active markets. The Company's cash and cash equivalents permit daily redemption and the fair values of these investments are based upon the quoted prices in active markets provided by the holding financial institutions.

The following table shows assets and liabilities that are measured at fair value on a recurring basis and their carrying value (in millions):


	As of March 31, 2025
			Fair Value
	Carrying Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	403.2	$	403.2	$	—	$	—
Marketable securities	$	796.2	$	796.2	$	—	$	—
Liabilities

Contingent consideration	$	187.2	$	—	$	—	$	187.2


	As of December 31, 2024
			Fair Value
	Carrying Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	555.0	$	555.0	$	—	$	—
Marketable securities	$	878.8	$	878.8	$	—	$	—
Liabilities


Contingent consideration	$	168.9	$	—	$	—	$	168.9

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INSMED INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Fair Value Measurements (Continued)

During the three months ended March 31, 2025, $630.5 million of marketable securities were purchased and $721.0 million of marketable securities matured, each consisting of US Treasury Bills.

The Company recognizes transfers between levels within the fair value hierarchy, if any, at the end of each quarter. There were no transfers in or out of Level 1, Level 2, or Level 3 during the three months ended March 31, 2025. During the three months ended March 31, 2025, new Level 1 assets were added in connection with the Company's purchase of available-for-sale securities.

As of March 31, 2025, the Company held $796.2 million of available-for-sale securities. Marketable securities maturing in one year or less are classified as current assets and marketable securities maturing in more than one year are classified as non-current assets.

The Company reviews the status of each security quarterly to determine whether an other-than-temporary impairment has occurred. In making its determination, the Company considers a number of factors, including: (1) the significance of the decline; (2) whether the security was rated below investment grade; (3) failure of the issuer to make scheduled interest or principal payments; and (4) the Company's ability and intent to retain the investment for a sufficient period of time for it to recover. The Company has determined that there were no other-than-temporary impairments during the three months ended March 31, 2025.

Deferred Consideration

The deferred consideration arose from the acquisitions of Motus Biosciences, Inc. (Motus) and AlgaeneX, Inc. (AlgaeneX) (together, the Business Acquisition) in August 2021 (see Note 16 - Acquisitions). The Company was obligated to issue to Motus equityholders an aggregate of 184,433 shares of the Company’s common stock on each of the first, second and third anniversaries of the closing date, subject to certain reductions. During August 2022, August 2023, and August 2024, the Company fulfilled the payments due on the first, second and third anniversaries of the closing date by issuing 171,427 shares, 177,203 shares and 182,182 shares of the Company's common stock, respectively, after certain reductions. A valuation of the deferred consideration was performed quarterly with gains and losses included within change in fair value of deferred and contingent consideration liabilities in the consolidated statements of comprehensive loss. As the deferred consideration was settled in shares, no discount rate was applied in the fair value calculation.

The deferred consideration was classified as a Level 2 recurring liability as its valuation utilized an input, the Insmed share price, which is a directly observable input at the measurement date and for the duration of the liabilities' anticipated lives. There was no remaining deferred consideration as of December 31, 2024.

Contingent Consideration

The contingent consideration liabilities arose from the Business Acquisition in August 2021 (see Note 16 - Acquisitions). The contingent consideration liabilities consist of developmental and regulatory milestones, a priority review voucher milestone, and net sales milestones. Upon the achievement of certain development and regulatory milestone events, the Company is obligated to issue to Motus equityholders up to 5,348,572 shares in the aggregate and AlgaeneX equityholders up to 368,867 shares in the aggregate. The fair value of the development and regulatory milestones are estimated utilizing a probability-adjusted approach. At March 31, 2025, the weighted average probability of success was 42%. The development and regulatory milestones will be settled in shares of the Company's common stock. As such, there is no discount rate applied in the fair value calculation.

If the Company were to receive a priority review voucher, the Company would be obligated to pay to the Motus equityholders a portion of the value of the priority review voucher, subject to certain reductions. The potential payout will be either 50% of the after tax net proceeds received by the Company from a sale of the priority review voucher or 50% of the average of the sales prices for the last three publicly disclosed priority review voucher sales, less certain adjustments. The fair value of the priority review voucher milestone is estimated utilizing a probability-adjusted discounted cash flow approach. This obligation will be settled in cash. On December 20, 2024, the FDA's priority review voucher program expired. As of March 31, 2025 and December 31, 2024, the Company determined that the likelihood of receiving a priority review voucher was remote and the milestone had no fair value.

The contingent consideration liabilities for net sales milestones were valued using an option pricing model with Monte Carlo simulation. As of March 31, 2025, the fair value of these net sales milestones were deemed immaterial to the overall fair value of the contingent consideration.

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INSMED INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Fair Value Measurements (Continued)

The contingent consideration liabilities have been classified as a Level 3 recurring liability as its valuation requires substantial judgment and estimation of factors that are not currently observable in the market. If different assumptions were used for the inputs to the valuation approach, the estimated fair value could be significantly different than the fair value the Company determined. Contingent consideration expected to be settled within twelve months or less is classified as a current liability within accounts payable and accrued liabilities. Contingent consideration expected to be settled in more than twelve months is classified as a non-current liability. As of March 31, 2025, the fair value of the current and non-current contingent consideration was $27.3 million and $159.9 million, respectively.

A valuation of the contingent consideration liabilities is performed quarterly with gains and losses included within change in fair value of deferred and contingent consideration liabilities in the consolidated statements of comprehensive loss. The following significant unobservable inputs were used in the valuation of the contingent consideration liabilities as of March 31, 2025 and December 31, 2024:

Fair Value as of March 31, 2025 (in millions)

Valuation Technique

Unobservable Inputs

Values

Development and regulatory milestones

$184.2

Probability-adjusted

Probabilities of success

14% - 97%

Fair Value as of December 31, 2024 (in millions)

Valuation Technique

Unobservable Inputs

Values

Development and regulatory milestones

$166.7

Probability-adjusted

Probabilities of success

14% - 97%

The following table is a summary of the changes in the fair value of the Company's valuations for the deferred and contingent consideration liabilities for the three months ended March 31, 2025 and 2024 (in thousands):


	Deferred Consideration (Level 2 Liabilities)		Contingent Consideration (Level 3 Liabilities)
Balance as of December 31, 2023	$	5,700	$	84,600
Additions	—		—
Change in fair value	(700)		(11,200)
Payments			—
Balance as of March 31, 2024	$	5,000	$	73,400

Balance as of December 31, 2024	$	—	$	168,900
Additions	—		—
Change in fair value	—		18,300
Payments	—		—
Balance as of March 31, 2025	$	—	$	187,200

Convertible Notes

The fair value of the Company's 0.75% convertible senior notes due 2028 (the 2028 Convertible Notes), which differs from their carrying value, is influenced by interest rates, the Company's stock price and stock price volatility (collectively, the Current Market Factors), and is determined by prices for the 2028 Convertible Notes observed in market trading which are Level 2 inputs.

The estimated fair value of the 2028 Convertible Notes (categorized as a Level 2 liability for fair value measurement purposes) as of March 31, 2025 was $1.4 billion, determined using Current Market Factors and the ability of the Company to obtain debt on comparable terms to the 2028 Convertible Notes. See Note 10 - Debt for further details.

Royalty Financing Agreement

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INSMED INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. Fair Value Measurements (Continued)

The fair value of the Royalty Financing Agreement at the time of the transaction was based on the Company’s estimates of future royalties expected to be paid to OrbiMed Royalty & Credit Opportunities IV, LP (OrbiMed) over the life of the arrangement, which was determined using forecasts from market data sources, which are considered Level 3 inputs. This liability is being amortized using the effective interest method over the life of the arrangement, in accordance with ASC 470, Debt and ASC 835, Interest. The Company will utilize the prospective method to account for subsequent changes in the estimated future payments to be made to OrbiMed and will update the effective interest rate on a quarterly basis. The carrying value of the Royalty Financing Agreement approximates fair value. For more information, see Note 11 - Royalty Financing Agreement for further details.

Secured Senior Term Loan

The carrying value of the Company's secured senior term loans are measured at amortized cost using the effective interest method and the carrying value approximates fair value. For more information, see Note - 10 Debt.

4. Product Revenues, Net

In accordance with ASC 606, Revenue from Contracts with Customers, the Company recognizes revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration the Company expects to receive in exchange for the goods or services provided. To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps: (1) identify the contracts with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when or as the entity satisfies a performance obligation. At contract inception, the Company assesses the goods or services promised within each contract to determine which are performance obligations and to assess whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when or as the performance obligation is satisfied. For all contracts that fall into the scope of ASC 606, the Company has identified one performance obligation: the sale of ARIKAYCE to its customers. The Company has not incurred or capitalized any incremental costs associated with obtaining contracts with customers.

Product revenues, net consist of net sales of ARIKAYCE. The Company's customers in the US include specialty pharmacies and a specialty distributor. In December 2020, the Company began recognizing product revenue from commercial sales of ARIKAYCE in Europe. In July 2021, the Company began recognizing product revenue from commercial sales of ARIKAYCE in Japan. Globally, product revenues are recognized once the Company performs and satisfies all five steps of the revenue recognition criteria mentioned above.

The following table presents a geographic summary of the Company's product revenues, net, for the three months ended March 31, 2025 and 2024 (in thousands):


	Three Months Ended March 31,
		2025		2024
US		$	64,275	$	56,349
Japan		22,083		14,891
Europe and rest of world		6,465		4,260
Total product revenues, net		$	92,823	$	75,500

Revenue is recorded at net selling price (transaction price), which includes estimates of variable consideration for which reserves are established for (a) customer credits, such as invoice discounts for prompt pay, (b) estimated government rebates, such as Medicaid and Medicare Part D reimbursements, and estimated managed care rebates, (c) estimated chargebacks, and (d) estimated costs of co-payment assistance. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (prompt pay discounts and chargebacks), prepaid expenses (co-payment assistance), or as a current liability (rebates). Where appropriate, these estimates take into consideration a range of possible outcomes which are probability-weighted for relevant factors such as the Company's historical experience, current contractual and statutory requirements, and forecasted customer buying and payment patterns. Overall, these reserves reflect the Company's best estimates of the amount of consideration to which it is entitled based on the terms of the applicable contract. The amount of variable consideration included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Company's estimates.

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INSMED INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Product Revenues, Net (Continued)

If actual results in the future vary from estimates, the Company adjusts these estimates, which would affect net product revenue and earnings in the period such variances become known.

Customer credits: Certain of the Company's customers are offered various forms of consideration, including prompt payment discounts. The payment terms for sales to specialty pharmacies and specialty distributors for prompt payment discounts are based on contractual rates agreed with the respective specialty pharmacies and distributors. The Company anticipates that its customers will earn these discounts and, therefore, deducts the full amount of these discounts from total gross product revenues at the time such revenues are recognized.

Rebates: The Company contracts with certain government agencies and managed care organizations, or collectively, third-party payors, so that ARIKAYCE will be eligible for purchase by, or partial or full reimbursement from, such third-party payors. The Company estimates the rebates it will provide to third-party payors and deducts these estimated amounts from total gross product revenues at the time the revenues are recognized. These reserves are recorded in the same period in which the revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability. The current liability is included in accounts payable and accrued liabilities on the consolidated balance sheets. The Company estimates the rebates that it will provide to third-party payors based upon (i) the Company's contracts with these third-party payors, (ii) the government mandated discounts applicable to government-funded programs, (iii) a range of possible outcomes that are probability-weighted for the estimated payor mix, and (iv) information obtained from the Company's specialty pharmacies.

Chargebacks: Chargebacks are discounts that occur when certain contracted customers, currently public health service institutions and federal government entities purchasing via the Federal Supply Schedule, purchase directly from the Company's specialty distributor. Contracted customers generally purchase the product at a discounted price and the specialty distributor, in turn, charges back to the Company the difference between the price the specialty distributor initially paid and the discounted price paid by the contracted customers. The Company estimates chargebacks provided to the specialty distributor and deducts these estimated amounts from gross product revenues, and from accounts receivable, at the time revenues are recognized.

Co-payment assistance: Patients who have commercial insurance and meet certain eligibility requirements may receive co-payment assistance. Based upon the terms of the program and information regarding programs provided for similar specialty pharmaceutical products, the Company estimates the average co-pay mitigation amounts and the percentage of patients that it expects to participate in the program in order to establish accruals for co-payment assistance. These reserves are recorded in the same period in which the related revenue is recognized, resulting in a reduction of product revenue. The Company adjusts its accruals for co-pay assistance based on actual redemption activity and estimates of future redemptions related to sales in the current period.

If any, or all, of the Company's actual experience varies from its estimates, the Company may need to adjust prior period accruals, affecting revenue in the period of adjustment.

The Company also recognizes revenue related to various early access programs (EAPs) in Europe. EAPs are intended to make products available on a named-patient basis before they are commercially available in accordance with local regulations.

5. Inventory

The Company's inventory balance consists of the following (in thousands):


	As of
	March 31, 2025		December 31, 2024

Raw materials	$	22,384	$	19,682
Work-in-process	42,117		39,932
Finished goods	36,212		38,964
	$	100,713	$	98,578

Inventory is stated at the lower of cost and net realizable value and consists of raw materials, work-in-process and finished goods. The Company has not recorded any significant inventory write-downs. The Company currently uses a limited number of third-party contract manufacturing organizations (CMOs) to produce its inventory.

