INSMED INC (Form: 10-Q, Received: 05/08/2014 07:31:59)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2014

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

For the transition period from to

Commission File Number 0-30739

INSMED INCORPORATED

(Exact name of registrant as specified in its charter)

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

9 Deer Park Drive, Suite C
Monmouth Junction, New Jersey		08852
(Address of principal executive offices)		(Zip Code)

(732) 997-4600

(Registrant’s telephone number including area code)

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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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

Large accelerated filer o Accelerated filer x Non-accelerated filer o Small Reporting Company o

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

As of April 30, 2014, there were 39,272,501 shares of the registrant’s common stock, $0.01 par value, outstanding.

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INSMED INCORPORATED

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2014

IND EX

PART I. FINANCIAL INFORMATION

ITEM 1	Consolidated Financial Statements
			Consolidated Balance Sheets as of March 31, 2014 (unaudited) and December 31, 2013	3
			Consolidated Statements of Comprehensive Loss (unaudited) for the three months ended March 31, 2014 and 2013	4
			Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2014 and 2013	5
			Notes to Consolidated Financial Statements (unaudited)	6
ITEM 2			Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
ITEM 3			Quantitative and Qualitative Disclosures about Market Risk	40
ITEM 4			Controls and Procedures	40

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 3		Defaults Upon Senior Securities		42
ITEM 4		Mine Safety Disclosures (Not Applicable)		42
ITEM 5		Other Information		42
ITEM 6		Exhibits		42

SIGNATURE				43
EXHIBIT INDEX				44

In this Form 10-Q, we use the words “Insmed Incorporated” to refer to Insmed Incorporated, a Virginia corporation, and we use the words “Company,” “Insmed,” “Insmed Incorporated,” “we,” “us” and “our” to refer to Insmed Incorporated and its consolidated subsidiaries. ARIKACE® and IPLEX® are registered trademarks of Insmed Incorporated. ARIKAYCE TM and INSMED TM 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.

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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, 2014			December 31, 2013
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	101,251		$	113,894
Prepaid expenses and other current assets	4,958			2,269
Total current assets	106,209			116,163

In-process research and development	58,200			58,200
Other assets	234			323
Fixed assets, net	1,977			1,812
Total assets	$	166,620		$	176,498

Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	9,818		$	5,929
Accrued expenses	3,143			3,905
Accrued compensation	1,371			2,839
Accrued lease expense, current	310			307
Deferred rent	121			129
Capital lease obligations, current	48			64
Current portion of long term debt	5,187			3,283
Total current liabilities	19,998			16,456

Accrued lease expense, long-term	315			380
Debt, long-term	14,569			16,338
Total liabilities	34,882			33,174

Shareholders’ equity:
Common stock, $0.01 par value; 500,000,000 authorized shares, 39,268,885 and 39,137,679 issued and outstanding shares at March 31, 2014 and December 31, 2013, respectively.	393			391
Additional paid-in capital	537,264			534,554
Accumulated deficit	(405,919		)	(391,621		)
Total shareholders’ equity	131,738			143,324
Total liabilities and shareholders’ equity	$	166,620		$	176,498

See accompanying notes to consolidated financial statements

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INSMED INCORPORATED

Consolidated Statements of Comprehensive Loss (Unaudited)

(in thousands, except per share data)

	Three Months ended March 31,
	2014			2013

Revenues	$	—		$	—

Operating expenses:
Research and development	11,351			10,334
General and administrative	6,728			3,975
Total operating expenses	18,079			14,309

Operating loss	(18,079		)	(14,309		)

Investment income	17			51
Interest expense	(606		)	(643		)
Other, net	(19		)	2
Loss before income taxes	(18,687		)	(14,899		)

(Benefit) from income taxes	(4,389		)	(1,221		)

Net loss and comprehensive loss	$	(14,298	)	$	(13,678	)

Basic and diluted net loss per share	$	(0.36	)	$	(0.43	)

Weighted average basic and diluted common shares outstanding	39,240			31,554

See accompanying notes to consolidated financial statements

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INSMED INCORPORATED

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	Three months ended March 31,
	2014			2013
Operating activities
Net loss	$	(14,298	)	$	(13,678	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	167			148
Stock based compensation expense	2,358			954
Gain on sale of asset, net	—			(2		)
Amortization of debt discount and debt issuance costs	102			118
Accrual of the end of term charge on the debt	33			49
Changes in operating assets and liabilities:
Prepaid expenses and other assets	(2,600		)	(797		)
Accounts payable	3,889			1,124
Accrued expenses and deferred rent	(770		)	1,787
Accrued lease expenses	(62		)	(64		)
Accrued compensation	(1,468		)	(848		)
Net cash used in operating activities	(12,649		)	(11,209		)

Investing activities
Purchase of fixed assets	(331		)	(163		)
Proceeds from sale of asset	—			2
Net cash used in investing activities	(331		)	(161		)

Financing activities
Payments on capital lease obligations	(16		)	(29		)
Proceeds from exercise of stock options	353			51
Net cash provided by financing activities	337			22

Decrease in cash and cash equivalents	(12,643		)	(11,348		)
Cash and cash equivalents at beginning of period	113,894			90,782

Cash and cash equivalents at end of period	$	101,251		$	79,434

Supplemental disclosures of cash flow information:
Cash paid for interest	$	463		$	476
Cash received for taxes	$	4,389		$	1,221

See accompanying notes to consolidated financial statements

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INSMED INCORPORATED

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. The Company and Basis of Presentation

Insmed is a biopharmaceutical company focused on developing and commercializing inhaled therapies for patients battling serious lung diseases that are often life threatening. The Company’s lead product candidate, ARIKAYCE TM , or liposomal amikacin for inhalation, is an inhaled antibiotic treatment that delivers a proven and potent anti-infective directly to the site of serious lung infections. The Company was incorporated in the Commonwealth of Virginia on November 29, 1999. On December 1, 2010, the Company completed a business combination with Transave, Inc. (Transave), a privately held, New Jersey-based pharmaceutical company focused on the development of differentiated and innovative inhaled pharmaceuticals for the treatment of serious lung infections (the “Merger”). The Company’s continuing operations are based on the technology and products historically developed by Transave. The Company’s principal executive offices are located in Monmouth Junction, New Jersey.

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 United States for complete consolidated financial statements have been condensed or are not included herein. The interim statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2013.

The results of operations of any interim period are not necessarily indicative of the results of operations for the full year. The unaudited interim condensed 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. The Company is responsible for the unaudited interim consolidated financial statements included in this report.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Transave, LLC, Insmed Pharmaceuticals, Incorporated, Insmed Limited, and Celtrix Pharmaceuticals, Incorporated. All intercompany transactions and balances have been eliminated in consolidation.

2. Summary of Significant Accounting Policies

The following are interim updates to certain of the policies described in “Note 2” to the Company’s audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013:

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 judgments 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.

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

Each major category of financial assets and liabilities measured at fair value on a recurring basis are categorized in the tables below 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 following table presents assets and liabilities measured at fair value as of March 31, 2014 and December 31, 2013 (in thousands):

	Fair Value Measurements at Reporting Date Using
			Quoted Prices in		Quoted Prices in
			Active Markets for		Inactive Markets for		Significant
			Identical Assets		Identical Assets		Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
As of March 31, 2014:
Assets:
Cash and cash equivalents	$	101,251	$	101,251	$	—	$	—
	$	101,251	$	101,251	$	—	$	—

As of December 31, 2013:
Assets:
Cash and cash equivalents	$	113,894	$	113,894	$	—	$	—
	$	113,894	$	113,894	$	—	$	—

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. Cash equivalents consist of liquid investments with a maturity of three months or less from the date of purchase.

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, 2014 and March 31, 2013.

As of March 31, 2014 and December 31, 2013, the Company held no securities that were in an unrealized gain or loss position. 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 securities were rated below investment grade, (3) how long the securities have been in an unrealized loss position, and (4) the Company’s ability and intent to retain the investment for a sufficient period of time for it to recover.

Net Loss Per Common Share - Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common 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 units and warrants to purchase common stock would be antidilutive as the Company incurred a net loss. Potentially dilutive common

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shares resulting from the assumed exercise of outstanding stock options and warrants are determined based on the treasury stock method.

The following table sets forth the reconciliation of the weighted average number of shares used to compute basic and diluted net loss per share for the three months ended March 31, 2014 and 2013:

	2014			2013
	(In thousands, except per share amounts)
Numerator:
Net loss:	$	(14,298	)	$	(13,678	)
Denominator:
Weighted average common shares used in calculation of basic net loss per share:	39,240			31,554
Effect of dilutive securities:
Common stock options	—			—
Restricted stock and restricted stock units	—			—
Common stock warrant	—			—
Weighted average common shares outstanding used in calculation of diluted net loss per share	39,240			31,554
Net loss per share:
Basic and Diluted	$	(0.36	)	$	(0.43	)

The following potentially dilutive securities have been excluded from the computations of diluted weighted-average common shares outstanding as of March 31, 2014 and 2013 as their effect would have been anti-dilutive (in thousands):

	2014	2013
Warrants to purchase common stock	—	330
Stock options to purchase common stock	4,230	2,348
Restricted stock and restricted stock units	18	200

3. Identifiable Intangible Assets and Goodwill

The Company believes there are no indicators of impairment relating to its in-process research and development intangible assets as of March 31, 2014.

4. Accrued Expenses

Accrued expenses consist of the following:

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	As of March 31,		As of December 31,
	2014		2013
	(in thousands)

Accrued clinical trial expenses	$	1,444	$	2,484
Accrued technical operation expenses	751		1,220
Accrued professional fees	764		24
Accrued interest payable	159		159
Other accrued expenses	25		18
	$	3,143	$	3,905

5. Debt

On June 29, 2012, the Company and its domestic subsidiaries, as co-borrowers, entered into a Loan and Security Agreement with Hercules Technology Growth Capital, Inc. (“Hercules”) that allowed the Company to borrow up $20.0 million in $10.0 million increments (“Loan Agreement”). The Company borrowed the first and second $10.0 million increments by signing two Secured Promissory Notes (“Note A” and “Note B” and collectively, the “Notes”) on June 29, 2012 and December 27, 2012, respectively. Notes A and B bear interest at 9.25%. Note A was originally scheduled to be repaid over a 42-month period with the first twelve monthly payments representing interest only followed by thirty monthly equal payments of principal and interest. Note B was originally scheduled to be repaid over a 36-month period with the first six monthly payments representing interest only followed by thirty monthly equal payments of principal and interest. The Loan Agreement provided that in certain circumstances the Company could delay the first principal payment by five months. In July 2013, subsequent to the completion of certain ARIKAYCE-related development milestones, the Company elected to extend the interest only period under the Notes from July 31, 2013 to December 31, 2013 and delay the first monthly principal repayments for Notes A and B from August 1, 2013 to January 1, 2014. On November 25, 2013, the Company and Hercules entered into an amendment (the “Amendment”) of the Loan Agreement. Pursuant to the Amendment, the interest-only period has been extended through June 30, 2014 and the first monthly principal payment is scheduled for July 1, 2014. The Amendment also allows the Company to further extend the interest-only period through December 31, 2014 and delay the first payment of principal until January 1, 2015, so long as the Company pays a $100,000 fee and obtains positive data from its phase 2 clinical trial of ARIKAYCE in patients who have lung infections caused by nontuberculous mycobacteria (NTM). The election and amendment did not change the maturity date for Notes A and B, which is January 1, 2016.

In connection with the Loan Agreement, the Company granted the lender a first position lien on all of the Company’s assets, excluding intellectual property. Prepayment of the loans made pursuant to the Loan Agreement is subject to penalty and the Company is required to pay an “end of term” charge of $390,000, which is being charged to interest expense (and accreted to the debt) using the effective interest method over the life of the Loan Agreement. Debt issuance fees paid to the lender were recorded as a discount on the debt and are being amortized to interest expense using the effective interest method over the life of the Loan Agreement. Debt issuance fees paid to third parties were capitalized and are being amortized to interest expense using the effective interest method over the life of the Loan Agreement.

The Loan Agreement also contains representations and warranties by the Company and the lender and indemnification provisions in favor of the lender and customary covenants (including limitations on other indebtedness, liens, acquisitions, investments and dividends, but no financial covenants), and events of default (including payment defaults, breaches of covenants following any applicable cure period, a material impairment in the perfection or priority of the lender’s security interest or in the collateral, and events relating to bankruptcy or insolvency). Upon the occurrence of an event of default, a default interest rate of an additional 5% may be applied to the outstanding loan balances, and the lender may terminate its lending commitment, declare all outstanding

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obligations immediately due and payable, and take such other actions as set forth in the Loan Agreement. In addition, pursuant to the Loan Agreement, the lender has the right to participate, in an amount of up to $1.0 million, in certain future private equity financing(s) by the Company.

In conjunction with entering into the Loan Agreement, the Company granted a warrant to the lender to purchase shares of the Company’s common stock. Since the warrant was granted in conjunction with entering into the Loan Agreement, the relative fair value of the warrant was recorded as equity and debt discount. The debt discount is being amortized to interest expense over the term of the related debt using the effective interest method.

The following table presents the components of the Company’s debt balance as of March 31, 2014:

	March 31, 2014
	(in thousands)
Debt:
Notes payable	$	20,000
Accretion of end of term charge	237
Issuance fees paid to lender	(179		)
Discount from warrant	(302		)
Current portion of long-term debt	(5,187		)
Long-term debt	$	14,569

As of March 31, 2014, future principal repayments of the two Notes for the period April 1, 2014 to December 31, 2014 and in each of the years ending December 31, 2015 and 2016 were as follows (in thousands):

Year Ending in December 31:
2014	$	3,626
2015	7,785
2016	8,589
	$	20,000

The estimated fair value of the debt (categorized as a Level 2 liability for fair value measurement purposes) is determined using current market factors and the ability of the Company to obtain debt at comparable terms to those that are currently in place. The Company believes the estimated fair value at March 31, 2014 approximates the carrying amount.

6. Stockholders’ Equity

Common Stock — As of March 31, 2014, the Company had 500,000,000 shares of common stock authorized with a par value of $0.01 and 39,268,885 shares of common stock issued and outstanding. Of the shares outstanding as of March 31, 2014, 1,765,271 shares represent holdback shares held by the Company as security for potential indemnification payments, as described in the Agreement and Plan of Merger with Transave (the “Merger Agreement”), filed as Exhibit 2.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 (see Note 10, Commitments and Contingencies, Legal Proceedings, Pilkiewicz v. Transave LLC for additional information regarding these holdback shares). In addition, as of March 31, 2014, the Company had reserved 4,229,646 shares of common stock for issuance upon the exercise of outstanding common stock options and 18,270 for issuance upon the vesting of restricted stock units.

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

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shares, at a price to the public of $10.40 per share. The Company’s net proceeds from the sale of the shares, after deducting the underwriter’s discount and offering expenses of $4.7 million, were $67.0 million.

Warrant - In conjunction with entering into the Loan Agreement (See Note 5 — Debt), the Company granted a warrant to the lender to purchase 329,932 shares of the Company’s common stock at an exercise price of $2.94 per share. The fair value of the warrant of $0.8 million was calculated using the Black-Scholes warrant-pricing methodology at the date of issuance and was recorded as equity and as a discount to the debt and is being amortized to interest expense over the term of the related debt using the effective interest method. On April 30, 2013, the lender exercised the warrant in full via the “net issuance” method specified in the warrant agreement. In accordance with such provisions, the Company issued and delivered 223,431 shares of common shares to the lender on May 1, 2013. As a result of the exercise, the warrant is no longer outstanding and there are no additional shares issuable under this instrument.

7. Stock-Based Compensation

During 2013, the Company had three equity compensation plans: the 2013 Incentive Plan, which was approved by shareholders at the Company’s Annual Meeting of Shareholders on May 23, 2013 (the “2013 Incentive Plan”), the Amended and Restated 2000 Stock Incentive Plan, as amended (the “2000 Stock Incentive Plan”) and the Amended and Restated 2000 Employee Stock Purchase Plan (the “Stock Purchase Plan”). Both the 2000 Stock Incentive Plan and the Stock Purchase Plan were adopted by the Company’s Board of Directors and approved by the Company’s shareholders in 2000. Upon the approval of the 2013 Incentive Plan, no additional awards were issued under the 2000 Stock Incentive Plan and the shares remaining for future grant under the 2000 Stock Incentive Plan were transferred to the 2013 Incentive Plan. The 2013 Incentive Plan is administered by the Compensation Committee and the Board of Directors of the Company. On October 31, 2013, the Company’s Board of Directors terminated the Stock Purchase Plan.

Under the terms of the 2013 Incentive Plan, the Company is authorized to grant a variety of incentive awards based on its common stock, including stock options (both incentive stock options and non-qualified stock options), performance shares and other stock awards, as well as the payment of incentive bonuses to all employees and non-employee directors. The 2013 Incentive Plan provides for a single aggregate per person annual sub-limit of 1,500,000 stock options, performance shares (including restricted stock units, or RSUs) and shares of restricted stock. The 2013 Incentive Plan provides for the issuance of a maximum of 3,053,833 shares of common stock. Shares subject to outstanding awards under the 2000 Stock Incentive Plan that are cancelled, expired, forfeited or otherwise not issued will also be added to the number of shares available under the 2013 Incentive Plan. As of March 31, 2014, 1,162,113 shares of the Company’s common stock were reserved for future grants (or issuances) of restricted stock, restricted stock units, stock options, and stock warrants under the 2013 Incentive Plan. The 2013 Incentive Plan will terminate on April 16, 2023 unless it is extended or terminated earlier pursuant to its terms.

Under the terms of the 2000 Stock Incentive Plan, the Company was authorized to grant a variety of incentive awards based on its common stock, including stock options, (both incentive stock options and non-qualified stock options), restricted stock, RSU’s, performance shares, and other stock awards to all employees and non-employee directors. On March 15, 2013, the Company’s Board of Directors amended the 2000 Stock Incentive Plan to provide for a single aggregate per person annual sub-limit for the issuance of a maximum of 1,500,000 stock options, performance shares (including RSUs) and shares of restricted stock. The 2000 Stock Incentive Plan ceased to be available for additional grants once the Company’s shareholders approved the 2013 Incentive Plan on May 23, 2013.

During the first quarter of 2013, the Company completed a review of equity compensation awards granted under its 2000 Stock Incentive Plan and determined that it had inadvertently exceeded the annual per-person sub-limits involving certain awards previously made to certain of its current and past officers and directors (the “excess awards”). The aggregate amount of common stock represented by these excess awards, which consisted of RSUs

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and stock options, was approximately 1.4 million shares. These awards were deemed to be granted outside of the 2000 Stock Incentive Plan and as such the Company applied liability accounting to these awards. On May 23, 2013 (the date of the Company’s 2013 Annual Meeting of Stockholders), the Company’s shareholders approved the grants associated with the excess awards, which as of that date, allowed the excess awards to be deemed granted under the 2000 Stock Incentive Plan. As a result, the excess awards were remeasured at fair value on May 23, 2013 and the liability was reclassified to additional paid-in capital. The unrecognized fair value calculated for the excess awards as of May 23, 2013 is recognized as compensation expense ratably over the remaining requisite service period for each award.

Stock Options - The Company calculates the fair value of stock options granted using the Black-Scholes valuation model.

The following table summarizes the Company’s grant date fair value and assumptions used in determining the fair value of stock options granted under and outside the 2013 Incentive Plan and the 2000 Stock Incentive Plan:

	Three Months Ended March 31,
	2014	2013

Volatility	83.6% - 85.5%	93.9% - 96.0%
Risk-free interest rate	1.46% - 1.76%	0.76% - 0.85%
Dividend yield	0.0%	0.0%
Expected option term (in years)	6.25	6.25
Weighted-average fair value of stock options granted	$14.35	$5.30

For all periods presented, the volatility factor was based on the Company’s historical volatility since the closing of the Company’s merger with Transave on December 1, 2010. The expected life was determined using the simplified method as described in ASC Topic 718, “Accounting for Stock Compensation”, which is the midpoint between the vesting date and the end of the contractual term. The risk-free interest rate is based on the US Treasury yield in effect at the date of grant. Forfeitures are based on actual percentage of option forfeitures since the closing of the Company’s merger with Transave on December 1, 2010, and this is the basis for future forfeiture expectations.

The following table summarizes the Company’s stock option activity for the three months ended March 31, 2014:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years	Aggregate Intrinsic Value (in thousands)
Options outstanding at December 31, 2013	3,632,996		$	7.94
Granted	649,050		19.78
Exercised	(52,400	)	6.73
Forfeited or expired	—
Options outstanding at March 31, 2014	4,229,646		$	9.77	8.97	$	39,808
Vested and expected to vest at March 31, 2014	3,968,337		$	9.65	8.96	$	37,812
Exercisable at March 31, 2014	617,662		$	4.23	8.18	$	9,148

The total intrinsic value of stock options exercised during the three months ended March 31, 2014 and 2013 was $0.6 million, and $0.1 million, respectively.

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As of March 31, 2014, there was $30.0 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted average period of 2.6 years. The following table summarizes the range of exercise prices and the number of stock options outstanding and exercisable:

Outstanding as of March 31, 2014								Exercisable as of March 31, 2014
					Weighted Average
					Remaining	Weighted			Weighted
Range of				Number of	Contractual Term	Average		Number of	Average
Exercise Prices				Options	(in years)	Exercise Price		Options	Exercise Price
$	3.03	$	3.29	276,787	7.75	$	3.04	133,502	$	3.04
$	3.40	$	3.40	708,314	8.45	$	3.40	265,619	$	3.40
$	3.48	$	6.70	434,845	8.37	$	5.59	149,355	$	5.46
$	6.90	$	6.96	474,700	8.92	$	6.91	62,436	$	6.92
$	7.44	$	10.35	436,950	8.93	$	7.75	6,750	$	8.11
$	11.14	$	11.46	257,000	9.34	$	11.22	—	—
$	12.44	$	12.44	551,300	9.15	$	12.44	—	—
$	12.78	$	16.19	450,700	9.57	$	14.57	—	—
$	16.54	$	20.49	624,050	9.83	$	19.81	—	—
$	21.54	$	21.54	15,000	9.81	$	21.54	—	—

Restricted Stock and Restricted Stock Units — The Company may grant Restricted Stock (“RS”) and RSUs to eligible employees, including its executives, and non-employee directors. Each RS and RSU represents a right to receive one share of the Company’s common stock upon the completion of a specific period of continued service or achievement of a certain milestone. RS and RSU awards granted under the 2013 Incentive Plan and 2000 Stock Incentive Plan are generally valued at the market price of the Company’s common stock on the date of grant. RSUs granted in excess of certain plan sub-limits were considered to be granted outside the 2000 Stock Incentive Plan and were classified as a liability and remeasured at fair value at the end of each reporting period and changes in fair value are included in compensation expense in the Consolidated Statements of Comprehensive Loss (see additional disclosures related to RSUs granted outside the 2000 Stock Incentive Plan at the end of this note). The Company recognizes noncash compensation expense for the fair values of these RS and RSUs on a straight-line basis over the requisite service period of these awards.

The following table summarizes the Company’s RSU awards activity during the three months ended March 31, 2014:

			Weighted
	Number of		Average
	RSU’s		Grant Price
Outstanding at December 31, 2013	92,641		$	6.27
Granted	17,568		20.49
Released	(91,939	)	6.21
Outstanding at March 31, 2014	18,270		$	20.25
Expected to vest	18,270		$	20.25

Awards Granted Outside of the 2000 Stock Incentive Plan — As described above, during the first quarter of 2013, the Company completed a review of equity compensation awards granted under its 2000 Stock Incentive Plan and determined that it had inadvertently exceeded the annual per-person sub-limits involving certain awards previously made to certain of its current and past officers and directors. The aggregate amount of common stock represented by these excess awards, which consisted of RSUs and stock options, was approximately 1.4 million shares. These awards were deemed to be granted outside of the 2000 Stock Incentive Plan and as such the Company applied liability accounting to these awards. On May 23, 2013 (the date of the Company’s 2013 Annual Meeting of

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Stockholders), the Company’s shareholders approved the grants associated with the excess awards, which as of that date, allowed the excess awards to be deemed granted under the 2000 Stock Incentive Plan. As a result, the excess awards were remeasured at fair value on May 23, 2013 and the liability was reclassified to additional paid-in capital. The unrecognized fair value calculated for the excess awards as of May 23, 2013 will be recognized as compensation expense ratably over the remaining requisite service period for each award.

The following table summarizes the aggregate stock-based compensation recorded in the Consolidated Statements of Comprehensive Loss related to stock options and RSUs during the three months ended March 31, 2014 and 2013:

	2014		2013
	(in millions)

Research and development expenses	$	0.9	$	0.2
General and administrative expenses	1.5		0.8

Total	$	2.4	$	1.0

8. Income Taxes

The benefit for income taxes was $4.4 million and $1.2 million for the three months ended March 31, 2014 and 2013, respectively. The benefit for income taxes recorded for the three months ended March 31, 2014 and 2013 solely reflect the reversal of a valuation allowance previously recorded against the Company’s New Jersey State net operating losses (“NOL”) that resulted from the Company’s sale of a portion of its New Jersey State NOLs under the State of New Jersey’s Technology Business Tax Certificate Transfer Program (the “Program”) for cash of $4.4 million and $1.2 million, respectively and net of commissions. The Program allows qualified technology and biotechnology businesses in New Jersey to sell unused amounts of NOLs and defined research and development tax credits for cash.

The Company is subject to US federal and state income taxes. The Company has never been audited and the statute of limitations for tax audit is generally open for the years 2010 and later. The Company has incurred net operating losses since inception, except in 2009. Such loss carryforwards would be subject to audit in any tax year in which those losses are utilized, notwithstanding the year of origin. The Company’s policy is to recognize interest accrued related to unrecognized tax benefits and penalties in income tax expense. The Company has recorded no such expense. As of March 31, 2014 and December 31, 2013, the Company has recorded no reserves for unrecognized income tax benefits, nor has it 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. Due to the Company’s history of operating losses, the Company recorded a full valuation allowance on its net deferred tax assets as it is more likely than not that such tax benefits will not be realized.

At December 31, 2013, the Company had federal net operating loss carryforwards for income tax purposes of approximately $398.7 million available to offset future taxable income, if any. The NOL carryovers and general business tax credits expire in various years beginning in 2018.

Utilization of the Company’s NOL and general business tax credit carryforwards generated in prior years through September 2012 (the “September 2012 and prior NOLs”) are likely subject to substantial limitations under Section 382 of the Internal Revenue Code (“Section 382”) due to ownership changes that occurred at various points during years prior to 2012 and during September 2012. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period. Since the Company’s formation, it has

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raised capital through the issuance of common stock on several occasions which, combined with the purchasing shareholders’ subsequent disposition of those shares, likely resulted in multiple changes in ownership, as defined by Section 382 since the Company’s formation in 1999. The substantial limitations on the use of the September 2012 and prior NOLs are likely to result in expiration of a substantial portion of these NOL or general business tax credit carryforwards before utilization which would substantially reduce the Company’s gross deferred tax assets. The Company plans to complete a Section 382 analysis regarding the limitation of its NOL and general business tax credit carryforwards and intends to disclose the results of this analysis when it is completed.

9. Contract Manufacturing Agreement

Therapure Biopharma Inc . — In February 2014, the Company entered into a Contract Manufacturing Agreement (the “Agreement”) with Therapure Biopharma Inc. (“Therapure”) for the manufacture of the Company’s product ARIKAYCE. Pursuant to the Agreement, the Company and Therapure will collaborate to construct a production and quality control area for the manufacture and testing of ARIKAYCE in Therapure’s existing manufacturing facility in Mississauga, Ontario, Canada. Therapure will manufacture ARIKAYCE for the Company on a non-exclusive basis. The Agreement has an initial term of five years from the first date on which Therapure delivers ARIKAYCE to Insmed after Insmed obtains permits related to the manufacture of ARIKAYCE, and will renew automatically for successive periods of two years each, unless terminated by either party by providing the required two years’ prior written notice to the other party. Notwithstanding the foregoing, the parties have rights and obligations under the Agreement prior to the commencement of the initial term. The Agreement allows for termination by either party upon the occurrence of certain events, including, (i) the material breach by the other party of any provision of the Agreement or the quality agreement expected to be entered into between the parties, or (ii) the default or bankruptcy of the other party. In addition, the Company may terminate the Agreement for any reason upon no fewer than one hundred eighty days’ advance notice. Costs incurred under this agreement will be recorded as a component of research and development expense until such time as the Company receives United States Food and Drug Administration approval for ARIKAYCE.

10. Commitments and Contingencies

Commitments

The Company has two operating leases for office and laboratory space located in Monmouth Junction, New Jersey through December 31, 2014. Future minimum rental payments under these two leases total approximately $0.5 million. The Company also has an operating lease for office and laboratory space located in Bridgewater, New Jersey that terminates in November 2019. Future minimum rental payments under this lease as of March 31, 2014 were $2.4 million. The Company also leases office space in Richmond, Virginia, where the Company’s corporate headquarters were previously located, through October 2016. Future minimum rental payments under this lease as of March 31, 2014 total approximately $1.3 million.

Rent expense charged to operations was $0.3 million and $0.2 million for the three months ended March 31, 2014 and 2013, respectively. Future minimum rental payments required under the Company’s operating leases for the period from April 1, 2014 to December 31, 2014 and for each of the next five years are as follows (in thousands):

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2014 (remaining)	$	938
2015	945
2016	885
2017	474
2018	488
2019	460
	$	4,190

Legal Proceedings

Pilkiewicz v. Transave LLC

On March 28, 2011, Frank G. Pilkiewicz and other former stockholders of Transave (collectively, the “Petitioners”) filed an appraisal action against the Company’s subsidiary Transave, LLC in the Delaware Court of Chancery captioned Frank G. Pilkiewicz, et al. v. Transave, LLC , C.A. No. 6319-CS. On December 13, 2011, following the mailing of the revised notice of appraisal rights in accordance with the settlement terms of Mackinson et al. v. Insmed , an Amended Petition for Appraisal of Stock was filed by the Petitioners.

The Petitioners seek appraisal under Delaware law of their total combined common stock holdings representing total dissenting shares of approximately 7.77 million shares of Transave common stock (the “Transave Stock”). The Petitioners are challenging the value of the consideration that they would be entitled to receive for their Transave Stock under the terms of the Company’s merger with Transave.

Under the terms of the Merger Agreement, certain of the former stockholders of Transave (the “Transave Stockholders”) are obligated to indemnify the Company for certain liabilities in connection with the appraisal action. The Company notified the Transave Stockholders in May 2012 that the Company is seeking indemnification in accordance with the Merger Agreement and that it will continue to retain the aggregate amount of the holdback shares totaling 1,765,271 shares, as security for any indemnification payments due under the Merger Agreement. Discovery was completed and a trial was scheduled to begin in April 2014. Prior to commencement of the trial, the parties agreed to settle the matter and are in the process of negotiating a settlement agreement. The Company expects to be indemnified in full for the settlement and related costs incurred in defending the appraisal action.