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INSMED INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Intangibles, Net and Goodwill

Intangibles, Net

Finite-lived Intangible Assets

As of March 31, 2025, the Company's finite-lived intangible assets consisted of acquired ARIKAYCE R&D and the milestones paid to PARI Pharma GmbH (PARI) for the license to use the Lamira® Nebulizer System (Lamira) for the delivery of ARIKAYCE to patients as a result of the FDA and EC approvals of ARIKAYCE in September 2018 and October 2020, respectively. The Company began amortizing its acquired ARIKAYCE R&D and PARI milestone-related intangible assets in October 2018, over ARIKAYCE's initial regulatory exclusivity period of 12 years. Amortization of these assets during each of the next five years is estimated to be approximately $5.1 million per year.

Indefinite-lived Intangible Assets

As of March 31, 2025, the Company's indefinite-lived intangible assets consisted of acquired IPR&D from the Business Acquisition (see Note 16 - Acquisitions). Indefinite-lived intangible assets are not amortized. A rollforward of the Company's intangible assets for the three months ended March 31, 2025 and 2024 is as follows (in thousands):



Intangible Asset	December 31, 2024		Additions		Amortization		March 31, 2025
Acquired ARIKAYCE R&D	$	27,888	$	—	$	(1,212)	$	26,676
Acquired IPR&D	29,600		—		—		29,600
PARI milestones	1,164		—		(51)		1,113
	$	58,652	$	—	$	(1,263)	$	57,389

Intangible Asset	December 31, 2023		Additions		Amortization		March 31, 2024
Acquired ARIKAYCE R&D	$	32,738	$	—	$	(1,212)	$	31,526
Acquired IPR&D	29,600		—		—		29,600
PARI milestones	1,366		—		(51)		1,315
	$	63,704	$	—	$	(1,263)	$	62,441

Goodwill

The Company's goodwill balance of $136.1 million as of March 31, 2025 and December 31, 2024, resulted from the Business Acquisition. See Note 16 - Acquisitions for further details.

7. Fixed Assets, Net

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


	Estimated Useful Life (years)	As of
Asset Description		March 31, 2025		December 31, 2024

Lab equipment	7	$	29,467	$	26,753
Furniture and fixtures	7	6,428		6,428
Computer hardware and software	3-5	7,579		6,485
Office equipment	7	171		171
Manufacturing equipment	7	1,336		1,336
Leasehold improvements	2-10	50,130		38,058
Construction in progress	—	45,488		51,127
		140,599		130,358
Less: accumulated depreciation		(52,241)		(50,306)
		$	88,358	$	80,052

INSMED INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consist of the following (in thousands):


	As of
	March 31, 2025		December 31, 2024
Accounts payable and other accrued operating expenses	$	57,683	$	73,033
Accrued clinical trial expenses	24,936		26,068
Accrued professional fees	26,223		17,895
Accrued technical operation expenses	8,439		18,388

Accrued compensation and employee related costs	34,295		80,312
Accrued royalty and milestones payable	10,941		6,324
Accrued interest payable	1,437		359
Revenue Interest Payments payable	3,712		4,177
Accrued sales allowances and related costs	19,208		16,762
Accrued French rebate payable	7,769		5,988
Deferred and contingent consideration	27,300		24,700


Other accrued liabilities	10,731		11,203
	$	232,674	$	285,209

9. Leases

The Company's lease portfolio consists primarily of office and laboratory space, manufacturing facilities, research equipment and fleet vehicles. All of the Company's leases are classified as operating leases, except for the Company's leases of its corporate headquarters and a research facility in San Diego, which are classified as finance leases. The terms of the Company's lease agreements that have commenced range from less than one year to ten years, ten months. In its assessment of the term of each such lease, the Company has not included any options to extend or terminate the lease due to the absence of economic incentives in its lease agreements. Leases that qualify for treatment as a short-term lease are expensed as incurred. These short-term leases are not material to the Company's financial position. Furthermore, the Company does not separate lease and non-lease components for all classes of underlying assets. The Company's leases do not contain residual value guarantees and it does not sublease any of its leased assets.

The Company outsources its manufacturing operations to CMOs. Upon review of the agreements with its CMOs, the Company determined that these contracts contain embedded leases for dedicated manufacturing facilities. The Company obtains substantially all of the economic benefits from the use of the manufacturing facilities, the Company has the right to direct how and for what purpose the facility is used throughout the period of use, and the supplier does not have the right to change the operating instructions of the facility. The operating lease right-of-use assets and corresponding lease liabilities associated with the manufacturing facilities is the sum of the minimum guarantees over the life of the production contracts.

The Company also records variable consideration for variable lease payments in excess of fixed fees or minimum guarantees. Variable consideration related to the Company's leasing arrangements was $2.5 million and $4.9 million for the three months ended March 31, 2025 and 2024, respectively. Variable costs related to CMO manufacturing agreements are direct costs related to the manufacturing of ARIKAYCE and are capitalized within inventory in the Company's consolidated balance sheet, while the variable costs related to other leasing arrangements, not related to the manufacturing of ARIKAYCE, have been classified within operating expenses in the Company's consolidated statements of comprehensive loss.

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INSMED INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. Leases (Continued)

The table below summarizes the supplemental non-cash disclosures of the Company's leases included in its consolidated financial statements (in thousands):


	Three Months Ended March 31,
		2025		2024
Finance right-of-use assets obtained in exchange for lease obligations		$	—	$	—
Operating right-of-use assets obtained in exchange for lease obligations		$	—	$	5,656

In addition to the Company's lease agreements that have previously commenced and are reflected in the consolidated financial statements, the Company has entered into additional lease agreements that have not yet commenced. The Company entered into certain agreements with Patheon UK Limited (Patheon) related to increasing its long-term production capacity for ARIKAYCE commercial inventory. The Company has determined that these agreements with Patheon contain an embedded lease for the manufacturing facility and the specialized equipment contained therein. Costs of $61.4 million and $59.0 million incurred by the Company under these additional agreements have been classified within other assets in the Company's consolidated balance sheet as of March 31, 2025 and December 31, 2024, respectively. Upon the commencement date, the Company will record an operating lease ROU asset and operating lease liability.

10. Debt

Debt, long-term consists of the following commitments as of March 31, 2025 and December 31, 2024 (in thousands):


	As of
	March 31, 2025		December 31, 2024
Convertible notes	$	567,726	$	567,164
Term Loans	537,342		536,218

Debt, long-term	$	1,105,068	$	1,103,382

Convertible Notes

In May 2021, the Company completed an underwritten public offering of $575.0 million aggregate principal amount of the 2028 Convertible Notes, including the exercise in full of the underwriters' option to purchase an additional $75.0 million in aggregate principal amount of 2028 Convertible Notes. The Company's net proceeds from the offering, after deducting underwriting discounts and commissions and other offering expenses of $15.7 million, were approximately $559.3 million. The 2028 Convertible Notes bear interest payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2021. The 2028 Convertible Notes have a remaining term of approximately 3.17 years. The 2028 Convertible Notes would have matured on June 1, 2028 but, on April 24, 2025, the Company called the outstanding 2028 Convertible Notes for redemption, with a redemption date of June 6, 2025. See Note 18 - Subsequent Events below for further details.

The $567.7 million carrying value of the 2028 Convertible Notes as of March 31, 2025 is net of $7.2 million of unamortized debt issuance costs. The 2028 Convertible Notes are long-term liabilities as of March 31, 2025. The following table presents the carrying value of the Company's convertible notes balance (in thousands):


	As of
	March 31, 2025		December 31, 2024
Face value of outstanding convertible notes	$	574,918	574,923
Debt issuance costs, unamortized	(7,192)		(7,759)


Convertible notes	$	567,726	$	567,164

Conversions of 2028 Convertible Notes

On July 1, 2024, October 1, 2024, and January 1, 2025, the 2028 Convertible Notes became convertible, through the end of the third quarter of 2024, fourth quarter of 2024, and first quarter of 2025, respectively, by the holders of such notes due to the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during

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INSMED INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. Debt (Continued)

the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter being greater than or equal to 130% of the conversion price on each applicable trading day. Until the Company issued a redemption notice for the 2028 Convertible Notes (as described under Note 18 - Subsequent Events), the conversion rate for the 2028 Convertible Notes was 30.7692 shares of common stock per $1,000 principal amount of notes (equivalent to a conversion price of approximately $32.50 per share of common stock). The Company elected to settle any conversions of the 2028 Convertible Notes in shares of common stock. As of March 31, 2025, holders of eighty-two thousand dollars of aggregate principal amount of 2028 Convertible Notes elected to convert their notes, resulting in an issuance of an aggregate of 2,514 shares of the Company’s common stock.

Secured Senior Term Loan

In October 2022, the Company entered into the $350.0 million loan agreement (the Loan Agreement) with Pharmakon Advisors, LP (Pharmakon) that would have matured on October 19, 2027 (the Tranche A Term Loan). 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. Up to 50% of the interest payable during the first 24 months from the closing of the Tranche A Term Loan could have been paid-in-kind at the Company's election. If elected, paid-in-kind interest would have been capitalized and added to the principal amount of the Tranche A Term Loan. The Tranche A Term Loan, including the paid-in-kind interest, would have been repaid in eight equal quarterly payments starting in the 13th quarter following the closing of the Tranche A Term Loan (i.e., the quarter ending March 31, 2026), except that the repayment start date could have been extended at the Company's option for an additional four quarters, so that repayments start in the 17th quarter following the closing of the Tranche A Term Loan, subject to the achievement of specified ARIKAYCE data thresholds and certain other conditions. Net proceeds from the Tranche A Term Loan, after deducting the lenders' fees and deal expenses of $15.1 million, were $334.9 million.

Amended and Restated Loan Agreement

In October 2024, the Company entered into an Amended and Restated Loan Agreement (the A&R Loan Agreement) with BioPharma Credit PLC, BPCR Limited Partnership and BioPharma Credit Investments V (Master) LP, which are funds managed by Pharmakon, and the guarantors party to such agreement. The A&R Loan Agreement amended and restated the Loan Agreement to, among other items, add an additional $150.0 million senior secured term loan tranche (the Tranche B Term Loan and, together with the Tranche A Term Loan, the Term Loans). The A&R Loan Agreement extends the maturity of the Term Loans to September 30, 2029, subject to acceleration to February 1, 2028 on the occurrence of certain prespecified events, and amends the interest rate on the Term Loans to a fixed rate of 9.6% per annum. As consideration for the provision of the Tranche B Term Loan, the Company agreed to pay Pharmakon a fee equal to 2.0% of the Tranche B Term Loan at the closing date of the Tranche B Term Loan and an additional exit fee of 2.0% of the amount of each prepayment or repayment of the Term Loans. The Term Loans will be repaid in eight equal quarterly payments starting on January 3, 2028. Net proceeds from the Tranche B Term Loan, after deducting the lenders' fees and administrative expenses of $3.7 million, were $146.3 million.

The Company evaluated whether the A&R Loan Agreement represented a debt modification or extinguishment in accordance with ASC 470-50, Debt – Modifications and Extinguishments. As the present value of the cash flows under the terms of the A&R Loan Agreement was less than 10% different from the remaining cash flows under the terms of the Tranche A Term Loan, the A&R Loan Agreement was accounted for as a debt modification. The unamortized balance of debt issuance costs incurred in connection with the Term Loans are being amortized through September 2029 utilizing the effective interest rate method. The effective interest rate of the Term Loans was 10.6% at modification.

The following table presents the carrying value of the Company’s Term Loans balance as of March 31, 2025 and December 31, 2024 (in thousands):


	As of
	March 31, 2025		December 31, 2024
Principal	$	500,000	$	500,000
Paid-in-kind interest capitalized	46,770		46,770
Debt discount, net	(9,428)		(10,552)
Term Loans	$	537,342	$	536,218

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INSMED INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. Debt (Continued)

As of March 31, 2025, future principal repayments of debt for each of the years through maturity were as follows (in thousands):


Year Ending December 31:
2025	$	—
2026	—
2027	—
2028	916,649
2029	205,039
2030 and thereafter	—
	$	1,121,688

Interest Expense

Interest expense related to debt and finance leases for the three months ended March 31, 2025 and 2024 is as follows (in thousands):


	Three Months Ended March 31,
		2025		2024
Convertible debt contractual interest expense		$	1,078	$	2,063
Term Loans contractual interest expense		13,122		12,483
Royalty Financing Agreement interest expense		5,023		4,822
Amortization of debt issuance costs		1,822		1,851

Swap interest income		—		(754)
Total debt interest expense		$	21,045	$	20,465
Finance lease interest expense		524		577
Total interest expense		$	21,569	$	21,042

11. Royalty Financing Agreement

In October 2022, the Company entered into the Royalty Financing Agreement with OrbiMed. Under the Royalty Financing Agreement, OrbiMed paid the Company $150.0 million in exchange for the right to receive, on a quarterly basis, royalties in an amount equal to 4% of ARIKAYCE global net sales prior to September 1, 2025 and 4.5% of ARIKAYCE global net sales on or after September 1, 2025, as well as 0.75% of brensocatib global net sales, if approved. In the event that OrbiMed has not received aggregate Revenue Interest Payments of at least $150.0 million on or prior to March 31, 2028, the Company must make a one-time payment to OrbiMed for the difference between the $150.0 million and the aggregated Revenue Interest Payments that have been paid. In addition, the royalty rate for ARIKAYCE will be increased beginning March 31, 2028 to the rate which would have resulted in aggregate Revenue Interest Payments as of March 31, 2028 equaling $150.0 million. The total Revenue Interest Payments payable by the Company to OrbiMed are capped at 1.8x of the purchase price or up to a maximum of 1.9x of the purchase price under certain conditions. Net proceeds from the Royalty Financing Agreement, after deducting the lenders' fees and deal expenses of $3.8 million, were $146.2 million. The Royalty Financing Agreement was amended in October 2024 to, among other things, amend certain restrictions on the Company’s ability to incur indebtedness.