From time to time, the Company is a party to various other lawsuits, claims and other legal proceedings that arise in the ordinary course of 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 the Company’s consolidated financial position, results of operations or cash flows.

11. Retirement Plan

The Company has a 401(k) defined contribution plan for the benefit for all employees and permits voluntary contributions by employees subject to IRS-imposed limitations. There were no employer contributions in the three months ended March 31, 2014 and 2013.

12. Subsequent Events

On April 2, 2014, the Company announced that Dr. Renu Gupta, a Named Executive Officer, will transition to a new role as Special Advisor to the Chief Executive Officer, effective as of April 21, 2014. She will serve in this position until her departure from the Company later this year. The Company expects to incur certain one-time expenses related to her Transition & Separation Agreement beginning in the second quarter of 2014.

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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. “Forward-looking statements,” as that term is defined in the Private Securities Litigation Reform Act of 1995, are statements that are not historical facts and involve a number of risks and uncertainties. Words herein such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “intends,” “potential,” “continues,” and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) identify forward-looking statements.

Forward-looking statements include, but are not limited to: failure or delay of European Medicines Agency, Health Canada, United States Food and Drug Administration and other regulatory reviews and approvals, competitive developments affecting the Company’s product candidates, delays in product development or clinical trials or other studies, patent disputes and other intellectual property developments relating to the Company’s product candidates, unexpected regulatory actions, delays or requests, the failure of clinical trials or other studies or results of clinical trials or other studies that do not meet expectations, the fact that subsequent analyses of clinical trial or study data may lead to different (including less favorable) interpretations of trial or study results or may identify important implications of a trial or study that are not reflected in Company’s prior disclosures, and the fact that trial or study results or subsequent analyses may be subject to differing interpretations by regulatory agencies, the inability to successfully develop the Company’s product candidates or receive necessary regulatory approvals, inability to make product candidates commercially successful, changes in anticipated expenses, changes in the Company’s financing requirements or ability raise additional capital; our ability to complete development of, receive regulatory approval for, and successfully commercialize ARIKAYCE TM ; our estimates of expenses and future revenues and profitability; our plans to develop and market new products and the timing of these development programs; our estimates of the size of the potential markets for our product candidates; our selection and licensing of product candidates; our ability to attract third parties with acceptable development, regulatory and commercialization expertise; the benefits to be derived from corporate license agreements and other third party efforts, including those relating to the development and commercialization of our product candidates; the degree of protection afforded to us by our intellectual portfolio; the safety and efficacy of our product candidates; sources of revenues and anticipated revenues, including contributions from license agreements and other third party efforts for the development and commercialization of products; our ability to create an effective direct sales and marketing infrastructure for products we elect to market and sell directly; the rate and degree of market acceptance of our product candidates; the timing and amount of reimbursement for our product candidates; the success of other competing therapies that may become available; and the availability of adequate supply and manufacturing capacity and quality for our product candidates.

Forward-looking statements are based upon our current expectations and beliefs, and involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance and achievements and the timing of certain events to differ materially from the results, performance, achievements or timing discussed, projected, anticipated or indicated in any forward-looking statements. Such factors include, among others, the factors discussed in Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013 filed with the Securities and Exchange Commission (“SEC”) on March 6, 2014. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the Securities and Exchange Commission, 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.

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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, 2013.

OVERVIEW

In March 2014, we reported top-line clinical results from the double-blind portion of our phase 2 clinical trial in the United States (US) and Canada of ARIKAYCE in patients who have lung infections caused by nontuberculous mycobacteria (NTM). The randomized, double-blind, placebo-controlled phase 2 clinical trial compared ARIKAYCE (590 mg delivered once daily), added to standard of care treatment, versus standard of care treatment plus placebo, in 90 adult patients with treatment resistant NTM lung disease. Eligibility for the study required patients to have been on the American Thoracic Society/Infectious Disease Society of America guideline therapy for at least six months prior to screening and to continue to have persistently positive mycobacterial cultures. The primary efficacy endpoint of the study was a semi-quantitative measurement of the change in mycobacterial density on a seven-point scale from baseline (day one) to the end of the randomized portion of the trial (day 84). ARIKAYCE did not meet the pre-specified level for statistical significance although there was a positive trend (p=0.148) in favor of ARIKAYCE. However, ARIKAYCE did achieve statistical significance with regard to the clinically relevant key secondary endpoint of culture conversion, with 11 out of 44 patients treated with ARIKAYCE (added to standard of care treatment) demonstrating negative cultures by day 84 of the study as compared to 3 out of 45 patients treated with placebo (added to standard of care treatment) (p=0.01). Data analyses for certain additional secondary, tertiary and exploratory endpoints are ongoing. We plan to present additional data at the American Thoracic Society meeting in May 2014. We also applied for Breakthrough Therapy Designation for ARIKAYCE in the US based upon the culture conversion results in our phase 2 clinical trial. ARIKAYCE has already received Orphan Drug, Qualified Infectious Disease Product (QIDP) and Fast Track designations from the US Food and Drug Administration (FDA) for the treatment of NTM lung infections and recently received Orphan Drug Designation from the European Medicines Agency (EMA).

In 2013, we concluded a phase 3 clinical trial in Europe and Canada of ARIKAYCE in cystic fibrosis (CF) patients who have lung infections caused by Pseudomonas aeruginosa ( Pseudomonas ). In this study, once-daily ARIKAYCE achieved its primary endpoint of non-inferiority when compared to twice-daily TOBI ® (tobramycin inhaled solution) for relative change in forced expiratory volume in one second from baseline to the end of the study.

The CF and NTM target indications address orphan patient populations. Our strategy includes plans to continue to develop ARIKAYCE to broaden the NTM indication and for additional indications beyond Pseudomonas in CF and NTM. We also plan to develop, acquire, in-license or co-promote other products that address orphan or rare diseases in the fields of pulmonology and infectious disease. Our current primary development focus is to obtain regulatory approval for ARIKAYCE in these two initial indications and to prepare for commercialization in the US, Europe, Canada and Japan. We anticipate that if approved, ARIKAYCE would be the first once-a-day inhaled antibiotic treatment option available for these CF and NTM indications. The following table summarizes the current status of ARIKAYCE development.

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Product Candidate/Target Indications	Status	Next Expected Milestones
ARIKAYCE Non-tuberculous mycobacteria (NTM) lung infections	· We reported top-line clinical results from our phase 2 clinical trial which stated that ARIKAYCE did not meet the pre-specified level for statistical significance with respect to the primary endpoint, but did achieve statistical significance with regard to the clinically relevant key secondary endpoint of culture conversion. · Granted orphan drug designation in Europe and the US. · Granted QIDP designation, which includes Priority Review, by the FDA in June 2013. · Granted Fast Track designation by the FDA in June 2013 which permits a rolling submission of an NDA. · Applied for Breakthrough Therapy Designation for ARIKAYCE in the US in April 2014 based upon the culture conversion results in the phase 2 clinical trial.	· We expect to commence an additional study in the US and/or Europe in the second half of 2014. · We expect to have dialogue with the FDA and the EMA in the next several months to discuss the regulatory pathway. · If approved, we expect ARIKAYCE would be the first approved inhaled antibiotic treatment for NTM lung infections. · We are developing plans to commercialize ARIKAYCE, if approved, initially in the US, in certain countries in Europe, and Canada and eventually Japan.

ARIKAYCE Pseudomonas aeruginosa lung infections in CF patients	· Reported top-line results from our phase 3 clinical trial for registration in Europe and Canada in July 2013, in which once-daily ARIKAYCE achieved its primary endpoint of non-inferiority when compared to twice-daily tobramycin inhaled solution. · Conducting a two-year, open-label safety study in patients that completed our phase 3 clinical trial in Europe and Canada. We expect to complete this study in mid-2015. · Reported top-line results from the first group of patients that completed the first year of the two-year open label extension study. · Granted orphan drug designation in Europe and the US.	· We expect to submit regulatory filings with the EMA and Health Canada (the government agency that provides regulatory and marketing approval for drugs and therapeutic products in Canada) in the second half of 2014. If the EMA allows a filing that includes both the CF and NTM indications we will most likely submit our filing in the second half of 2014. · We are developing plans to commercialize ARIKAYCE, if approved, in certain countries in Europe and in Canada where we expect it would be the only once-a-day treatment for Pseudomonas lung infections in CF patients. · We expect to reevaluate our plans regarding a US phase 3 clinical trial in CF patients with Pseudomonas lung infection after we receive the final results from the ongoing phase 2 clinical trial in NTM patients in the US.

ARIKAYCE Pseudomonas aeruginosa and other susceptible organisms causing lung infections in non-CF bronchiectasis patients	· Completed phase 2 study in the US. · Granted orphan drug designation in the US.	· We do not intend to initiate further clinical studies with respect to a non-CF bronchiectasis indication until we have completed additional clinical studies for CF patients with Pseudomonas lung infections and for patients with NTM lung infections. Following those studies, we will evaluate whether to develop ARIKAYCE further for non-CF bronchiectasis.

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For FDA marketing application and review purposes, ARIKAYCE is considered a new molecular entity (NME) primarily due to its proprietary liposomal technology. The FDA has indicated that it considers ARIKAYCE a NME for application and review purposes even though the agency has previously approved drugs with the active ingredient, amikacin sulfate. FDA characterizes some drugs as NMEs for administrative purposes, even if they contain an active moiety (the molecule or ion responsible for the action of the drug substance) that is closely related to active moieties in products that have previously been approved by FDA. Amikacin sulfate is an FDA-approved antibiotic with proven efficacy in the treatment of a broad range of gram-negative infections, including Pseudomonas and NTM. ARIKAYCE is in the aminoglycoside class of antibiotics.

If approved for NTM patients, we believe ARIKAYCE would be the first and only approved inhaled antibiotic for the treatment of NTM lung infections. If approved for CF patients with Pseudomonas lung infections, we believe ARIKAYCE would be the first inhaled antibiotic to be approved for once-daily administration in this indication. ARIKAYCE has been granted the following orphan drug designations:

· US: NTM lung infections, Pseudomonas lung infections in CF patients, and lung infections in non-CF bronchiectasis patients; and

· European Union (EU): NTM lung infections and Pseudomonas lung infections in CF patients.

Corporate History

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

Our Strategy

Our strategy is to focus on the development and commercialization of innovative inhaled therapies for patients with serious lung diseases in orphan indications. While we believe that ARIKAYCE has the potential to treat many different diseases, our attention is initially focused on regulatory approval and commercialization preparation for our two initial indications: (1) NTM lung infections and (2) Pseudomonas lung infections in CF patients. Our current priorities are as follows:

· Continue generating additional clinical data from studies showing the effects of ARIKAYCE to treat NTM lung infections and Pseudomonas lung infections in CF patients necessary for new drug applications in Europe, Canada, Japan and the US;

· Actively pursue new drug filings to secure approval for ARIKAYCE to treat NTM lung infections in the US, Europe, Canada and Japan;

· Actively pursue new drug filings to secure approval for ARIKAYCE to treat Pseudomonas lung infections in CF patients in Europe and Canada;

· Expand our product supply chain in support of clinical development and if approved, commercialization;

· Prepare for commercial launch in the NTM indication in the US, Europe, Canada and eventually Japan and certain other countries including Korea, Taiwan and China;

· Prepare for commercial launch in Pseudomonas in CF patients indication in Europe and Canada;

· Attempt to develop, acquire, in-license or co-promote promising late stage or commercial products that we believe are complementary to ARIKAYCE and our core competencies; and

· Continue to develop novel formulations of existing therapies, where such reformulation could materially improve the treatment paradigm for the underlying disease or to enable pursuit of a new indication.

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In support of these priorities, we completed our registrational phase 3 clinical study of ARIKAYCE in CF patients with Pseudomonas lung infections in Europe and Canada. We plan to submit regulatory filings in Europe and Canada for the CF indication in the second half of 2014 and, if the EMA allows, the filing will include both the CF and NTM indications. In the first quarter of 2014 we completed the double blind phase of our US and Canadian phase 2 clinical study of ARIKAYCE in patients with recalcitrant NTM lung infections. We expect to commence an additional study in the second half of 2014 for patients with NTM lung infections. We plan to scale up manufacturing, we are identifying second source suppliers, and we plan to implement supply and quality agreements in preparation for commercialization of ARIKAYCE. In February 2014, we entered into a contract manufacturing agreement with Therapure Biopharma Inc. (“Therapure”) for the manufacture of ARIKAYCE at the larger scales necessary to support commercialization. We also intend to continue to work closely with PARI Pharma GmbH (PARI), the manufacturer of our drug delivery nebulizer, to address our commercial supply needs. We have commenced the build-out of our commercial infrastructure in preparation for potential commercial launches in Europe, Canada and the US. We will continue to evaluate opportunities for additional products through various business development channels.

Product Candidates

Our lead product candidate, ARIKAYCE, or LAI, is a once-a-day inhaled antibiotic treatment engineered to deliver an anti-infective directly to the site of serious lung infections. There are two key components of ARIKAYCE: the liposomal formulation of the drug and the nebulizer device through which ARIKAYCE is inhaled via the mouth and into the lung. The nebulizer technology is owned by PARI, but we have exclusive access to this technology, which is specifically developed for the delivery of our liposomal encapsulation of amikacin, through our licensing agreement with PARI. Our proprietary liposomal technology and the nebulizer are designed specifically for delivery of pharmaceuticals to the lung and provides for potential improvements to existing treatments. We believe that ARIKAYCE has potential usage for at least two orphan patient populations with high unmet need: patients who have NTM lung infections and CF patients who have Pseudomonas lung infections. We estimate the combined global market potential for these two orphan indications to be approximately $1 billion.

ARIKAYCE has the potential to be differentiated from amikacin and certain marketed drugs for the treatment of chronic lung infections if it can be demonstrated to provide improved efficacy, safety and patient convenience. We believe ARIKAYCE’s ability to deliver high, sustained levels of amikacin directly to the lung and to the specific site of the underlying infection could distinguish it from other alternatives. We are also investigating ARIKAYCE’s potential for durability of effect, benefiting patients when off treatment or for an extended period of treatment. In addition, the inhalation delivery of ARIKAYCE may reduce the potential for adverse events such as ototoxicity (hearing loss, ringing in the ears and/or loss of balance) and nephrotoxicity (toxicity to the kidneys), as compared with intravenous (IV) administration of amikacin. If approved, we expect that ARIKAYCE will be administered once-daily for approximately 13 minutes via inhalation using the eFlow ® Nebulizer System, which has been optimized specifically for ARIKAYCE by PARI. We believe that this nebulizer system will reduce treatment time or dosing frequency, as compared with the currently marketed inhaled antibiotics, which require dosing two to three times daily with treatment times ranging from approximately 10 to 40 minutes per day. By easing the patient’s treatment burden we believe that ARIKAYCE can potentially improve patient compliance, which we believe may in turn lead to a reduction in the development of antibiotic resistance and, ultimately, lead to clinical benefit.

We believe that ARIKAYCE may provide: (1) improved efficacy resulting from sustained deposition of drug in the lung and improved ability to reach the site of infection (for CF Pseudomonas infections, this means penetration of biofilm and facilitated drug release by factors that are secreted by the bacteria, and for NTM, this means enhanced uptake into macrophages, where NTM often grows); (2) decreased adverse events and improved tolerability as compared with amikacin delivered intravenously; and (3) reduced dosing frequency or treatment time

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as compared to existing products. In the future we may conduct head-to-head comparative studies that would be necessary to make comparative statements against other products.

ARIKAYCE for Patients with NTM Lung Infections

Overview of NTM Lung Infections

Nontuberculous mycobacteria, or NTM, are organisms common in soil and water that have been associated with lung disease in select patient groups. NTM have characteristics that are similar to tuberculosis, or TB, but NTM are not believed to be contagious. Many people have NTM in their bodies, but NTM do not normally lead to an infection, perhaps because the body’s immune system successfully overcomes the threat of infection. It is not completely understood why certain individuals are susceptible to NTM infections. However, the patients who become infected by NTM often are immune-compromised, due to comorbidities such as HIV or rheumatoid arthritis, or have structural damage in their lungs, due to smoking, chronic obstructive pulmonary disease or CF, at the time of the infection.

NTM are organisms that invade and multiply chiefly within macrophages. They are characteristically resistant to most antibiotics. NTM lung infections are chronic, debilitating and progressive and often require lengthy, repeat hospitalizations. Signs and symptoms of NTM pulmonary disease are variable and nonspecific. They include chronic cough, sputum production and fatigue. Less commonly, malaise, dyspnea, fever, hemoptysis, and weight loss also can occur, usually with advanced NTM disease. Evaluation is often complicated by the symptoms caused by co-existing lung diseases. According to a study published in the American Journal of Respiratory and Critical Care Medicine , these conditions include chronic obstructive airway disease associated with smoking, bronchiectasis, previous mycobacterial diseases, CF and pneumoconiosis (Olivier et al. 2003).

Current Treatment Options and Limitations

We believe there currently is no drug approved in Europe or the US for treatment of NTM lung infections, and as a result all current drug treatments for NTM are used off-label. Patients are often treated with the same antibiotics that are used to treat TB. Such treatments usually consist of lengthy multi-drug antibiotic regimens, which are often poorly tolerated and not very effective, especially in patients with severe disease and patients who have failed prior treatments. NTM patients average 7.6 antibiotic courses per year (SDI Healthcare Database, July 2009). Treatment guidelines published in 2007 in the American Journal of Respiratory and Critical Care Medicine reported that few clinical trials were under way to identify treatment recommendations, and no new antibiotics had been studied for the treatment of NTM lung infections in multi-center, randomized clinical trials since the late 1990s.

Although approved for other indications, amikacin sulfate is not approved by the FDA for NTM lung infections. In practice, however, it is often recommended by physicians as part of the standard treatment regimen for some NTM patients. It is delivered most commonly by intravenous administration and, far less often, by inhalation. Because the drug is delivered for months at a time, resulting in high systemic (blood) levels of the drug, there can be considerable toxicity, including ototoxicity and nephrotoxicity, associated with intravenous treatment. There are very few prior studies to support what doses should be administered to effectively treat NTM patients even with these existing medications and they are often titrated on a patient by patient basis.

Market

The prevalence of human disease attributable to NTM has increased over the past two decades. In 2012, in collaboration with the NIH, we funded a study performed by Clarity Pharma Research that showed there were an estimated 50,000 cases of pulmonary disease attributable to NTM in the US in 2011 and that such cases were estimated to be growing at a rate of 10% per year. NTM is four to five times more prevalent than TB in the US (Incidence of TB from Center for Disease Control and Prevention Morbidity and Mortality Weekly Report, March

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2012). In a decade-long study, researchers found that the diagnosis of NTM in the US is increasing at approximately 8% per year and that those NTM patients over the age of 65 are 40% more likely to die than those who do not have the disease (Adjemian et al, Prevalence of Pulmonary Nontuberculous Mycobacterial Disease among Medicare Beneficiaries, USA, 1997-2007, American Journal of Respiratory and Critical Care Medicine, April 2012).

In 2013, we engaged Clarity Pharma Research to perform a similar chart audit study of NTM in Europe and Japan. Based on results of this study, researchers estimated that there are approximately 20,000 cases of pulmonary disease attributable to NTM within the European nations of France, Germany, the United Kingdom, Italy and Spain combined and approximately 30,000 in the twenty-eight countries comprising the EU. In addition, there are nearly 32,000 cases in Japan. Although population-based data on the epidemiology of NTM infections in Europe are limited, consistent with US prevalence trends, recent published studies concur that prevalence in Europe is increasing and, according to a study published in the Japanese journal Kekkaku in 2011, Japan has one of the world’s highest NTM disease rates.

Although there are many species of NTM that have been reported to cause lung infections, ARIKAYCE is intended to treat two of the most common, Mycobacterium Avium Complex (MAC) and Mycobacterium abscessus ( M. abscessus ). MAC accounts for the vast majority of NTM lung infections with prevalence rates from 72% to more than 85% in the US. The reported prevalence rates for M. abscessus range from 3% to 11% in the US. The diagnosed prevalence of NTM species causing lung infections varies geographically with MAC rates of 25% to 55% reported in Europe. MAC is also the most common NTM pathogen in Japan.

ARIKAYCE for NTM Lung Infections: Potential Advantages and Distinguishing Features

If approved, we believe ARIKAYCE would be the first and only approved treatment for patients battling NTM lung infections.

Liposomal Design and Formulation

We believe that ARIKAYCE may be effective in treating patients with NTM lung infections due to the apparent ability of the ARIKAYCE liposomes to be taken up inside lung macrophages that harbor NTM. Macrophages are immune cells whose primary function includes removing foreign particles and bacteria from the lungs. NTM are taken up by and multiply inside these macrophages. Many antibiotics cannot efficiently gain access to the macrophage interior. ARIKAYCE liposomes, however, are designed to be internalized by lung macrophages and thereby deliver high levels of drug inside the macrophages where the NTM bacteria are located.

Preclinical Activity

ARIKAYCE has been shown to have superior in vitro activity against MAC and M. abscessus when compared with amikacin solution (study conducted by L.E. Bermudez at Oregon State University, data on file, 2010). ARIKAYCE also has been shown to more effectively kill certain forms of NTM in cultured lung phagocytes as compared to soluble amikacin.

Route of Administration

We believe ARIKAYCE has the potential to offer a safety profile different from that of intravenous delivery of amikacin. For example, unlike the intravenous administration of amikacin, ARIKAYCE would deliver the drug more directly to the site of disease. We anticipate this will result in less exposure of non-disease sites to amikacin. We believe this may reduce the potential for the occurrence of any drug-related systemic toxicity, such as nephrotoxicity, which is especially important with diseases like NTM that require long-term drug administration.

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Anticipated Dosage Regimen

We believe ARIKAYCE, if approved, could improve patient convenience by providing once-a-day dosing. According to SDI Healthcare Database NTM patients average 7.6 antibiotic courses and 10.2 hospital days per year. We anticipate that ARIKAYCE will be administered once daily outside of the hospital for approximately 13 minutes per day for a period of 84 days for this indication. We believe that an effective inhaled treatment that improves the outcomes for an NTM patient would represent a significant benefit in the patient’s quality of life.

Current Clinical Program

In March 2014, we reported top-line clinical results from the double-blind portion of our phase 2 clinical trial in the US and Canada of ARIKAYCE in patients who have lung infections caused by NTM. The randomized, double-blind, placebo-controlled phase 2 clinical trial compared ARIKAYCE (590 mg delivered once daily), added to standard of care treatment, versus standard of care treatment plus placebo, in 90 adult patients with treatment resistant NTM lung disease. Eligibility for the study required patients to have been on the American Thoracic Society/Infectious Disease Society of America guideline therapy for at least six months prior to screening and to continue to have persistently positive mycobacterial cultures. The primary efficacy endpoint of the study was a semi-quantitative measurement of the change in mycobacterial density on a seven-point scale from baseline (day one) to the end of the randomized portion of the trial (day 84). ARIKAYCE did not meet the pre-specified level for statistical significance although there was a positive trend in favor of ARIKAYCE. However, ARIKAYCE did achieve statistical significance with regard to the clinically relevant key secondary endpoint of culture conversion, with 11 out of 44 patients treated with ARIKAYCE (added to standard of care treatment) demonstrating negative cultures by day 84 of the study as compared to 3 out of 45 patients treated with placebo (added to standard of care treatment). Data analyses for certain additional secondary, tertiary and exploratory endpoints are ongoing. We plan to present additional data at the American Thoracic Society meeting in May 2014 and we applied for Breakthrough Therapy Designation for ARIKAYCE in the United States based upon the culture conversion results in our phase 2 clinical trial. Additionally, we have initiated a scintigraphy sub-study to examine drug deposition and distribution of ARIKAYCE in the lung.

There was a pre-specified stratification of patients with MAC versus M. abscessus and patients with and without cystic fibrosis. The study also measured certain secondary, tertiary and exploratory endpoints, including but not limited to: the proportion of patients with culture conversion to negative, the time to “rescue” anti-mycobacterial drugs, the change from baseline in six-minute walk distance and oxygen saturation, the change from baseline in patient reported outcomes, and evaluation of safety and tolerability.

In addition to the phase 2 clinical trial outlined above, we intend to commence an additional study in the second half of 2014 with planned sites in the US and Europe.

ARIKAYCE received orphan drug status in the US and Europe for the treatment of NTM.

Development History

Nonclinical evaluations of ARIKAYCE in relation to NTM infections indicate: (1) high concentrations of drug are deposited in the lung, and high levels are sustained for prolonged periods, with low serum concentrations, and (2) ARIKAYCE has in vitro activity that is superior to amikacin solution against different strains of NTM.

Data obtained from in vitro testing of ARIKAYCE with respect to four different strains of MAC and M. abscessus indicate dose response with ARIKAYCE and superior activity to free amikacin. We believe that the safety and efficacy data obtained from the phase 3, phase 2 and open label studies of ARIKAYCE in CF and non-CF patients with chronic lung disease and pulmonary infections and the non-clinical data collected to date serve as the basis for further development of ARIKAYCE in patients with NTM lung infections.

We submitted an IND to launch a phase 3 study of ARIKAYCE in CF and non-CF patients with recalcitrant NTM lung disease. In August 2011, prior to starting the NTM study, we announced that the FDA placed

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a clinical hold on our phase 3 trial for ARIKAYCE in patients with recalcitrant NTM lung infections. The clinical hold for the NTM study was lifted in January 2012. The FDA based its clinical hold decision on an initial review of the results of a long-term rat inhalation carcinogenicity study with ARIKAYCE. When rats were given ARIKAYCE daily by inhalation for two years, 2 of the 120 rats receiving the highest dose developed lung tumors. These rats received ARIKAYCE doses that were within two-fold of those in clinical studies (normalized on a body surface area basis or a lung weight basis). ARIKAYCE was not associated with changes that may lead to tumors in shorter-term studies in animals. Additionally, ARIKAYCE was not shown to be genotoxic in our standard series of tests. The relevance of the observed rat tumors to the use of ARIKAYCE in humans is not known. The FDA requested we conduct a phase 2 clinical trial, instead of our previously agreed upon phase 3 clinical trial in adult NTM patients, to provide proof-of-concept efficacy and safety data for ARIKAYCE in NTM patients. Despite the change in status from phase 3 to phase 2, the study design and target enrollment did not change. In connection with the FDA’s decision to lift the clinical hold for all disease indications, we agreed to conduct a dog inhalation toxicity study of ARIKAYCE. In 2013, we concluded the dog inhalation toxicity study. In summary, the final report from the study stated that the lung macrophage response in dogs was similar to that seen in our previous 3 month dosing dog study, and there was no evidence of neoplasia, squamous metaplasia or proliferative changes.

Strategy for Commercialization

We currently plan to retain marketing rights for ARIKAYCE for the NTM indication. Given the current lack of approved treatments for NTM lung infections, we believe we will immediately have a strong market position if ARIKAYCE is approved for commercialization in the NTM indication. We believe ARIKAYCE will require a limited commercial infrastructure because of the small focused nature of the potential physician prescribing population for NTM patients. In 2013, we commenced preparations for the potential commercialization of ARIKAYCE, including hiring Matt Pauls, our Chief Commercial Officer. We plan to fill several other new positions to support our future sales and marketing efforts. We may also seek to out-license ARIKAYCE outside of Europe, Canada and the US.

ARIKAYCE for CF Patients with Pseudomonas Lung Infections

Overview of CF and Pseudomonas Lung Infections

CF is an inherited chronic disease that is often diagnosed before the age of two. CF occurs primarily in individuals of central and western European origin. CF affects roughly 70,000 children and adults worldwide, including 30,000 children and adults in the US (Cystic Fibrosis Foundation Patient Registry, 2011) and 35,000 patients in Europe (Hoiby, BMC Medicine, 2011, 9:32). There is no cure for CF.

Despite extensive treatment with multiple antibiotics, improved nutrition, and other treatments, life expectancy of a CF patient is only about 37 years (Cystic Fibrosis Foundation Patient Registry, 2011). Median predicted age of survival is calculated using life table analysis (as calculated by actuaries) given the ages of the patients in the registry and the distribution of deaths. Using this calculation, half of the people in the patient registry are expected to live beyond the median predicted survival age, and half are expected to live less than the median predicted survival age.

Among other issues, CF causes thick, sticky mucus to develop in and clog the lungs. This creates an ideal environment for various pathogens, such as Pseudomonas , to colonize and lead to chronic infection of the lung, inflammation and progressive loss of lung function. In fact, chronic bronchial infections with Pseudomonas are a major cause of morbidity and mortality among patients with CF. Once a CF patient acquires a Pseudomonas infection, it is difficult to eradicate. The current, best available treatment is chronic administration of antibiotics to suppress the bacteria, reduce inflammation and preserve lung function for as long as possible. The rate of infection with Pseudomonas in CF patients increases with age. It is estimated that 70% of adult CF patients have chronic infection due to Pseudomonas (CFF Patient Registry, 2011). A study reported in the Journal of Cystic Fibrosis

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(Liou, 2010) found that deterioration in lung function of CF patients is the main cause of death and that, despite best efforts, lung function declines by 1% to 3% annually.

Current Treatment Options and Limitations

CF therapy significantly impacts patients’ quality of life. Patients generally receive extensive antibiotic treatments, which can be delivered via the oral, intravenous and inhaled routes. Some CF patients spend up to three hours per day taking medications and other treatments, including inhaled antibiotics, and often face the burden of taking in excess of 20 pills per day. All currently approved inhalation treatments for Pseudomonas lung infections require two- to three-times a day dosing.

Antibiotics delivered via inhalation are part of the standard treatment for CF patients with Pseudomonas lung infections and are generally thought to be a way to deliver more active drug directly to the site of infection compared with other routes of administration. The most used treatment in the US for the management of chronic Pseudomonas infection in subjects with CF is suppressive therapy with tobramycin. One example is twice daily Tobi inhaled solution, which is approved by the FDA for CF patients ages six years and above with a FEV1 (forced expiratory volume in 1 second) of 25%-75%, has been sold in the US since January 1998. A 1999 study reported that Tobi, 300 mg, administered twice a day for cycles of 28 days followed by 28-days-off treatment was shown to reduce Pseudomonas colony counts, increase FEV1 percent predicted, reduce hospitalizations and decrease additional antibiotic use (Ramsey et al., 1999, New England Journal of Medicine). High levels of tobramycin can be attained in the lung with relatively low systemic exposure with inhaled drug compared to intravenous tobramycin. However, patients using Tobi must be dosed twice a day for approximately 15 to 20 minutes of inhalation session per dose for a total of approximately 30 to 40 minutes per day. Recent data show that the effect of Tobi on pulmonary function in CF patients has lessened since its introduction into the marketplace more than a decade ago (Konstan et al., Journal of Cystic Fibrosis, January 2011, and Assael et al., 34 th European Cystic Fibrosis Society Conference, Poster 86, June 2011). In addition, according to information presented at a FDA advisory panel, resistance to Tobi has increased 85% in the ten-year period from 1999 to 2009 (FDA advisory panel US-FDA-AIDAC for Tobi-Podhaler, September 2012).

Market

We estimate that the global market for the treatment of Pseudomonas lung infections in CF patients is approximately $500 million. We believe this market is being driven by physicians’ desire to maintain the lung function of CF patients, which continues to decline in many patients despite extensive treatment with current therapies including currently approved inhaled antibiotics. We believe that the following additional factors may lead to further market growth:

· Better patient adherence to physician prescribed regimens resulting from more convenient (less frequent and less time consuming) treatments;

· Physicians initiating treatment with inhaled antibiotics earlier for patients with Pseudomonas in their lungs;

· CF patients living longer;

· Physicians moving to a different antibiotic every other month as opposed to giving patients off-treatment holidays on alternate months; and

· The standard of care in the rest of the world continuing to advance closer to that in the EU and the US.

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ARIKAYCE for CF Patients with Pseudomonas Lung Infections: Potential Advantages and Distinguishing Features

Patient Compliance Considerations

We believe ARIKAYCE may facilitate better patient compliance with prescribed treatment regimens; patient compliance with or “adherence” to prescribed treatment is generally expected to impact the effectiveness of treatment. If a product can improve adherence, it may be able to differentiate itself from other marketed drugs. In the case of treatment and management of chronic Pseudomonas lung infections in CF patients, currently the most used treatment in the US is suppressive therapy with 300 mg twice daily of Tobi inhaled solution and tobramycin inhaled powder. Tobi is administered twice daily for 28 days followed by a 28-day-off period. This cycle of “on and off” treatment is repeated in a chronic pattern. We anticipate that ARIKAYCE would be administered once daily for approximately 13 minutes per day for 28 days followed by a 28-day off-drug period. We believe that any inhaled treatment that reduces the treatment burden on a CF patient could represent a significant improvement in the patient’s quality of life and result in improved compliance, as well as reduce the development of antibiotic resistance.

Liposomal Design and Formulation

We believe ARIKAYCE has the potential to deliver high levels of amikacin directly to the site of bacteria in the lung for a sustained period of time, which we expect would differentiate it from other marketed drugs for the treatment of chronic Pseudomonas lung infections in CF patients. Current inhaled antibiotics are commonly used as standard treatments for CF patients with Pseudomonas lung infections and generally are thought to be a way to deliver more drug directly to the site of infection as compared with other methods of delivery. However, CF patients seldom clear the Pseudomonas permanently from their lungs, in part because of the thick sticky mucus these patients produce in their lungs, and often become chronically infected despite existing antibiotic treatments. All existing aminoglycoside antibiotics, including tobramycin and amikacin, are positively charged and tend to bind to the negative surfaces of mucus and the biofilm. In contrast, we have designed ARIKAYCE to be a neutrally charged liposome, which has been shown in laboratory studies, to penetrate both CF mucus and a Pseudomonas biofilm. This means that ARIKAYCE may reach the site of the Pseudomonas infection in CF patients’ lungs more efficiently than the other currently available aminoglycoside antibiotics, including currently available inhaled antibiotics.

In addition, ARIKAYCE has demonstrated a prolonged half-life in animals’ lungs. We believe this effect is due to our proprietary liposomal technology. One important measure of the effectiveness of antibiotics is the maintenance of anti-bacterial drug levels in the lung above the minimum inhibitory concentration. We anticipate that ARIKAYCE will be maintained in the human lung in a manner similar to what was demonstrated in animal studies.

We believe ARIKAYCE may be further differentiated from other marketed drugs for the treatment of chronic Pseudomonas lung infections in CF patients due to improved lung function during both on-treatment and off-treatment cycles. Typically an inhaled antibiotic is given to CF patients with chronic Pseudomonas lung infections for 28 days followed by a 28-day off-treatment cycle, which is often repeated chronically or for the rest of a patient’s life. In February 2014, we reported interim data from our two-year open label extension study which showed a mean increase in relative change in FEV 1 which was sustained during both on-treatment and off-treatment months. In addition, during phase 2 studies ARIKAYCE demonstrated statistically significant and clinically meaningful improvement in pulmonary function throughout the 28-day treatment period, and such improvement was sustained during the 28-days off treatment period.

We have also reported data showing durability of effect for longer off-treatment periods. In an open-label phase 2 extension trial (TR02-105), CF patients using ARIKAYCE demonstrated sustained efficacy in lung function improvement during a 28-day treatment period and 56-day off-treatment period across multiple cycles of therapy as compared to baseline. In this clinical study, ARIKAYCE produced an improvement in lung function that was sustained over six cycles totaling approximately 17 months. During the off-treatment periods for this study, approximately 50% to 70% of the benefit achieved during the on-treatment periods was sustained at the end of the

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off-treatment periods. To our knowledge, no other inhaled antibiotic has shown sustained improvement in lung function at the end of a 56-day off-treatment period.

Route of Administration

We believe ARIKAYCE has the potential to offer a safety profile different from that of intravenous delivery of aminoglycosides. Pseudomonas is susceptible to several broad spectrum antibiotics, notably aminoglycosides. Some examples of aminoglycoside antibiotics include tobramycin and amikacin. Studies found that aminoglycosides are an important class of antibiotics for the treatment of Pseudomonas lung infections in CF patients because of their broad antimicrobial activity and concentration dependent bactericidal activity (Lacy et al., 1998; Lortholary et al., 1995; Zembower et al., 1998). Intravenous antibiotics were originally used for treatment of chronic infections associated with CF and are still used for pulmonary exacerbations. Studies report that ototoxicity and nephrotoxicity are common adverse events associated with the use of intravenous aminoglycosides and these effects are related to plasma drug levels (Mingeot-Leclercq and Tulkens, 1999).

There are two main obstacles to effective and safe treatment of CF:

· Drug Resistance. High-level multi-drug resistance complicates eradication of such strains from the bronchial secretions of CF patients. Pseudomonas lung infections are commonly treated using aminoglycoside antimicrobial agents, such as amikacin and tobramycin. However, due to drug resistance, significantly higher concentrations of these drugs above the minimum inhibitory concentration are required at the site of infection. The intravenous dosage levels required to achieve such exposures can be nephrotoxic and ototoxic.

· Limited Penetration. There is limited penetration into and through the sputum/biofilm matrix by aminoglycoside antibiotics. The antibiotics are positively charged and the biofilm is negatively charged. As a result, the antibiotics bind to the biofilm and the availability of the drug at the location of the microorganism is suboptimal. We believe that our proprietary liposomal technology will result in localized targeting of drugs, leading to increased availability of the drug at the location of the microorganism, while significantly reducing drug exposure at non-disease sites throughout the body and reducing the occurrence of systemic drug-related toxicity.

Current Clinical Program

We completed a registrational phase 3 clinical trial of ARIKAYCE for CF patients with Pseudomonas lung infections in Europe and Canada during the second quarter of 2013. The phase 3 trial was a randomized, open label, multi-center study designed to assess the comparative safety and efficacy of once-daily ARIKAYCE administered for approximately 13 minutes via the eFlow Nebulizer System and twice-daily Tobi (tobramycin inhalation solution) administered for approximately 15 minutes per treatment via the PARI LC Plus Nebulizer System for a daily total of approximately 30 minutes per day in CF patients with Pseudomonas . A total of 302 adult and pediatric CF patients with chronic Pseudomonas were randomized to receive 28-days of ARIKAYCE treatment or Tobi delivered twice-daily via the PARI LC Plus ® Nebulizer System over a 24-week treatment period. The primary endpoint of the study was relative change in forced expiratory volume in one second (“FEV 1 ”) measured after three treatment cycles, with each cycle consisting of 28 days “on” treatment and 28 days “off” treatment. The study was designed to demonstrate non-inferiority to Tobi at a 5% non-inferiority margin with 80% power agreed upon by us and the EMA. Secondary endpoints measured were relative changes in FEV 1 at other time points, time to and number of pulmonary exacerbations, time to antibiotic rescue treatment, change in density of Pseudomonas in sputum, respiratory hospitalizations and changes in Patient Reported Outcomes assessing Quality of Life. Top-line results from this study indicated:

· ARIKAYCE achieved its primary endpoint of non-inferiority to Tobi for relative change in FEV 1 f rom baseline to the end of the study;

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· Overall, secondary endpoints, as summarized above, showed comparability of once-daily ARIKAYCE compared with twice-daily Tobi; and

· The safety profile of ARIKAYCE was comparable to Tobi during all three treatment cycles, with adverse events consistent with those seen in similar studies and expected in a population of CF patients receiving inhaled antibiotics. There was no difference between arms in the reporting of serious adverse events and there were no unexpected adverse events.

We are conducting a two-year, open label safety study in patients that also completed our registrational phase 3 clinical study of ARIKAYCE for CF patients with Pseudomonas lung infections in Europe and Canada. Approximately 75% of the eligible patients that completed our registrational phase 3 clinical study consented to participate in the safety study. The patients in this study will receive ARIKAYCE for up to a two year period, using the same cycles of a 28 day on-treatment period and a 28 day off-treatment period. In February 2014, we reported interim data from our two-year open label extension study which showed a mean increase in relative change in FEV 1 which was sustained during both on-treatment and off-treatment months. We expect to use this interim data from this study as part of our regulatory filings with the EMA and Health Canada, which we expect to submit during 2014, and we expect to complete this study in mid-2015.

ARIKAYCE has been granted orphan drug status in the US and Europe for the treatment of Pseudomonas lung infections in CF patients.

Development History

Nonclinical evaluations of ARIKAYCE in relation to Pseudomonas lung infections indicate:

· High concentrations of drug are deposited in the lung, and high levels are maintained for prolonged periods, with low serum concentrations;

· ARIKAYCE penetrates CF sputum and Pseudomonas biofilm;

· ARIKAYCE exhibits antipseudomonal activity in in vitro and in vivo models, including against resistant isolates; and

· Virulence factors secreted by Pseudomonas facilitate the release of amikacin from ARIKAYCE.

Our predecessor liposomal amikacin formulations for inhalation were evaluated in a series of phase 1 clinical studies involving healthy volunteers and CF patients with Pseudomonas lung infections. The current formulation of ARIKAYCE was evaluated in phase 2 clinical studies in CF patients with Pseudomonas lung infections. We completed two randomized, placebo-controlled phase 2 studies with ARIKAYCE in 105 CF patients with chronic Pseudomonas lung infections in Europe and the US. In these studies, patients in the ARIKAYCE 560 mg cohort demonstrated statistically significant and clinically meaningful improvement in lung function throughout the 28-day on-treatment period compared with placebo. In addition, the improvement in lung function that was achieved at the end of the 28-day on-treatment period was sustained during the 28-day off-treatment period and was statistically significantly better than placebo.

In a separate follow-on open-label, multi-cycle clinical trial conducted in Europe, ARIKAYCE was given at a dose of 560 mg once daily via an eFlow Nebulizer System for six cycles which consisted of a 28-day on-treatment and 56-day off-treatment period, which is double the standard 28-day off-treatment period. In this clinical study, ARIKAYCE produced a statistically significant improvement in lung function that was sustained over the six cycles (approximately 17 months). In addition, approximately 50% to 70% of the benefit achieved during the 28-day on-treatment periods was sustained at the end of the 56-day off-treatment periods. In other words, ARIKAYCE demonstrated sustained efficacy in lung function improvement during the treatment and off-treatment periods across multiple cycles of therapy. To our knowledge, no other inhaled antibiotic has shown sustained improvement in lung function at the end of a 56-day off-treatment period. In addition, ARIKAYCE was well tolerated with overall

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adverse events reported as consistent with those expected in a population of CF patients receiving other inhaled medicines.

In August 2011, we announced that the FDA placed a clinical hold on our phase 3 trial for ARIKAYCE in CF patients with Pseudomonas lung infections, which was lifted in May 2012. A clinical hold is an order issued by the FDA to the sponsor to delay a proposed clinical trial or suspend an ongoing clinical trial. The FDA based its clinical hold decision on an initial review of the results of a long-term rat inhalation carcinogenicity study with ARIKAYCE. When rats were given ARIKAYCE daily by inhalation for two years, 2 of the 120 rats receiving the highest dose developed lung tumors. These rats received ARIKAYCE doses that were within two-fold of those in clinical studies (normalized on a body surface area basis or a lung weight basis). ARIKAYCE was not associated with changes that may lead to tumors in shorter-term studies in animals. Additionally, ARIKAYCE was not shown to be genotoxic in our standard series of tests. The relevance of the observed rat tumors to the use of ARIKAYCE in humans is not known.

In connection with the FDA’s decision to lift the clinical hold for the CF Pseudomonas aeruginosa lung infection indication, we agreed to conduct a 9 month dog inhalation toxicity study of ARIKAYCE. In 2013, we concluded the 9 month dog inhalation toxicity study. In summary, the final report from the study stated that the lung macrophage response in dogs was similar to that seen in our previous 3 month dosing dog study, and there was no evidence of neoplasia, squamous metaplasia or proliferative changes.

We expect to reevaluate our plans regarding a US phase 3 clinical trial in CF patients with Pseudomonas lung infection after we receive the final results from the ongoing phase 2 clinical trial in NTM patients in the US.

Strategy for Commercialization

We currently plan to retain marketing rights for ARIKAYCE for CF patients with Pseudomonas lung infections in certain countries in Europe, Canada and the US. We believe ARIKAYCE will require a limited commercial infrastructure in these regions because of the small focused nature of the potential physician prescribing population for CF patients. We may seek to out-license ARIKAYCE in certain countries in Europe, as well as outside of Europe, Canada and the US.

ARIKAYCE for Non-CF Bronchiectasis Patients with Pseudomonas Lung Infections

Overview of Non-CF Bronchiectasis and Pseudomonas Lung Infections

We believe ARIKAYCE has the potential to be used to treat non-CF bronchiectasis characterized by Pseudomonas lung infections. However, we are currently concentrating our development efforts on the treatment of Pseudomonas lung infections in CF patients and patients with NTM lung infections. We will evaluate our development and commercialization strategies for this indication when we complete our phase 2 study in patients with NTM infections.

Non-CF bronchiectasis is a serious pulmonary condition characterized by localized, irreversible enlargement of the bronchial tubes. Accumulation of mucus in the bronchi leads to frequent infections, which causes inflammation and further reduces lung function. Patients evolve to a chronic inflammation-infection cycle. Disease burden has primarily been linked to productive cough and high levels of sputum production.

Market

It is estimated that there are more than 250,000 non-CF bronchiectasis patients in the US (SDI Innovations in Healthcare Analytics, 2008), of which approximately 30% of non-CF bronchiectasis patients are infected with Pseudomonas (Wilson, C.B., et al., Eur Respir, 1997, 10(8):1754-1760); Nicotra, M.B., et al., Chest, 1995 108(4):955-961). Currently there are no approved antibiotics for this indication. When bronchiectasis patients

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become infected with Pseudomonas , they tend to have more frequent exacerbations and hospitalizations and are more frequent users of antibiotics.

Development Program

ARIKAYCE was granted orphan drug status in the US for the treatment of bronchiectasis in patients with Pseudomonas or other susceptible pathogens.

In May 2009 we completed our randomized, placebo controlled US phase 2 study (TR02-107) of ARIKAYCE in the treatment of chronic Pseudomonas infection in non-CF patients with bronchiectasis. In the study, 64 study subjects were randomized (1:1:1) to receive ARIKAYCE 280 mg, ARIKAYCE 560 mg or a placebo on a daily basis during a 28-day on-treatment period. The subjects completed follow-up assessments at the end of a 28-day off-treatment period. This study provided initial evidence of safety, tolerability and clinically meaningful improvement in pulmonary function throughout the on-treatment period in the treatment of chronic Pseudomonas infection in non-CF patients with bronchiectasis.

In the study both ARIKAYCE 280 mg and ARIKAYCE 560 mg were well tolerated. The adverse events experienced by patients during the study were consistent with underlying chronic lung disease in bronchiectasis patients. There was no evidence of renal toxicity or ototoxicity. Patients in the 560-mg cohort had a slightly higher frequency of dry cough post administration than patients in the 280 mg cohort. Cough was of short duration and self-limiting. One patient discontinued treatment due to dysphonia (hoarseness or difficulty speaking) and cough.

There was a statistically significant reduction in Pseudomonas density observed in the 560 mg ARIKAYCE cohort relative to the placebo cohort. Patients receiving ARIKAYCE experienced fewer pulmonary exacerbations at a rate of 4.7%, as compared to 10.5% in those receiving placebo. No patients in the ARIKAYCE cohorts required anti- Pseudomonas rescue treatment, whereas 15% of patients in the placebo cohort required treatment. Hospitalization from any cause occurred at a 5.3% rate for patients in the placebo cohort, as compared to a 2.3% rate for patients in the ARIKAYCE cohort. Patients receiving ARIKAYCE achieved improvements in patient respiratory symptoms and quality of life assessments compared with patients receiving placebo.

Although we believe there is an opportunity to develop ARIKAYCE for non-CF bronchiectasis, we do not intend to initiate further clinical studies with respect to a non-CF bronchiectasis indication until we have completed additional clinical studies for CF patients with Pseudomonas lung infections and for patients with NTM lung infections. Following those studies, we will evaluate whether to develop ARIKAYCE further for non-CF bronchiectasis.

ARIKAYCE has been granted orphan drug status in the US for the treatment of bronchiectasis in patients with Pseudomonas aeruginosa and other susceptible microbial pathogens.

Optimized eFlow Nebulizer System

If approved for commercialization, we expect that ARIKAYCE will be administered once daily via inhalation using an eFlow Nebulizer System optimized specifically for ARIKAYCE by PARI, a third-party vendor.

The optimized eFlow Nebulizer System is a medical device that uses PARI’s patented eFlow technology to enable highly efficient delivery of inhaled medication, also called aerosolization, including liposomal formulations via a vibrating, perforated membrane that includes thousands of specially designed laser-drilled holes, which aids the delivery of ARIKAYCE to the lung. We believe the optimized eFlow Nebulizer System is state of the art and highly efficient. The eFlow Nebulizer System delivers a very high density of active drug, in a precisely defined and controlled droplet size, with a high proportion of respirable droplets delivered in a relatively short period of time. In addition, the eFlow Nebulizer System has a quiet mode of operation, is small in size, light weight and provides for optional battery-powered operation. We believe that using the eFlow Nebulizer System to deliver ARIKAYCE will

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reduce treatment time and ease the patient’s treatment burden and thereby potentially improve patient compliance. We believe that improved compliance with the prescribed treatment regimen may lead to a reduction in the development of antibiotic resistance by increasing the exposure of the infection to the minimum inhibitory concentration of antibiotic and therefore may ultimately lead to clinical benefit.

MANUFACTURING OF ARIKAYCE

The ARIKAYCE used in our clinical studies is manufactured for us by Ajinomoto Althea, Inc. (Althea), a third-party contract manufacturing organization in the US. We are working with Althea to develop commercial production capabilities for ARIKAYCE. Our agreement with Althea provides for a term expiring in July 2014, subject to an earlier termination upon the provision of 180 days’ notice by either party, or in the event of an uncured material breach, certain bankruptcy or liquidation events, or upon the occurrence of certain other specified termination events. We are negotiating with Althea to extend the manufacture of ARIKAYCE at Althea beyond July 2014. There can be no assurance that we will enter into an agreement to extend the manufacture or that we will enter into an agreement on terms favorable to us.

In February 2014, we entered into a contract manufacturing agreement with Therapure for the manufacture of the Company’s product ARIKAYCE at the larger scales necessary to support commercialization. Pursuant to the agreement, the Company and Therapure will collaborate to construct a production and quality control area for the manufacture and testing of ARIKAYCE in Therapure’s existing manufacturing facility in Mississauga, Ontario, Canada. Therapure will manufacture ARIKAYCE for us on a non-exclusive basis. The agreement has an initial term of five years from the first date on which Therapure delivers ARIKAYCE to us after we obtain permits related to the manufacture of ARIKAYCE.

We are also exploring the possibility of establishing our own manufacturing facilities in order to support clinical studies and to support in the commercial launch of ARIKAYCE.

All sites of manufacture of ARIKAYCE use the technology developed and optimized by us. We and all our manufacturing partners must comply with applicable regulations relating to the current good manufacturing practices (cGMP) regulations of regulatory agencies. The cGMP regulations include requirements relating to the organization of personnel, buildings and facilities, equipment, control of components and drug product containers and closures, production and process controls, packaging and labeling controls, holding and distribution, laboratory controls, records and reports, and returned or salvaged products. We believe that all facilities will meet cGMP requirements for the sterile manufacturing of finished ARIKAYCE product.

The eFlow nebulizer system is manufactured by PARI under the names PARI Pharma GmbH in Europe and PARI Respiratory Equipment, Inc., in the US. PARI manufactures eFlow nebulizer systems utilizing technology licensed, developed and optimized within its company and produces several commercially available eFlow technology based products for use in Europe, North America and other countries. PARI maintains facilities and equipment necessary to support manufacture of eFlow nebulizers for use with ARIKAYCE. PARI must comply with applicable governmental regulations relating to medical device production in each country of manufacture. We will continue to work with PARI to address our manufacturing needs for our clinical program and plan for commercialization.

We seek to maintain the quality of our suppliers through quality agreements and our vendor audit program.

IPLEX

In addition to the ARIKAYCE development program, we have a second proprietary compound, IPLEX ® , which is IGF-1, with its natural binding protein, IGFBP-3. IPLEX is no longer a development priority for us. We no longer have protein development capability or the in-house capability to manufacture IPLEX. Previously, under the proprietary IPLEX protein platform, we maintained an expanded access program for amyotrophic lateral

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sclerosis (also known as ALS or Lou Gehrig’s disease) until drug supplies were exhausted at the end of 2011. It is our intention to seek licensing partners for the IPLEX development programs. In 2012, we out-licensed the IPLEX technology to Premacure Holdings AB and Premacure AB of Sweden (collectively, Premacure) for retinopathy of prematurity indication. In March 2013, we amended the Premacure License Agreement to provide Premacure with the option to pay us $11.5 million and assume any of our royalty obligations to other parties in exchange for a fully paid license. In March 2013, Shire plc announced that they acquired Premacure. In April 2013 Shire exercised this option and paid us $11.5 million, and as a result we are not entitled to future royalties from Shire.

KEY COMPONENTS OF OUR STATEMENT OF OPERATIONS

Revenues

We currently do not recognize any revenue from product sales or other sources.

Research and Development Expenses

Research and development expenses consist primarily of salaries, benefits and other related costs, including stock-based compensation, for personnel serving in our research and development functions, and other internal operating expenses, the cost of manufacturing our drug candidate for clinical study, the cost of conducting clinical studies, and the cost of conducting preclinical and research activities. Our expenses related to manufacturing our drug candidate for clinical study are primarily related to activities at contract manufacturing organizations that manufacture ARIKAYCE for our use. Our expenses related to clinical trials are primarily related to activities at contract research organizations that conduct and manage clinical trials on our behalf. These contracts set forth the scope of work to be completed at a fixed fee or amount per patient enrolled. Payments under these contracts primarily depend mainly 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. Nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities are deferred and capitalized. Such amounts are then recognized as an expense as the related goods are delivered or the services are performed, or when the goods or services are no longer expected to be provided.

Since 2011, we have focused our development activities principally on our proprietary, advanced liposomal technology designed specifically for inhalation lung delivery. In March 2014, we reported top-line clinical results from the double-blind portion of our phase 2 clinical trial in the US and Canada of ARIKAYCE in patients who have lung infections caused by NTM. In 2013, we completed a phase 3 trial in Europe and Canada in which we evaluated ARIKAYCE in CF patients with Pseudomonas lung infections. We are currently conducting two clinical trials: (1) the completion of the open-label portion of a phase 2 trial in the US in which we are evaluating ARIKAYCE for NTM infections and (2) an open label extension study in which CF patients that completed our phase 3 trial receive ARIKAYCE for a period of two years. Since our business combination with Transave, the majority of our research and development expenses were for our ARIKAYCE program. We expect that our development efforts in 2014 will principally relate to the development of ARIKAYCE in the CF and NTM indications.

Our clinical trials with ARIKAYCE are subject to numerous risks and uncertainties that are outside of our control, including the possibility that necessary regulatory approvals may not be obtained. In addition, the duration and the cost of clinical trials may vary significantly from trial to trial over the life of a project as a result of differences in the study protocol for each trial as well as differences arising during the clinical trial, including, among others, the following:

· The number of patients that ultimately participate in the trial;

· The duration of patient follow-up that is determined to be appropriate in view of results;

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· The number of clinical sites included in the trials;

· The length of time required to enroll suitable patient subjects; and

· The efficacy and safety profile of the product candidate.

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

General and Administrative Expenses

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

Debt Issuance Costs

Debt issuance costs are amortized to interest expense using the effective interest rate method over the term of the debt. Our balance sheet reflects debt net of debt issuance costs paid to the lender and reflects debt issuance costs paid to other third parties as other assets.

Investment Income and Interest Expense

Investment income consists of interest and dividend income earned on our cash, cash equivalents and short-term investments, along with realized gains (losses) on the sale of investments. Interest expense consists primarily of interest costs related to our debt and capital lease obligations.

RESULTS OF OPERATIONS

Comparison of the Three Months Ended March 31, 2014 and 2013

Net Loss

Net loss for the three months ended March 31, 2014 was $14.3 million, or ($0.36) per common share — basic and diluted, compared with a net loss of $13.7 million, or ($0.43) per common share — basic and diluted for the three months ended March 31, 2013. The increase in our net loss in the first quarter of 2014 as compared to 2013 of $0.6 million was primarily due to:

· A $1.0 million increase in our research and development expenses that primarily resulted from an increase in internal expenses, specifically compensation and personnel related expenses, including non-cash stock compensation expense, and an increase in manufacturing expenses as a result of the completion of certain process improvement projects at our third party manufacturing partner and the manufacture of ARIKAYCE for clinical supply. These

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increases were offset by a decrease in external clinical expenses which was primarily related to the fact that our phase 3 pivotal study in CF patients was completed in 2013;

· A $2.8 million increase in our general and administrative expenses primarily resulted from an increase in pre-commercial activities, an increase in personnel costs due to an increase in headcount, and an increase in non-cash stock compensation expense; and

· A $3.2 million increase in the benefit from income taxes resulting from sale of a portion of our New Jersey State NOLs under the State of New Jersey’s Technology Business Tax Certificate Transfer Program for cash of $4.4 million and $1.2 million in 2014 and 2013, respectively, and net of commissions.

Research and Development Expenses

Research and development expenses for the three months ended March 31, 2014 and 2013 comprised the following:

	Three Months Ended
	March 31,				Increase (Decrease)
	2014		2013		$			%
External Expenses
Clinical development	$	3,084	$	6,853	$	(3,769	)	-55.0	%
Manufacturing	2,861		563		2,298			408.2	%
Regulatory and quality assuarance	493		123		370			300.8	%
Subtotal - external expenses	$	6,438	$	7,539	$	(1,101	)	-14.6	%

Internal Expenses
Compensation and related expenses	$	4,012	$	1,808	$	2,204		121.9	%
Other internal operating expenses	901		987		(86		)	-8.7	%
Subtotal - internal expenses	$	4,913	$	2,795	$	2,118		75.8	%

Total	$	11,351	$	10,334	$	1,017		9.8	%

Research and development expenses increased to $11.4 million during the three months ended March 31, 2014 from $10.3 million in the same period in 2013. The $1.0 million increase was primarily due to a $2.1 million increase in internal expenses, specifically a $2.2 million increase in compensation and related expenses, including a $0.7 million increase in non-cash stock compensation expense. In addition, there was a $2.3 million increase in manufacturing expenses as a result of the completion of certain process improvement projects at our third party manufacturing partner and the manufacture of ARIKAYCE for clinical supply. These increases were offset, in part, by a decrease of $3.8 million in external clinical expenses which was primarily related to the fact that our phase 3 pivotal study in CF patients was completed in 2013.

General and Administrative Expenses

General and administrative expenses increased to $6.7 million during the three months ended March 31, 2014 from $4.0 million in the same period in 2013. The $2.7 million increase was primarily due to a $1.4 million increase in pre-commercial expenses as there were no significant pre-commercial activities in the first quarter of 2013. In addition, there was a $0.7 million increase in non-cash stock compensation expense in the three months ended March 31, 2014 as compared to the same period in 2013.

Investment Income

Investment income decreased to $0.0 million during the three months ended March 31, 2014 from $0.1 million in the same period in 2013.

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Interest Expense

Interest expense was $0.6 million during the three months ended March 31, 2014 and 2013 and represents interest expense under our Loan Agreement.

Benefit from Income Taxes

The benefit for income taxes was $4.4 million and $1.2 million for the three months ended March 31, 2014 and 2013, respectively. The benefit for income taxes recorded for the three months ended March 31, 2014 and 2013 solely reflect the reversal of a valuation allowance previously recorded against our New Jersey State net operating losses (“NOL”) that resulted from the sale of a portion of our New Jersey State NOLs under the State of New Jersey’s Technology Business Tax Certificate Transfer Program (the “Program”) for cash of $4.4 million and $1.2 million, respectively and net of commissions. The Program allows qualified technology and biotechnology businesses in New Jersey to sell unused amounts of NOLs and defined research and development tax credits for cash.

LIQUIDITY AND CAPITAL RESOURCES

Overview

There is considerable time and cost associated with developing a potential drug or pharmaceutical product to the point of regulatory approval and commercialization. Historically, we have funded our operations through public and private placements of equity securities, through debt financing, from the proceeds from the sale of our follow-on biologics platform to Merck in 2009, from revenues related to sales of product and our IPLEX EAP, which was discontinued in 2011 and revenue related to a one-time payment received in exchange for our right to receive royalties under our license agreement with Premacure (now Shire plc) in 2013. We expect to continue to incur losses because we plan to fund research and development activities and commercial launch activities, and we do not expect material revenues for at least the next few years.

We believe we currently have sufficient funds to meet our financial needs for the next twelve months. However, our business strategy may require us to, or we may otherwise determine to, raise additional capital at any time through equity or debt financing(s), strategic transactions or otherwise. Such additional funding may be necessary to continue to develop our potential product candidates, to pursue the license or purchase of other technologies, to commercialize our product candidates or to purchase other products. In addition, we may determine to raise capital opportunistically. We cannot assure you that adequate capital will be available on favorable terms, or at all, when needed. If we are unable to obtain sufficient additional funds when required, we may be forced to delay, restrict or eliminate all or a portion of our research or development programs, dispose of assets or technology or cease operations. During 2014 we plan to continue to fund further clinical development of ARIKAYCE, increase our investment in third-party manufacturing capacity, support efforts to obtain regulatory approvals and prepare for commercialization. We estimate that our second quarter 2014 cash requirements to fund operations will be in the range of $18 million to $20 million. In addition, in the second quarter of 2014 we expect to invest $3 million to $5 million in capital expenditures related to the build out of our new headquarters in Bridgewater, New Jersey. We will relocate our operations to the Bridgewater facility during 2014 as the lease for our current operating facility expires in December 2014.