The fair value of the Royalty Financing Agreement at the time of the transaction was based on the Company’s estimates of future royalties expected to be paid to OrbiMed over the life of the arrangement, which was determined using forecasts from market data sources, which are considered Level 3 inputs. This liability is being amortized using the effective interest method over the life of the arrangement, in accordance ASC 470, Debt and ASC 835, Interest. The initial annual effective interest rate was determined to be 12.4%. The Company is utilizing the prospective method to account for subsequent changes in the estimated future payments to be made to OrbiMed and updates the effective interest rate on a quarterly basis.

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INSMED INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. Royalty Financing Agreement (Continued)

The following table shows the activity within the liability account for the three-month period ended March 31, 2025 and year ended December 31, 2024 (in thousands):


	Three Months Ended March 31, 2025		Twelve Months Ended December 31, 2024
Royalty Financing Agreement liability - beginning balance	$	163,671	$	158,162
Revenue Interest Payments paid and payable	(3,713)		(14,535)
Interest expense recognized	5,023		20,044
Royalty Financing Agreement liability - ending balance	$	164,981	$	163,671

Royalty issuance costs, unamortized - beginning balance	$	(2,604)	$	(3,128)
Amortization of issuance costs	131		524

Royalty issuance costs, unamortized - ending balance	$	(2,473)	$	(2,604)
Royalty Financing Agreement	$	162,508	$	161,067

The Revenue Interest Payments payable in connection with the Royalty Financing Agreement were $3.7 million and $4.2 million as of March 31, 2025 and December 31, 2024, respectively, which were recorded within accounts payable and accrued expenses on the consolidated balance sheet. Non-cash interest expense is recorded within interest expense in the consolidated statements of comprehensive loss.

12. Shareholders' Equity

Common Stock—As of March 31, 2025, the Company had 500,000,000 shares of common stock authorized with a par value of $0.01 per share and 181,900,074 shares of common stock issued and outstanding. In addition, as of March 31, 2025, the Company had reserved 21,227,364 shares of common stock for issuance upon the exercise of outstanding stock options, 3,646,828 shares of common stock for issuance upon the vesting of RSUs, and 8,870 shares for issuance upon the vesting of PSUs. The Company has also reserved 17,689,767 shares of common stock in the aggregate for issuance upon conversion of the remaining 2028 Convertible Notes, subject to adjustment in accordance with the indenture governing such notes. In connection with the Business Acquisition, the Company reserved 9,406,112 shares of the Company’s common stock, subject to certain closing-related reductions. The shares of the Company’s common stock reserved in connection with the Motus acquisition were partly issued as acquisition consideration at closing and on the first, second and third anniversaries of the closing date of the acquisition, and will also be issued upon the achievement of certain development and regulatory milestone events, subject to certain reductions. The shares of the Company’s common stock reserved in connection with the AlgaeneX acquisition will be issued upon the achievement of a development milestone event, subject to certain reductions.

Of the 9,406,112 shares reserved, the Company issued a total of 3,420,149 shares of the Company's common stock in connection with the Business Acquisition (see Note 16 - Acquisitions), after certain closing-related deductions, and the subsequent anniversary share issuances.

From the third quarter of 2024 through the first quarter of 2025, in connection with the conversions of 2028 Convertible Notes, the Company issued 2,514 shares of the Company's common stock.

In May 2024, the Company completed an underwritten offering of 14,514,562 shares of the Company's common stock at a public offering price of $51.50 per share. 1,893,203 of the shares of common stock were issued pursuant to the exercise in full of the underwriters' option to purchase additional shares. The Company's net proceeds from the sale of the shares, after deducting the underwriting discounts and estimated offering expenses of $34.3 million, were $713.2 million.

In the first quarter of 2024, the Company entered into a sales agreement with Leerink Partners LLC (Leerink Partners) to sell shares of the Company's common stock, with aggregate gross sales proceeds of up to $500.0 million, from time to time, through an “at the market” equity offering program (the ATM program), under which Leerink Partners acted as sales agent. During the year ended December 31, 2024, the Company issued and sold an aggregate of 5,022,295 shares of common stock through the ATM program at a weighted-average public offering price of $75.64 per share and received net proceeds of $371.3 million. In November 2024, the Company terminated the sales agreement.

Preferred Stock—As of March 31, 2025, the Company had 200,000,000 shares of preferred stock authorized with a par value of $0.01 per share and no shares of preferred stock were issued and outstanding.

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INSMED INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13. Stock-Based Compensation

The Company's current equity compensation plan, the Insmed Incorporated Amended and Restated 2019 Incentive Plan (the 2019 Incentive Plan), was approved by shareholders at the Company's Annual Meeting of Shareholders on May 13, 2023. The 2019 Incentive Plan replaced the Insmed Incorporated 2019 Incentive Plan, as amended, pursuant to which the Company was authorized to grant incentive awards up to an aggregate of 13,750,000 shares. At the Company’s 2023 Annual Meeting of Shareholders, in connection with approval of the 2019 Incentive Plan, the Company's shareholders approved the issuance of an additional 10,500,000 shares under the 2019 Incentive Plan. At the Company's 2024 Annual Meeting of Shareholders, the Company's shareholders approved Amendment No. 1 to the 2019 Incentive Plan, which provides for the issuance of an additional 3,000,000 shares under the plan. The Company has submitted a proposal to its shareholders to approve an amendment to the 2019 Incentive Plan at the 2025 Annual Meeting of Shareholders (Amendment No .2). Amendment No. 2, if approved, will provide for the issuance of an additional 10,000,000 shares under the 2019 Incentive Plan. As of March 31, 2025, 3,387,045 shares remain available for future issuance under the 2019 Incentive Plan. The 2019 Incentive Plan will terminate on April 3, 2029 unless it is extended or terminated earlier pursuant to its terms.

In addition, from time to time, the Company makes inducement grants of stock options to new hires, which awards are made pursuant to the Nasdaq's inducement grant exception to the shareholder approval requirement for grants of equity compensation. The Company granted inducement stock options covering 222,750 shares of the Company's common stock to new employees during the three months ended March 31, 2025. In February 2025, the Company adopted the Insmed Incorporated 2025 Inducement Plan, under which the Company is authorized to grant a variety of inducement awards, including stock options and RSUs, up to an aggregate of 1,000,000 shares, as an inducement to become an employee of the Company or any of its subsidiaries, none of which have been granted as of March 31, 2025.

On May 15, 2018, the 2018 Employee Stock Purchase Plan (ESPP) was approved by shareholders at the Company's 2018 Annual Meeting of Shareholders. The Company has reserved the following for issuance under the ESPP: (i) 1,000,000 shares of common stock, plus (ii) commencing on January 1, 2019 and ending on December 31, 2023, an additional number of shares to be added on the first day of each calendar year equal to the lesser of (A) 1,200,000 shares of common stock, (B) 2% of the number of outstanding shares of common stock on such date and (C) an amount determined by the administrator.

Stock Options—As of March 31, 2025, there was $167.6 million of unrecognized compensation expense related to unvested stock options. As of March 31, 2025, the Company had performance-conditioned options totaling 114,780 shares outstanding which had not yet met the recognition criteria.

Restricted Stock Units—As of March 31, 2025, there was $99.9 million of unrecognized compensation expense related to unvested RSU awards.

Performance Stock Units—As of March 31, 2025, there were 8,870 unvested PSUs outstanding. The PSUs were subject to two performance conditions based on brensocatib milestones, both of which had been achieved as of March 31, 2025, and a service condition, 3 years of continued employment. The Company achieved the first performance condition by issuing a press release announcing certain topline results from the ASPEN trial by June 30, 2024. The Company achieved the second performance condition in February 2025 upon the FDA's notification that the new drug application (NDA) had been accepted for brensocatib. During the second quarter of 2024, the Company's total shareholder return was compared to the Company's Peer Group and the payout of the awards was determined to be 250% of the target. During the three months ended March 31, 2025, 651,596 shares were issued upon vesting of the PSUs and $10.3 million of stock-based compensation expense was recognized. As of March 31, 2025, the service condition has not been satisfied for the 8,870 unvested PSUs outstanding.

The following table summarizes the aggregate stock-based compensation expense recorded in the consolidated statements of comprehensive loss related to stock options, RSUs, PSUs and the ESPP during the three months ended March 31, 2025 and 2024 (in thousands):


	Three Months Ended March 31,
		2025		2024
Research and development expenses		$	17,380	$	10,335
Selling, general and administrative expenses		21,882		11,115
Total stock-based compensation expense		$	39,262	$	21,450

14. Income Taxes

The Company recorded a provision for income taxes of $0.9 million and $0.6 million for the three months ended March 31, 2025 and 2024, respectively. The provisions recorded for the three months ended March 31, 2025 and 2024 are primarily a result of certain of the Company's international subsidiaries, which had taxable income during the periods.

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INSMED INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. Income Taxes (Continued)

Additionally, the Company is impacted by certain state taxes which effectively impose income tax on modified gross revenues. In jurisdictions where the Company has net losses, there was a full valuation allowance recorded against the Company's deferred tax assets and therefore no tax benefit was recorded.

The Company is subject to US federal, state and international income taxes and the statute of limitations for tax audit is open for the Company’s federal tax returns for the years ended 2021 and later, generally open for certain states for the years 2020 and later, and generally open for international jurisdictions for the years 2019 and later. The Company has incurred net operating losses since inception, except for the year ended December 31, 2009. Such loss carryforwards would be subject to audit in any tax year in which those losses are utilized, notwithstanding the year of origin. As of March 31, 2025 and December 31, 2024, the Company had recorded reserves for unrecognized income tax benefits against certain deferred tax assets in the US. However, given the Company’s valuation allowance position, these reserves do not have an impact on the balance sheet as of March 31, 2025 and December 31, 2024 or the consolidated statements of comprehensive loss for the three months ended March 31, 2025 and 2024. The Company has not recorded any accrued interest or penalties related to uncertain tax positions. The Company does not anticipate any material changes in the amount of unrecognized tax positions over the next twelve months.

The Organisation for Economic Co-operation and Development recently published a framework to implement a global corporate minimum income tax rate of 15% on income arising in low-tax jurisdictions (Pillar Two). The Pillar Two proposed legislation is applicable to multinational corporations with global revenue exceeding €750 million for at least two years of the preceding four years. Over 140 countries have agreed in principle to implement Pillar Two and many have, or are in the process of, enacting related legislation. The Pillar Two legislation is not anticipated to be effective for the Company until the Company’s annual global revenues have exceeded the €750 million threshold. The Company is still evaluating the potential consequences of Pillar Two on its longer-term financial position.

15. Commitments and Contingencies

Rent expense charged to operations was $3.5 million and $3.1 million for the three months ended March 31, 2025 and 2024, respectively.

Legal Proceedings

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

16. Acquisitions

Business Combination

On August 4, 2021, the Company acquired all of the equity interests of Motus and AlgaeneX, each a privately held, pre-clinical stage company. In connection with the closing of the Company’s acquisition of Motus, the Company issued an aggregate of 2,889,367 shares of the Company’s common stock, following certain closing-related reductions, to Motus’s former stockholders and option holders and certain individuals who are entitled to receive a portion of the acquisition consideration (collectively, Motus equityholders), subject to certain adjustments. The Company was obligated to issue to Motus equityholders an aggregate of 184,433 shares of the Company’s common stock on each of the first, second and third anniversaries of the closing date. During August 2022, August 2023 and August 2024, the Company fulfilled the payments due on the first, second and third anniversaries of the closing date by issuing 171,427 shares, 177,203 shares and 182,182 shares of the Company's common stock, respectively, after certain reductions. The Company is obligated to issue to the Motus equityholders up to 5,348,572 shares in the aggregate upon the achievement of certain development and regulatory milestone events, and to pay to the Motus equityholders an aggregate of $35 million upon the achievement of certain net sales-based milestones and a portion of the value of a priority review voucher (to the extent issued to the Company), in each case, subject to certain reductions.

At the closing of the Company’s acquisition of AlgaeneX, the Company paid $1.5 million in cash to AlgaeneX’s former stockholders and certain individuals who are entitled to receive a portion of the acquisition consideration (collectively, the AlgaeneX equityholders). The Company is obligated to issue to the AlgaeneX equityholders an aggregate of 368,867 shares of the Company’s common stock upon the achievement of a development milestone event and pay to the AlgaeneX equityholders a mid-single digits licensing fee on certain future payments received by the Company in licensing transactions for AlgaeneX’s manufacturing technology, in each case, subject to certain reductions.