Cash Flows

As of March 31, 2014, we had total cash and cash equivalents $101.3 million, as compared with $113.9 million as of December 31, 2013. Our working capital was $86.2 million as of March 31, 2014.

Net cash used in operating activities was $12.6 million and $11.2 million for the three months ended March 31, 2014 and 2013, respectively. Excluding the proceeds from the sale of a portion of our New Jersey State NOLs under the State of New Jersey’s Technology Business Tax Certificate Transfer Program of $4.4 million and $1.2

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million in 2014 and 2013, respectively, net cash used in operating activities for the first quarter of 2014 and 2013 would have been $17.0 million and $12.4 million, respectively. The net cash used in operating activities during the first quarter of 2014 and 2013 was primarily for the clinical development of ARIKAYCE.

Net cash used in investing activities was $0.3 million and $0.2 million for the three months ended March 31, 2014 and 2013, respectively. The net cash used in investing activities in the first quarter of 2014 was primarily for the build out of our new headquarters in Bridgewater, New Jersey and fixed asset purchases for computers and lab equipment.

Net cash provided by financing activities was $0.3 million and $0.0 million for the three months ended March 31, 2014 and 2013, respectively. Net cash provided by financing activities in the first quarter of 2014 included $0.4 million of proceeds from stock option exercises.

Contractual Obligations

On June 29, 2012, we and our domestic subsidiaries, as co-borrowers, entered into a Loan and Security Agreement with Hercules Technology Growth Capital, Inc. (“Hercules”) that allowed us to borrow up to $20.0 million in $10.0 million increments (“Loan Agreement”). We borrowed the first and second $10.0 million increments by signing two Secured Promissory Notes (“Note A” and “Note B” and collectively, the “Notes”) on June 29, 2012 and December 27, 2012, respectively. Notes A and B bear interest at 9.25%. Note A was originally scheduled to be repaid over a 42-month period with the first twelve monthly payments representing interest only followed by thirty monthly equal payments of principal and interest. Note B was originally scheduled to be repaid over a 36-month period with the first six monthly payments representing interest only followed by thirty monthly equal payments of principal and interest. The Loan Agreement provided that in certain circumstances the Company could delay the first principal payment by five months. In July 2013, subsequent to the completion of certain ARIKAYCE-related development milestones, the Company elected to extend the interest only period under the Notes from July 31, 2013 to December 31, 2013 and delay the first monthly principal repayments for the Notes from August 1, 2013 to January 1, 2014. On November 25, 2013, the Company and Hercules entered into an amendment (the “Amendment”) to the Loan Agreement. Pursuant to the Amendment, the interest-only period has been extended through June 30, 2014 and the first monthly principal payment is scheduled for July 1, 2014. The Amendment also allows the Company to further extend the interest-only period through December 31, 2014 and delay the first payment of principal until January 1, 2015, so long as the Company pays a $100,000 fee and obtains positive data from its phase 2 clinical trial of ARIKAYCE in patients who have lung infections caused by NTM. The election and amendment did not change the maturity date for Notes A and B, which is January 1, 2016. In connection with the Loan Agreement, we granted the lender a first position lien on all of our assets, excluding intellectual property. Prepayment of the loans made pursuant to the Loan Agreement is subject to penalty and we are required to pay an “end of term” charge of $390,000.

We have two operating leases for office and laboratory space located in Monmouth Junction, New Jersey that expire on December 31, 2014. Future minimum rental payments under these two leases total approximately $0.7 million. We also have an operating lease for office and laboratory space located in Bridgewater, NJ that expires in November 2019. Future minimum rental payments under this lease total approximately $2.4 million. We continue to lease office space in Richmond, Virginia where our corporate headquarters was previously located. Future minimum rental payments under this lease total approximately $1.3 million. We also entered into three capital leases for lab equipment and leasehold improvements with monthly payments through December 2014.

As of March 31, 2014, future payments under the two promissory notes, the capital leases and minimum future payments under non-cancellable operating leases are as follows:

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			As of March 31, 2014
			Payments Due By Period
			Less than						After
	Total		1 year		1-3 Years		4-5 Years		5 Years
	(In thousands)
Debt obligations:
Debt maturities	$	20,000	$	5,508	$	14,492	$	—	$	—
Contractual interest	2,617		1,708		909		—		—
Capital lease obligations:
Debt maturities	48		48		—		—		—
Contractual interest	—		—		—		—		—
Operating leases	4,190		1,171		1,713		970		336
Purchase obligations	—		—		—		—		—

Total contractual obligations	$	26,855	$	8,435	$	17,114	$	970	$	336

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

We currently have a licensing agreement with PARI for use of the optimized eFlow Nebulizer System for delivery of ARIKAYCE in treating patients with CF, bronchiectasis and NTM infections. We have rights to several US and foreign issued patents, and patent applications involving improvements to the optimized eFlow Nebulizer System. Under the licensing agreement, PARI is entitled to receive payments either in cash, qualified stock or a combination of both, at PARI’s discretion, based on achievement of certain milestone events including phase 3 trial initiation (which occurred in 2012), first acceptance of MAA submission (or equivalent) in the US of ARIKAYCE and the device, first receipt of marketing approval in the US for ARIKAYCE and the device, and first receipt of marketing approval in a major EU country for ARIKAYCE and the device, and NDA acceptance and regulatory approval of ARIKAYCE. In addition, PARI is entitled to receive royalty payments on commercial sales of ARIKAYCE pursuant to the licensing agreement.

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

In 2009 and 2012, we entered into a cooperative research and development agreement (CRADA) with the National Institute of Allergy and Infectious Diseases (NIAID) to design and conduct our phase 2 study of ARIKAYCE in patients with NTM. NIAID has also agreed to provide biostatistical advisory input in connection with the phase 2 NTM study. If we decide not to continue with the commercialization of ARIKAYCE in NTM, NIAID will have the right to complete the clinical trial. Further NIAID may elect to pursue its rights to obtain license rights to certain inventions made under the CRADA.

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In 2014, we entered into a contract manufacturing agreement with Therapure for the manufacture of ARIKAYCE at the larger scales necessary to support commercialization. Pursuant to the agreement, the Company and Therapure will collaborate to construct a production and quality control area for the manufacture and testing of ARIKAYCE in Therapure’s existing manufacturing facility in Mississauga, Ontario, Canada. Therapure will manufacture ARIKAYCE for us on a non-exclusive basis. The agreement has an initial term of five years from the first date on which Therapure delivers ARIKAYCE to us after we obtain permits related to the manufacture of ARIKAYCE. We expect to pay Therapure approximately $12 million for the build out of the construction area and related manufacturing costs.

Future Funding Requirements

We may need to raise additional capital to fund our operations, to develop and commercialize ARIKAYCE and to develop, acquire, in-license or co-promote other products that address orphan or rare diseases in the fields of pulmonology or infectious disease. Our future capital requirements may be substantial and will depend on many factors, including:

· The decisions of the FDA and EMA with respect to our applications for marketing approval of ARIKAYCE in the US and Europe; the costs of activities related to the regulatory approval process; and the timing of approvals, if received;

· The timing and cost of our anticipated clinical trials of ARIKAYCE for the treatment of adult patients with CF or for the treatment of patients with NTM lung infections;

· The cost of putting in place the sales and marketing capabilities necessary to be prepared for a potential commercial launch of ARIKAYCE, if approved;

· The cost of filing, prosecuting and enforcing patent claims;

· The costs of our manufacturing-related activities;

· The costs associated with commercializing ARIKAYCE if we receive marketing approval; and

· Subject to receipt of marketing approval, the levels, timing and collection of revenue received from sales of approved products, if any, in the future.

In May 2013, we filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission. This shelf registration statement permits us to offer, from time to time, any combination of common stock, preferred stock, debt securities and warrants of up to an aggregate of $100.0 million. In July 2013, we issued approximately $71.8 million worth of common stock utilizing the shelf registration statement. We believe we currently have sufficient funds to meet our financial needs for the next twelve months. However, our business strategy may require us to, or we may otherwise determine to, raise additional capital at any time through equity or debt financing(s), strategic transactions or otherwise. Such additional funding may be necessary to continue to develop our potential product candidates, to pursue the license or purchase of complementary technologies, to commercialize our product candidates or to purchase other products. In addition, we may determine to raise capital opportunistically. If we are unable to obtain additional financing, we may be required to reduce the scope of our planned product development and commercialization or our plans to establish a sales and marketing force, any of which could harm our business, financial condition and results of operations. The source, timing and availability of any future financing will depend principally upon equity and debt market conditions, interest rates and, more specifically, our continued progress in our regulatory, development and commercial activities. We cannot assure you that such capital funding will be available on favorable terms or at all. If we are unable to obtain sufficient additional funds when required, we may be forced to delay, restrict or eliminate all or a portion of our research or development programs, dispose of assets or technology or cease operations.

To date, we have not generated any revenue from ARIKAYCE. We do not know when or if we will generate any revenue. We do not expect to generate significant revenue unless or until we obtain marketing approval of, and commercialize, ARIKAYCE.

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Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, other than operating leases, that have or are reasonably likely to have a current or future 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 POLICIES

Preparation of financial statements in accordance with generally accepted accounting principles in the US requires us to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenues and expenses and the disclosures of contingent assets and liabilities. We use our historical experience and other relevant factors when developing our estimates and assumptions. We continually evaluate these estimates and assumptions. The amounts of assets and liabilities reported in our consolidated balance sheets and the amounts of revenue reported in our consolidated statements of comprehensive loss are effected by estimates and assumptions, which are used for, but not limited to, the accounting for research and development, revenue recognition, beneficial conversion charge, stock-based compensation, identifiable intangible assets and goodwill, and accrued expenses. The accounting policies discussed below are considered critical to an understanding of our consolidated financial statements because their application places the most significant demands on our judgment. Actual results could differ from our estimates. There have been no material changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2013. For the required interim updates of our accounting policies see Note 2 to our Consolidated Financial Statements — “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, 2014, our cash and cash equivalents were in cash accounts or were invested in money market funds. Such accounts or investments are not insured by the federal government.

As of March 31, 2014, we had $20.0 million of fixed rate borrowings in the form of two secured promissory notes that bear interest at 9.25% outstanding under a Loan and Security Agreement we entered into in June 2012. A hypothetical 10% change in interest rates occurring on March 31, 2014 would not have had a material effect on the fair value of our debt as of that date, nor would it have had a material effect on our future earnings or cash flows.

The majority of our business is conducted in US dollars. However, we do conduct certain transactions in other currencies, including Euros or British Pounds. Historically, fluctuations in foreign currency exchange rates have not materially affected our results of operation and during the three months ended March 31, 2014 and 2013, our results of operation 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 principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2014. 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 provide reasonable assurance that information required to be disclosed by us in the periodic 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, 2014, our Chief Executive Officer

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and Chief Financial Officer have concluded that our disclosure controls and procedures are effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended March 31, 2014 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are a party to various other lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. Management does not expect that the ultimate costs to resolve these matters will materially adversely affect our business, financial position, or results of operations.

See Note 10 to the consolidated financial statements for the three months ended March 31, 2014 included in this Quarterly Report on Form 10-Q, and Note 12 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013 for a description of our significant legal proceedings, which is incorporated by reference herein.

ITEM 1A. RISK FACTORS

Except for the historical information in this report on Form 10-Q, the matters contained in this report include forward-looking statements that involve risks and uncertainties. Our operating results and financial condition have varied in the past and may in the future vary significantly depending on a number of factors. These factors, among others, could cause actual results to differ materially from those contained in forward-looking statements made in this report and presented elsewhere by management from time to time. Such factors may have a material adverse effect upon our business, results of operations and financial condition.

You should consider carefully the risk factors, together with all of the other information included in our Annual Report on Form 10-K for the year ended December 31, 2013. Each of these risk factors could adversely affect our business, results of operations and financial condition, as well as adversely affect the value of an investment in our common stock. There have been no material changes to our risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2013, except for the following update:

Risks Related to Development and Commercialization of our Product Candidates

Our near term prospects are highly dependent on the success of our most advanced product candidate, ARIKAYCE. If we are unable to successfully complete the development of, obtain regulatory approval for, and successfully commercialize ARIKAYCE, our business and the value of our common stock may be materially adversely affected.

We are investing substantially all of our efforts and financial resources in the development of ARIKAYCE, our most advanced product candidate. Our ability to generate product revenue from ARIKAYCE, which may not occur for at least the next year or two, if ever, will depend heavily on the successful completion of development of, receipt of regulatory approval for, and commercialization of, ARIKAYCE.

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Positive results from preclinical studies of a drug candidate may not be predictive of similar results in human clinical trials, and promising results from earlier clinical trials of a drug candidate may not be replicated in later clinical trials. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials even after achieving promising results in earlier stages of development. Accordingly, the results of the completed clinical trials for ARIKAYCE may not be predictive of the results we may obtain in future or ongoing clinical trials. On March 26, 2014, we reported top-line clinical results from a phase 2 clinical trial in the US and Canada of ARIKAYCE in patients who have lung infections caused by NTM. ARIKAYCE did not meet the pre-specified level for statistical significance with respect to the primary endpoint although there was a positive trend (p=0.148) in favor of ARIKAYCE. Although ARIKAYCE achieved statistical significance for a clinically relevant secondary endpoint, we will not have a clear development or regulatory path forward until we have further discussions with FDA and EMEA, and we will need to conduct additional clinical trials. We do not expect ARIKAYCE or any other drug candidates we may develop to be commercially available for at least a year, if at all.

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

There were no unregistered sales of the Company’s equity securities during the quarter ended March 31, 2014.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

A list of exhibits filed herewith is included on the Exhibit Index, which immediately precedes such exhibits and is incorporated herein by reference.

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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, 2014	By	/s/ Andrew T. Drechsler
		Andrew T. Drechsler
		Chief Financial Officer

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EXHIBIT INDEX

10.1*	Contract Manufacturing Agreement, dated February 7, 2014, between Insmed Incorporated and Therapure Biopharma Inc.

10.2*	Amending Agreement, dated March 13, 2014, between Insmed Incorporated and Therapure Biopharma Inc.

10.3	Transition and Separation Agreement, dated March 26, 2014 and effective as of April 16, 2014, between Insmed Incorporated and Renu Gupta, M.D.

31.1	Certification of William H. Lewis, Chief 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.

31.2	Certification of Andrew T. Drechsler, Chief Financial 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.

32.1	Certification of William H. Lewis, Chief 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 Andrew T. Drechsler, Chief Financial 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.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

*Confidential treatment has been requested for certain portions of this exhibit. The confidential portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission.

Exhibit 10.1

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK [***], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

CONTRACT MANUFACTURING AGREEMENT

This Contract Manufacturing Agreement (this “ Agreement ”) is entered into and effective this 7th day of February, 2014 (the “ Effective Date ”), by and between Therapure Biopharma Inc. (“ Therapure ”), a Canadian corporation with its principal place of business in Mississauga, Ontario and Insmed Incorporated (“ Insmed ”), a Virginia corporation, having its principal office at 9 Deer Park Drive, Suite C, Monmouth Junction, New Jersey. Each of Therapure and Insmed is referred to herein as a “party” and collectively as the “parties”.

RECITALS

WHEREAS, Therapure maintains certain registrations and licenses with certain Governmental or Regulatory Authorities (as defined below) as are necessary and appropriate to Manufacture ARIKACE (as defined below) for use in or as finished drug products for sale in the Territory (as defined below);

AND WHEREAS, Insmed shall obtain the NDA and all other ARIKACE Permits (as defined below) necessary or required for the sale, marketing, distribution and reimbursement of ARIKACE in the Territory;

AND WHEREAS, the parties shall perform certain development work in connection with developing ARIKACE for scale production, as further described in this Agreement;

AND WHEREAS, in furtherance of the foregoing, Therapure and Insmed wish to enter into this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties agree as follows:

ARTICLE 1
DEFINITIONS

1.1. Definitions . As used in this Agreement, the following words and phrases shall have the respective meanings ascribed below.

1.1.1. “ Acceptance Criteria ” shall have the meaning set out in Section 13.2.3(i).

1.1.2. “ Affiliate ” of any person or entity means another person or entity that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person or entity. For the purposes of this definition, “control” means, as to any person or entity, the power to direct or cause the direction of the management and policies of such person or entity, whether through the ownership of voting securities, by contract or otherwise.

1.1.3. “ Agreement ” shall have the meaning set out in the Preamble.

1.1.4. “ Amikacin ” shall mean the active pharmaceutical ingredient Amikacin in unfinished form, which is to be included in ARIKACE.

1.1.5. “ Annual Minimum Batch Processing Fee Amount ” shall have the meaning set out in Schedule C.

1.1.6. “ Anti-Corruption Laws ” means all applicable laws, regulations, orders, judicial decisions, conventions and international financial institution rules regarding corruption, bribery, ethical business conduct, money laundering, political contributions, gifts and gratuities, or lawful expenses to public officials and private persons, agency relationships, commissions, lobbying, books and records, and financial controls.

1.1.7. “ ARIKACE ” shall mean ARIKACE™ (liposomal amikacin for inhalation), as Manufactured according to the ARIKACE Specifications.

1.1.8. “ ARIKACE Delivery Deadline ” shall have the meaning set out in Section 12.3.1.

1.1.9. “ ARIKACE Permit ” shall have the meaning set out in Section 8.1.2.

1.1.10. “ ARIKACE SOPs ” shall mean the Standard Operating Procedures applicable to the Manufacture of ARIKACE.

1.1.11. “ ARIKACE Specifications ” shall have the meaning set out in Section 4.6.

1.1.12. “ Allocated Minimum Batch Labour ” shall mean the labour allocated by Therapure to Manufacture that amount of ARIKACE equivalent to the Annual Minimum Batch Processing Fee Amount in any Manufacturing Year.

1.1.13. “ Basis of Design ” shall mean the engineering specifications for ARIKACE, as are described in Schedule F.

1.1.14. “ Batch ” shall mean [***] kilograms of ARIKACE that is intended to have uniform character and quality as set out in ARIKACE Specifications, and is produced according to a single manufacturing order during the same cycle of Manufacture.

1.1.15. “ Batch Processing Fee ” shall mean the processing fee for ARIKACE to be paid by Insmed.

1.1.16. “ Batch Production Records ” shall mean the batch production records of ARIKACE, which document the Manufacture of the Batch according to the ARIKACE Specifications.

1.1.17. “ Batch Release Date ” shall mean the date on which Therapure submits to Insmed a report which documents that a Batch meets all of the release specifications according to the analytical release testing being performed by Therapure.

1.1.18. “ Batch Release Documentation ” shall mean the executed Batch Production Records as well as the analytical release testing to be performed by Therapure.

1.1.19. “ Binding Portion ” shall have the meaning set out in Section 11.3.5.

1.1.20. “ Breach Date ” shall have the meaning set out in Section 22.1.1(ii).

1.1.21. “ Business Day ” shall mean any day other than a Saturday, a Sunday or a day on which banks in Toronto, Ontario or New York, New York are authorized or obligated by Law to not open or remain closed.

1.1.22. “ Certificate of Analysis ” shall mean a certificate relating to a Batch of ARIKACE or Amikacin that sets forth a list of items tested by Therapure, the applicable specifications, and the test results.

1.1.23. “ cGMP Process Validation Performance Run Fee ” shall have the meaning set out in Section 12.1.1.

1.1.24. “ Change Fee ” shall have the meaning set out in Section 7.1.3.

1.1.25. “ Change Notice ” shall have the meaning set out in Section 7.1.2.

1.1.26. “ Change of Control ” shall occur, with respect to any specified person, if:

(i) any Group, who prior to such time beneficially owned less than 50 percent of the voting shares or other equity interests of such specified person (measured by voting power rather than the number of shares or other equity interests), shall acquire (including by merger, consolidation or otherwise) voting shares or other equity interests of such specified person, in one or more transactions or series of transactions, and after such transaction or transactions such Group beneficially owns 50 percent or more of voting shares or other equity interests of such specified person (measured by voting power rather than the number of shares or other equity interests); or

(ii) such specified person shall sell all or substantially all of its assets relating to this Agreement to any Group which, prior to the time of such transaction, beneficially, directly or indirectly, owned less than 50 percent of the voting shares or other equity interests of such specified person (measured by voting power rather than the number of shares or other equity interests).

1.1.27. “ Clean Room Consumables ” shall mean the clean room consumable items used by operators in the Workshop during Manufacturing, including, without limitation, wipes, shoe covers, gloves, face masks, sterile coveralls, hairnets, goggles, aprons and lab coats.

1.1.28. “ Commercial Manufacturing Date ” shall have the meaning set out in Section 11.3.1.

1.1.29. “ Commercialization Permits ” shall have the meaning set out in Section 8.1.2.

1.1.30. “ Commodity Taxes ” shall mean all Taxes levied on or measured by, or referred to as goods and services, harmonized sales, Québec sales, value-added, consumption, sales, provincial sales, use, transfer, land transfer, registration charges, gross receipt, turnover, excise or stamp, all customs duties, countervail, anti-dumping and special import measures and all import and export taxes.

1.1.31. “ Confidentiality Agreement ” shall mean the Mutual Confidential Disclosure Agreement between Insmed and Therapure dated March 1, 2012.

1.1.32. “ Confidential Information ” shall mean any non-public information or other material, whether written, oral, electronic, or in any other form, received or obtained at any time in connection with this Agreement whether before, on or after the date of this Agreement, that is confidential or proprietary. Confidential Information includes, but is not limited to, proprietary and non-public know-how, plans, flow charts, technical documentation, formulas, ingredients, concepts, and information concerning the design, specifications and methods for the development, manufacture, packaging and supply of ARIKACE or Amikacin produced by Therapure or Insmed in addition to the terms and conditions of this Agreement. Moreover, Confidential Information includes notes, analyses, compilations, summaries, data, studies, interpretations, forecasts, records, memoranda or other documents or information prepared by the parties and their respective Affiliates and representatives which contain, reflect or are based on, in whole or in part, Confidential Information. Confidential Information shall not include any information to the extent which, either before or after disclosure to the party receiving the Confidential Information (the “ Receiving Party ”):

(i) was or becomes published or lawfully known to the public through no fault or omission on the part of the Receiving Party;

(ii) was known or used by the Receiving Party prior to its disclosure by the party disclosing the Confidential Information (the “Disclosing Party”) to the Receiving Party and the Receiving Party is able to substantiate that such information was derived by it from a source (independent from the Disclosing Party) without any obligation of confidentiality; or

(iii) is provided to the Receiving Party without restriction by a third party having the legal right to do so.

1.1.33. “ CPI - Canada ” shall mean the Consumer Price Index for Canada as calculated by Statistics Canada or, in the event Statistics Canada ceases to be responsible for calculation of CPI - Canada, by the agency or entity that assumes such responsibility.

1.1.34. “ Corrective Action ” shall have the meaning set out in Section 17.2.

1.1.35. “ Corrective Action Date ” shall have the meaning set out in Section 17.3.2(i).

1.1.36. “ Correction Costs ” shall have the meaning set out in Section 17.3.2(i).

1.1.37. “ Cost of Amikacin ” shall mean $[***] per kilogram (the cost of Amikacin as of the Effective Date) or the then-current cost of Amikacin procured by Insmed, as supported in both cases by reasonable documentation provided by Insmed to Therapure.

1.1.38. “ Cost of Excipients ” shall mean (i) $[***] per kilogram (the cost of dipalmitoylphosphatidylcholine (DPPC) as of the Effective Date); and (ii) $[***] per kilogram (the cost of cholesterol as of the Effective Date) or the then-current cost of such materials procured by Insmed, as supported in both cases by reasonable documentation provided by Insmed to Therapure.

1.1.39. “ Current Good Manufacturing Practices ” or “ cGMPs ” shall mean the good manufacturing practices required by the FDA (and set out in the FD&C Act or FDA regulations, as they may be amended from time to time (including, without limitation, 21 CFR 210 and 211), and other applicable Governmental or Regulatory Authorities as mutually agreed by the parties in writing, laws, policies, guidelines or guidance in effect at any time during the Term, for the manufacture and testing of biopharmaceutical materials as applied solely to ARIKACE.

1.1.40. “ Demand Forecast ” shall have the meaning set out in Section 11.3.3.

1.1.41. “ Dollars ” (represented as “$”) shall mean U.S. Dollars.

1.1.42. “ Effective Date ” shall have the meaning set out in the Preamble.

1.1.43. “ EMA ” shall mean the European Medicines Agency, or any one or more successor agency thereto performing similar functions.

1.1.44. “ Equipment ” shall have the meaning set out in Section 3.1.2.1.

1.1.45. “ Equipment Costs ” shall have the meaning set out in Section 3.1.3.2.

1.1.46. “ Equipment Invoices ” shall have the meaning set out in Section 3.1.3.2.

1.1.47. “ Equipment Replacement Costs ” shall have the meaning set out in Section 3.1.2.6.

1.1.48. “ European Economic Area ” shall mean the members states of the European Union (except Croatia), as of the Effective Date, plus Iceland and Norway.

1.1.49. “ Excipients ” shall mean dipalmitoylphosphatidylcholine (DPPC) and cholesterol, but excluding ethanol, NaCL and NAOH.

1.1.50. “ Extension Term ” shall have the meaning set out in Section 14.1(ii).

1.1.51. “ Facility ” shall mean Therapure’s manufacturing facilities in Mississauga, Canada, used, among other things, for the Manufacture of ARIKACE.

1.1.52. “ Facility Permit ” shall have the meaning set out in Section 8.1.1.

1.1.53. “ FCPA ” shall mean the U.S. Foreign Corrupt Practices Act (15 U.S.C. Section 78dd-1, et -seq.), as amended.

1.1.54. “ FDA ” shall mean the United States Food and Drug Administration, or any successor agency thereto performing similar functions.

1.1.55. “ FD&C Act ” shall mean the United States Federal Food, Drug and Cosmetic Act, as may be amended from time to time.

1.1.56. “ Firm Portion ” shall have the meaning set out in Section 11.3.6.

1.1.57. “ Force Majeure ” shall have the meaning set out in Section 23.1.

1.1.58. “ G&A Cost ” shall mean:

(i) an amount equal to Therapure’s out-of-pocket third party costs actually incurred for the construction, retrofit and associated validation of the Workshop and the procurement and validation of Equipment;

(ii) an amount equal to Therapure’s out-of-pocket third party costs actually incurred in connection with the Technology Transfer Program plus [***] percent; and

(iii) for the period following the completion of the Technology Transfer Program, an amount equal to Therapure’s out-of-pocket third party costs actually incurred plus [***] percent.

1.1.59. “ Governmental or Regulatory Authority ” shall mean any domestic or foreign entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including, FDA, EMA and Health Canada as well as any other agency, department, board, commission, court, tribunal, judicial body or instrumentality of any union of nations, federation, nation, state, municipality, county, locality or other political subdivision thereof.

1.1.60. “ Group ” shall mean any person, or any two or more persons acting as a group, and all Affiliates of such person or persons.

1.1.61. “ Heads of Agreement ” shall mean the Heads of Agreement Summary entered into by Insmed and Therapure dated August 14, 2013.

1.1.62. “ Health Canada ” shall mean Health Canada, the regulatory body of the Government of Canada governing health products under the Food and Drugs Act (Canada) and regulations.

1.1.63. “ Indemnified Party ” shall mean the person seeking indemnification.

1.1.64. “ Indemnifying Party ” shall mean the person from whom indemnification is sought.

1.1.65. “ Indication ” shall mean an approved use of ARIKACE by a Governmental or Regulatory Authority for the treatment, prevention, or diagnosis of a medical condition.

1.1.66. “ Inflation Period ” shall mean the period commencing on the Effective Date and ending on the first day of Manufacturing Year 1.

1.1.67. “ Initial Delivery Date ” shall mean the first date on which Therapure delivers ARIKACE to Insmed after Insmed obtains Permits related to the Manufacture of ARIKACE.

1.1.68. “ Initial Term ” shall have the meaning set out in Section 14.1(i).

1.1.69. “ Insmed ” shall have the meaning set out in the Recitals.

1.1.70. “ Insmed Intellectual Property ” shall have the meaning set out in Section 16.1.2.

1.1.71. “ Insmed Representatives ” shall have the meaning set out in Section 21.2.

1.1.72. “ Intellectual Property Rights ” shall mean United States, Canadian, and worldwide intellectual property rights including, without limitation, trademarks, service marks, trade dress, logos, copyrights, rights of authorship, inventions, patents, rights of inventorship, moral rights, rights of publicity and privacy, trade secrets, industrial design rights, rights under unfair competition and unfair trade practices laws, know how, show how and all other intellectual and industrial property rights related thereto, or otherwise, whether registered, unregistered, statutory, common law, or pending, throughout the world.

1.1.73. “ Inventory ” shall mean the amount of ARIKACE specified in the Demand Forecast.

1.1.74. “ Joint Project Team ” shall have the meaning set out in Section 2.1.1.

1.1.75. “ Latent Defect ” shall mean a defect in ARIKACE to the extent attributable to Therapure, which results in ARIKACE not conforming to the Acceptance Criteria

and that is not discoverable by a commercially reasonable examination of such ARIKACE in accordance with Insmed’s quality assurance program.

1.1.76. “ Latent Defect Notice ” shall have the meaning set out in Section 13.2.3(ii).

1.1.77. “ Laws ” shall mean all constitutions, laws, statutes, ordinances, treaties, rules, common law, rulings, regulations, orders, charges, directives, determinations, executive orders, writs, judgments, injunctions, decrees, restrictions or similar pronouncements of any applicable Governmental or Regulatory Authority.

1.1.78. “ Litigation Conditions ” shall have the meaning set out in Section 21.3.2.

1.1.79. “ Losses ” shall have the meaning set out in Section 21.1.

1.1.80. “ Manufacture ” or “ Manufacturing ” shall mean the formulation, filling, packaging, inspecting, validating and testing of ARIKACE, and does not include authority over commercialization activities, including, without limitation, pricing and price-reporting, sales, marketing, and/or distribution.

1.1.81. “ Manufacturing Defect ” means a deviation from the ARIKACE Specifications, Master Batch Record and ARIKACE SOPs resulting in an inability to issue a Certificate of Analysis.

1.1.82. “ Manufacturing Materials ” shall mean the formulation and packaging materials, filling components such as product containers, vials, filters, stoppers, hoses, packaging, standard labels or supplies required for the Manufacture of ARIKACE (other than Amikacin and Excipients) in accordance with ARIKACE Specifications and the external testing required for such materials and for Amikacin and Excipients.

1.1.83. “ Manufacturing Period ” shall mean the period commencing on the date on which Insmed delivers to Therapure the first shipment of Amikacin and Excipients intended for Manufacture into ARIKACE for commercial distribution.

1.1.84. “ Manufacturing Permit ” shall have the meaning set out in Section 8.1.1.

1.1.85. “ Manufacturing Site Registration Filing Date ” shall mean the date on which Insmed files the Therapure manufacturing site registration.

1.1.86. “ Manufacturing Suppliers and Vendors ” shall mean suppliers of all Manufacturing Materials, including all raw materials and primary and secondary packaging components used in the Manufacture of ARIKACE, as well as any providers of services used by Therapure in connection with Manufacture of ARIKACE.

1.1.87. “ Manufacturing Technology Transfer ” means the transfer by Therapure to Insmed (or its third-party designee) at Insmed’s expense of all know-how, documents, records, technology, materials and information necessary or useful in the manufacture of ARIKACE, and shall include, without limitation, consultation time with Therapure’s employees, as reasonably requested by Insmed.

1.1.88. “ Manufacturing Year ” shall mean any 12-month period, the first of which shall commence on the date Therapure receives its first shipment of Amikacin and Excipients intended for Manufacture into ARIKACE for commercial distribution.

1.1.89. “ Master Batch Record ” shall mean the formal set of instructions for the Manufacture of ARIKACE at a 200 kilogram scale.

1.1.90. “ NDA ” shall mean the FDA-required New Drug Application or a corresponding license or application required by a Governmental or Regulatory Authority.

1.1.91. “ Negotiated Cap ” shall have the meaning set out in Section 6.1(iii)(A).

1.1.92. “ Notice of Non-Conformity ” shall have the meaning set out in Section 13.2.3(i).

1.1.93. “ Permits ” shall mean franchises, approvals, permits, authorizations, applications, licenses, pharmacy licenses, orders, registrations, certificates, variances, drug master files and other similar permits or rights obtained from any applicable Governmental or Regulatory Authority.

1.1.94. “ Persistent Failure ” shall mean either that (i) at least [***] percent of the number of Batches Manufactured under this Agreement in any [***] rolling period fail to conform with Therapure’s Manufacturing Requirements; or (ii) [***] successive Batches Manufactured under this Agreement fail to conform with Therapure’s Manufacturing Requirements. For clarity, once a Batch is determined to be non-conforming in accordance with the procedure described in Section 13.2.3, such Batch shall count as a non-conforming Batch for the purposes of this Persistent Failure definition.

1.1.95. “ Persistent Failure Cure Period ” shall have the meaning set out in Section 6.3.1.

1.1.96. “ Persistent Failure Cure Plan ” shall have the meaning set out in Section 6.3.1.

1.1.97. “ Product Documentation ” shall mean all documentation related to ARIKACE required to ensure compliance with any and all existing product filings in any jurisdiction for Therapure’s Manufacture of ARIKACE.

1.1.98. “ Product Information ” shall mean all information and data relating to Amikacin and ARIKACE necessary for Therapure to Manufacture ARIKACE, including formulae, methods of manufacture, product descriptions, test methods, validation of test methods, Batch Production Records, and all other supporting documentation, data and reports acquired by Insmed or its Affiliates during the Term in connection with the manufacture and supply of ARIKACE, and all applications, submissions, filings and correspondence of Insmed or its Affiliates with or to any Governmental or Regulatory Authority with respect to Amikacin and ARIKACE.

1.1.99. “ Purchase Order ” shall have the meaning set out in Section 11.2.1.

1.1.100. “ Quality Agreement ” shall have the meaning set out in Section 13.1.

1.1.101. “ Reallocated Minimum Batch Labour ” shall have the meaning set out in 6.1(i)(B).

1.1.102. “ Registration Batch shall have the meaning set out in Section 12.1.1.

1.1.103. “ Release Testing Fee ” shall mean the release testing fee for Manufacturing Materials, Amikacin and Excipients to be paid by Insmed.

1.1.104. “ Request Order ” shall mean a notice to ship Amikacin and/or Excipients issued by Therapure and derived from the Demand Forecast.

1.1.105. “ Response to Notice of Non-Conformity ” shall have the meaning set out in Section 13.2.3(iii).

1.1.106. “ Review Period ” shall have the meaning set out in Section 7.1.4 .

1.1.107. “ SOPs ” shall mean all Standard Operating Procedures other than the ARIKACE SOPs applicable to the Workshop.

1.1.108. “ Stage Deposit ” shall mean the non-refundable amount of $[***].

1.1.109. “ Standby Fees ” shall have the meaning set out in Section 6.1(iii)(B).

1.1.110. “ Storage Period ” shall have the meaning set out in Section 12.4.

1.1.111. “ Substances ” shall have the meaning set out in Section 9.2.

1.1.112. “ Target Technology Transfer Completion Date ” shall have the meaning set out in Section 4.7.

1.1.113. “ Tax ” shall mean all taxes, duties, fees, premiums, assessments, imposts, levies, rates, withholdings, dues, government contributions and other charges of any kind whatsoever, whether direct or indirect, together with all interest, penalties, fines, additions to tax or other additional amounts, imposed by any Governmental or Regulatory Authority.

1.1.114. “ Technology Transfer ” shall mean the scale production of ARIKACE as described in Schedule A.

1.1.115. “ Technology Transfer Invoices ” shall have the meaning set out in Section 4.4.

1.1.116. “ Technology Transfer Period ” shall mean the period commencing on the Effective Date and ending on the Manufacturing Site Registration Filing Date.

1.1.117. “ Technology Transfer Program ” shall mean all activities with respect to the completion of the Technology Transfer.

1.1.118. “ Technology Transfer Program Managers ” shall have the meaning set out in Section 4.5.

1.1.119. “ Term ” shall mean the Initial Term and any Extension Terms.

1.1.120. “ Termination Payment Section ” shall have the meaning set out in Section 14.5.1.

1.1.121. “ Territory ” shall mean Canada, the European Economic Area, the United States of America and its territories, commonwealths, possessions, including, without limitation, Puerto Rico, plus any other territories as mutually agreed by the parties in writing from time to time.

1.1.122. “ Therapure ” shall have the meaning set out in the Preamble.

1.1.123. “ Therapure Intellectual Property ” shall have the meaning set out in Section 16.2.1.

1.1.124. “ Therapure’s Manufacturing Requirements ” shall have the meaning set out in Section 13.2.1.

1.1.125. “ Therapure Representatives ” shall have the meaning set out in Section 21.1.

1.1.126. “ Third Party Claims ” shall have the meaning set out in Section 21.1.

1.1.127. “ True-Up Payment ” shall have the meaning set out in 6.1(i).

1.1.128. “ US Export Control Laws ” shall mean all applicable U.S. laws and regulations relating to the export or re-export of commodities, technologies, or services, including, but not limited to, the Export Administration Act of 1979, 24 U.S.C. §§ 2401-2420, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701-1706, the Trading with the Enemy Act, 50 U.S.C. §§ 1 et. seq., the Arms Export Control Act, 22 U.S.C. §§ 2778 and 2779, and the International Boycott Provisions of Section 999 of the U.S. Internal Revenue Code of 1986.

1.1.129. “ Workshop ” shall mean a production and control area and related utilities located in the Facility, in which Therapure Manufactures ARIKACE.

1.1.130. “ Workshop Construction Costs ” shall have the meaning set out in Section 3.1.3.1.

1.1.131. “ Workshop Construction Invoices ” shall have the meaning set out in Section 3.1.3.1.

1.1.132. “ Workshop Construction Period ” shall mean the period commencing on the Effective Date and ending upon completion of the construction of the Workshop.

1.1.133. “ Workshop Construction Plan ” shall mean the plan as set out in Schedule E for the construction of the Workshop, including the budget for the Workshop Construction Costs and the Equipment Costs.

1.1.134. “ Workshop Deposit ” shall mean the non-refundable amount of $[***].

1.1.135. “ Year ” shall mean any 12-month period, the first of which shall commence on the Effective Date.

1.2. Schedules . The following Schedules shall form part of this Agreement:

Schedule A	-	Technology Transfer Activities Quote

Schedule B	-	Process Flow Diagram

Schedule C	-	Minimum Commitments

Schedule D	-	Demand Forecasting Examples

Schedule E		Workshop Construction Plan

Schedule F		Basis of Design

ARTICLE 2
JOINT PROJECT TEAM

2.1. Joint Project Team .

2.1.1. Formation, Membership and Purpose . Within [***] days following the Effective Date, the parties shall establish a joint project team which shall include each party’s project manager, as well as at least one technical representative from each party (the “ Joint Project Team ”). The Joint Project Team will meet to discuss questions or issues regarding the project and the relationship between the parties. The Joint Project Team will have no formal voting authority, but shall be expected to work towards consensus decisions on matters of concern to the parties regarding the project and the relationship between the parties. In the event the Joint Project Team is unable to reach a consensus decision, the question(s) or issue(s) in dispute shall be resolved in accordance with Article 37.

2.1.2. Limitation of Authority . The Joint Project Team shall have only such powers as are specifically delegated to it hereunder and shall not be a substitute for the rights of the parties.

2.1.3. Quarterly Manufacturing Meetings . The Joint Project Team shall meet once each calendar quarter at a mutually agreeable location to review all aspects of this Agreement, including each Demand Forecast. The Joint Project Team representatives from each party with an appropriate level of expertise in manufacturing, quality assurance and regulatory affairs and other matters mutually identified as relevant shall attend such meetings to facilitate the highest level of performance under this Agreement. Each party shall designate one Joint Project Team representative who shall have reasonable access to such party’s information, of the type set out in this Section 2.1.3(i)-(vii) related to ARIKACE and the authority to discuss and address issues related to the Manufacture of ARIKACE and this Agreement, including: (i) Manufacturing operations; (ii) regulatory, quality and compliance activities; (iii) FDA, Health Canada or EMA correspondence, (iv) ARIKACE planning and scheduling; (v) the Workshop; (vi) all critical systems data associated with the Manufacturing operations; and (vii) technical issues related to qualification and shipment of Amikacin.

2.1.4. Additional Meetings of the Joint Project Team . In addition to the quarterly meetings under Section 2.1.3, t he Joint Project Team shall hold meetings at such times as it elects to do so; provided, however that the Joint Project Team shall hold meetings no less frequently than bi-weekly , subject to additional meetings as needed or by mutual agreement. The location of meetings shall be established by the Joint Project Team, provided that such meetings may be held in person, teleconference or video conference, as mutually agreed by the parties. For purposes of clarity, no meeting of the Joint Project Team shall be held or be valid without at least one member of each party being present at such meeting. To the extent practicable, each party shall provide proposed agenda items to the Joint Project Team members in advance of each Joint Project Team meeting date. Each member of the Joint Project Team may propose additional agenda items at least [***] Business Days in advance of each meeting. The costs incurred by each party in connection with its participation at any meetings of the Joint Project Team shall be borne

solely by such party. Unless the members of the Joint Project Team agree upon a person to act as secretary of a meeting of the Joint Project Team, a Joint Project Team member of Therapure shall serve as secretary of that meeting. The secretary of each meeting shall prepare, and by e-mail distribute to all members of the Joint Project Team, minutes of the meeting within [***] days following the meeting to allow adequate review and comment.

ARTICLE 3
WORKSHOP CONSTRUCTION PERIOD

3.1. Workshop Construction Period . During the Workshop Construction Period, the parties agree as follows:

3.1.1. Workshop Construction . Without limiting the obligations of Therapure under this Agreement, Therapure shall:

(i) procure the necessary assets required to be used or held for use in the construction of the Workshop in accordance with the Workshop Construction Plan;

(ii) construct, configure, retrofit and validate the Workshop, as approved by Insmed and in accordance with the Workshop Construction Plan, to allow for the Manufacture of ARIKACE; and

(iii) undertake such activities as are required to secure and maintain all approvals from the FDA, Health Canada or EMA necessary for use of the Workshop for the Manufacture of ARIKACE.

3.1.2. Equipment .

3.1.2.1. Therapure shall procure the necessary assets specifically required for the Manufacture or testing of ARIKACE (the “ Equipment ”).

3.1.2.2. Therapure shall own, possess and have good and marketable title to all of the Equipment.

3.1.2.3. Therapure shall not be permitted to use the Equipment for any purpose, other than the Manufacture of ARIKACE, at any time during the Term without the prior written consent of Insmed, which consent shall not be unreasonably withheld, conditioned or delayed.

3.1.2.4. If Therapure identifies another customer that could utilize the Equipment during the Term, and Insmed provides its prior written consent for such use, Therapure and Insmed shall negotiate in good faith a compensatory payment to Insmed.

3.1.2.5. Therapure shall take reasonable precautions to protect the Equipment from damage (except for normal wear and tear).

3.1.2.6. The costs associated with the replacement of the Equipment (the “ Equipment Replacement Costs ”) due to ordinary wear and tear shall be borne [***] percent by Insmed and [***] percent by Therapure; provided, however, that Therapure shall be responsible for paying all other reasonable Equipment Replacement Costs.

3.1.2.7. Therapure shall have established (i) procedures that require routine calibration, inspection, checking and maintenance of the Equipment; and (ii) calibration and maintenance processes for the Equipment, as supported by calibration and maintenance records available to Insmed.

3.1.2.8. Therapure shall obtain and maintain, during the Term, commercially reasonable levels of insurance on the Equipment.

3.1.3. Payment and Invoicing .

3.1.3.1. Without limiting the obligations of Insmed under this Agreement, Insmed shall pay all reasonable (and for costs exceeding $[***]) third party and internal Therapure costs of the construction, retrofit and associated validation of the Workshop in accordance with the Workshop Construction Plan (the “ Workshop Construction Costs ”). Therapure shall invoice Insmed on a monthly basis based on commitments made in accordance with the Workshop Construction Plan (the “ Workshop Construction Invoices ”); provided, however, that no Workshop Construction Invoices shall be rendered by Therapure to Insmed for Workshop Construction Costs in excess of the applicable amounts set forth in the Workshop Construction Plan, without the prior written consent of Insmed . Each Workshop Construction Invoice shall be payable by Insmed within [***] days of invoice by Therapure and any failure to pay within that period shall be subject to the late payment fee set out in Section 12.2.2.

3.1.3.2. The cost of Equipment (the “ Equipment Costs ”) shall be borne [***] percent by Insmed and [***] percent by Therapure. Therapure shall invoice Insmed on a monthly basis based on commitments made in accordance with the Workshop Construction Plan (the “ Equipment Invoices ”); provided, however, that no Equipment Invoices shall be rendered by Therapure to Insmed for Equipment Costs in excess of the applicable amounts set forth in the Workshop Construction Plan, without the prior written consent of Insmed. Each Equipment Invoice shall be payable by Insmed within [***] days of invoice by Therapure and any failure to pay within that period shall be subject to the late payment fee set out in Section 12.2.2.

3.1.4. Workshop Deposit .

3.1.4.1. Insmed shall pay to Therapure the Workshop Deposit as follows, receipt of which shall be acknowledged by Therapure in writing in the manner provided in Section 24.1:

(i) concurrently upon execution of this Agreement, in an amount equal to $1.5 million; and

(ii) within [***] days of the issuance of the first purchase order for Equipment, in an amount equal to $[***] million.

3.1.4.2. The Workshop Deposit shall be credited as follows:

(i) $[***] of the Workshop Deposit shall be credited in equal instalments of $[***] per calendar month against each Workshop Construction Invoice or Equipment Invoice under this Agreement (starting with the first Workshop Construction Invoice or Equipment Invoice such that the full $[***] amount is credited in [***] months); provided, that if a Workshop Construction Invoice or Equipment Invoice is not issued in a calendar month during such [***] month period, then the excess credit shall be carried forward and applied against the next issued Workshop Construction Invoice or Equipment Invoice; and

(ii) $[***] of the Workshop Deposit shall be credited against the last of the Workshop Construction Invoices or Equipment Invoices under this Agreement.

ARTICLE 4
TECHNOLOGY TRANSFER PERIOD

4.1. Objective . During the Technology Transfer Period, Insmed and Therapure shall reasonably cooperate with each other to complete the Technology Transfer Program as set out under Schedule A. The provisions of this Article 4 apply solely during the Technology Transfer Period.

4.2. Diligence and Resources .

4.2.1. Without limiting the obligations of Insmed under this Agreement, Insmed shall, at its own expense, in respect of the Technology Transfer Program:

(i) work diligently in a professional manner and with all reasonable commercial efforts in fulfilling any and all of its obligations, including under this Section 4.2.1;

(ii) subject to Article 18, provide to Therapure all Product Documentation and Product Information;

(iii) pursuant to and in accordance with a Request Order, deliver Amikacin to Therapure DDP (Incoterms 2010) Therapure’s facilities in Mississauga, Ontario;

(iv) assist Therapure in process implementation and validation;

(v) approve or object to engineering and process designs within [***] Business Days of receipt thereof by Insmed from Therapure (or be deemed to approve the same within [***] Business Days of receipt by Insmed from Therapure of a second notice thereof);

(vi) in Insmed’s sole discretion, file, seek, prosecute and maintain all ARIKACE Permits, including the NDA and all other approvals from any applicable Governmental or Regulatory Authority;

(vii) provide reasonable technical advice and resources to Therapure to the extent necessary for Therapure to undertake the Technology Transfer;

(viii) provide to Therapure SOPs and manufacturing bill of materials;

(ix) pay Therapure’s fees and charges relating to Technology Transfer and engineering and production of regulatory compliance batches required for licensing of the Manufacturing operations, as set out in Schedule A; and

(x) promptly report to Therapure (and in no event later than [***] Business Days after the occurrence of) any development which may materially and adversely affect Therapure’s performance under this Agreement.

4.2.2. Without limiting the obligations of Therapure under this Agreement, Therapure shall, in respect of the Technology Transfer Program:

(i) work diligently in a professional manner and with all reasonable commercial efforts in fulfilling any and all of its obligations, including under this Section 4.2.2;

(ii) employ specialized technical resources reasonably necessary to execute the Technology Transfer;

(iii) following completion of the Workshop Construction Period, operate the Workshop to allow for the Manufacture of ARIKACE;

(iv) retain suitably qualified personnel and maintain appropriate quality systems and other infrastructure to support Manufacture of ARIKACE and the continued operation and maintenance of the Workshop;

(v) promptly report to Insmed (and in no event later than [***] Business Days after the occurrence of) any development which may materially and adversely affect Insmed’s performance under this Agreement;

(vi) reasonably assist Insmed, at a cost to Insmed of $[***] per hour, with filing, seeking, prosecuting and maintaining all ARIKACE Permits, including the NDA and all other approvals from any applicable Governmental or Regulatory Authority; and

(vii) use reasonable commercial efforts to carry out the activities set out in Schedule A.

4.3. Stage Deposit . Insmed shall pay to Therapure the Stage Deposit as follows, receipt of which shall be acknowledged by Therapure in writing in the manner provided in Section 24.1:

(i) prior to commencement of Stage 1A activities as described in Schedule A, in an amount equal to $[***] to be offset against the last of the Technology Transfer Invoices for Stage 1 activities as described in Schedule A;

(ii) prior to commencement of Stage 2A activities as described in Schedule A, in an amount equal to $[***] to be offset against the last of the Technology Transfer Invoices for Stage 2 activities as described in Schedule A; and

(iii) prior to commencement of Stage 3A activities as described in Schedule A, in an amount equal to $[***] to be offset against the last of the Technology Transfer Invoices for Stage 3 activities as described in Schedule A.

4.4. Payment and Invoicing . Therapure shall invoice Insmed (i) on a monthly basis, (A) the amounts set out in Schedule A based on percentage of the work completed by Therapure and (B) the reasonable (and for costs exceeding $[***], documented) costs as pre-approved by Insmed due to third parties in connection with the Technology Transfer Program for goods and services provided at the G&A Cost; and (ii) the Manufacturing Materials as they are procured at the G&A Cost (the “ Technology Transfer Invoices ”). Each Technology Transfer Invoice shall be payable by Insmed within [***] days of invoice by Therapure and any failure to pay within that period shall be subject to the late payment fee set out in Section 12.2.2.

4.5. Technology Transfer Program Managers . Each party shall appoint one project manager to act as that party’s representative (the “ Technology Transfer Program Manager ”) with responsibility for being the primary point of contact between the parties with respect to the Technology Transfer Program. Technology Transfer Program Managers shall have regular (no less frequently than once per week, unless otherwise agreed between the parties, provided that such communications may be held in person, teleconference or video conference, as mutually agreed by the parties) communications in connection with the Technology Transfer Program. Each party may also appoint a substitute or successor representative by providing written notice thereof to the other party.

4.6. ARIKACE Specifications . Prior to commencement of Stage 3A activities as described in Schedule A, Insmed shall approve both the Master Batch Record and ARIKACE SOPs delivered to it by Therapure during the Technology Transfer Period. The Master Batch Record and ARIKACE SOPs approved by Insmed shall collectively constitute the “ ARIKACE Specifications ” (as such term is used in this Agreement).

4.7. Technology Transfer Delays . The parties acknowledge and agree that the parties will use reasonable commercial efforts to complete the Technology Transfer by the target technology transfer completion date, which the parties agree shall be [***] from the Effective Date (the “ Target Technology Transfer Completion Date ”). To the extent a delay in the Target Technology Transfer Completion Date is attributable to an act or omission of Therapure that is not otherwise caused by an event or circumstance beyond Therapure’s control, then Therapure shall compensate Insmed at a rate equal to $[***] per week that the Target Technology Transfer Completion Date is so delayed.

ARTICLE 5
MANUFACTURING PERIOD

5.1. Manufacturing Period . During the Manufacturing Period, the parties agree as follows:

5.1.1. Diligence and Resources .

5.1.1.1. Without limiting the obligations of Insmed under this Agreement, Insmed shall, at its own expense, in respect of the Manufacturing Period:

(i) work diligently in a professional manner and with all reasonable commercial efforts in fulfilling any and all of its obligations, including under this Section 5.1.1.1;

(ii) subject to Article 18, provide to Therapure all Product Documentation and Product Information;

(iii) if requested by Therapure, provide reasonable technical support to Therapure to the extent necessary for Therapure to Manufacture ARIKACE; and

(iv) pursuant to and in accordance with a Request Order, deliver to Therapure DDP (Incoterms 2010) Therapure’s facilities in Mississauga, Ontario:

(A) the Amikacin for the applicable calendar quarter (or such longer period of time to the extent required to release Batches for commercial Manufacturing), for further processing into ARIKACE; and

(B) the Excipients,

provided, however, that the Amikacin and Excipients so delivered:

(A) shall be stored in a secure and appropriately segregated area within the Facility;

(B) shall not be transferred to any third party (except as may be required by applicable Law) without the prior written consent of Insmed; and

5.1.1.2. Without limiting the obligations of Therapure under this Agreement, Therapure shall, in respect of the Manufacturing Period:

(i) work diligently in a professional manner and with all reasonable commercial efforts in fulfilling any and all of its obligations, including under this Section 5.1.1.2;

(ii) prepare executed Batch Production Records;

(iii) manufacture and package Batches pursuant to Therapure’s Manufacturing Requirements;

(iv) within [***] days prior to commencement of a calendar quarter send Request Orders to Insmed for quantities of Amikacin and Excipients derived from the quantity of ARIKACE forecasted in the Demand Forecast for such calendar quarter (or such longer period of time to the extent required to release Batches for commercial Manufacturing);

(v) store all Amikacin and Excipients in a secure and appropriately segregated area within the Facility;

(vi) take reasonable precautions to protect Amikacin and Excipients from damage; provided, that in the event of damage to the Amikacin or Excipients, to the extent attributable to the negligence or intentional act or omission of Therapure, Insmed’s exclusive remedy shall be the payment by Therapure of the costs associated with the replacement of such Amikacin or Excipients, which the parties agree shall be no greater than the Cost of Amikacin or the Cost of Excipients, as applicable;

(vii) not transfer any Amikacin or Excipients to any third party (except as may be required by applicable Law) without the prior written consent of Insmed;

(viii) only use Amikacin and Excipients for the Manufacture of ARIKACE; and

(ix) maintain commercially reasonable levels of insurance for all Amikacin and Excipients stored within the Facility.

5.1.2. Subcontracting . Therapure will [***] . Each permitted subcontractor shall be bound by the terms of this Agreement that are reasonably applicable to the work being performed by such subcontractor as consented to by Insmed. Therapure will be responsible for the actions of such subcontractors, including any breach of the applicable terms of this Agreement by such subcontractors. Therapure shall be responsible for the direction and coordination of the performance of each permitted subcontractor. No contractual relationship shall be created between Insmed and subcontractors.

5.1.3. Notification of Certain Events . In addition to other notices required pursuant to this Agreement, and without limiting the rights and obligations of each party under Section 13.2, each party shall use its reasonable commercial efforts to give notice to the other party within [***] Business Days of becoming aware of the following:

(i) any defective or adulterated ARIKACE or any information which may suggest that Amikacin, Excipients or ARIKACE is or may be defective, adulterated or misbranded, or fails to meet the Batch Production Records or to maintain the stability as indicated; or

(ii) any material safety or toxicity problem regarding ARIKACE.

ARTICLE 6
MINIMUM COMMITMENTS; PERSISTENT FAILURE

6.1. True-Up Payment . The payments in Section 6.1 shall be calculated within [***] days after the end of any Year, and Insmed shall pay any amounts owing within [***] days of invoice by Therapure, with any late payment subject to the late payment fee set out in Section 12.2.2:

(i) Subject to Section 6.1(ii) and 6.1(iii), beginning on [***], if in that Year or in any subsequent Year, Insmed fails to order that amount of ARIKACE equivalent to the Annual Minimum Batch Processing Fee Amount, then Insmed shall pay to Therapure for such Year an amount (the “ True-Up Payment ”) equal to ( (x) — (y) ), where “(x)” equals the Annual Minimum Batch Processing Fee Amount as set out in Schedule C and “(y)” equals the actual aggregate Batch Processing Fees paid by Insmed for such Year; provided, that the True-Up Payment shall be reduced by

(A) [***] percent of the cost of the Clean Room Consumables for such Year;

(B) if Therapure is able to reasonably reallocate the Allocated Minimum Batch Labour for such Year (the “ Reallocated Minimum Batch Labour ”) in the manner provided under this Section 6.1(i)(B) (to the extent applicable), [***] percent of the cost of the Reallocated Minimum Batch Labour. Therapure shall use reasonable commercial efforts to reallocate the excess Allocated Minimum Batch Labour for any Year in which the Binding Portion of the Demand Forecast for such Year plus the Firm Portion of the Demand Forecast for such Year do not exceed the amount of ARIKACE equivalent to the Annual Minimum Batch Processing Fee Amount for such Year; and

For clarity, no payment shall be due by Insmed if the reductions in clauses (A), (B) and (C) above exceed the True-Up Payment for such Year.

(ii) If, in any Year, an additional Indication is approved, then the Annual Minimum Batch Processing Fee Amount for any subsequent Year shall be increased automatically by an amount equal to the lesser of (x) [***]; or (y) $[***].

(iii) Insmed shall promptly report to Therapure if Insmed expects, acting reasonably, that approval by Governmental or Regulatory Authority for an Indication shall not be obtained prior to [***], in which case:

(A) the parties shall negotiate in good faith an amendment to Schedule C to update the Annual Minimum Batch Processing Fee Amounts based on the anticipated approval date for an Indication; provided, that the new Annual Minimum Batch Processing Fee Amount for a Year negotiated by the parties cannot be greater than [***] (the “ Negotiated Cap ”). By way of example, the new Annual Minimum Batch Processing Fee Amount for [***] negotiated by the parties cannot be greater than $[***];

(B) effective [***] and continuing until the earlier of (x) an amendment to Schedule C agreed to by the parties or (y) termination of this Agreement pursuant to Section 6.1(iii)(D), Insmed shall, on a monthly basis, pay to Therapure a monthly

standby fee at a rate of [***] (collectively, the “ Standby Fees ”);

(C) notwithstanding anything to the contrary in this Agreement, Insmed shall not be required to make any True-Up Payment until Schedule C is amended in accordance with Section 6.1(iii)(A) (for clarity, Insmed shall not be required to make any True-Up Payment if this Agreement is terminated pursuant to Section 6.1(iii)(D)); and

(D) if the parties are unable to agree on an amendment to Schedule C within [***] days, then Insmed may terminate this Agreement by giving notice to Therapure in the manner provided in Section 24.1; provided, however, that if Insmed does not elect to terminate this Agreement, the dispute shall be resolved in accordance with Article 37 and the Negotiated Cap shall apply in any such dispute resolution proceeding.

(iv) For clarity, following an amendment to Schedule C in accordance with the terms of Section 6.1(iii), the Annual Minimum Batch Processing Fee Amount used in the calculation of the True-Up Payment for that Year and any subsequent Year shall equal the new Annual Minimum Batch Processing Fee Amount for such Year(s) in such amended Schedule C.

6.2. Safety Stock . Therapure must maintain at all times at least enough inventory of Manufacturing Materials to meet the greater of (x) [***] percent of Insmed’s forecasted amount for the applicable calendar quarter; or (y) [*** ] .

6.3. Persistent Failure .

6.3.1. In the event of a Persistent Failure, Insmed shall provide Therapure with written notice of such Persistent Failure in the manner provided in Section 24.1. Subject to Section 6.3.2, following Therapure’s receipt of such notice, Therapure shall for a period of [***] days (the “ Persistent Failure Cure Period ”) use reasonable commercial efforts to cure such Persistent Failure; provided, that after the Persistent Failure Cure Period, or any time prior thereto if in Therapure’s sole discretion a cure for such Persistent Failure cannot be reasonably effected within the Persistent Failure Cure Period, Therapure shall deliver to Insmed Therapure’s good faith plan for curing such Persistent Failure (the “ Persistent Failure Cure Plan ”). If Insmed does not accept the Persistent Failure Cure Plan in its sole discretion, acting reasonably, or following acceptance by Insmed of the Persistent Failure Cure Plan, Therapure fails to cure the failure as agreed in the Persistent Failure Cure Plan:

(i) the parties shall cooperate to promptly conduct Manufacturing Technology Transfer, whereby Insmed may satisfy any requirement for ARIKACE by its own manufacture or other self-supply;

(ii) subject to the terms and conditions of this Agreement, Therapure shall grant to Insmed a non-exclusive, perpetual, irrevocable, transferable, fully paid, worldwide license (with a right to sublicense through multiple tiers) to use the Intellectual Property Rights developed or used by, or on behalf of, Therapure in the Manufacture of ARIKACE solely to make, have made, use, offer for sale, sell, export or import ARIKACE; and

(iii) Therapure shall use reasonable commercial efforts to assist Insmed (at Therapure’s cost and expense) with Insmed’s efforts to qualify an alternate site for manufacturing ARIKACE. For clarity, nothing in this Agreement shall prohibit Insmed from qualifying an alternate site for the manufacture of ARIKACE at any time during the Term.