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INSMED INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16. Acquisitions (Continued)

The shares of the Company’s common stock issued to the Motus equityholders and the AlgaeneX equityholders were issued, and the shares issuable in the future will be issued, pursuant to Section 4(a)(2) of the Securities Act of 1933, and the numbers of such issued and issuable shares was calculated based on a per share value of $27.11, which was the weighted average price per share of the Company's common stock preceding the closing of the Business Acquisition for the 45 consecutive trading day period beginning on May 24, 2021. The Company will not receive any proceeds from the issuance of common stock to the Motus equityholders or the AlgaeneX equityholders.

The Company evaluated the Business Acquisition under ASC 805 and ASU 2017-01. The Company concluded that substantially all of the fair value of the gross assets acquired is not concentrated in a single identifiable asset or a group of similar identifiable assets. The transaction does not pass the screen test and thus management performed a full assessment to determine if the acquired entities met the definition of a business. For the full assessment, management considered whether it has acquired (a) inputs, (b) substantive processes, and (c) outputs. Under ASC 805, to be considered a business, a set of activities and assets is required to have only the first two of the three elements, which together are or will be used in the future to create outputs. Management determined that the acquired entities met the definition of a business since the Company acquired inputs and substantive processes capable of producing outputs.

Therefore, the transaction has been accounted for under the acquisition method of accounting. Under the acquisition method, the total purchase price of the acquisition is allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on the fair values as of the date of the acquisition. The fair value of the consideration totaled approximately $165.5 million. The results of Motus's and AlgaeneX's operations have been included in the Company's consolidated statements of comprehensive loss beginning on the acquisition date.

The fair value of IPR&D was capitalized as of the acquisition date and accounted for as indefinite-lived intangible assets until completion or disposition of the assets or abandonment of the associated research and development efforts. Upon successful completion of the development efforts, the useful lives of the IPR&D assets will be determined based on the anticipated period of regulatory exclusivity and will be amortized within operating expenses. Until that time, the IPR&D assets will be subject to impairment testing and will not be amortized. The goodwill recorded related to the acquisition is the excess of the fair value of the consideration transferred by the acquirer over the fair value of the net identifiable assets acquired and liabilities assumed at the date of acquisition. The goodwill recorded is not deductible for tax purposes.

17. Segment Reporting

The Company manages its business activities on a consolidated basis and operates as a single operating segment. The Company derives its revenues from the development and commercialization of therapies for patients facing serious diseases. The accounting policies of the segment are the same as those described in Note 2 – Summary of Significant Accounting Policies.

The Company has a single management team that reports to the Chief Executive Officer, the chief operating decision maker (CODM), who comprehensively manages the entire business. When evaluating the Company’s financial performance, the CODM regularly reviews total revenues, total expenses, and expenses by function, and makes decisions using this information on a global basis. The CODM uses net loss, as reported in the consolidated statements of comprehensive loss, in evaluating the performance of the segment. Decisions regarding resource allocation are made primarily during the annual budget planning process and augmented as needed throughout the year. The measure of segment assets is reported on the balance sheet as total assets. The Company does not operate separate lines of business with respect to its products or product candidates. Accordingly, the Company has one reportable segment.

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INSMED INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

17. Segment Reporting (Continued)

Segment loss, including significant segment expenses, for the three month periods ended March 31, 2025 and 2024 is as follows (in thousands):


		Three Months Ended March 31,
		2025		2024
Product revenues, net		$	92,823	$	75,500
Less:
	Cost of product revenues (excluding amortization of intangible assets)	21,278		17,457
	ARIKAYCE external R&D expenses	12,121		13,926
	Brensocatib external R&D expenses	20,661		19,518
	TPIP external R&D expenses	9,153		13,782
	Other external R&D expenses	28,083		13,275
	R&D compensation and benefit-related expenses	53,558		41,460
	SG&A compensation and benefit-related expenses	54,836		32,585
	Other segment items(a)	119,695		76,789
	Depreciation	1,883		1,588
	Amortization of intangible assets	1,263		1,263
	Change in fair value of deferred and contingent consideration liabilities	18,300		(11,900)
	Investment income	(13,906)		(8,783)
	Interest expense	21,569		21,042
	Provision for income taxes	912		589
Segment net loss		$	(256,583)	$	(157,091)

(a) Other segment items include stock-based compensation, professional fees, and facility-related expenses.

18. Subsequent Events

Redemption and Conversions of 2028 Convertible Notes

On April 1, 2025, the 2028 Convertible Notes became convertible, through the end of the second quarter of 2025, consistent with convertibility described in more detail in Note 10 - Debt - Conversions of 2028 Convertible Notes.

On April 24, 2025, the Company issued a redemption notice for the 2028 Convertible Notes with a redemption date of June 6, 2025 (the Redemption Date). All then outstanding 2028 Convertible Notes will be redeemed at a redemption price equal to 100% of the principal amount of the 2028 Convertible Notes, plus accrued and unpaid interest on the 2028 Convertible Notes to, but excluding, the Redemption Date (the Redemption Price). For each $1,000 principal amount of 2028 Convertible Notes, the Redemption Price will be equal to approximately $1,001.10. The Company has elected to settle any conversions of the 2028 Convertible Notes that occur on or before the second business day prior to the Redemption Date in shares of common stock.

From April 1, 2025 to May 6, 2025, holders of $5.8 million aggregate principal amount of the outstanding 2028 Convertible Notes elected to convert their notes into shares of the Company's common stock. These conversions resulted in the issuance of an aggregate of 179,037 shares of the Company’s common stock. Unless earlier converted, on the Redemption Date, the remaining $569.1 million aggregate principal amount of 2028 Convertible Notes outstanding will be redeemed by the Company at the Redemption Price.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. "Forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are statements that are not historical facts and involve a number of risks and uncertainties. Words herein such as "may," "will," "should," "could," "would," "expects," "plans," "anticipates," "believes," "estimates," "projects," "predicts," "intends," "potential," "continues," and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) identify forward-looking statements.

Forward-looking statements are based on our current expectations and beliefs, and involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance and achievements and the timing of certain events to differ materially from the results, performance, achievements or timing discussed, projected, anticipated or indicated in any forward-looking statements. Such risks, uncertainties and other factors include, among others, the following:

•failure to continue to successfully commercialize ARIKAYCE, our only approved product, in the US, Europe or Japan (amikacin liposome inhalation suspension, Liposomal 590 mg Nebuliser Dispersion, and amikacin sulfate inhalation drug product, respectively), or to maintain US, European or Japanese approval for ARIKAYCE;

•our inability to obtain full approval of ARIKAYCE from the FDA, including the risk that we will not successfully or in a timely manner complete the confirmatory post-marketing clinical trial required for full approval of ARIKAYCE, or our failure to obtain regulatory approval to expand ARIKAYCE’s indication to a broader patient population;

•failure to obtain, or delays in obtaining, regulatory approvals for brensocatib, TPIP or our other product candidates in the US, Europe or Japan or for ARIKAYCE outside the US, Europe or Japan, including separate regulatory approval for Lamira in each market and for each usage;

•failure to successfully commercialize brensocatib, TPIP or our other product candidates, if approved by applicable regulatory authorities, or to maintain applicable regulatory approvals for brensocatib, TPIP or our other product candidates, if approved;

•uncertainties or changes in the degree of market acceptance of ARIKAYCE or, if approved, brensocatib, TPIP, or our other product candidates, by physicians, patients, third-party payors and others in the healthcare community;

•our inability to obtain and maintain adequate reimbursement from government or third-party payors for ARIKAYCE or, if approved, brensocatib, TPIP, or our other product candidates, or acceptable prices for ARIKAYCE or, if approved, brensocatib, TPIP, or our other product candidates;

•inaccuracies in our estimates of the size of the potential markets for ARIKAYCE, brensocatib, TPIP, or our other product candidates or in data we have used to identify physicians, expected rates of patient uptake, duration of expected treatment, or expected patient adherence or discontinuation rates;

•failure of third parties on which the Company is dependent to manufacture sufficient quantities of ARIKAYCE, brensocatib, or TPIP for commercial or clinical needs, to conduct the Company's clinical trials, or to comply with the Company's agreements or laws and regulations that impact the Company's business;

•the risks and uncertainties associated with, and the perceived benefits of, our senior secured loan with certain funds managed by Pharmakon and our royalty financing with OrbiMed, including our ability to maintain compliance with the covenants in the agreements for the senior secured loan and royalty financing and the impact of the restrictions on our operations under these agreements;

•our inability to create or maintain an effective direct sales and marketing infrastructure or to partner with third parties that offer such an infrastructure for distribution of ARIKAYCE or any of our product candidates that are approved in the future;

•failure to successfully conduct future clinical trials for ARIKAYCE, brensocatib, TPIP, or our other product candidates and our potential inability to enroll or retain sufficient patients to conduct and complete the trials or generate data necessary for regulatory approval of our product candidates or to permit the use of ARIKAYCE in the broader population of patients with MAC lung disease, among other things;

•development of unexpected safety or efficacy concerns related to ARIKAYCE, brensocatib, TPIP, or our other product candidates;

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•risks that our clinical studies will be delayed, that serious side effects will be identified during drug development, or that any protocol amendments submitted will be rejected;

•failure to successfully predict the time and cost of development, regulatory approval and commercialization for novel gene therapy products;

•risk that interim, topline or preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available or may be interpreted differently if additional data are disclosed, or that blinded data will not be predictive of unblinded data;

•risk that our competitors may obtain orphan drug exclusivity for a product that is essentially the same as a product we are developing for a particular indication;

•our inability to attract and retain key personnel or to effectively manage our growth;

•our inability to successfully integrate our acquisitions and appropriately manage the amount of management’s time and attention devoted to integration activities;

•risks that our acquired technologies, products and product candidates will not be commercially successful;

•inability to adapt to our highly competitive and changing environment;

•inability to access, upgrade or expand our technology systems or difficulties in updating our existing technology or developing or implementing new technology;

•risk that we are unable to maintain our significant customers;

•risk that government healthcare reform materially increases our costs and damages our financial condition;

•business or economic disruptions due to catastrophes or other events, including natural disasters or public health crises;

•risk that our current and potential future use of artificial intelligence (AI) and machine learning may not be successful;

•deterioration in general economic conditions in the US, Europe, Japan and globally, including the effect of prolonged periods of inflation, affecting us, our suppliers, third-party service providers and potential partners;

•the risk that we could become involved in costly intellectual property disputes, be unable to adequately protect our intellectual property rights or prevent disclosure of our trade secrets and other proprietary information, and incur costs associated with litigation or other proceedings related to such matters;

•restrictions or other obligations imposed on us by agreements related to ARIKAYCE, brensocatib or our other product candidates, including our license agreements with PARI and AstraZeneca AB (AstraZeneca), and failure to comply with our obligations under such agreements;

•the cost and potential reputational damage resulting from litigation to which we are or may become a party, including product liability claims;

•risk that our operations are subject to a material disruption in the event of a cybersecurity attack or issue;

•our limited experience operating internationally;

•changes in laws and regulations applicable to our business, including any pricing reform and laws that impact our ability to utilize certain third parties in the research, development or manufacture of our product candidates, and failure to comply with such laws and regulations;

•our history of operating losses, and the possibility that we never achieve or maintain profitability;

•goodwill impairment charges affecting our results of operations and financial condition;

•inability to repay our existing indebtedness and uncertainties with respect to our ability to access future capital; and

•delays in the execution of plans to build out an additional third-party manufacturing facility approved by the appropriate regulatory authorities and unexpected expenses associated with those plans.

We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. Any forward-looking statement is based on information current as of the date of this Quarterly Report on Form 10-Q and speaks only as of the date on which such statement is made. Actual events or results may differ materially from the results, plans, intentions or expectations anticipated in these forward-looking statements as a result of a variety of factors, many of which are beyond our control. More information on factors that could cause actual results to differ materially from

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those anticipated is included from time to time in our reports filed with the Securities and Exchange Commission (SEC), including, but not limited to, those described in the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q and included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

The following discussion should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the consolidated financial statements and related notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2024.

OVERVIEW

We are a people-first global biopharmaceutical company striving to deliver first- and best-in-class therapies to transform the lives of patients facing serious diseases. Our first commercial product, ARIKAYCE, was approved in the US in September 2018, in the EU in October 2020 and in Japan in March 2021. Our pipeline includes clinical-stage programs brensocatib, TPIP, and INS1201, as well as pre-clinical research programs. Brensocatib is a small molecule, oral, reversible inhibitor of DPP1, which we are developing for the treatment of patients with bronchiectasis and other neutrophil-mediated diseases, including CRSsNP and HS. TPIP is an inhaled formulation of the treprostinil prodrug treprostinil palmitil which may offer a differentiated product profile for PH-ILD and PAH. INS1201 is an intrathecally delivered gene therapy for patients with DMD. Our pre-clinical research programs encompass a wide range of technologies and modalities, including gene therapy, AI-driven protein engineering, protein manufacturing, RNA end-joining, and synthetic rescue.