6.3.2. If, and to the extent that, the reason Therapure is prevented from reasonably effecting a cure for the Persistent Failure within the Persistent Failure Cure Period is directly attributable to the unavailability of necessary Amikacin, Excipients or Manufacturing Materials, the Persistent Failure Cure Period shall be extended for the period that Therapure is prevented from performance by such unavailability, subject to Therapure demonstrating to Insmed’s satisfaction, acting reasonably, that it has diligently pursued and, to the extent reasonably possible, continues to diligently pursue a cure for the Persistent Failure.

ARTICLE 7
CHANGES AND DEVIATIONS

7.1. Change Notice .

7.1.1. The parties hereby acknowledge and agree that in the event that:

(i) during the Technology Transfer Period, changes are proposed or required, including, without limitation, changes to any activities and/or deliverables set out in Schedule A, changes to Schedule F and/or process changes;

(ii) beginning in Manufacturing Year 1, at the end of each Manufacturing Year the actual Batch size varies from Schedule B for that Manufacturing Year; or

(iii) there is a change in, or proposed change to, the Amikacin, ARIKACE Specifications, Master Batch Records, ARIKACE SOPs, the Manufacturing of ARIKACE and/or the Commercial Manufacturing Date,

then this Agreement and the applicable Schedule shall be amended in accordance with the procedure described below.

7.1.2. Either party shall present a written notice to the other party outlining in sufficient detail the proposed changes to the relevant Schedule (the “ Change Notice ”).

7.1.3. Within [***] Business Days after submission of the Change Notice, Therapure shall present in writing to Insmed a quote for work to be undertaken and/or proposed revisions to the Batch Processing Fee (the “ Change Fee ”), required as a result of the Change Notice, such Change Fee to reflect solely the incremental costs and Therapure’s reasonable profits associated with the Change Notice, as supported by reasonable documentation provided by Therapure to Insmed.

7.1.4. The parties shall have [***] Business Days (the “ Review Period ”) after presentation of the Change Fee to discuss the Change Fee. On or before the expiry of the Review Period, the parties shall:

(i) accept the Change Fee by executing the Change Fee and related Change Notice (in accordance with Section 7.1.6) and returning a copy to each other;

(ii) discuss proposed amendments to the Change Fee and/or related Change Notice; or

(iii) reject the Change Fee in writing (in which case the Change Fee and related Change Notice shall not be effective).

7.1.5. Any amended Change Fee and/or related Change Notice mutually agreed and executed by the parties shall be incorporated as part of the relevant Schedule and such Schedule shall be deemed to have been amended to include the Change Fee and/or related Change Notice, as amended.

7.1.6. All Change Fees and related Change Notices will be executed (i) on behalf of Therapure by its Vice President, Operations and (ii) on behalf of Insmed by its Vice-President, Technical Operations before they will be deemed to be effective. In addition, Change Fees and related Change Notices that include changes in the Batch Processing Fees will also be executed (i) on behalf of Therapure by its Chief Executive Officer; and (ii) on behalf of Insmed by its Vice-President, Technical Operations before they will be deemed to be effective.

7.1.7. The parties acknowledge and agree that changes in Schedule A, Schedule B, or Schedule F may result in changes to the pricing set out in this Agreement. If any Change Notice may result in documented changes to the pricing set out in this Agreement, the parties shall negotiate an appropriate amendment to this Agreement to reflect such changes, applied retroactively to the effective date of such changes.

7.2. Acknowledgments . Insmed hereby acknowledges that Schedule B sets out the criteria on which Schedule A is based.

7.3. Changes to Workshop . Therapure, at its own expense, may make commercially reasonable changes to the Workshop without the prior consent of Insmed, provided that such changes (i) do not adversely affect Therapure’s ability to Manufacture or release ARIKACE; (ii) do not negatively affect the condition or maintenance of the Equipment; and (iii) comply with all applicable Laws relating to the Manufacture or release of ARIKACE.

7.4. Changes to ARIKACE Specifications, Master Batch Records and/or the ARIKACE SOPs . The parties acknowledge and agree that in the event of any changes that impact ARIKACE Specifications, Master Batch Records and/or the ARIKACE SOPs, any resulting increase in Batch Processing Fees shall be borne by Insmed; provided, however, that to extent that (i) changes in the Master Batch Records or ARIKACE Specifications, as the case may be, result in a reduction in the cost of Manufacturing; and (ii) such changes were proposed by Therapure and adopted by Insmed, then the Batch Processing Fee shall be reduced to reflect [***] of the total cost reduction.

ARTICLE 8
REGULATORY MATTERS

8.1. Permits .

8.1.1. Insmed shall have sole right, at its own expense, to file, seek, prosecute and maintain all Permits, including the NDA and all other approvals from any applicable Governmental or Regulatory Authority, related to the Manufacture of ARIKACE (collectively, the “ Manufacturing Permits ”). The parties acknowledge and agree that the Manufacturing Permits specifically exclude all Permits necessary or required under applicable Laws to keep the Workshop and Facility operational for purposes of carrying out Therapure’s Manufacturing obligations hereunder (the “ Facility Permits ”), the obtaining and maintaining of which shall be the sole responsibility of Therapure. Therapure shall also have sole responsibility for maintaining the Workshop in a state of GMP compliance and preparedness for inspection by the FDA, Health Canada, EMA or, to the extent reasonably requested by Insmed, any other applicable Governmental or Regulatory Authority.

8.1.2. Insmed shall have sole right, at Insmed’s expense, to file, seek, prosecute and maintain all Permits related to the commercialization and distribution of ARIKACE anywhere in the Territory, including, but not limited to, all Permits necessary or required for the sale, marketing, distribution and reimbursement of ARIKACE in the Territory (collectively, the “ Commercialization Permits ”, and together with the Manufacturing Permits, the “ ARIKACE Permits ”). Therapure shall provide Insmed with such information related to Manufacturing as may be reasonably requested by Insmed in order to obtain and maintain any such ARIKACE Permits.

8.1.3. Insmed shall keep Therapure informed of:

(i) the progress made towards obtaining Manufacturing Permits and promptly notify Therapure, in writing, of any expected delay greater than one month in obtaining any such Manufacturing Permits;

(ii) the receipt of any Manufacturing Permits, in writing, promptly after such Manufacturing Permits are obtained; and

(iii) any new submitted application for Manufacturing Permits and inform Therapure promptly after such Manufacturing Permits are obtained.

8.1.4. In addition to the procedure described under Article 7, in the event that Insmed initiates any reasonable change to the NDA or any other ARIKACE Permit, Therapure shall, at Insmed’s expense (such expense to only include Therapure’s personnel and other direct costs and third party costs attributable to effecting such change), assist Insmed in supporting and implementing such change.

8.1.5. Each party shall promptly notify the other of new regulatory requirements and other applicable Laws of which it becomes aware which are necessary for the Manufacture or distribution of ARIKACE. The parties shall confer with each other and use reasonable commercial efforts to implement the best means to comply with such applicable Laws.

ARTICLE 9
SUPPLIERS; MATERIAL TRANSFERS

9.1. Vendor and Supplier Audit and Certification . Insmed shall have the right to approve all suppliers of all Manufacturing Materials, including all raw materials and primary and secondary packaging components used in the Manufacture of ARIKACE and the terms under which such components shall be provided. Insmed shall also have the right to approve any providers of services used by Therapure in connection with Manufacture of ARIKACE, which approval shall not be unreasonably withheld, conditioned or delayed. Each party shall notify the other as far in advance as reasonably practicable of any changes in Manufacturing Suppliers and Vendors or the costs of goods or services to be provided by any such Manufacturing Suppliers and Vendors.

9.2. Material Transfers . Each of the parties may from time to time provide to the other materials owned by or licensed to a party (“ Substances ”). In such instances the parties shall enter into a material transfer agreement (it being noted that upon one party’s request, the parties shall have good faith discussions regarding any necessary or appropriate amendments to the material transfer agreement).

ARTICLE 10
AUDITS

10.1. Audits . Insmed shall have the right, subject to Article 19 hereof, to a compliance audit of the Workshop and any relevant documentation, including, but not limited to, production

records relevant to: (i) assessing ARIKACE’s safety, purity and potency; and (ii) determining compliance with ARIKACE Specifications, cGMPs, this Agreement, and applicable Laws. Such audits may be conducted upon reasonable advance written notice to Therapure no more than once per calendar year (except for any for cause audit or in the event the audit results in any adverse findings, in which case a reasonable number of additional audits shall be permitted), and shall be at Insmed’s expense. In connection with performing such audits, Insmed shall take reasonable steps to avoid disruption of operations at the Workshop and to comply with reasonable rules and regulations generated by Therapure. If Insmed’s audit results in any adverse findings, Insmed shall notify Therapure of such findings in writing and Therapure shall prepare a corrective action reasonably acceptable to Insmed within [***] days following delivery to Therapure of such findings. Therapure shall use reasonable commercial efforts to correct any such adverse finding. Any Insmed Representatives who conduct the audits shall have appropriate and relevant qualifications, as determined by Insmed, in its reasonable judgement, shall comply with all Workshop rules regarding safety and security, and shall execute written agreements to maintain in confidence all Confidential Information obtained during the course of any audit except for disclosure to Therapure under the terms of this Agreement.

ARTICLE 11
DEMAND FORECAST

11.1. Agreement to Supply and to Purchase .

11.1.1. During the Term, and subject to the terms and conditions of this Agreement, Therapure shall be a non-exclusive manufacturer and supplier of ARIKACE for Insmed.

11.2. Purchase Orders .

11.2.1. Insmed may from time to time submit to Therapure a purchase order (a “ Purchase Order ”) under which supply of ARIKACE shall be implemented in accordance with the terms of Section 11.3.

11.2.2. Purchase Orders shall be submitted no later than [***] days prior to the required delivery date, specifying the quantity of ARIKACE and the required delivery date .

11.2.3. If a Purchase Order is in compliance with this Article 11, Therapure shall acknowledge and accept such Purchase Order in writing to Insmed within [***] Business Days of receipt of same. If Therapure fails to provide Insmed with such written acknowledgement and acceptance within the [***] Business Day period, Therapure shall be deemed to have accepted the applicable Purchase Order. Within [***] Business Days of Therapure’s acceptance of a Purchase Order, Insmed shall pay to Therapure as a deposit a non-refundable amount equal to [***] percent of the value of such Purchase Order. Notwithstanding this Section 11.2, if any Purchase Order is outside the binding portion of the Demand Forecast, Therapure reserves the right to decline such Purchase Order.

11.2.4. Notwithstanding any other provision of this Agreement, a failure of Therapure to meet a purchase quantity specified on a Purchase Order in excess of the applicable forecasted amount by the requested delivery date(s) (despite using reasonable commercial efforts to do so) shall not constitute a breach of this Agreement by Therapure.

11.3. Demand Forecast .

11.3.1. As soon as reasonably practicable, Insmed shall provide written notice to Therapure of the date on which Insmed intends to request the first delivery of ARIKACE for commercial distribution (the “ Commercial Manufacturing Date ”).

11.3.2. Prior to delivery of the Demand Forecast under Section 11.3.3(i), Insmed and Therapure shall reasonably discuss in good faith Insmed’s anticipated supply requirements for ARIKACE. All such discussions shall be non-binding on both parties.

11.3.3. Insmed shall provide to Therapure:

(i) [***] months before the Commercial Manufacturing Date, an initial forecast covering the [***] month period following the Commercial Manufacturing Date; and

(ii) prior to the first day of each calendar quarter during the Term, commencing with the calendar quarter which includes the Commercial Manufacturing Date, a forecast covering a rolling [***] month period,

setting out in each case Insmed’s requirements for ARIKACE for each month during the applicable [***] month period. The forecasts under clauses (i) and (ii) above are “ Demand Forecasts ”.

11.3.4. Therapure shall accept or reject each Demand Forecast in writing to Insmed within [***] Business Days. Any rejection of a Demand Forecast by Therapure shall be accompanied by a written reason for such rejection. If Therapure fails to provide Insmed with such written acceptance or rejection within the [***] Business Day period, Therapure shall be deemed to have accepted the Demand Forecast. Therapure may only reject a Demand Forecast submitted in accordance with Section 11.3.3 if Therapure is limited by capacity restraints; provided, that the cost of any portion of the ARIKACE under a Demand Forecast rejected by Therapure shall be removed from the applicable Annual Minimum Batch Processing Fee Amount for the applicable Year. Notwithstanding the foregoing, Therapure may not reject (i) any portion of a Demand Forecast containing a previously accepted Binding Portion; or (ii) any portion of a Demand Forecast pursuant to which a Firm Portion becomes a Binding Portion so long as the applicable portion of the Demand Forecast complies with Section 11.3.6.

11.3.5. The first [***] of each Demand Forecast accepted by Therapure shall be binding on Insmed and Therapure and shall obligate Therapure to Manufacture, sell and

deliver to Insmed the specified quantity of ARIKACE, all in accordance with the terms and conditions of this Agreement (such first 6 month period, the “ Binding Portion ”).

11.3.6. The [***] of each Demand Forecast accepted by Therapure shall be semi-binding on Insmed and Therapure in accordance with this Section 11.3.6 (such second [***] period, the “ Firm Portion ”). The forecasted quantity of ARIKACE for [***] of each Demand Forecast (i) shall not vary (either up or down) by more than the greater of (x) [***] percent or (y) [***], for any such month in any subsequent Demand Forecast and (ii) may not be changed in Demand Forecasts more than [***] times while in such firm period.

11.3.7. The [***] of each Demand Forecast are non-binding on both Parties and not subject to any forecasting restrictions but should represent good faith estimates on the part of Insmed.

11.3.8. An example of the Demand Forecast described in Section 11.3 is set out in Schedule D and is provided by way of example only.

11.4. Production and Inventory Report . Therapure shall provide Insmed with monthly reports documenting year-to-date production and Inventory promptly following the date which it becomes generally available to Therapure, which shall include, to the extent available, the following information: (i) lot number; (ii) planned release month; (iii) FDA, Health Canada or EMA submission or planned submission date; (iv) release date; (v) expiration dates of ARIKACE; and (vi) vials available.

11.5. Right to Observe . Insmed shall be entitled to have a representative present at any time to observe, but not to participate in, production, testing, quality control and assurance or other activities associated with the Manufacture and release of ARIKACE, provided such representative not interfere with the operations of Therapure. Insmed shall provide as much advance notice as possible to Therapure of any such visit.

11.6. Problems with Supply . At any time during the Term, as soon as it becomes reasonably apparent to Therapure that circumstances will result in any failure or delay in delivery of any ARIKACE to continue for more than [***], Therapure shall notify Insmed as soon as possible, and Therapure shall meet with Insmed to discuss the best practical method of assuring Insmed a source of supply of such ARIKACE, as applicable, during the continuance of such circumstances; provided, however, that during such circumstances, Therapure shall continue to use reasonable commercial efforts to prioritize and/or allocate space and capacity within the Facility to manufacture ARIKACE for Insmed.

ARTICLE 12
PRICE; INVOICING; DELIVERY

12.1. Price .

12.1.1. Subject to this Agreement, Insmed shall pay a fee (the “ cGMP Process Validation Performance Run Fee ”) per Batch for the three [***] kilogram cGMP validation batches (each, a “ Registration Batch ”) as set out in Schedule A for the processing of each Registration Batch and its associated analytical testing. The Batch Processing Fee to be paid by Insmed will be determined by Therapure [***] days following completion of the third Registration Batch; provided, however, that if the Batch Processing Fee so determined is outside the margin of plus or minus [***] percent of the cGMP Process Validation Performance Run Fee other than as a result of a change made at the request of Insmed to the scope of work to be performed by Therapure, then Insmed may terminate this Agreement without any additional payment by giving notice to Therapure in the manner provided in Section 24.1.

12.1.2. The Release Testing Fee to be paid by Insmed will be determined by the parties [***] days following completion of the third Registration Batch.

12.1.3. The Batch Processing Fee to be paid by Insmed shall not include the cost of the Amikacin or the Excipients. Insmed shall supply the Amikacin and the Excipients to Therapure at no cost.

12.1.4. The Batch Processing Fees, the Release Testing Fees and the Annual Minimum Batch Processing Fee Amount shall be adjusted annually beginning on the anniversary of the Effective Date, by an amount equal to the [***].

12.2. Invoicing and Payment .

12.2.1. Therapure shall invoice Insmed for:

(i) ARIKACE, on the Batch Release Date, and, subject to Section 12.2.3, Insmed shall pay Therapure within [***] days of each Batch Release Date, with any late payment subject to the late payment fee set out in Section 12.2.2;

(ii) amounts due to third parties in connection with goods and services provided, on a monthly basis at the G&A Cost, and Insmed shall pay Therapure within [***] days of invoice by Therapure, with any late payment subject to the late payment fee set out in Section 12.2.2; and

(iii) Manufacturing Materials, as they are procured at the G&A Cost, and Insmed shall pay Therapure within [***] days of invoice by Therapure, with any late payment subject to the late payment fee set out in Section 12.2.2.

12.2.2. Payments shall be made in United States Dollars by electronic fund transfer to an account specified by Therapure or by other means agreed to by Therapure and Insmed. Each invoice shall be payable by Insmed in accordance with the terms noted above. If payment in full in respect of any invoice is not made on the required invoice payment date, Insmed shall pay a late fee in an amount equal to 1.5 percent per month calculated for the period during which payment is late, multiplied by the invoice balance remaining unpaid on the required invoice payment date. The amount of the late fee shall cumulate until paid in full.

12.2.3. Insmed shall have no obligation to pay for non-conforming ARIKACE that is subject to an unresolved Notice of Non-Conformity under Section 13.2.3, and such ARIKACE shall be excluded in determining whether Therapure has satisfied its obligations hereunder, including without limitation its obligation to timely deliver ARIKACE under Section 12.3.1.

12.3. Delivery .

12.3.1. Therapure shall deliver ARIKACE to Insmed Ex-Works (Therapure’s facilities in Mississauga, Ontario) pursuant to Incoterms 2010 within [***] of the required delivery date (the “ ARIKACE Delivery Deadline ”); provided, however, that Therapure shall not deliver ARIKACE, in whole or in part, prior to Insmed’s acceptance (or deemed acceptance) of the Batch of ARIKACE in accordance with the procedure described in Section 13.2.3.

12.3.2. If, following acceptance (or deemed acceptance) by Insmed of the Batch of ARIKACE in accordance with the procedure described in Section 13.2.3, Therapure fails to deliver ARIKACE in accordance with Section 12.3.1, and such failure is attributable to an act or omission of Therapure, for every [***] past the ARIKACE Delivery Deadline that ARIKACE has not been so delivered by Therapure, Insmed shall receive a credit equal to [***] percent of the Batch Processing Fee payable for such ARIKACE. By way of example only, Insmed shall receive:

(i) if Therapure delivers a Batch of ARIKACE, in whole or in part, within [***] of the ARIKACE Delivery Deadline, no credit;

(ii) if Therapure delivers a Batch of ARIKACE, in whole or in part, within [***] to [***] of the ARIKACE Delivery Deadline, a credit equal to [***] percent of the Batch Processing Fee payable for such ARIKACE; and

(iii) if Therapure delivers a Batch of ARIKACE, in whole or in part, within [***] to [***] of the ARIKACE Delivery Deadline, a credit equal to [***] percent of the Batch Processing Fee payable for such ARIKACE.

The applicable Annual Minimum Batch Processing Fee Amount shall also be reduced by any credit Insmed receives in the applicable Year pursuant to this Section 12.3.2.

12.3.3. Insmed agrees to take delivery of, and pay for, in accordance with this Agreement, all quantities of ARIKACE Manufactured by Therapure, according to Purchase Orders, provided that Insmed accepts (or is deemed to accept) the Batches of ARIKACE in accordance with the procedure described in Section 13.2.3.

12.3.4. All liability for ARIKACE shall pass to Insmed upon delivery by Therapure.

12.3.5. Therapure shall provide Insmed with any reasonably requested production documentation related to any delivered ARIKACE.

12.4. Storage .

12.4.1. Therapure agrees to store in its inventory (at Therapure’s expense) any ARIKACE for a period not to exceed the first calendar month anniversary of the Batch Release Date (the “ Storage Period ”). By way of example, if a Batch Release Date is May 15, the first calendar month anniversary would be June 15. If ARIKACE remains at Therapure’s warehouse after the end of the Storage Period, Therapure shall notify Insmed in writing and charge Insmed for further storage at a cost of $[***] per skid for each subsequent calendar month, or part thereof.

12.4.2. Therapure agrees to store in its inventory any Manufacturing Materials at a cost to Insmed of $[***] per skid per calendar month, or part thereof.

ARTICLE 13
QUALITY CONTROL

13.1. Quality Agreement . Insmed and Therapure agree to negotiate in good faith a quality agreement (the “ Quality Agreement ”) to be executed and delivered no later than six months from the Effective Date that will address matters relating to, without limitation, product quality and safety.

13.2. Batch Release .

13.2.1. Therapure shall Manufacture ARIKACE in accordance with (i) cGMPs or any other applicable Laws; (ii) the applicable ARIKACE Permit (including the NDA) and Facility Permit; (iii) the ARIKACE Specifications; and (iv) the requirements set out in the Quality Agreement (clauses (i) through (iv) collectively, “ Therapure’s Manufacturing Requirements ”).

13.2.2. On the Batch Release Date, Therapure shall deliver to Insmed the Batch Release Documentation for each Batch.

13.2.3. Insmed shall examine the Batch Release Documentation upon receipt in accordance with Insmed’s quality assurance program then in effect and the following shall apply:

(i) If Insmed believes any Batch or part thereof does not conform to Therapure’s Manufacturing Requirements (the “ Acceptance Criteria ”) or otherwise breaches Section 20.1(i), it shall notify Therapure in writing as soon as reasonably practicable, but in no event later than [***] of its receipt of the Batch Release Documentation, and instruct Therapure not to deliver ARIKACE. Insmed shall provide Therapure with a detailed explanation of the non-conformity. Each notice given by Insmed to Therapure under this Section 13.2.3 is referred to as a “ Notice of Non-Conformity ”. If Insmed fails to provide to Therapure a Notice of Non-Conformity within the [***] period, then Insmed shall be deemed to have accepted the Batch is conforming and waived its right to object to such conclusion.

(ii) Notwithstanding Section 13.2.3(i), Insmed shall provide notice in writing to Therapure of a Latent Defect (a “ Latent Defect Notice ”) within [***] Business Days of Insmed become aware of such Latent Defect.

(iii) Upon receipt of a Notice of Non-Conformity or a Latent Defect Notice, Therapure shall promptly investigate the Batch of any ARIKACE identified in the notice and provide written notice back to Insmed as to whether Therapure agrees with Insmed’s determination of non-conformity or Latent Defect (the “ Response to Notice of Non-Conformity ”). If Therapure fails to provide to Insmed a Response to Notice of Non-Conformity within [***] of receipt of the Notice of Non-Conformity or Latent Defect Notice, then Therapure shall be deemed to have accepted Insmed’s conclusion that the Batch of any ARIKACE is non-conforming or contains a Latent Defect, as applicable, and waived its right to object to such conclusion.

(iv) If Therapure disagrees with Insmed’s conclusion regarding non-conformity or Latent Defect, Insmed shall have the right to investigate the origin of the non-conformity or Latent Defect, as applicable, and Therapure shall give access to Insmed to any necessary documentation.

(v) If Insmed disagrees with Therapure’s conclusion regarding non-conformity or Latent Defect after an investigation pursuant to Section 13.2.3(iv), then the Batch Release Documentation shall be supplied to a mutually acceptable independent laboratory or consultant for resolution, whose determination of conformity or non-conformity or Latent Defect, and determination of the party responsible for causing such non-conformity or Latent Defect, shall be binding. The cost of the independent laboratory or consultant shall be allocated between the parties in proportion with their relative fault for the non-conforming ARIKACE; provided, however, that (i) if the independent laboratory or consultant

determines that Therapure is not responsible for causing such non-conformity or Latent Defect, Insmed shall reimburse Therapure for any reasonable expenses incurred by Therapure in connection with the procedures set out in this Section 13.2.3; and (ii) if the independent laboratory or consultant determines that Therapure is responsible for causing such non-conformity or Latent Defect, Therapure shall reimburse Insmed for any reasonable expenses incurred by Insmed in connection with the procedures set out in this Section 13.2.3.

(vi) If Insmed agrees with Therapure’s conclusion regarding non-conformity or Latent Defect, or if the independent laboratory or consultant determines in accordance with Section 13.2.3(v) that Therapure is not responsible (in whole or in part) for causing such non-conformity or Latent Defect, Insmed shall be deemed to accept, and shall be obligated to pay for the Batch of ARIKACE (in which case such amounts of ARIKACE shall be included for purposes of determining whether Therapure has satisfied its obligations hereunder, including without limitation its obligation to timely deliver ARIKACE under Section 12.3.1).

(vii) If Therapure accepts Insmed’s conclusion regarding such non-conformity or Latent Defect, or if the independent laboratory or consultant determines in accordance with Section 13.2.3(v) that Therapure is responsible (in whole or in part) for causing such non-conformity or Latent Defect, then, in either case, Insmed’s exclusive remedy (including for any breach by Therapure of Section 20.1(i), but subject to Therapure’s indemnification obligations with respect to Third Party Claims under Section 21.2) shall be, at its election, either: (i) the prompt replacement by Therapure of the non-conforming or defective ARIKACE with conforming ARIKACE at no cost to Insmed (where such replacement shall [***]), or (ii) the repayment by Therapure of the full amount of any payments, including shipping and handling costs made by Insmed for such non-conforming or defective ARIKACE; provided, however, that if the independent laboratory or consultant determines in accordance with Section 13.2.3(v) that Insmed is also responsible for causing such non-conformity or Latent Defect, the [***] shall be [***].

ARTICLE 14
TERM, TERMINATION AND SURVIVAL

14.1. Term . Unless extended or terminated early pursuant to this Article 14, the term of this Agreement shall commence on the Effective Date and, unless terminated earlier in accordance with the terms and conditions of this Agreement, shall continue:

(i) for an initial term of 5 years from the Initial Delivery Date (“ Initial Term ”); and

(ii) for successive periods of two years each (each, an “ Extension Term ”) following the expiration of the Initial Term, unless terminated by either party by not less than two years prior written notice to the other party.

14.2. Termination .

14.2.1. In addition to the termination rights set out in Sections 6.1(iii)(D) and 12.1.1, Insmed shall have the option to terminate this Agreement by giving notice to Therapure in the manner provided in Section 24.1 upon the occurrence of any of the following:

(i) Therapure’s material breach of a provision of this Agreement;

(ii) Therapure’s default under the terms of the Quality Agreement, and such default remains uncured for [***] after notice thereof by Insmed; or

(iii) in the event of insolvency of Therapure; or in the event that an involuntary or voluntary petition in bankruptcy is filed by, against, or on behalf of Therapure, and such petition shall not be dismissed within 90 days after the filing thereof; or in the event Therapure makes a general assignment for the benefit of its creditors, or a receiver or trustee is appointed for its business or property; or

(iv) for any other reason, on no fewer than 180 days notice.

14.2.2. Therapure shall have the option to terminate this Agreement by giving notice to Insmed in the manner provided in Section 24.1 upon the occurrence of any of the following:

(i) Insmed’s material breach of a provision of this Agreement;

(ii) Insmed’s default under the terms of the Quality Agreement, and such default remains uncured for [***] after notice thereof by Therapure; or

(iii) in the event of insolvency of Insmed or in the event that an involuntary or voluntary petition in bankruptcy is filed by, against, or on behalf of Insmed, and such petition shall not be dismissed within 90 days after the

filing thereof; or in the event Insmed makes a general assignment for the benefit of its creditors, or a receiver or trustee is appointed for its business or property.

14.2.3. Notwithstanding any other provision of this Agreement:

(i) in the event of a default by Therapure under Section 14.2.1(i), Therapure will have [***] after written notice thereof by Insmed to cure such default; and

(ii) in the event of a default by Insmed under Section 14.2.2(i), Insmed will have [***] after written notice thereof by Therapure to cure such default.

14.3. Failure of Technology Transfer Program Not a Breach by Therapure . The parties acknowledge and agree that Therapure does not make any guarantee nor provides any assurance that the Technology Transfer Program shall lead to any particular result or outcome. Notwithstanding any other provision of this Agreement, a failure of the Technology Transfer Program to lead to any particular result or outcome in and of itself (absent negligence or wilful misconduct on the part of Therapure) shall not constitute a breach of this Agreement by Therapure.

14.4. Effect of Termination .

14.4.1. Upon termination or expiration of this Agreement, Therapure shall:

(i) immediately cease the Manufacture of ARIKACE;

(ii) immediately deliver to Insmed any remaining ARIKACE, Amikacin, Excipients and Manufacturing Materials purchased by Insmed, subject to the provisions of Article 13;

(iii) subject to the terms and conditions of this Agreement, grant to Insmed a non-exclusive, perpetual, irrevocable, worldwide, transferable, license (with a right to sublicense through multiple tiers) to use the Intellectual Property Rights owned by or licensed to Therapure and used by Therapure in the Manufacture of ARIKACE solely to make, have made, use, offer for sale, sell, export or import ARIKACE; provided, that if this Agreement is terminated pursuant to Section 14.2.1(iv) such license shall be royalty-bearing for any patent owned by or licensed to Therapure (other than any Therapure Intellectual Property) and carry a commercially reasonable royalty rate on the net sales of ARIKACE where the Manufacture of ARIKACE would infringe such patent, and, in all other cases, shall be fully paid; provided, further that in the event of any failure to agree on the terms of such royalty, the license shall be granted on a royalty free basis

until final resolution of such dispute pursuant to Article 37 (with the royalty applied retroactively on ARIKACE Manufactured and sold following the grant of such license);

(iv) use reasonable commercial efforts to assist Insmed (at Therapure’s cost) with Insmed’s efforts to qualify an alternate site for manufacturing ARIKACE; provided, that such assistance shall be at Insmed’s cost if this Agreement is terminated pursuant to Section 14.2.1(iv), 14.2.2(i) or 14.2.2(ii);

(v) cease using the Confidential Information of Insmed and return to Insmed or destroy all copies of the Confidential Information of Insmed, except that Therapure may maintain 1 archival copy in its legal files for the sole purpose of determining its continuing obligations under this Agreement; and

(vi) transfer-back to Insmed any document relative to the Intellectual Property Rights of Insmed or any Affiliate of Insmed, provided that Insmed shall reimburse Therapure for any expenses incurred in effecting such transfer where the termination is a result of any reason other than by default by Therapure provided in section 14.2.1.

14.4.2. Upon termination or expiration of this Agreement, Insmed shall:

(i) be permitted to file an amendment under its ARIKACE regulatory applications/filings to provide for manufacturing of ARIKACE by another party at another manufacturing facility, and Therapure shall upon request use reasonable commercial efforts to assist Insmed in such efforts (including signing and delivering any documents as necessary with applicable regulatory authorities);

(ii) have the right to conduct the Manufacturing Technology Transfer pursuant to the terms of Section 6.3.1(i), provided, however that Insmed shall be responsible for all reasonable costs associated with such Manufacturing Technology Transfer if this Agreement is terminated by Therapure pursuant to Section 14.2.2;

(iii) accept for delivery any ARIKACE delivered by Therapure, subject to the provisions of Article 13;

(iv) pay all amounts owed to Therapure (including unbilled work in process) within [***] days of expiration or termination of this Agreement; and

(v) cease using the Confidential Information of Therapure and return to Therapure all copies of the Confidential Information of Therapure, except

that Insmed may maintain 1 archival copy in its legal files for the sole purpose of determining its continuing obligations under this Agreement.

14.4.3. Upon termination or expiration of this Agreement, this Agreement shall automatically and without any further action by or on behalf of either of the parties terminate and be of no further force or effect except as set out in Section 14.6. All licenses granted to Therapure shall automatically terminate upon the expiration or termination of this Agreement. No termination of this Agreement shall release or discharge the parties from any debt or liability which shall have been incurred or accrued prior to the date of such termination or which is attributable to a period prior to such termination. Upon termination of this Agreement, any payments then-owing under this Agreement shall be deemed immediately due and payable, except as may otherwise be provided herein.

14.5. Termination Payment .

14.5.1. If this Agreement is terminated pursuant to Section 6.1(iii)(D) or 14.2.1(iv) (each, a “ Termination Payment Section ”) on or after January 1, 2016, Insmed shall pay to Therapure, in immediately available funds, within [***] days of such termination, a fee equal to (x) less (y), where:

“(x)” equals the sum of (A) [***]; and (B) [***],

“(y)” equals any unused portion of the Workshop Deposit held by Therapure on the termination date.

By way of example, if this Agreement is terminated pursuant to a Termination Payment Section in [***], Insmed shall pay to Therapure a fee of [***] in immediately available funds within [***] days of such termination.

14.5.2. If this Agreement is terminated pursuant to a Termination Payment Section prior to [***], Insmed shall pay to Therapure, in immediately available funds, within [***] days of such termination, a fee equal to [***] less any unused portion of the Workshop Deposit held by Therapure on the termination date.

14.6. Survival . Termination, expiration, cancellation or abandonment of this Agreement through any means or for any reason, shall be without prejudice to the rights and remedies (which shall be cumulative) of either party with respect to any antecedent breach of any of the provisions of this Agreement. The provisions of Sections 14.3, 14.4, 14.5 and 14.6, Article 18, Article 21, Article 22 and Article 37 and any other clause which is stated to survive the termination or expiration of this Agreement shall survive expiration or termination of this Agreement. Subject to Section 14.4.2, Insmed’s obligation to purchase any ARIKACE shall terminate immediately upon the effective date of termination of this Agreement.

ARTICLE 15
INSURANCE

15.1. Therapure Insurance . Therapure shall procure and maintain, during each Manufacturing Year and for a period of at least 3 years following the expiration date of the last Batch Manufactured by Therapure, (i) Product/Completed Operations Liability Insurance in an amount not less than $5 million per claim and in the aggregate; (ii) Commercial General Liability Insurance in an amount not less than $5 million per occurrence and in the aggregate, which insurance may cover any operation of Therapure; (iii) Workers Compensation Insurance, statutory through WSIB covering work-related injuries to Therapure’s employees; (iv) Professional Liability/Errors & Omissions Liability Insurance in an amount not less than $5 million per claim and in the aggregate covering claims for losses incurred as a result of the acts, errors, or omissions of Therapure in the performance of Therapure’s obligations under this Agreement; and (v) Property Insurance coverage for Therapure’s property at the manufacturing facility required for Therapure to perform its obligations under this Agreement for such property’s full replacement cost. Therapure shall furnish Insmed a certificate evidencing its ARIKACE and Commercial General Liability Insurance. The requirements of this Section 15.1 shall be re-evaluated annually, based on Therapure’s financial condition; provided, however that the obligation of Therapure with respect to the insurance coverage set out in this Section 15.1 shall not be amended except by the mutual agreement of the parties.

15.2. Insmed Insurance . Insmed shall procure and maintain, during the Term and for a period of 3 years beyond the expiration date of ARIKACE, (i) Product/Completed Operations Liability Insurance in an amount not less than $5 million per claim and in the aggregate: (ii) Commercial General Liability Insurance in an amount not less than $5 million per occurrence and in the aggregate, which insurance may cover any or all operations of Insmed and its Affiliates: and (iii) Property Insurance covering the full replacement cost of the Amikacin and Excipients Insmed shall furnish Therapure a certificate evidencing its insurance upon written request. The requirements of this Section 15.2 shall be re-evaluated annually, based on Insmed’s financial condition; provided, however that the obligation of Insmed with respect to the insurance coverage set out in this Section 15.2 shall not be amended except by the mutual agreement of the parties.

ARTICLE 16
INTELLECTUAL PROPERTY

16.1. Insmed Intellectual Property .

16.1.1. Insmed shall solely own and retain exclusive worldwide right, title and interest in and to all proprietary or Confidential Information and all Intellectual Property Rights which it owned on and prior to the Effective Date, and it shall also own any and all Confidential Information and Intellectual Property Rights and proprietary information that are (i) improvements, derivatives or modifications to any of the foregoing and (ii) developed during the Term related to Insmed’s process.

16.1.2. Therapure hereby assigns, transfers and conveys to Insmed or its designee, all of Therapure’s worldwide right, title and interest in and to any and all inventions, works of authorship and information, including software, data, drawings, specifications, photographs and sketches, to the extent covering, claiming or relating to ARIKACE (including manufacturing process, quality control, testing or compliance procedures relating solely to ARIKACE), whether or not patentable or registrable under patent, copyright or similar laws, which Therapure (through its employees or permitted subcontractors) may solely or jointly conceive, develop or reduce to practice, or cause to be conceived, developed or reduced to practice, solely in the Manufacture of ARIKACE or which result, to any extent, from use of Insmed’s property or Insmed Materials, including its Confidential Information (collectively, the “ Insmed Intellectual Property ”), including any and all moral rights and Intellectual Property Rights inherent therein and appurtenant thereto, including, but not limited to, all patent rights, copyrights, trademarks, know-how and trade secrets. Therapure further acknowledges and agrees that all original works of authorship that are made by Therapure in the Manufacture of ARIKACE and which are protectable by copyright (and are required to be assigned above) are “works made for hire,” as that term is defined in the United States Copyright Act. Upon the request and at the reasonable expense of Insmed, Therapure shall execute and deliver to Insmed any and all documents and instruments, and do such other acts, that may be necessary or desirable to evidence the foregoing assignment and transfer and otherwise to vest in Insmed possession and control of all Insmed Intellectual Property and Intellectual Property Rights of Insmed.

16.1.3. Insmed shall grant to Therapure during the Term a non-exclusive, non-transferable, non-assignable, royalty-free limited license (with a right to sublicense only to permitted third-party subcontractors) to use the Insmed Intellectual Property and Intellectual Property Rights of Insmed solely to the extent necessary for Therapure to meet its obligations hereunder.

16.1.4. Therapure acknowledges and agrees that title to Insmed Intellectual Property shall always remain with Insmed, and that Therapure shall not acquire any interest therein except to the extent such Insmed Intellectual Property is included in the license granted to Therapure hereunder. Therapure shall not challenge, contest or otherwise impair Insmed’s ownership of Insmed Intellectual Property or the validity or enforceability of Intellectual Property Rights of Insmed therein.

16.2. Therapure Intellectual Property .

16.2.1. Notwithstanding anything to the contrary contained herein, any Confidential Information and Intellectual Property Rights and proprietary information which is developed by, or on behalf of, Therapure related to Therapure’s general business processes and the manufacturing process, quality control, testing and compliance procedures and is not Insmed Intellectual Property (collectively, the “ Therapure Intellectual Property ”) shall be solely and exclusively owned by Therapure. In no event shall Insmed challenge, contest or otherwise impair Therapure’s ownership of any of Therapure Intellectual Property or the validity of any of Therapure Intellectual Property.

16.2.2. Notwithstanding anything to the contrary contained herein and in addition to any rights granted to Insmed, Therapure shall grant to Insmed a non-exclusive, perpetual, irrevocable, transferable, fully paid, worldwide license (with a right to sublicense through multiple tiers) to use the Therapure Intellectual Property used by Therapure in the Manufacture of ARIKACE solely to make, have made, use, offer for sale, sell, export or import ARIKACE.

16.2.3. Insmed acknowledges and agrees that title to Therapure Intellectual Property shall always remain with Therapure, and that Insmed shall not acquire any interest therein except to the extent such Therapure Intellectual Property is included in the licenses granted to Insmed hereunder.

16.2.4. Insmed shall immediately give Notice to Therapure upon becoming aware of any Intellectual Property Rights infringement or imitation of any Intellectual Property Rights of Therapure or of any facts that Insmed believes might constitute infringement or imitation.

ARTICLE 17
PHARMACOVIGILENCE AND FIELD CORRECTIVE ACTIONS

17.1. Pharmacovigilence . Insmed shall deliver written notice to Therapure of any complaints it receives, directly or through an Affiliate or third party, regarding or relating to ARIKACE promptly upon receipt of such complaints by Insmed’s complaint handling unit. Therapure shall cooperate with Insmed in any necessary and appropriate investigation of any such complaint. Upon request by Insmed and at Insmed’s expense, Therapure shall conduct any necessary batch record reviews or other analysis of its Manufacturing operations for ARIKACE. Unless otherwise agreed, Therapure shall complete and deliver its written analysis to Insmed as soon as reasonably practicable, giving due consideration to any potential reporting requirements imposed by Governmental or Regulatory Authorities. Insmed shall be responsible for reporting any and all complaints relating to ARIKACE to any applicable Governmental or Regulatory Authorities requiring the filing of such reports. Such reporting shall be made in compliance with all applicable Laws. Therapure shall give prompt (and in any event within [***]) written notice to Insmed of complaints it receives regarding or relating to ARIKACE and provide such information and documentation to Insmed as is necessary for Insmed to evaluate such complaints with respect to Insmed’s existing inventory and previously distributed ARIKACE. Insmed shall reimburse Therapure for the direct costs it incurs in connection with any investigation or review pursuant to this Section 17.1, unless the circumstances giving rise to the such investigation or review are attributable to the acts or omissions of Therapure.

17.2. Field Corrective Actions .

17.2.1. The parties hereby acknowledge and agree that field corrective actions, market withdrawals and/or recalls may be initiated by a Governmental or Regulatory Authority or by Insmed. Each party shall promptly notify (and in any event, within [***]) the other party of all facts or circumstances which could precipitate the need for implementing a field corrective action, market withdrawal and/or recall (“ Corrective Action ”) with respect to ARIKACE. Such facts or circumstances may include product complaints received by a party or

other information regarding ARIKACE which comes to the attention of a party, including information regarding the Manufacturing process or its output. Reported information shall include, but not be limited to:

(i) the date the information was received;

(ii) lot number(s); and

(iii) the reported terms(s) seriousness, and any other relevant outcome information.

17.2.2. Therapure shall make available any necessary batch records or other analysis of its Manufacturing operations for ARIKACE which may be necessary in order for Insmed to fully investigate the matter. Neither party shall unreasonably withhold any information from the other party involving patient safety, efficacy of ARIKACE or efficacy of a Corrective Action. Insmed shall develop and issue any statements to be made to any third parties (including, without limitation, Governmental or Regulatory Authorities or the general public) relating to a Corrective Action in compliance with all applicable Laws and shall provide Therapure with reasonable opportunity for review prior to the publication or release of such statements.

17.3. Correction Costs .

17.3.1. In the event that a Corrective Action or like procedures are necessary, each party shall cooperate fully with the other to ensure expeditious completion of such Corrective Action in compliance with all applicable Laws.

17.3.2. Subject to Section 17.3.3:

(i) if a Corrective Action relates to a Manufacturing Defect caused by Therapure (including any failure to follow any ARIKACE SOP or Master Batch Record), Therapure shall be responsible for complying with Section 13.2.3(vii) and paying reasonable costs and expenses directly related to the Corrective Action (the “ Correction Costs ”), which the parties agree shall be no greater than the greater of (x) the [***]; and (y) the [***];

(ii) if a Corrective Action relates to design, marketing, distribution, production or handling by Insmed of ARIKACE or any Manufacturing Defect primarily caused by an act or omission of Insmed, including defects in the Amikacin, the Excipients or the Manufacturing Materials, Insmed shall be responsible for and pay all Correction Costs; and

(iii) if a Corrective Action relates to a failure by Therapure to maintain the Workshop in a state of GMP compliance, Therapure shall be responsible for and pay all costs and expenses related to bringing the Workshop into a state of GMP compliance.

17.3.3. In the event that a Corrective Action has been caused by or contributed to by the fault of both Therapure and Insmed, the responsibility for and payment of the Correction Costs shall be apportioned among the parties in proportion to the degree of fault by Therapure and Insmed in causing the Corrective Action.

17.3.4. In the event that Correction Costs are incurred by a party that are paid by the other party, the responsible party shall reimburse the incurring party for any such reasonable Correction Costs within [***] days of receipt of a bill from the incurring party for such Correction Costs.

17.4. Compliance . The obligations of Therapure and Insmed set out in this Article 17 are intended to comply with the applicable Laws relating to Manufacture, release and distribution of ARIKACE. The requirements of this Article 17 shall therefore be construed and interpreted to comply with all such Laws. To the extent provisions of this Article 17 do not adequately reflect any such Law such provisions shall be revised to the extent reasonably necessary to make such provisions legal and valid in accordance with such Laws.

ARTICLE 18
CONFIDENTIAL INFORMATION, NONDISCLOSURE, PUBLICITY AND NON-SOLICITATION OF EMPLOYEES

18.1. Confidentiality .

18.1.1. Each of Therapure and Insmed shall (and shall use its best efforts to cause each of its respective Affiliates and representatives to) keep confidential and not disclose to any other person or entity or use for its own benefit, or the benefit of any other person or entity, any Confidential Information. Each of Insmed or Therapure shall be responsible for any breach of this Article 18 by any of the Insmed Representatives or any of the Therapure Representatives, as applicable.

18.1.2. The parties may disclose Confidential Information solely to the extent required by any Governmental or Regulatory Authority having jurisdiction over that party asserting a right to obtain such information, including, without limitation, where disclosure is required to be made for the purpose of obtaining regulatory approvals in any jurisdiction; provided, however, that prior to any disclosure pursuant to this Section 18.1.2 (except where such disclosure is required to be made to a Governmental or Regulatory Authority in order for such Disclosing Party to obtain regulatory approvals in any jurisdiction), the Disclosing Party shall promptly advise the other party in the event of any request by a Governmental or Regulatory Authority or other Governmental or Regulatory Authority for the Confidential Information and shall cooperate with the other party to assert any right of objection to such

request or to seek a protective order or to take other appropriate action to protect the Confidential Information, except as otherwise prohibited by Law.

18.1.3. Notwithstanding anything in this Agreement to the contrary, each of the parties shall not disclose the other party’s or any of its respective Affiliates’ Confidential Information of the type set out in the Demand Forecast to the other party or its respective Representatives other than those production personnel or Representatives who need to know such Confidential Information.

18.2. Limitation of Disclosure . The parties agree that, except as otherwise may be required to be disclosed by law, order or regulation of a court or tribunal or Governmental or Regulatory Authority, no information concerning this Agreement and the transactions contemplated herein shall be made public by either party without the prior written consent of the other.

18.3. Public Announcements . Therapure and Insmed shall consult with each other before issuing, and give each other the opportunity to review and comment upon, any press release or other public statements with respect to the announcement of the transactions contemplated by this Agreement, and shall not and shall cause their respective Therapure Representatives or Insmed Representatives not to issue any such press release or make any such public statement prior to such consultation, except as such party may reasonably conclude may be required by applicable Law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national securities quotation system.

18.4. Non-Solicitation of Employees . During the Term: (i) Insmed agrees that, without the prior written consent of Therapure, neither Insmed nor any Insmed Representative shall (or shall assist or encourage others to), directly or indirectly, solicit to hire or cause or seek to cause to leave the employ of Therapure or any of its Affiliates any person who is then employed by Therapure or any of its Affiliates; (ii) Therapure agrees that, without the prior written consent of Insmed, neither Therapure nor any Therapure Representative (which, for the purposes of this Section 18.4, does not include Affiliates of Therapure) shall (or shall assist or encourage others to), directly or indirectly, solicit to hire or cause or seek to cause to leave the employ of Insmed or any of its Affiliates any person who is then employed by Insmed or any of its Affiliates; provided that general solicitations in electronic or written media or hiring as a result thereof, shall not constitute a breach of this Section 18.4.

ARTICLE 19
GOVERNMENTAL OR REGULATORY AUTHORITY INSPECTIONS AND NOTICES

19.1. Governmental or Regulatory Authority Inspections . Each party shall promptly (within [***] Business Days) notify the other party of any notices of inspection, request for records or other documentation received from a Governmental or Regulatory Authority which are related to the Manufacture of ARIKACE and shall have final authority and responsibility for submitting responses to the observations; provided, that Therapure shall, to the extent reasonably practicable, (i) provide Insmed with the ability to review and comment on any draft responses

and (ii) incorporate any comments from Insmed. Responses to the observations shall be made in accordance with all applicable Laws and requirements of the Governmental or Regulatory Authority. The responding party shall inform the other of the results of any such inspection and provide a copy of any report or other written communication received or submitted in connection with such inspection. Therapure will allow the EMA, FDA, Health Canada or other applicable Governmental or Regulatory Authority to perform reasonable inspections and audits of the Facility to ensure compliance with applicable Laws.

19.2. Governmental or Regulatory Authority Notices . To the extent allowed or consented to by Law, Therapure shall promptly (within [***] Business Days) notify Insmed of any subpoena, civil investigative demand, or similar request for records or other documentation received from a Governmental or Regulatory Authority regarding ARIKACE and allow Insmed the opportunity to seek a protective order at the discretion and cost of Insmed.

ARTICLE 20
REPRESENTATIONS, WARRANTIES AND COVENANTS

20.1. Therapure’s Representation and Warranty . Therapure represents, warrants and covenants as follows:

(i) that at the time of Manufacture, ARIKACE shall conform to ARIKACE Specifications and shall be Manufactured in accordance with Therapure’s Manufacturing Requirements;

(ii) during the Term, Therapure shall comply with and shall take no action that would cause it to be in violation of applicable Laws, including but not limited to the FCPA, US Export Control Laws and Anti-Corruption Laws in the Territory; further, it shall immediately notify Insmed if Therapure has any information or suspicion that there may be a violation of the FCPA or any other Anti-Corruption Law in connection with the performance of this Agreement, and shall reasonably cooperate with Insmed with respect to any investigation or audit related thereto;

(iii) it has not been debarred pursuant to the FD&C Act, excluded from a federal health care program, or debarred from federal contracting by any Governmental or Regulatory Authority in the Territory, and have not been convicted of or pled nolo contendere, to a crime that could lead to such debarment or exclusion;

(iv) it will not directly or indirectly employ, contract with or retain any person or entity, including but not limited to Manufacturing Suppliers and Vendors, to perform services under this Agreement if such person or entity is debarred pursuant to the FD&C Act, excluded from a federal health care program, or debarred from federal contracting by any Governmental or Regulatory Authority in the Territory, or has been convicted or pled nolo

contendere to a crime that could lead to such exclusion or debarment. In the event that Therapure becomes aware of or receives notice of the debarment or exclusion of any person or entity providing services to under this Agreement, then Therapure agrees to notify Insmed immediately and address the issue as directed by Insmed;

(v) that it has obtained, and shall remain in compliance during the Term with all applicable Facility Permits which are required under applicable Laws of Governmental or Regulatory Authorities applicable to the operation of the Workshop for Manufacture of ARIKACE as set out in this Agreement;

(vi) subject to the terms and conditions of this Agreement, it shall deliver ARIKACE within [***] from the Batch Release Date;

(vii) ARIKACE delivered to Insmed shall (A) be free from any and all encumbrances, liens, security interest or other third-party claims; and (B) not be misbranded, contaminated or adulterated in violation of applicable Laws;

(viii) during the Term, Therapure shall promptly report to Insmed any development coming to its attention which may, in any way, reasonably be expected to materially affect the performance of this Agreement;

(ix) that it is duly organized and validly existing under the Laws of the Province of Ontario, and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof, and its entering into this Agreement has been duly authorized by all requisite corporate action;

(x) the execution, delivery and performance of this Agreement by Therapure does not conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by which it may be bound, nor violate any material applicable Law; and

(xi) this Agreement is legally binding upon it and enforceable in accordance with its terms.

20.2. Disclaimer of Warranties . EXCEPT FOR THOSE WARRANTIES EXPRESSLY SET OUT IN THIS AGREEMENT, NEITHER PARTY MAKES ANY OTHER WARRANTIES OR REPRESENTATIONS OF ANY KIND WHATSOEVER, WRITTEN OR ORAL, EXPRESS OR IMPLIED, STATUTORY, BY OPERATION OF LAW OR OTHERWISE, WITH RESPECT TO ARIKACE, MATERIALS PROVIDED UNDER THIS AGREEMENT OR THE MANUFACTURE OF ARIKACE AND EACH PARTY EXPRESSLY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING THE WARRANTIES OF

MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, AND SUITABILITY OF ARIKACE.

20.3. Insmed’s Representation and Warranty . Insmed represents, warrants and covenants as follows:

(i) the Insmed Intellectual Property and the technical advice and resources provided by Insmed to Therapure in respect of the Technology Transfer Program are sufficient to enable Therapure to fulfill any and all of its obligations under this Agreement, including the obligations of the Therapure in respect of the Technology Transfer Program and to Manufacture ARIKACE as contemplated by this Agreement;

(ii) Insmed has provided to Therapure all Product Information and Product Documentation necessary for Therapure to Manufacture ARIKACE and to enable Therapure to comply with any and all applicable ARIKACE Permits which are required under applicable Laws of Governmental or Regulatory Authorities;

(iii) Insmed has not received written notice alleging that the Insmed Intellectual Property directly relating to the Manufacture of ARIKACE violates, misappropriates or infringes the intellectual property rights (including patents) of a third party within the 3-year period prior to the Effective Date; and to Insmed’s knowledge there is no basis for such an allegation or litigation;

(iv) during the Term, it has the right to give Therapure any information or materials provided hereunder, and that Therapure has the right to use such information or materials for the Manufacture of ARIKACE;

(v) in connection with the performance of its obligations under this Agreement, it shall comply with all applicable Laws and, if obtained, shall remain in compliance during the Term with all applicable ARIKACE Permits which are required under applicable Laws of Governmental or Regulatory Authorities;

(vi) the Amikacin, the Excipients and the Manufacturing Materials delivered to Therapure by Insmed are, to Insmed’s knowledge (but except as disclosed to Therapure regarding the toxicity of ARIKACE pursuant to Section 5.1.3(ii)), free of hazardous or toxic components, or, if hazardous or toxic components are present, that all such risks, hazards and testing or certification of such materials, and any specific handling instructions required to handle such materials, shall have been fully disclosed by providing notice to Therapure in advance of delivery of such Amikacin, Excipients and Manufacturing Materials;

(vii) there are no actual or pending, and to Insmed’s knowledge, no alleged or threatened, adverse actions, suits, claims, or formal governmental investigations, or settlements or judgments, involving ARIKACE by or against Insmed or any of its Affiliates in or before any Governmental or Regulatory Authority. In particular, to Insmed’s knowledge, there is no pending or threatened product liability action involving the use or administration of any ARIKACE;

(viii) there is no litigation pending against Insmed that alleges that the Manufacture of ARIKACE infringes, misappropriates or otherwise violates the intellectual property rights (including patents) of a third party; Insmed has not received written notice alleging such infringement, misappropriation or violation within the 3-year period prior to the Effective Date; and to Insmed’s knowledge there is no basis for such an allegation or litigation;

(ix) during the Term, the Amikacin comply with all testing requirements under the relevant Governmental or Regulatory Authority and, when applicable, are produced in compliance with the process approved by the Governmental or Regulatory Authority under all Permits (including the NDA), and shall be delivered to Therapure in accordance with all Request Orders;

(x) during the Term, Insmed shall promptly report to Therapure any development coming to its attention which may, in any way, reasonably be expected to materially affect the performance of this Agreement;

(xi) that it is duly organized and validly existing under the Laws of the State of Virginia, and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof, and its entering into this Agreement has been duly authorized by all requisite corporate action;

(xii) the execution, delivery and performance of this Agreement by it does not conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by which it may be bound, nor violate any material applicable Law; and

(xiii) this Agreement is legally binding upon it and enforceable in accordance with its terms.

ARTICLE 21
THIRD PARTY INDEMNIFICATION

21.1. Insmed Third Party Indemnification . Insmed shall indemnify, defend and hold harmless Therapure, its Affiliates and their respective directors, officers, employees,

subcontractors, delegates, agents and Affiliates (collectively, the “ Therapure Representatives ”) from and against any and all liabilities, charges, obligations, penalties, judgments, demands, disbursements of any kind and nature, losses, damages, fines, costs and expenses (including, without limitation, reasonable attorneys’ fees), including, without limitation, property damage or personal injury (including, without limitation, death) of third parties (collectively, “ Losses ”) arising out of or resulting from any third party claims, judgments, demands, actions or suits (collectively, “ Third Party Claims ”) to the extent arising or resulting from:

(i) Insmed’s storage, promotion, labeling claim, marketing, distribution, pricing, use or sale (including resale) of ARIKACE;

(ii) any claim that the use, sale, Manufacture, marketing, packaging design, handling or distribution or use of ARIKACE by Insmed violates the Intellectual Property Rights of any third party, except to the extent such violation results from any Manufacturing Materials supplied by Therapure or Therapure Intellectual Property;

(iii) any product liability or similar claim for injury to person or property in connection with the sale, marketing, handling, or distribution of ARIKACE, except with respect to any Manufacturing Defect caused by Therapure;

(iv) any negligence or wilful misconduct by an Insmed Representative;

(v) any breach by Insmed of its representations, warranties or covenants in this Agreement; or

(vi) any failure of the Amikacin, the Excipients or the Manufacturing Materials supplied by Insmed to meet their applicable specifications,

in each case, except to the extent any of the foregoing arises out of or results from the negligence or wilful misconduct of any Therapure Representative or Therapure’s breach of its obligations under this Agreement.

21.2. Therapure Third Party Indemnification . Therapure shall indemnify Insmed, its Affiliates and their respective employees, directors, officers, subcontractors, delegates, agents and Affiliates (collectively, the “ Insmed Representatives ”) from and against any and all Losses arising out of or resulting from any Third Party Claims to the extent arising or resulting from:

(i) any product liability or similar claim for injury to person or property, solely in connection with a Manufacturing Defect caused by Therapure, in each case, except to the extent such Third Party Claims are: (A) attributable to the Amikacin or the Manufacturing Materials; (B) caused by an act or omission of a Insmed Representative; or (C) or attributable to Insmed’s instructions or specifications;

(ii) any breach by Therapure of its representations, warranties or covenants in this Agreement; or

(iii) any negligence or wilful misconduct by a Therapure Representative,

in each case, except to the extent any of the foregoing arises out of or results from the negligence or wilful misconduct of any Insmed Representative or Insmed’s breach of its obligations under this Agreement.

21.3. Procedure .

21.3.1. In the event of a Third Party Claim, then the Indemnified Party shall promptly notify the Indemnifying Party thereof in writing after becoming aware of such Third Party Claim; provided, however, that no delay on the part of the Indemnified Party in notifying the Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then only to the extent that) the Indemnifying Party is actually and materially prejudiced thereby. Such notice shall set out in reasonable detail the basis of the claim (including, if applicable, the representation, warranty or covenant alleged to have been breached), and, if estimable, the amount of such claim.

21.3.2. The Indemnifying Party shall have the right, exercisable by written notice to the Indemnified Party within [***] of receipt of notice from the Indemnified Party of the commencement of or assertion of any Third Party Claim, to assume the defense of such Third Party Claim to the extent that it involves (and continues to involve) monetary damages; provided, however, that:

(i) the Indemnifying Party expressly agrees in such notice that, as between the Indemnifying Party and the Indemnified Party, the Indemnifying Party shall be solely obligated to satisfy and discharge the Third Party Claim;

(ii) the defense of such Third Party Claim by the counsel representing the Indemnifying Party does not, in the reasonable judgment of the Indemnified Party, constitute a conflict of interest under the applicable canons or rules of legal professional ethics; and

(iii) the Indemnifying Party makes reasonably adequate provision to ensure the Indemnified Party of the ability of the Indemnifying Party to satisfy the full amount of any adverse monetary judgment that would reasonably be expected to result therefrom.

(the conditions set out in clauses (i), (ii) and (iii) above are collectively referred to as the “ Litigation Conditions ”).

21.3.3. In no event shall the Indemnifying Party have the right to control any Third Party Claim to the extent such Third Party Claim covers injunctive, criminal or other equitable relief that, if granted, would adversely affect the Indemnified Party.

21.3.4. Within [***] after the Indemnifying Party has given notice to the Indemnified Party of its intended exercise of its right to defend a Third Party Claim, the Indemnified Party shall give notice to the Indemnifying Party of any objection thereto based upon the Litigation Conditions. If the Indemnified Party so objects, the Indemnified Party shall continue to defend the Third Party Claim at the expense of the Indemnifying Party until such time as such objection is withdrawn. If no such notice is given, or if any such objection is withdrawn, the Indemnifying Party shall be entitled, at its sole cost and expense, to assume and conduct such defense, with counsel selected by the Indemnifying Party and reasonably acceptable to the Indemnified Party, until such time as the Indemnified Party shall give notice that any of the Litigation Conditions, in its reasonable judgment, are no longer satisfied.

21.3.5. During such time as the Indemnifying Party is controlling the defense of such Third Party Claim, the Indemnified Party shall cooperate, and cause its Affiliates and agents to cooperate, to the extent commercially reasonable, upon request of the Indemnifying Party in the defense or prosecution of the Third Party Claim, including by furnishing such records, information and testimony and attending such conferences, discovery proceedings, hearings, trials or appeals as may reasonably be requested by the Indemnifying Party.

21.3.6. In the event that the Indemnifying Party fails to satisfy the Litigation Conditions or does not notify the Indemnified Party in writing of the Indemnifying Party’s intent to defend any Third Party Claim within [***] days after notice thereof, the Indemnified Party may (without further notice to the Indemnifying Party) undertake the defense thereof with counsel of its choice and at the Indemnifying Party’s expense (including attorneys’ fees and costs and expenses of enforcement or defense).