Prior to 2019, we had not generated significant revenue and, through March 31, 2025, we had an accumulated deficit of $4.6 billion. We have financed our operations primarily through the public offerings of our equity securities, debt financings and revenue interest financings. Although it is difficult to predict our future funding requirements, based upon our current operating plan, we anticipate that our cash and cash equivalents and marketable securities as of March 31, 2025 will enable us to fund our operations for at least the next 12 months.

Our ability to reduce our operating loss and begin to generate positive cash flow from operations depends on the continued success in commercializing ARIKAYCE and achieving positive results from the ARIKAYCE confirmatory clinical trial program in order to obtain full approval of ARIKAYCE in the US and potentially reach more patients. Our continued success also depends on commercializing brensocatib, if approved, as well as bringing additional clinical stage products to market, such as TPIP and INS1201, and advancement of our pre-clinical research programs. We expect to continue to incur substantial expenses related to our research and development activities as we continue the ARIKAYCE confirmatory clinical program, conduct studies to explore the potential of brensocatib in additional neutrophil-mediated diseases, including CRSsNP and HS, conduct trials of TPIP in PAH and PH-ILD, and fund development of our pre-clinical research programs. We also expect to continue to incur significant costs related to the commercialization of ARIKAYCE and our commercial readiness activities, and if approved, commercial activities in preparation for a launch of brensocatib for patients with bronchiectasis. Our financial results may fluctuate from quarter to quarter and will depend on, among other factors, the net sales of ARIKAYCE; the scope and progress of our research and development efforts; and the timing of certain expenses. We cannot predict whether or when new products or new indications for marketed products will receive regulatory approval or, if any such approval is received, whether we will be able to successfully commercialize such products and whether or when we may become profitable.

The information below summarizes our updates and anticipated near-term milestones for ARIKAYCE and our product candidates.

ARIKAYCE

•Following the announcement of positive topline results from the ARISE trial, in June 2024, we met and aligned with the FDA on the primary endpoint for the ENCORE trial. If the data are positive, ENCORE may support a label expansion to include all MAC lung disease as well as support full approval for the current refractory indication.

•We completed enrollment in the ENCORE trial with 425 patients in the fourth quarter of 2024.

•We anticipate reporting topline data from the ENCORE trial in the first half of 2026, with the submission of a US supplementary new drug application for ARIKAYCE in all patients with MAC lung disease projected for the second half of 2026.

Brensocatib

•We announced positive topline results from the ASPEN trial in May 2024. The study met its primary endpoint, with both dosage strengths of brensocatib demonstrating statistically significant reductions in the annualized rate of adjudicated pulmonary exacerbations (PEs) versus placebo.

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•Our NDA for brensocatib in patients with bronchiectasis was accepted and granted priority review by the FDA in February 2025. Under the Prescription Drug User Fee Act (PDUFA), the FDA set a target action date of August 12, 2025. We are advancing commercial readiness activities in preparation for a launch of brensocatib for patients with bronchiectasis and, if approved, we anticipate a US launch in the third quarter of 2025.

•Regulatory submissions for brensocatib in Europe and the UK have been accepted, with submission in Japan planned for 2025. Insmed anticipates commercial launches for each territory in 2026, pending approval.

•We completed enrollment in and anticipate reporting topline data from the Phase 2b study of brensocatib in patients with CRSsNP, which we refer to as the BiRCh trial, by the end of 2025.

•We initiated a Phase 2b study of brensocatib in patients with HS, which we refer to as the CEDAR trial, in December 2024.

TPIP

•In May 2024, we reported topline safety data and certain exploratory efficacy endpoints from the Phase 2a study of TPIP in patients with PH-ILD. We anticipate initiating a Phase 3 study of TPIP in patients with PH-ILD in the second half of 2025.

•The Phase 2b study of TPIP in patients with PAH has been completed. We anticipate topline results for this study in June 2025.

Gene Therapy

•In the fourth quarter of 2024, we received clearance from the FDA for our investigational new drug (IND) application for INS1201, an intrathecally delivered gene therapy for patients with DMD. We anticipate dosing our first patient in the Phase 1 ASCEND trial in the second quarter of 2025.

Pre-Clinical Programs

•We continue to progress our pre-clinical research programs across a wide range of technologies and modalities, including gene therapy, AI-driven protein engineering, protein manufacturing, RNA end-joining, and synthetic rescue.

To complement our internal research and development, we also actively evaluate in-licensing and acquisition opportunities for products, product candidates and technologies, including those that address serious diseases with significant unmet need.

Our Strategy

We strive to develop and commercialize first- and best-in-class therapies that serve patient communities where the need is greatest. Our first product, ARIKAYCE, is approved in the US as ARIKAYCE® (amikacin liposome inhalation suspension), in Europe as ARIKAYCE Liposomal 590 mg Nebuliser Dispersion and in Japan as ARIKAYCE inhalation 590mg (amikacin sulfate inhalation drug product). We are not aware of any other approved inhaled therapies specifically indicated to treat MAC lung disease in North America, Europe or Japan. We believe that ARIKAYCE has the potential to prove beneficial in other patients with refractory MAC. Our product candidates are brensocatib, our Phase 3 product candidate that we are developing for patients with bronchiectasis and other neutrophil-mediated diseases, TPIP, our Phase 2 product candidate that may offer a differentiated product profile for patients with PH-ILD and PAH, and INS1201, our intrathecally delivered gene therapy product candidate for patients with DMD. We announced positive topline results from our Phase 3 ASPEN trial of brensocatib in May 2024 and the acceptance by the FDA of our NDA, with priority review granted, for brensocatib in patients with bronchiectasis in February 2025, which we anticipate will be followed by filings with the European and Japanese regulatory authorities. We are also advancing our pre-clinical research programs encompassing a wide range of technologies and modalities, including gene therapy, AI-driven protein engineering, protein manufacturing, RNA end-joining, and synthetic rescue.

Our key priorities are as follows:

•Continue to provide ARIKAYCE to appropriate patients and expand our reliable revenue stream;

•Advance commercial readiness activities to serve significantly more patients facing serious diseases;

•Produce topline clinical data readouts in the near and long term; and

•Control spending, prudently deploying capital to support the best return-generating opportunities.

ARIKAYCE for Patients with MAC Lung Disease

ARIKAYCE is our first approved product. ARIKAYCE received accelerated approval in the US in September 2018 for the treatment of refractory MAC lung disease as part of a combination antibacterial drug regimen for adult patients with

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limited or no alternative treatment options. In October 2020, ARIKAYCE received approval in Europe for the treatment of NTM lung infections caused by MAC in adults with limited treatment options who do not have CF. In March 2021, ARIKAYCE received approval in Japan for the treatment of patients with NTM lung disease caused by MAC who did not sufficiently respond to prior treatment with a multidrug regimen. MAC lung disease is a rare and often chronic infection that can cause irreversible lung damage and can be fatal. Amikacin solution for parenteral administration is an established drug that has activity against a variety of NTM; however, its use is limited by the need to administer it intravenously and by toxicity to hearing, balance, and kidney function. Unlike amikacin solution for intravenous administration, our proprietary Pulmovance™ technology uses charge-neutral liposomes to deliver amikacin directly to the lungs where liposomal amikacin is taken up by the lung macrophages where the MAC infection resides. This technology also prolongs the release of amikacin in the lungs, while minimizing systemic exposure, thereby offering the potential for decreased systemic toxicities. ARIKAYCE's ability to deliver high levels of amikacin directly to the lung and sites of MAC infection via the use of our Pulmovance technology distinguishes it from intravenous amikacin. ARIKAYCE is administered once-daily using Lamira, an inhalation device developed and manufactured by PARI. Lamira is a portable nebulizer that enables aerosolization of liquid medications via a vibrating, perforated membrane, and was designed specifically for ARIKAYCE delivery.

The FDA has designated ARIKAYCE as an orphan drug and a Qualified Infectious Disease Product (QIDP) for NTM lung disease. Orphan designated drugs are eligible for seven years of exclusivity for the orphan indication. QIDP designation provides an additional five years of exclusivity for the designated indication. The FDA granted a total of 12 years of exclusivity in the indication for which ARIKAYCE was approved.

ARIKAYCE also has been included in the international treatment guidelines for NTM lung disease. The evidence-based guidelines, issued by the American Thoracic Society (ATS), European Respiratory Society (ERS), European Society of Clinical Microbiology and Infectious Diseases (ESCMID), and Infectious Diseases Society of America (IDSA), strongly recommend the use of ARIKAYCE for MAC lung disease as part of a combination antibacterial drug regimen for adult patients with limited or no alternative treatment options who have failed to convert to a negative sputum culture after at least six months of treatment.

In October 2020, the FDA approved a supplemental new drug application for ARIKAYCE, adding important efficacy data regarding the durability and sustainability of culture conversion to the ARIKAYCE label. The data, which are from the Phase 3 CONVERT study of ARIKAYCE, demonstrate that the addition of ARIKAYCE to guideline-based therapy (GBT) was associated with sustained culture conversion through the end of treatment as well as durable culture conversion three months post-treatment compared with GBT alone.

Accelerated Approval

In September 2018, the FDA granted accelerated approval for ARIKAYCE under the Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD) for the treatment of refractory MAC lung disease as part of a combination antibacterial drug regimen for adult patients with limited or no alternative treatment options. LPAD, which was enacted as part of the 21st Century Cures Act, serves to advance the development of new antibacterial drugs to treat serious or life-threatening infections in limited populations of patients with unmet needs. As required for drugs approved under the LPAD pathway, labeling for ARIKAYCE includes certain statements to convey that the drug has been shown to be safe and effective only for use in a limited population.

As a condition of accelerated approval, we must conduct a post-marketing confirmatory clinical trial. In December 2020, we commenced the post-marketing confirmatory clinical trial program for ARIKAYCE in patients with MAC lung disease consisting of the ARISE trial, an interventional study designed to validate cross-sectional and longitudinal characteristics of a PRO tool in MAC lung disease, and the ENCORE trial, designed to establish the clinical benefits and evaluate the safety of ARIKAYCE in patients with newly diagnosed or recurrent MAC lung infection who have not started antibiotics using the PRO tool validated in the ARISE trial. In September 2023, we announced positive topline results from the ARISE trial. The study met its primary objective of demonstrating that the QOL-B respiratory domain works effectively as a PRO tool in patients with MAC lung disease. In June 2024, we met and aligned with the FDA on the primary endpoint for the ENCORE study. If the data are positive, ENCORE may support a label expansion to include all MAC lung disease as well as support full approval for the current refractory indication. Based on feedback and in alignment with the FDA, we have determined that the primary endpoint for the ENCORE study will include eight questions from the QOL-B respiratory domain PRO. We completed enrollment of the ENCORE study in the fourth quarter of 2024, with 425 patients enrolled. We anticipate reporting topline data in the first half of 2026.

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. ARIKAYCE is reimbursed nationally in France, Belgium, the Netherlands, the UK and Ireland. We have worked with the German National Association of Statutory Health Insurance Funds

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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 are working to ensure an uninterrupted supply of ARIKAYCE for patients in Germany and to provide physicians and pharmacists the information they need to obtain ARIKAYCE for their patients through the importation pathway. In January 2023, we agreed upon reimbursement terms with the French authorities. To date, we have been unable to reach an acceptable agreement of a nationally reimbursed price with the Italian Medicines Agency; however, ARIKAYCE remains commercially available for physicians to prescribe in Italy under Class C, where we set the price and funding is agreed locally.

In March 2021, Japan's MHLW approved ARIKAYCE for the treatment of patients with NTM lung disease caused by MAC who did not sufficiently respond to prior treatment with a multidrug regimen. In July 2021, we launched ARIKAYCE in Japan.

The CONVERT Study and 312 Study

Accelerated approval of ARIKAYCE was supported by preliminary data from the CONVERT study, a global Phase 3 study evaluating the safety and efficacy of ARIKAYCE in adult patients with refractory MAC lung disease, using achievement of sputum culture conversion (defined as three consecutive negative monthly sputum cultures) by Month 6 as the primary endpoint. Patients who achieved sputum culture conversion by Month 6 continued in the CONVERT study for an additional 12 months of treatment following the first monthly negative sputum culture in order to assess the durability of culture conversion, as defined by patients that have completed treatment and continued in the CONVERT study off all therapy for three months. In May 2019, we presented at the American Thoracic Society meeting that 41/65 (63.1%) of patients on ARIKAYCE plus GBT who had achieved culture conversion by Month 6 had maintained durable culture conversion for three months off all therapy compared to 0/10 (0%) on GBT only (p<0.0002). Safety data for these patients were consistent with safety data previously reported for patients by Month 6 of the CONVERT study.

Patients who did not culture convert by Month 6 may have been eligible to enroll in the 312 study, an open-label extension study for these non-converting patients who completed six months of treatment in the CONVERT study. The primary objective of the 312 study was to evaluate the long-term safety and tolerability of ARIKAYCE in combination with a standard multi-drug regimen. The secondary objectives of the 312 study included evaluating the proportion of subjects achieving culture conversion (defined in the same way as the CONVERT study) by Month 6 and the proportion of subjects achieving culture conversion by Month 12, which was the end of treatment. We previously reported interim data as of December 2017 for patients in the 312 study, with 28.4% of patients who received GBT only in the CONVERT study (19/67) and 12.3% of patients who had received ARIKAYCE plus GBT in the CONVERT study (7/57) achieving culture conversion by Month 6 of the 312 study. The 312 study has concluded and final efficacy data regarding culture conversion were consistent with these interim data. We have analyzed the safety and efficacy data from the 312 study, and we did not observe any new safety signals.

The ARISE Study

The ARISE trial was a global, randomized, double-blind, placebo-controlled Phase 3b study in adult patients with newly diagnosed or recurrent MAC infections that aimed to generate evidence demonstrating the domain specification, reliability, validity, and responsiveness of PRO-based scores, including a respiratory symptom score. The ARISE study met its primary objective of demonstrating that the QOL-B respiratory domain works effectively as a PRO tool in patients with MAC lung disease.

Patients in ARISE (N=99) were randomized 1:1 to treatment with ARIKAYCE plus macrolide-based background regimen (ARIKAYCE arm) or placebo plus macrolide-based background regimen (comparator arm) once daily for six months, followed by one month off treatment. ARIKAYCE-treated patients performed better than those in the comparator arm as measured by the QOL-B instrument, with 43.8% of patients achieving an improvement in QOL-B respiratory score above the estimated meaningful within-subject score difference of 14.8, compared with 33.3% of patients in the comparator arm. While the study was not powered to show a statistically significant difference between treatment arms, a strong trend toward significance was observed for improvement from baseline at Month 7 (12.24 vs. 7.76, p=0.1073). Patients in the ARIKAYCE arm also achieved nominally statistically significantly higher culture conversion rates at Month 7 versus patients in the comparator arm (78.8% vs. 47.1%, p=0.0010), and culture conversion was faster and more likely to persist through Month 7 for the ARIKAYCE arm, suggesting that ARIKAYCE-treated patients are more likely to remain negative.

Consistent with our expectations, the FDA and the Pharmaceuticals and Medical Devices Agency in Japan confirmed that it would not consider a label expansion for ARIKAYCE based on data from the ARISE study alone.

ARISE Culture Conversion

Consistent with prior clinical studies, a higher proportion of patients in the ARIKAYCE arm achieved culture conversion by Month 6 (defined as negative cultures at Months 5 and 6) compared to patients in the comparator arm (80.6% vs. 63.9%, p=0.0712). Among patients who achieved culture conversion by Month 6, more patients in the ARIKAYCE arm

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achieved the first of their two required monthly negative cultures for clinical conversion at Month 1 versus the comparator arm (74.3% vs. 46.7%).

Correlation Between ARISE Culture Conversion and QOL-B Performance

Patients in the ARIKAYCE arm who achieved culture conversion at both Month 6 and Month 7 had nominally statistically significantly greater improvements in QOL-B respiratory domain scores at Month 7 compared to patients in the ARIKAYCE arm who did not achieve culture conversion (15.74 vs. 3.53, p=0.0167 at Month 6 and 14.89 vs. 4.50, p=0.0416 at Month 7).

ARISE Safety and Tolerability

The discontinuation rate of ARIKAYCE or the placebo used in the comparator arm was 22.9% in the ARIKAYCE arm and 7.8% in the comparator arm. Study completion rates were 91.7% in the ARIKAYCE arm and 94.1% in the comparator arm. No new safety events were observed in the ARIKAYCE arm, and the safety profile in general was as expected in both treatment arms. Treatment-emergent adverse events (TEAEs) were reported by 91.7% of patients in the ARIKAYCE arm and 80.4% of patients in the comparator arm. The most common TEAEs were dysphonia (41.7% for the ARIKAYCE arm vs. 3.9% for the comparator arm), cough (27.1% vs. 7.8%), diarrhea (27.1% vs. 25.5%), and COVID-19 (12.5% vs. 9.8%). Of the treatment-emergent serious adverse events observed in the trial, none were determined to be related to ARIKAYCE by investigators.

Further Research and Lifecycle Management

We are currently exploring and supporting research and lifecycle management programs for ARIKAYCE beyond treatment of refractory MAC lung disease as part of a combination antibacterial regimen for adult patients who have limited or no treatment options. As noted above, we will continue to advance the post-marketing confirmatory MAC lung disease clinical trial program for ARIKAYCE, through the completed ARISE and ongoing ENCORE trials, which are intended to fulfill the FDA's post-marketing requirement to allow for the full approval of ARIKAYCE in the US, as well as to support the use of ARIKAYCE as a treatment for patients with MAC lung disease.

The ENCORE trial is a randomized, double-blind, placebo-controlled Phase 3b study to evaluate the efficacy and safety of an ARIKAYCE-based regimen in patients with newly diagnosed or recurrent MAC infection who have not started antibiotics. Patients are randomized 1:1 to receive ARIKAYCE plus background regimen or placebo plus background regimen once daily for 12 months. Patients will then discontinue all study treatments and remain in the trial for three months for the assessment of durability of culture conversion. The primary endpoint is change from baseline to Month 13 in respiratory symptom score. The key secondary endpoint is the proportion of subjects achieving durable culture conversion at Month 15. In June 2024, we met and aligned with the FDA on the primary endpoint for the ENCORE study. If the data are positive, ENCORE may support a label expansion to include all MAC lung disease as well as support full approval for the current refractory indication. Based on feedback and in alignment with the FDA, we have determined that the primary endpoint for the ENCORE study will include eight questions from the QOL-B respiratory domain PRO. We completed enrollment of the ENCORE study in the fourth quarter of 2024, with 425 patients enrolled. We anticipate reporting topline data in the first half of 2026.

Subsequent lifecycle management studies could also potentially enable us to reach more patients. These initiatives may include new clinical studies sponsored by us and may also include investigator-initiated studies, which are independent clinical studies initiated and sponsored by physicians or research institutions, with funding from us.

Product Pipeline

Brensocatib

Brensocatib is a small molecule, oral, reversible inhibitor of DPP1, which we licensed from AstraZeneca in October 2016. DPP1 is an enzyme responsible for activating neutrophil serine proteases (NSPs) in neutrophils when they are formed in the bone marrow. Neutrophils are the most common type of white blood cell and play an essential role in pathogen destruction and inflammatory mediation. Neutrophils contain the NSPs (including neutrophil elastase, proteinase 3, and cathepsin G) that have been implicated in a variety of inflammatory diseases. In chronic inflammatory lung diseases, neutrophils accumulate in the airways and result in excessive active NSPs that cause lung destruction and inflammation. Brensocatib may decrease the damaging effects of inflammatory diseases such as bronchiectasis by inhibiting DPP1 and its activation of NSPs.

In June 2020, the FDA granted breakthrough therapy designation for brensocatib for the treatment of adult patients with non-cystic fibrosis bronchiectasis (NCFBE) for reducing exacerbations. The FDA's breakthrough therapy designation is designed to expedite the development and review of therapies that are intended to treat serious or life-threatening diseases and for which preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over available therapy. The benefits of breakthrough therapy designation include more frequent communication and meetings with the FDA, eligibility for rolling and priority review, intensive guidance on an efficient drug development program, and organizational commitment from the FDA involving senior managers. In November 2020, brensocatib was granted access to the PRIME scheme from the European Medicines Agency (EMA) for patients with NCFBE.

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In October 2021, the EMA’s Paediatric Committee approved the brensocatib Pediatric Investigational Plan for the treatment of patients with NCFBE. As a result, the ASPEN trial includes 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.

The WILLOW Study

The WILLOW study was a randomized, double-blind, placebo-controlled, parallel-group, multi-center, multi-national, Phase 2b study to assess the efficacy, safety and tolerability, and pharmacokinetics of brensocatib administered once daily for 24 weeks in patients with NCFBE. The WILLOW study was conducted at 116 sites and enrolled 256 adult patients diagnosed with NCFBE who had at least two documented pulmonary exacerbations in the 12 months prior to screening. Patients were randomized 1:1:1 to receive either 10 mg or 25 mg of brensocatib or matching placebo. The primary efficacy endpoint was the time to first pulmonary exacerbation over the 24-week treatment period in the brensocatib arms compared to the placebo arm.

WILLOW Efficacy, Safety and Tolerability Data

We announced topline data for the WILLOW study in February 2020 and full data for the WILLOW study in June 2020. In September 2020, final results from the WILLOW study were published online in the New England Journal of Medicine. The data demonstrate that the WILLOW study met its primary endpoint of time to first pulmonary exacerbation over the 24-week treatment period for both the 10 mg and 25 mg dosage groups of brensocatib compared to placebo (p=0.027, p=0.044, respectively). The risk of exacerbation at any time during the trial was reduced by 42% for the 10 mg group versus placebo (HR 0.58, p=0.029) and by 38% for the 25 mg group versus placebo (HR 0.62, p=0.046). In addition, treatment with brensocatib 10 mg resulted in a significant reduction in the rate of pulmonary exacerbations, a key secondary endpoint, versus placebo. Specifically, patients treated with brensocatib experienced a 36% reduction in the 10 mg arm (p=0.041) and a 25% reduction in the 25 mg arm (p=0.167) versus placebo. Change in concentration of active neutrophil elastase in sputum versus placebo from baseline to the end of the treatment period was also statistically significant (p=0.034 for 10 mg, p=0.021 for 25 mg). Brensocatib was generally well-tolerated in the study. Rates of AEs leading to discontinuation in patients treated with placebo, brensocatib 10 mg, and brensocatib 25 mg were 10.6%, 7.4%, and 6.7%, respectively.

The ASPEN Study

Based on the positive results of the WILLOW study, in December 2020 we commenced the ASPEN study, a global, randomized, double-blind, placebo-controlled Phase 3 study to assess the efficacy, safety, and tolerability of brensocatib in adult patients with bronchiectasis. Patients with bronchiectasis due to CF were not enrolled in the study. The primary endpoint was the rate of adjudicated PEs over the 52-week treatment period. Secondary endpoints included the time to first adjudicated PE, the proportion of subjects free of adjudicated PE by 52 weeks, the absolute change from baseline in post-bronchodilator FEV1, the reduction in annualized rate of severe adjudicated PE, and the change from baseline in the Bronchiectasis QOL-B Respiratory Symptoms Domain Score.

As part of the ASPEN study’s conduct, more than 460 trial sites were engaged in nearly 40 countries. After excluding sites that did not enroll any patients and all sites in Ukraine, due to the ongoing conflict, the total number of active sites in ASPEN was 391 sites in 35 countries. Adult patients (ages 18 to 85 years) were randomized 1:1:1 and adolescent patients (ages 12 to <18 years) were randomized 2:2:1 for treatment with brensocatib 10 mg, brensocatib 25 mg, or placebo once daily for 52 weeks, followed by 4 weeks off treatment.

ASPEN Safety and Efficacy Data

We announced positive topline results from the ASPEN trial in May 2024. Results from the ASPEN trial were published in the New England Journal of Medicine in April 2025. The primary efficacy analysis included data from 1,680 adult patients and 41 adolescent patients. Brensocatib was well-tolerated in the study. In addition, the study met its primary endpoint, with both dosage strengths of brensocatib demonstrating statistically significant reductions in the annualized rate of adjudicated PEs versus placebo. The study also met several of its prespecified secondary endpoints with statistical significance. In February 2025, the FDA accepted our NDA, with priority review granted, for brensocatib in patients with bronchiectasis. The FDA indicated that it does not plan to hold an advisory committee meeting to discuss the NDA.

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Topline efficacy results from the ASPEN study were as follows:

Brensocatib 10 mg compared to placebo

Brensocatib 25 mg
compared to placebo

Primary Endpoint

Reduction in annualized rate of PEs

21.1%

p=0.0019*

19.4%

p=0.0046*

Secondary Endpoints

Prolongation of time to first PE

18.7%

p=0.0100*

17.5%

p=0.0182*

Increase in odds of remaining exacerbation free over 52 weeks

41.2%

p=0.0059*

40.0%

p=0.0074*

Change from baseline in post-bronchodilator forced expiratory volume in 1 second (FEV1) at week 52

11 mL

p=0.3841

38 mL

p=0.0054*

Reduction in annualized rate of severe PEs

25.8%

p=0.1277

26.0%

p=0.1025

Change from baseline in the Quality of Life – Bronchiectasis (QOL-B) Respiratory Score at week 52

2.0 points

p=0.0594

3.8 points

p=0.0004^

* - Statistically significant

^ - Nominally significant p-value

Further Research and Development

In January 2023, we reported topline data from the Phase 2a, multiple-dose, pharmacokinetic/pharmacodynamic study of brensocatib in patients with CF. This Phase 2a study included both patients who were on background CFTR modulator drugs and patients who were not on CFTR modulator drugs. The study duration was approximately one month and dosed CF patients to placebo, 10 mg, 25 mg, and 40 mg of brensocatib. A clear dose-dependent and exposure-dependent inhibition of blood NSPs was observed in patients treated with brensocatib across all doses in this study, consistent with the mechanism of action of brensocatib. Safety and tolerability were consistent with what was observed during the Phase 2b WILLOW study, with no significant drug-related findings. We concluded that an additional cohort evaluating a 65 mg dose of brensocatib is not needed in this patient population.

We are conducting further studies to explore the potential of brensocatib in additional neutrophil-mediated diseases, including CRSsNP and HS. CRSsNP currently has one approved pharmacological therapy (corticosteriod nasal spray); however, many patients do not respond to corticosteroids or endoscopic sinus surgery. The Phase 2b BiRCh trial of brensocatib in patients with CRSsNP is underway, with enrollment of 288 patients completed. We anticipate reporting topline data from the BiRCh trial by the end of 2025. In the fourth quarter of 2024, we initiated a Phase 2b study of brensocatib in patients with HS.

Treprostinil Palmitil Inhalation Powder

TPIP is an investigational inhaled formulation of a treprostinil prodrug that has the potential to address certain of the current limitations of existing prostanoid therapies. We believe that TPIP prolongs duration of effect and may provide patients with greater consistency in pulmonary arterial pressure reduction over time. Current inhaled prostanoid therapies must be dosed four to nine times per day. Reducing dose frequency has the potential to ease treatment burden for patients and improve compliance. Additionally, we believe that TPIP may be associated with fewer side effects, including severity and/or frequency of cough, headache, throat irritation, nausea, flushing and dizziness that are associated with high initial drug levels and local upper airway exposure when using current inhaled prostanoid therapies. We believe TPIP may offer a differentiated product profile for PH-ILD and PAH.

In February 2021, we announced topline results from the Phase 1 study of TPIP in healthy volunteers. The objective of this first-in-human single ascending dose and multiple ascending dose study was to assess the pharmacokinetics and tolerability profile of TPIP. Data from the study demonstrated that TPIP was generally well tolerated, with a pharmacokinetic profile that supports continued development with once-daily dosing. The most common AEs across all cohorts in the study were cough, dizziness, headache, and nausea. Most AEs were mild in severity and consistent in nature with those typically seen with other inhaled prostanoid therapies. There were few moderate AEs and no severe or serious AEs. Subjects in the multiple dose panel that incorporated an up-titration approach beginning at 112.5 µg once-daily and progressing to 225 µg once-daily reported fewer AEs compared to the panel dosed with 225 µg once-daily from the first dose.

Overall pharmacokinetic results demonstrated that treprostinil exposure (AUC and Cmax) was dose-proportional, with low to moderate inter-subject variability. Treprostinil was detected in the plasma at 24 hours at all doses and throughout the 48-hour sampling period for the two highest doses. Compared with currently available inhaled treprostinil therapy, TPIP showed substantially lower Cmax and longer half-life.

In May 2024, we reported topline safety data and certain exploratory efficacy endpoints from the Phase 2a study of TPIP in patients with PH-ILD. We anticipate initiating a Phase 3 registration program in PH-ILD in the second half of 2025.

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We also have an ongoing Phase 2b study designed to investigate the effect of TPIP in patients with PAH. Enrollment in the Phase 2b study of TPIP in PAH completed in the fourth quarter of 2024 and we anticipate topline results in June 2025.

Gene Therapy

In the fourth quarter of 2024, we received clearance from the FDA for our IND application for INS1201, a microdystrophin adeno-associated virus gene replacement therapy for patients with DMD. Administered intrathecally, this approach has the potential to target both skeletal and cardiac muscles at lower doses than intravenous DMD gene therapies. We anticipate dosing our first patient in the Phase 1 ASCEND trial in the second quarter of 2025.

Pre-Clinical Development

Our early-stage research efforts are comprised of our pre-clinical programs, advanced through internal research and development and augmented through business development activities. In March 2021, we acquired a proprietary protein deimmunization platform, called Deimmunized by Design, focused on the reengineering of therapeutic proteins to evade immune recognition and reaction. In August 2021, we acquired Motus and AlgaeneX, pre-clinical stage companies engaged in the research, development and manufacturing of gene therapies for rare genetic disorders. In January 2023, we acquired Vertuis Bio, Inc., a privately held, pre-clinical stage company engaged in the research and development of gene therapies for rare genetic disorders. In June 2023, we acquired Adrestia Therapeutics Ltd., a privately held, pre-clinical 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.

Corporate Development

We plan to continue to develop, acquire, in-license or co-promote other products, product candidates and technologies, including those that address serious diseases that currently have significant unmet needs. We are focused broadly on serious disease therapeutics and prioritizing those areas that best align with our core competencies.

KEY COMPONENTS OF OUR RESULTS OF OPERATIONS

Product Revenues, Net

Product revenues, net, consist of net sales of ARIKAYCE. We recognize revenue for product received by our customers net of allowances for customer credits, including prompt pay discounts, service fees, estimated rebates, including government rebates, such as Medicaid rebates and Medicare Part D coverage gap reimbursements in the US, and chargebacks.

Cost of Product Revenues (Excluding Amortization of Intangible Assets)

Research and Development Expenses

R&D expenses consist of salaries, benefits and other related costs, including stock-based compensation, for personnel serving in our research and development functions, including medical affairs and program management. 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 pre-clinical and research activities. In addition, R&D expenses include payments to third parties for the license rights to products in development (prior to marketing approval), such as brensocatib, and may include the cost of asset acquisitions. Our R&D expenses related to manufacturing our product candidates and medical devices for clinical study are primarily related to activities at CMOs that manufacture brensocatib, TPIP and early-stage research activities. Our R&D expenses related to clinical trials are primarily related to activities at contract research organizations (CROs) that conduct and manage clinical trials on our behalf. These contracts with CROs set forth the scope of work to be completed at a fixed fee or amount per patient enrolled. Payments under these contracts with CROs primarily depend on performance criteria such as the successful enrollment of patients or the completion of clinical trial milestones as well as time-based fees. Expenses are accrued based on contracted amounts applied to the level of patient enrollment and to activity according to the clinical trial protocol. Deposits for goods or services that will be used or rendered for future research and development activities are deferred and capitalized. Such amounts are then recognized as an expense as the related goods are delivered or the services are performed.

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Selling, General and Administrative (SG&A) Expenses

SG&A expenses consist of salaries, benefits and other related costs, including stock-based compensation, for our non-employee directors and personnel serving in our executive, finance and accounting, legal and compliance, commercial and pre-commercial, corporate development, field sales, information technology and human resource functions. SG&A expenses also include professional fees for legal services, consulting services, including commercial activities, insurance, board of director fees, tax and accounting services and certain milestones related to ARIKAYCE.

Amortization of Intangible Assets

Upon commercialization of ARIKAYCE, our intangible assets began to be amortized over their estimated useful lives. The fair values assigned to our intangible assets are based on estimates and assumptions we believe are reasonable based on available facts and circumstances. Unanticipated events or circumstances may occur that require us to review the assets for impairment.

Change in Fair Value of Deferred and Contingent Consideration Liabilities

In connection with the Business Acquisition, we recorded deferred and contingent consideration liabilities related to potential future milestone payments. Adjustments to the fair value are due to changes in the probability of achieving milestones, our stock price, or certain other estimated assumptions. The change in fair value of deferred and contingent consideration liabilities is calculated quarterly with gains and losses recorded in the consolidated statements of comprehensive loss. Our deferred consideration liabilities were fully settled in the third quarter of 2024. Subsequent to the settlement of deferred consideration, only contingent consideration liabilities exist.

Investment Income and Interest Expense

Investment income consists of interest and dividend income earned on our cash and cash equivalents and marketable securities. Interest expense consists primarily of contractual interest costs, Royalty Financing Agreement non-cash interest expense and the amortization of debt issuance costs related to our debt. Debt issuance costs are amortized to interest expense using the effective interest rate method over the term of the debt. Our consolidated balance sheets reflect debt, net of the debt issuance costs paid to the lender, and other third-party costs.

Change in Fair Value of Interest Rate Swap

We record derivative and hedge transactions in accordance with GAAP. In the fourth quarter of 2022, we entered into an interest rate swap contract (the Swap Contract) with a notional value of $350.0 million to economically hedge our variable rate-based term debt for three years, effectively changing the variable rate under the term debt to a fixed interest rate. Our interest rate swap was not designated as a hedging instrument for accounting purposes. We settled and terminated the Swap Contract in October 2024. All changes in the fair value of the Swap Contract were reported as change in fair value of interest rate swap in the consolidated statements of comprehensive loss.

RESULTS OF OPERATIONS

Comparison of the Three Months Ended March 31, 2025 and 2024

Overview - Operating Results

Our operating results for the three months ended March 31, 2025, included the following:

•Product revenues, net, increased $17.3 million, or 22.9%, as compared to the same period in the prior year as a result of the growth in ARIKAYCE sales;

•Cost of product revenues (excluding amortization of intangible assets) increased $3.8 million, or 21.9%, as compared to the same period in the prior year as a result of the growth in ARIKAYCE sales discussed above;

•R&D expenses increased $31.5 million, or 26.0%, as compared to the same period in the prior year primarily as a result of increases in compensation and benefit-related expenses and stock-based compensation costs;

•SG&A expenses increased $54.4 million, or 58.5%, as compared to the same period in the prior year primarily as a result of increases in compensation and benefit-related expenses and stock-based compensation costs;

•Amortization of intangible assets of $1.3 million was consistent with the same period in the prior year;

•Change in fair value of deferred and contingent consideration liabilities increased $30.2 million, primarily as a result of the increase in our share price;

•Investment income increased $5.1 million, or 58.3%, as compared to the same period in the prior year primarily as a result of the increase in our average cash and cash equivalents and marketable securities balances; and

•Interest expense increased $0.5 million, or 2.5%, as compared to the same period in the prior year primarily as a result of the interest related to the Swap Contract in 2024.

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Product Revenues, Net

Product revenues, net, consists of net sales of ARIKAYCE. The following table summarizes revenue by geography for the three months ended March 31, 2025 and 2024 (in thousands):


	Three Months Ended March 31,				Increase (decrease)
	2025		2024		$		%
US	$	64,275	$	56,349	$	7,926	14.1%
Japan	22,083		14,891		7,192		48.3%
Europe and rest of world	6,465		4,260		2,205		51.8%
Total product revenues, net	$	92,823	$	75,500	$	17,323	22.9%

Product revenues, net, for the three months ended March 31, 2025 were $92.8 million as compared to $75.5 million for the same period in 2024, an increase of $17.3 million, or 22.9%. This increase was a result of the growth in sales of ARIKAYCE in the US, Japan, and Europe and the rest of the world.

Cost of Product Revenues (excluding amortization of intangible assets)

Cost of product revenues (excluding amortization of intangible assets) for the three months ended March 31, 2025 and 2024 were comprised of the following (in thousands):


	Three Months Ended March 31,						Increase (decrease)
	2025			2024			$		%
Cost of product revenues (excluding amortization of intangible assets)	$	21,278		$	17,457		$	3,821	21.9	%
Cost of product revenues, as % of revenues	22.9		%	23.1		%

Cost of product revenues (excluding amortization of intangible assets) were $21.3 million for the three months ended March 31, 2025 as compared to $17.5 million for the same period in 2024, an increase of $3.8 million, or 21.9%. This increase was primarily attributable to the increase in total product revenues discussed above.

R&D Expenses

R&D expenses for the three months ended March 31, 2025 and 2024 were comprised of the following (in thousands):


	Three Months Ended March 31,				Increase (decrease)
	2025		2024		$		%
External Expenses
Clinical development and research	$	40,537	$	41,069	$	(532)	(1.3)	%
Manufacturing	21,809		14,076		7,733		54.9	%
Regulatory, quality assurance, and medical affairs	7,672		5,356		2,316		43.2	%
Subtotal—external expenses	$	70,018	$	60,501	$	9,517	15.7	%
Internal Expenses
Compensation and benefit-related expenses	$	53,558	$	41,460	$	12,098	29.2	%
Stock-based compensation	17,380		10,335		7,045		68.2	%
Other internal operating expenses	11,621		8,787		2,834		32.3	%
Subtotal—internal expenses	$	82,559	$	60,582	$	21,977	36.3	%
Total R&D expenses	$	152,577	$	121,083	$	31,494	26.0	%

R&D expenses were $152.6 million for the three months ended March 31, 2025 as compared to $121.1 million for the same period in 2024, an increase of $31.5 million, or 26.0%. This increase was primarily due to a $19.1 million increase in compensation and benefit-related expenses and stock-based compensation costs due to an increase in headcount and a $7.7 million increase in manufacturing expenses.

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External R&D expenses by product for the three months ended March 31, 2025 and 2024 were comprised of the following (in thousands):


	Three Months Ended March 31,				Increase (decrease)
	2025		2024		$		%
ARIKAYCE external R&D expenses	$	12,121	$	13,926	$	(1,805)	(13.0)	%
Brensocatib external R&D expenses	20,661		19,518		1,143		5.9	%
TPIP external R&D expenses	9,153		13,782		(4,629)		(33.6)	%

Other external R&D expenses	28,083		13,275		14,808		111.5	%
Total external R&D expenses	$	70,018	$	60,501	$	9,517	15.7	%

We expect R&D expenses to increase in 2025 relative to 2024 primarily due to our clinical trial activities, manufacturing costs 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.

SG&A Expenses

SG&A expenses for the three months ended March 31, 2025 and 2024 were comprised of the following (in thousands):


	Three Months Ended March 31,				Increase (decrease)
	2025		2024		$		%
Compensation and benefit-related expenses	$	54,836	$	32,585	$	22,251	68.3	%
Stock-based compensation	21,882		11,115		10,767		96.9	%
Professional fees and other external expenses	50,561		34,670		15,891		45.8	%
Facility related and other internal expenses	20,266		14,732		5,534		37.6	%
Total SG&A expenses	$	147,545	$	93,102	$	54,443	58.5	%

SG&A expenses were $147.5 million for the three months ended March 31, 2025 as compared to $93.1 million for the same period in 2024, an increase of $54.4 million, or 58.5%. This increase was primarily due to a $33.0 million increase in compensation and benefit-related expenses and stock-based compensation costs due to an increase in headcount and a $15.9 million increase in professional fees and other external expenses, both driven by commercial readiness activities for brensocatib. We expect SG&A expenses 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 three months ended March 31, 2025 and 2024 was $1.3 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 EC approvals of ARIKAYCE.

Change in Fair Value of Deferred and Contingent Consideration Liabilities

The change in fair value of deferred and contingent consideration for the three months ended March 31, 2025 was $18.3 million and was primarily due to the increase in our share price. The change is related to the fair value of the potential future consideration to be paid to former equityholders of the businesses we acquired.

Investment Income

Investment income was $13.9 million for the three months ended March 31, 2025 as compared to $8.8 million for the same period in 2024, an increase of $5.1 million, or 58.3%. This increase was primarily due to an increase in our average cash and cash equivalents and marketable securities balances in 2025 relative to 2024.

Interest Expense

Interest expense for the three months ended March 31, 2025 was $21.6 million as compared to $21.0 million for the same period in 2024, an increase of $0.5 million, or 2.5%. This increase was primarily due to interest related to the Swap Contract in 2024. See Note 10 - Debt and Note 11 - Royalty Financing Agreement in this Quarterly Report on Form 10-Q for further details.

Change in Fair Value of Interest Rate Swap

Prior to settlement and termination of the Swap Contract in October 2024, the change in fair value of interest rate swap was due to changes in interest rates during 2024 relative to the interest rate of the Swap Contract as of March 31, 2024.

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LIQUIDITY AND CAPITAL RESOURCES

Overview

There is considerable time and cost associated with developing potential pharmaceutical products to the point of regulatory approval and commercialization. We commenced commercial shipments of ARIKAYCE in October 2018. We expect to continue to incur consolidated operating losses, including losses at our US and certain international entities, as we plan to fund R&D for ARIKAYCE, brensocatib, TPIP and our other pipeline programs, continue commercialization and regulatory activities for ARIKAYCE, fund commercial readiness activities for brensocatib, and engage in other general and administrative activities.

In May 2024, we completed an underwritten offering of 14,514,562 shares of our common stock at a public offering price of $51.50 per share. 1,893,203 of the shares of common stock were issued pursuant to the exercise in full of the underwriters' option to purchase additional shares. Our net proceeds from the sale of the shares, after deducting underwriting discounts and estimated offering expenses of $34.3 million, were $713.2 million.

In the first quarter of 2024, we entered into a sales agreement with Leerink Partners, to sell shares of our common stock, with aggregate gross sales proceeds of up to $500.0 million, from time to time, through an ATM program, under which Leerink Partners acted as sales agent. During the year ended December 31, 2024, we issued and sold an aggregate of 5,022,295 shares of common stock through the ATM program at a weighted-average public offering price of $75.64 per share and received net proceeds of $371.3 million. In November 2024, we terminated the sales agreement.

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. While we believe we currently have sufficient funds to meet our financial needs for at least the next 12 months, we may opportunistically raise additional capital and may do so through equity or debt financing(s), strategic transactions or otherwise. Our cash requirements for the 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 for ARIKAYCE and if approved, brensocatib, development costs for our clinical-stage assets, and, to a lesser extent, our pre-clinical research programs.

Cash Flows

As of March 31, 2025, we had cash and cash equivalents of $403.2 million, as compared to $555.0 million as of December 31, 2024. In addition, as of March 31, 2025, we had marketable securities of $796.2 million, as compared to $878.8 million as of December 31, 2024. The decrease of $151.8 million in cash and cash equivalents and decrease of $82.6 million in marketable securities was primarily due to our cash used in operating activities. Our working capital was $1.2 billion as of March 31, 2025, as compared with $1.3 billion as of December 31, 2024.

Net cash used in operating activities was $262.1 million and $184.0 million for the three months ended March 31, 2025 and 2024, respectively. The net cash used in operating activities during the three months ended March 31, 2025 and 2024 was primarily for the commercial, clinical, and manufacturing activities related to ARIKAYCE, commercial readiness activities for brensocatib, as well as other SG&A expenses and clinical trial expenses related to brensocatib and TPIP. The increase in cash used in operating activities for the three months ended March 31, 2025 as compared to the same period in 2024 was primarily due to the increase in net loss, excluding the adjustments to reconcile net loss to net cash used in operating activities.

Net cash provided by investing activities was $80.4 million and $295.3 million for the three months ended March 31, 2025 and 2024, respectively. During the three months ended March 31, 2025, net cash provided by investing activities consisted primarily of maturities of marketable securities, mostly offset by purchases of marketable securities. Net cash provided by investing activities during the three months ended March 31, 2024, primarily consisted of maturities of marketable securities.

Net cash provided by financing activities was $29.0 million and $3.0 million for the three months ended March 31, 2025 and 2024, respectively. The increase in cash provided by financing activities for the three months ended March 31, 2025 as compared to the same period in 2024 is due to the proceeds from stock options and our ESPP.

Contractual Obligations

There were no material changes outside of the ordinary course of business in our contractual obligations during the three months ended March 31, 2025 from those disclosed in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Contractual Obligations” in our Annual Report on Form 10-K for the year ended December 31, 2024.

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Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. We do not have any interest in special purpose entities, structured finance entities or other variable interest entities.

CRITICAL ACCOUNTING ESTIMATES

There have been no material changes to our critical accounting policies and estimates as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024. For the required interim disclosure updates related to our accounting policies and estimates, see Note 2 - Summary of Significant Accounting Policies in this Quarterly Report on Form 10-Q.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of March 31, 2025, our cash and cash equivalents were in cash accounts and money market funds. Our investments in money market funds are not insured by the federal government. As of March 31, 2025, we had $796.2 million in marketable securities.

As of March 31, 2025, we had $574.9 million of 2028 Convertible Notes outstanding. Our 2028 Convertible Notes bear interest at a coupon rate of 0.75%. In addition, as of March 31, 2025, we had the $500.0 million Term Loans and a $150.0 million Royalty Financing Agreement outstanding. The Term Loans accrue interest quarterly at a fixed rate of 9.6% per annum. The Royalty Financing Agreement requires a Revenue Interest Payment of 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. If a 10% change in interest rates had occurred on March 31, 2025, it would not have had a material effect on the fair value of our debt as of that date, nor would it have a material effect on our future earnings or cash flows.

The majority of our business is conducted in US dollars. However, we do conduct certain transactions in other currencies, including Euros, British Pounds, and Japanese Yen. Historically, fluctuations in foreign currency exchange rates have not materially affected our results of operations and during the three months ended March 31, 2025 and 2024, our results of operations were not materially affected by fluctuations in foreign currency exchange rates.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2025. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (the Exchange Act), means controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit with the SEC is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation as of March 31, 2025, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. While the outcomes of these matters are uncertain, management does not expect that the ultimate costs to resolve these matters will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

ITEM 1A. RISK FACTORS

Our business is subject to substantial risks and uncertainties. You should carefully consider the information contained in this Quarterly Report on Form 10-Q and the risk factors and other information contained in our other public filings in evaluating our business, including our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on February 20, 2025. Any of the risks and uncertainties described herein and in our other filings with the SEC,

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either alone or taken together, could materially and adversely affect our business, financial condition, results of operations, prospects for growth, and the value of an investment in our common stock. In addition, these risks and uncertainties could cause actual results to differ materially from those expressed or implied by forward-looking statements contained in this Form 10-Q (please read "Cautionary Note Regarding Forward-Looking Statements" in this Quarterly Report on Form 10-Q).

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

For the three months ended March 31, 2025, holders of five thousand dollars of aggregate principal amount of 2028 Convertible Notes elected to convert their notes, resulting in an issuance of an aggregate of 152 shares of the Company’s common stock. The shares of the Company’s common stock issued to the holders of the 2028 Convertible Notes were issued pursuant to Section 3(a)(9) of the Securities Act. The Company did not receive any proceeds from the issuance of common stock to the holders of the 2028 Convertible Notes.

ITEM 5. OTHER INFORMATION

Rule 10b5-1 Trading Plans

Our policy governing transactions in our securities by our directors, officers and employees permits our directors, officers and employees to enter into trading plans complying with Rule 10b5-1 under the Exchange Act. The following table describes the written plans for the sale of our securities adopted, modified or terminated by our executive officers and directors during the first quarter of 2025, each of which was entered into during an open trading window and is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) (each, a Trading Plan).

Name and Title

Date of Adoption of Trading Plan

Scheduled Start Date of Trading Plan

Scheduled Expiration Date of Trading Plan (1)

Maximum Shares Subject to Trading Plan

Date Plan Terminated

Alfred Altomari

Director

02/24/2025

05/26/2025

09/30/2025

25,000

N/A

S. Nicole Schaeffer

Chief People Strategy Officer

02/26/2025

05/28/2025

10/31/2025

99,172

N/A

Michael Smith

Chief Legal Officer

02/27/2025

05/30/2025

12/31/2025

109,462

N/A

Martina Flammer

Chief Medical Officer

02/27/2025

09/02/2025

08/31/2026

399,391

N/A

David W.J. McGirr

Director

03/04/2025

06/03/2025

08/01/2025

6,250

N/A

Roger Adsett

Chief Operating Officer

03/04/2025

06/16/2025

07/15/2025

21,953

N/A

Sara Bonstein

Chief Financial Officer

03/05/2025

06/09/2025

12/31/2025

243,778

N/A

(1) A Trading Plan may expire on an earlier date if all contemplated transactions are completed before such Trading Plan’s expiration date, upon termination by broker or the holder of the Trading Plan, or as otherwise provided in the Trading Plan.

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ITEM 6. EXHIBITS

Exhibit Index


3.1						Articles of Incorporation of Insmed Incorporated, as amended through June 14, 2012 (incorporated by reference from Exhibit 3.1 to Insmed Incorporated’s Annual Report on Form 10-K filed on March 18, 2013).

3.2						Amended and Restated Bylaws of Insmed Incorporated (effective as of May 11, 2023) (incorporated by reference from Exhibit 3.1 to Insmed Incorporated’s Current Report on Form 8-K filed on May 11, 2023).

10.1**						Insmed Incorporated 2025 Inducement Plan (incorporated by reference from Exhibit 4.1 to Insmed Incorporated’s Registration Statement on Form S-8 filed on February 20, 2025).

10.2**						Form of Award Agreement for Restricted Stock Units pursuant to the Insmed Incorporated 2025 Inducement Plan (filed herewith).

10.3**						Form of Award Agreement for Restricted Stock Units to non-US employees pursuant to the Insmed Incorporated 2025 Inducement Plan (filed herewith).

10.4**						Form of Award Agreement for Non-Qualified Stock Options pursuant to the Insmed Incorporated 2025 Inducement Plan (filed herewith).

10.5**						Form of Award Agreement for Non-Qualified Stock Options issued to non-US employees pursuant to the Insmed Incorporated 2025 Inducement Plan (filed herewith).

31.1						Certification of William H. Lewis, Chair and Chief Executive Officer (Principal Executive Officer) of Insmed Incorporated, pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith).

31.2						Certification of Sara Bonstein, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) of Insmed Incorporated, pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (filed herewith).

32.1						Certification of William H. Lewis, Chair and Chief Executive Officer (Principal Executive Officer) of Insmed Incorporated, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

32.2						Certification of Sara Bonstein, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) of Insmed Incorporated, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

101						The following materials from Insmed Incorporated’s quarterly report on Form 10-Q for the quarter ended March 31, 2025 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024, (ii) Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2025 and 2024, (iii) Consolidated Statements of Shareholders' Equity for the three months ended March 31, 2025 and 2024, (iv) Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024, (v) Notes to the Unaudited Consolidated Financial Statements, and (vi) Cover Page.

104						The cover page from the Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, formatted in iXBRL and contained in Exhibit 101.

**						Management contract or compensatory plan or arrangement.

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		INSMED INCORPORATED


Date: May 8, 2025	By	/s/ Sara Bonstein
		Sara Bonstein
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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Date	Price Target	Rating	Analyst
5/13/2025	$105.00	Buy	Jefferies
2/25/2025	$100.00	Outperform	RBC Capital Mkts
4/23/2024	$48.00	Buy	Truist
2/15/2024	$42.00	Outperform	Wolfe Research
12/8/2023	$55.00	Overweight	Wells Fargo
11/20/2023	$36.00	Overweight	JP Morgan
7/26/2023	$50.00	Buy	Guggenheim
12/9/2022	$28.00	Buy	Mizuho

SEC Form 10-Q filed by Insmed Incorporated

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