21.3.7. The Indemnifying Party or the Indemnified Party, as the case may be, shall have the right to join in (including the right to conduct discovery, interview and examine witnesses and participate in all settlement conferences), but not control, at its own cost and expense, the defense of any Third Party Claim that the other party is defending as provided in this Agreement.

21.3.8. The Indemnifying Party, if it shall have assumed the defense of any Third Party Claim as provided in this Agreement, shall not consent to a settlement of, or the entry of any judgment arising from, any such Third Party Claim without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed), provided, however, that the Indemnifying Party may settle claims involving solely monetary damages without the consent of the Indemnified Party if a full release of the Indemnifying Party is obtained with respect to such claims. The Indemnifying Party shall not, without the prior written consent of the Indemnified Party, not to be unreasonably withheld, enter into any compromise or settlement which commits the Indemnified Party to take, or to forbear to take, any action. The Indemnified Party shall have the right to settle any Third Party Claim, on such terms and

conditions as it deems reasonably appropriate, to the extent such Third Party Claim involves equitable or other non-monetary relief; provided, however, the Indemnified Party shall not, without the prior written consent of the Indemnifying Party (which consent shall not to be unreasonably withheld, conditioned or delayed) enter into any compromise or settlement that would adversely affect the Indemnifying Party. The Indemnifying Party’s indemnity obligation shall be reduced by the any amounts the Indemnified Party receives or shall receive from any third party, including an insurance carrier, for the Losses.

ARTICLE 22
LIMITATION OF LIABILITY

22.1. Limitation of Liability .

22.1.1. Subject to Section 22.1.2 and to Sections 5.1.1.2(vi) and 13.2.3(vii) (which shall be Insmed’s exclusive remedy with respect to claims related thereto), the maximum aggregate liability of Therapure for all claims, judgments, demands, actions or suits arising under, out of or related to this Agreement, including the services contemplated hereby and any claims whether in contract, tort, strict liability, in equity or otherwise, shall be strictly limited to:

(i) for [***], the [***];

(ii) for [***], the [***]; and

(iii) for [***], the [***].

22.1.2. Notwithstanding anything to the contrary, the exclusive remedies set forth in Section 5.1.1.2(vi) and Section 13.2.3(vii) and the limitations and exclusions set forth in Section 22.1.1 shall not apply:

(i) in the case of, (A) gross negligence, wilful misconduct or fraud by Therapure, or (B) any material breach by Therapure of its confidentiality or non-use obligations under Section 18.1 and 18.2; or

(ii) to Therapure’s third party indemnification obligations under Section 21.2.

22.1.3. EXCEPT FOR:

(i) TERMINATION PAYMENTS UNDER SECTION 14.5;

(ii) DAMAGES AVAILABLE FOR A PARTY’S BREACH OF ITS CONFIDENTIALITY OBLIGATIONS UNDER ARTICLE 18; OR

(iii) AMOUNTS ACTUALLY PAID TO A THIRD PARTY AND A PARTY’S ACTUAL COSTS INCURRED IN CONNECTION WITH DEFENDING A THIRD PARTY CLAIM TO THE EXTENT, IN EITHER CASE, THAT A PARTY IS OBLIGATED TO INDEMNIFY THE OTHER UNDER ARTICLE 21,

IN NO EVENT SHALL EITHER PARTY BE LIABLE UNDER ANY LEGAL THEORY, WHETHER IN CONTRACT OR TORT OR PRODUCTS LIABILITY OR OTHERWISE, FOR ANY INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES, INCLUDING DAMAGES FOR LOSS OF BUSINESS PROFITS, BUSINESS LOSSES, BUSINESS INTERRUPTION, WORK STOPPAGE, LOSS OF DATA, LOSS OF GOODWILL, AND ANY OF THE LIKE), WHETHER FORESEEABLE OR NOT, THAT ARE IN ANY WAY RELATED TO THIS AGREEMENT.

ARTICLE 23
FORCE MAJEURE

23.1. Force Majeure . Neither party shall be held liable or responsible to the other party for failure to perform or for delays in performing any obligation under this Agreement if such failure or delay is caused by acts of God, fires, strike, epidemics, lockout or other industrial dispute, embargoes, war (whether or not declared), riot, rebellion, insurrections, or other similar events, or other causes beyond the reasonable control and without the fault or negligence of the party so affected to the extent it disproportionately affects the industry in which Insmed or Therapure operates or the processes hereunder (a “ Force Majeure ”); provided that such affected party promptly notifies the other party of the nature of the Force Majeure and provides an estimate of its expected duration and impact on the performance of such party’s obligations under this Agreement. The party affected by such Force Majeure shall exercise reasonable commercial efforts to (i) overcome the Force Majeure and (ii) mitigate or limit damages to the non-affected party. For clarification, any action by a Governmental or Regulatory Authority or FDA, Health Canada or EMA, including the shutdown of a Therapure’s Facility or the Workshop by the FDA or other Governmental or Regulatory Authority (other than any shutdown due primarily to the fault or negligence of Therapure) shall constitute a Force Majeure, provided such action also limits the production, sales or commercialization ability of a significant number of similarly situated participants in the industry in which Therapure or Insmed operates. If any Force Majeure continues for a period of [***] or more, the party that is not subject to the Force Majeure event shall have the right to terminate this Agreement upon [***] days prior notice to the other.

ARTICLE 24
NOTICES

24.1. Notices . All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed given if (i) delivered personally, (ii) by telecopy (which transmission is confirmed electronically), or (iii) sent by overnight courier (providing proof of delivery) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

If to Therapure:		Copy to (which copy shall not constitute notice to Therapure):

Therapure Biopharma Inc. 2585 Meadowpine Blvd., Mississauga, Ontario, Canada L5N 8H9		Gowling Lafleur Henderson LLP 1 First Canadian Place 100 King Street West Suite 1600 Toronto, Ontario, M5X 1G5

Attention: Brian Fielding, Chief Financial Officer and Elaine dos Santos, Law Clerk Telephone: [*] Email: [] Email: [**]		Attention: Vanessa Grant Telephone: [*] Email: [*]

If to Insmed:		Copy to (which copy shall not constitute notice to Insmed):

Insmed Incorporated 9 Deer Park Drive, Suite C Monmouth Junction, NJ 08852		Insmed Incorporated 9 Deer Park Drive, Suite C Monmouth Junction, NJ 08852

Attention: Christine Pellizzari, Corporate Counsel Telephone: [*] Email: [*]		Attention: Peter Clarke, PhD, Vice President, Technical Operations Telephone: [*] Email: [*]

Notices shall be effective upon receipt if personally delivered, on the day following the date of transmission if sent by facsimile, and on the second business day following the date of delivery to the overnight delivery service if sent by overnight delivery. A party may change its address listed above by notice to the other party.

ARTICLE 25
APPLICABLE LAW

25.1. Applicable Law . This Agreement shall be deemed to be made in and in all respects shall be construed and interpreted and the rights granted herein governed in accordance with the laws of the State of New York, regardless of any laws or principles of conflicts of laws or rules that would cause the application of the laws of any jurisdiction other than the State of New York. Subject to Section 37.1.2, the parties hereby irrevocably submit exclusively to the jurisdiction of the U.S. District Court for the Southern District of New York, unless such court declines the exercise of jurisdiction, in which case the courts of the State of New York located in the County, City and State of New York (and, in each case, any appellate court therefrom), solely in respect of the interpretation and enforcement of the provisions of this Agreement and of the documents referred to in this Agreement, and in respect of the transactions contemplated hereby, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof or of any such document, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in said courts or that the venue thereof may not be appropriate or that this Agreement or any such document may not be enforced in or by such courts, and the parties irrevocably agree that all claims with respect to such action or proceeding shall be heard and determined in said courts. Subject to Section 37.1.2, the parties hereby consent to and grant any such court jurisdiction over the person of such parties and over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 24.1 or in such other manner as may be permitted by law shall be valid and sufficient service thereof. Any process or other papers hereunder may be served by registered or certified mail, return receipt requested, or by personal service, provided that a reasonable time for appearance or response is allowed.

EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT:

(i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER;

(ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER;

(iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY; AND

(iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATES IN THIS Article 25.

25.2. Vienna Convention . The United Nations Convention on Contracts for the International Sale of Goods (also called the Vienna Convention, and which is cited in the statutes of Canada as the International Sale of Goods Contracts Convention Act ) will not apply to this Agreement or the transactions contemplated by this Agreement.

ARTICLE 26
DOCUMENTS INCORPORATED BY REFERENCE

26.1. Documents Incorporated by Reference . The following documents shall be specifically incorporated herein by reference and made a part hereof:

(i) the Schedules identified in this Agreement;

(ii) the ARIKACE Specifications; and

(iii) the Quality Agreement.

ARTICLE 27
ASSIGNMENT

27.1. Assignment .

27.1.1. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, transferred, delegated or otherwise disposed of (whether voluntarily or involuntarily, directly or indirectly, by operation of law, merger, sale of stock, sale of assets or otherwise), by either party without the prior written consent of the other party, which consent shall not be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, either party may, without the prior consent of the other party, assign, transfer, delegate or otherwise dispose of, this Agreement, or any of its rights, interests or obligations hereunder to:

(i) any Affiliate of such party, provided, that no such assignment shall relieve the assigning party from any of its obligations hereunder; or

(ii) any successor in connection with a Change of Control of such party, provided that (A) the successor assumes this Agreement in writing or by operation of law, and (B) if such assignment is in writing, such party delivers prompt written notice of such assignment to the other party.

27.1.2. Any purported assignment of this Agreement in violation of Section 27.1.1 shall be null and void.

27.1.3. The terms and conditions of this Agreement shall be binding on and inure to the benefit of the permitted assigns and successors of the parties.

ARTICLE 28
FURTHER ASSURANCES

28.1. Further Assurances . Each party agrees to execute and deliver any and all such other and additional instruments and documents to do any and all such other acts and things as may be necessary or expedient to effectuate more fully this Agreement and to carry out the business contemplated by this Agreement.

ARTICLE 29
TAXES

29.1. Taxes .

29.1.1. All amounts payable by Insmed to Therapure under this Agreement are exclusive of applicable Commodity Taxes, if any. Insmed and Therapure agree to provide a valid exemption certificate to claim exemption from applicable Commodity Taxes under where required under applicable Law. Insmed shall pay all Commodity Taxes payable in respect of the export or import of the Amikacin or purchase of ARIKACE pursuant to this Agreement, and in respect of the subsequent export, import, sale or distribution of ARIKACE by Insmed (or at Insmed’s Expense, defend against the imposition of such taxes and expenses). Insmed shall act as exporter and importer of record of the Amikacin. Therapure shall notify Insmed of any such taxes that any Governmental or Regulatory Authority requires Therapure to collect from Insmed, and Insmed may assume the defense thereof in Therapure’s name, and Therapure agrees to fully cooperate in such defense to the extent of the capacity of Therapure, at Insmed’s Expense. Therapure shall pay all Canadian federal income, provincial, municipal or other taxes imposed on Therapure’s net income resulting from the Manufacture by Therapure of ARIKACE for Insmed under this Agreement.

29.1.2. All amounts payable by Insmed to Therapure under this Agreement shall be made free and clear of, and without deduction or withholding for, any present or future Taxes. If any Taxes are so levied or imposed, Insmed agrees to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every payment of all amounts due under this Agreement, after withholding or deduction for or on account of any Taxes, shall not be less than the amount otherwise required to be paid.

ARTICLE 30
ENTIRE AGREEMENT

30.1. Entire Agreement . This Agreement (along with the Quality Agreement and all documents specifically incorporated herein by reference and made a part hereof) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements or understandings, both written and oral (including the Confidentiality

Agreement and the Heads of Agreement), with respect to such subject matter (including any letter of intent or term sheet). No party hereto has made any representation or warranty or given any covenant to another party hereto except as set out in this Agreement.

ARTICLE 31
SEVERABILITY

31.1. Severability . It is the intention of the parties hereto that the provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions of this Agreement. It is the intention of the parties hereto that if any provision of this Agreement, or the application thereof to any person, entity or circumstance, is invalid or unenforceable, (i) a suitable and equitable provision shall be substituted herefor in order to carry out, so far as the may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (ii) the remainder of this Agreement and the application of such provision to other persons, entities or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction.

ARTICLE 32
AMENDMENT AND WAIVER OF AGREEMENT

32.1. Amendment and Waiver of Agreement . This Agreement may not be amended, supplemented or otherwise modified, except upon the execution and delivery of a written agreement by the parties hereto. By an instrument in writing, the parties may waive compliance by the other party hereto with any provision of this Agreement; provided, however, that any such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure or with respect to a party hereto that has not executed and delivered any such waiver. No failure to exercise and no delay in exercising any right, remedy, or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, or power hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy or power provided herein or by law or at equity.

ARTICLE 33
INDEPENDENT CONTRACTOR

33.1. Independent Contractor . From and after the Effective Date, Therapure shall act as an independent contractor for Insmed or any of its Affiliates, as the case may be, in providing the services required hereunder and shall not be considered an agent, partner or joint venturer with Insmed or any of its Affiliates.

ARTICLE 34
COUNTERPARTS

34.1. Counterparts . This Agreement may be executed in counterparts, each of which shall constitute an original and all of which together shall constitute one and the same instrument. This Agreement may be executed by fax or other electronic transmission with the same binding effect as original ink signatures.

ARTICLE 35
INTERPRETATION

35.1. Interpretation . When a reference is made in this Agreement to sections, such reference shall be to a Section of this Agreement unless otherwise indicated. Headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the word “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”. This Agreement shall not be construed for or against any party hereto by reason of the authorship or alleged authorship of any provision hereof or by reason of the status of the respective parties hereto. For all purposes of this Agreement, words stated in the singular shall be held to include the plural and vice versa, and words of one gender shall be held to include each other gender, as the context may require or allow. The terms “hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole (and not to any particular provision of this Agreement). The word “or” shall not be exclusive.

ARTICLE 36
NO THIRD PARTY BENEFICIARIES

36.1. No Third Party Beneficiaries . Other than as contemplated in Article 21, this Agreement is not intended to and does not confer upon any person or entity other than the parties hereto any legal or equitable rights or remedies.

ARTICLE 37
DISPUTE RESOLUTION

37.1. Dispute Resolution .

37.1.1. Prior to initiating any arbitration proceeding relating to any disputes arising from or in connection with this Agreement or any transaction contemplated hereby, including any question regarding its existence, validity, or termination (any such dispute, a “ Controversy ”), the parties shall attempt in good faith to resolve such Controversy promptly by negotiations between executives who have authority to settle the Controversy and who are at a higher level of management than the persons with direct responsibility for the issues in Controversy; provided, however, that notwithstanding this Section 37.1.1, any Controversy regarding non-conforming ARIKACE or Latent Defects shall be finally resolved in accordance with Section 13.2.3. All such negotiations shall take place in New York, New York, or such

other location as may be agreed upon by the parties. Either party may give the other party written notice of any such Controversy at any time. Within [***] after delivery of this notice, the receiving party shall submit to the other a written response. The notice and the response shall include: (i) a statement of the party’s position; and (ii) the name and title of the executive who shall represent that party and of any other person (who shall, unless otherwise agreed to by the parties, not be serving in their capacity as inside or outside counsel to the parties) who shall accompany the executive. Within [***] after delivery of the notifying party’s notice, the executives of both parties shall meet and thereafter meet as often as they both reasonably deem necessary, to attempt to resolve the Controversy. All negotiations pursuant to this clause are confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence. In the event that such Controversy is not resolved within a [***] period after delivery of the initial notice or such longer period to which the parties agree in writing, either party shall be free to proceed to arbitrate such Controversy in accordance with Section 37.1.2.

37.1.2. Subject to Section 37.1.1, all Controversies, including any question as to whether a particular Controversy is arbitrable hereunder, shall be referred to and finally resolved by binding arbitration under the Commercial Arbitration Rules of the American Arbitration Association by three arbitrators appointed in accordance with said Rules, with the two co-arbitrators having [***] days from the appointment of the second arbitrator to nominate the chair. The place of arbitration shall be New York, New York, and the language to be used in the arbitral proceedings shall be English. Judgment upon the award may be entered by any court having jurisdiction as set out in Section 25.1. Except to the extent necessary to confirm an award or as may be required by law, neither party nor any arbitrator may disclose the existence, content, or results of an arbitration without the prior written consent of both parties. The arbitration tribunal shall determine the legal costs. This Section 37.1.2 applies equally to requests for temporary, preliminary or permanent injunctive relief, except that in the case of temporary or preliminary injunctive relief, any party may proceed in court without prior arbitration for the limited purpose of avoiding immediate and irreparable harm. The provisions of this Section 37.1.2 shall be enforceable in any court of competent jurisdiction. Following all permitted discovery and in accordance with procedures otherwise determined by the arbitrator, each party shall prepare a written report setting forth its final position with respect to the substance of the Controversy. The parties agree that they will use reasonable commercial efforts to complete the arbitration as expeditiously as possible. Judgment upon the award rendered by such arbitrator shall be binding on the parties and may be entered by any court having jurisdiction thereof.

ARTICLE 38
EXPENSES

38.1. Expenses . Except as otherwise provided in this Agreement, each party shall pay its own expenses and costs incidental to the preparation of this Agreement and to the consummation of the transactions contemplated hereby.

ARTICLE 39
USE OF NAME

39.1. Use of Name . Neither party may use the name of the other party for any advertisement, publicity or any other reason unless such use has been approved in writing or by email by legal counsel of such party (or such other person that the Chief Executive Officer of such party may designate in writing) prior to use or publication.

ARTICLE 40
AUTHORITY

40.1. Authority . The parties executing this Agreement on behalf of Insmed and Therapure represent and warrant that they have the authority to enter into this Agreement and to bind their respective companies to all the terms and conditions of this Agreement.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGE TO FOLLOW]

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be signed by their duly authorized representatives as of the date first written above.

	THERAPURE BIOPHARMA INC.

	By:	/s/ Nicholas Green
		Name: Nicholas Green
		Title: President & CEO

	By:	/s/ Brian Fielding
		Name: Brian Fielding
		Title: VP Finance & CFO

	INSMED INCORPORATED

	By:	/s/ Matthew Pauls
		Name: Matthew Pauls
		Title: Chief Commercial Officer

SCHEDULE A

TECHNOLOGY TRANSFER ACTIVITIES QUOTE

[See attached.]

[***]

SCHEDULE B

PROCESS FLOW DIAGRAM

[See attached.]

[***]

SCHEDULE C

MINIMUM COMMITMENTS

Year

[***]

[***] and
Beyond

Annual Minimum Batch Processing Fee Amount (Dollars)

[***]

Per Section 6.1, by way of example only, and using hypothetical assumptions:

If in [***]: (i) Annual Minimum Batch Processing Fee Amount was $[***] and (ii) actual aggregate Batch Processing Fee paid by Insmed was $[***] for such Year, then the True-Up Payment payable by Insmed to Therapure for such Year shall be equal to $[***]; provided, however, that [***] percent of the cost of the Clean Room Consumables (or $[***], assuming the cost of the Clean Room Consumables was $[***]) and, if Therapure is able to its sole satisfaction to reallocate the Allocated Minimum Batch Labour, [***] percent of the cost of the Reallocated Minimum Batch Labour (or $[***], assuming the cost of the Reallocated Minimum Batch Labour was $[***]) shall be credited against the True-Up Payment, such that the True-Up Payment would be reduced to $[***].

Additional Indication Approved in [***]

If in [***] an additional Indication is approved, the Annual Minimum Batch Processing Fee Amount for [***] would automatically be increased to $[***]. Consequently, if the actual aggregate Batch Processing Fee paid by Insmed is $[***] for [***], then the True-Up Payment would be $[***]; provided, however, that [***] percent of the cost of the Clean Room Consumables (or $[***], assuming the cost of the Clean Room Consumables was $[***]) and, if Therapure is able to its sole satisfaction to reallocate the Allocated Minimum Batch Labour, [***] percent of the cost of the Reallocated Minimum Batch Labour (or $[***], assuming the cost of the Reallocated Minimum Batch Labour was $[***]) shall be credited against the True-Up Payment, such that the True-Up Payment would be reduced to $[***].

Additional Indication Approved in [***]

If in [***] an additional Indication is approved, the Annual Minimum Batch Processing Fee Amount for [***] would automatically be increased to $[***]. Consequently, if the actual aggregate Batch Processing Fee paid by Insmed is $[***] for [***], then the True-Up Payment would be $[***] provided, however, that [***] percent of the cost of the Clean Room Consumables (or $[***], assuming the cost of the Clean Room Consumables was $[***]) and, if Therapure is able to its sole satisfaction to reallocate the Allocated Minimum Batch Labour, [***] percent of the cost of the Reallocated Minimum Batch Labour (or $[***], assuming the cost of the Reallocated Minimum Batch Labour

was $[***]) shall be credited against the True-Up Payment, such that the True-Up Payment would be reduced to $[***].

SCHEDULE D

DEMAND FORECASTING EXAMPLES

[***]

SCHEDULE E

WORKSHOP CONSTRUCTION PLAN

[See attached.]

[***]

SCHEDULE F

BASIS OF DESIGN

[See attached.]

[***]

Exhibit 10.2

AMENDING AGREEMENT

This Amending Agreement (this “ Amending Agreement ”) is entered into and effective this 13th day of March, 2014 (the “ Effective Date ”), by and between Therapure Biopharma Inc. (“ Therapure ”), a Canadian corporation with its principal place of business in Mississauga, Ontario and Insmed Incorporated (“ Insmed ”), a Virginia corporation, having its principal office at 9 Deer Park Drive, Suite C, Monmouth Junction, New Jersey. Each of Therapure and Insmed is referred to herein as a “party” and collectively as the “parties”.

RECITALS

WHEREAS, Therapure and Insmed entered into a Commercial Manufacturing Agreement effective the 7th day of February, 2014 (the “ CMA ”), for the manufacture of ARIKACE™ (liposomal amikacin for inhalation);

AND WHEREAS, the parties desire to amend certain terms of the CMA in the manner and on the terms and conditions set forth below;

AND WHEREAS, pursuant to Section 32.1 of the CMA, the CMA may not be amended, except upon the execution and delivery of a written agreement by the parties.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties agree as follows:

ARTICLE 1
CAPITALIZED TERMS

1.1. Capitalized Terms . Unless otherwise defined in this Amending Agreement, all capitalized terms used herein shall have the meaning given to such terms in the CMA.

ARTICLE 2
AMENDMENTS TO CMA

2.1. Amendments to CMA . The CMA is hereby amended as follows:

(i) the first page of Schedule E (being, for the avoidance of doubt, the Confidential — Capital Estimate (January 27, 2014)) is hereby deleted in its entirety and replaced with the document attached hereto at Appendix I.

ARTICLE 3
REMAINING TERMS UNCHANGED

Remaining Terms Unchanged . Except as expressly amended as set forth herein, all of the terms and conditions and provisions of the CMA are hereby confirmed to continue in full force and effect, unamended, it being the intent that the CMA shall henceforth be read and construed in conjunction with this Amending Agreement. On and after the Effective Date, each reference in the CMA to the “Agreement” shall be to the CMA as amended hereby. In the event

that any provision of the CMA is deemed to be in conflict with the provisions of this Amending Agreement, the provisions of this Amending Agreement shall prevail.

ARTICLE 4
APPLICABLE LAW

4.1. Applicable Law . This Amending Agreement shall be deemed to be made in and in all respects shall be construed and interpreted and the rights granted herein governed in accordance with the laws of the State of New York, regardless of any laws or principles of conflicts of laws or rules that would cause the application of the laws of any jurisdiction other than the State of New York.

ARTICLE 5
COUNTERPARTS

5.1. Counterparts . This Amending Agreement may be executed in counterparts, each of which shall constitute an original and all of which together shall constitute one and the same instrument. This Amending Agreement may be executed by fax or other electronic transmission with the same binding effect as original ink signatures.

ARTICLE 6
AUTHORITY

6.1. Authority . The parties executing this Amending Agreement on behalf of Insmed and Therapure represent and warrant that they have the authority to enter into this Agreement and to bind their respective companies to all the terms and conditions of this Amending Agreement.

ARTICLE 7
GENERAL

7.1. General . Articles 18, 24, 27, 28, 32 and 38 of the CMA shall apply to this Amending Agreement mutatis mutandis .

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGE TO FOLLOW]

IN WITNESS WHEREOF, the undersigned have caused this Amending Agreement to be signed by their duly authorized representatives as of the date first written above.

THERAPURE BIOPHARMA INC.

By:	/s/ Nicholas Green
	Name:	Nicholas Green
	Title:	President & CEO

By:	/s/ Brian Fielding
	Name:	Brian Fielding
	Title:	VP Finance & CFO


INSMED INCORPORATED

By:	/s/ Matthew Pauls
	Name:	Matthew Pauls
	Title:	Chief Commercial Officer

APPENDIX I

[See attached.]

[***]

Exhibit 10.3

March 26, 2014

Renu Gupta

Executive VP Development &

Chief Medical Officer

Insmed Incorporated

9 Deer Park Drive, Suite C

Monmouth Junction, NJ 08852

Dear Renu:

This letter confirms our mutual agreement regarding the terms and conditions of your transition and separation (“Transition and Separation Agreement”) from employment with Insmed, Inc. (“Insmed” or the “Company”). You and the Company agree as follows:

1. Transition to Special Advisor . Provided that you execute this letter and the release attached hereto as Exhibit A, you last day of employment with the Company in your current role as Chief Medical Officer (“CMO”) will be April 18, 2014, (“Last Day as CMO”) and beginning on April 21, 2014, the Company will employ you in a role titled Special Advisor to the Chief Executive Officer (“CEO”).

2. Role as Special Advisor : As Special Advisor to the CEO, your sole responsibility will be to work directly for the CEO of the Company on primarily three (3) areas. Those three (3) areas are:

i) The convening of a Scientific Advisory Board (“Board”) that will serve Insmed and address any important scientific questions related to Arikayce and other areas as identified and requested by the CEO. You will serve as either Chair, or Co-Chair, of the Scientific Advisory Board as determined by the CEO, and you may continue serving in that capacity beyond October 21 st , 2014, the effective date of your separation, at the discretion of the CEO .

ii) Advise the CEO on any areas of potential future development of Arikayce.

iii) Identify and evaluate, as directed by the CEO, ground breaking scientific advances in the field of pulmonary and infectious disease which are consistent with any imperatives addressed or expressed by the CEO and the Board of Directors of the Company.

After your Last Day as CMO, you agree not to carry out any other duties, take on any other responsibilities, or make any public statement concerning the Company’s business operations, except as expressly directed by the CEO, and consistent with your experience and expertise, including but not limited to the three areas described above. You will not be required to report to the office on a daily basis. While serving as Special Advisor to the CEO, you will receive up to twelve (12) hours per week of administrative support from a staff member to be designated by the Company.

3. Compensation and Benefits in Role as Special Advisor : Your compensation and benefits set forth in Sections 4 (“Compensation”) and 5 (“Expense Reimbursement and other Benefits”) of the Employment Agreement between you and the Company, which was made and entered into on January 31, 2011 and effective on December 2, 2010 (the “2010 Employment Agreement”) will continue in full force and effect during your employment with the Company as Special Advisor to the CEO. During your employment as Special Advisor to the CEO, all Equity Awards (as defined in the 2010 Employment Agreement) will continue to vest.

4. Transition Period : Unless the terms set forth in this Transition and Separation Agreement are extended or modified in writing by mutual agreement of you and the Company, your employment with the Company as Special Advisor to the CEO will begin on April 21 2014 and end on October 21, 2014 (“Transition Period”). During the Transition Period, the Company shall have the right, in its sole discretion, to terminate its employment relationship with you at any time. If the Company terminates your employment prior to October 21, 2014, and at the time of your termination you are an employee in good standing, execute and do not revoke both this Transition and Separation Agreement, and the Release attached as Exhibit B, and provided you abided by the terms and conditions of this Transition and Separation Agreement, carried out all the advisor duties required by the CEO, and return all Company property, you will receive the Supplemental Severance described in Section II of Exhibit A.

5. Severance and Supplemental Severance : Regardless of whether you sign this Transition and Separation Agreement, and only upon the termination of your employment with the Company, the Company will provide you with the payments and benefits provided for under Section 6(g) (“Termination by Executive Without Good Reason”) of the 2010 Employment Agreement, and which are described in Section I of Exhibit A, attached hereto. This Transition and Separation Agreement will become effective upon execution of this Agreement (which release must be executed on or before April 16, 2014, and the expiration of the seven (7) day revocation period provided for in Paragraph 17(g) herein. You will be eligible to receive the Supplemental Severance described in Section II of Exhibit A only upon your last day of employment as Special Advisor, provided that you have executed both this Transition and Separation Agreement and the Release attached as Exhibit B on your last day of employment with the company, have abided by the terms and conditions of this Transition and Separation Agreement, carried out all the advisor duties required by the CEO, and returned all Company property.

6. Release .

a) In consideration of (i) the Company continuing to employ you in the role of Special Advisor to the CEO, (ii) the continued vesting during your employment as Special Advisor of all Equity Awards set forth in the 2010 Employment Agreement, and (iii) your eligibility to receive Supplemental Severance by executing the agreement and release attached hereto as Exhibit B (which release must be executed on, but not before, your last day of employment with the Company), you agree to the fullest extent permitted by law to waive, release and forever discharge the Company and each of its past and current parents, subsidiaries, affiliates and each of its and their respective past and current directors, officers, trustees, employees, representatives, agents, employee benefit

plans and such plans’ administrators, fiduciaries, trustees, record-keepers and service providers, and each of its and their respective successors and assigns, each and all of them in their personal and representative capacities (collectively the “Company Releasees”) from any and all claims legally capable of being waived, grievances, injuries, controversies, agreements, covenants, promises, debts, accounts, actions, causes of action, suits, arbitrations, sums of money, attorneys’ fees, costs, damages, or any right to any monetary recovery or any other personal relief, whether known or unknown, in law or in equity, by contract, tort, law of trust or pursuant to federal, state or local statute, regulation, ordinance or common law, which you now have, ever have had, or may hereafter have, based upon or arising from any fact or set of facts, whether known or unknown to you, from the beginning of time until the date of execution of this Transition and Separation Agreement, arising out of, or relating in any way to, your employment relationship with the Company or the Company Releasees or other associations with the Company or the Company Releasees or any termination thereof. Without limiting the generality of the foregoing, this waiver, release, and discharge, includes any claim or right based upon or arising under any federal, state or local fair employment practices or equal opportunity laws, including, but not limited to, Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq., the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. (“ERISA”) (excepting claims for vested pension benefits, to the extent such vested benefits may exist), the Americans with Disabilities Act (“ADA”), 42 U.S.C. § 12101, et seq., the Age Discrimination in Employment Act (“ADEA”), 29 U.S.C. § 621 et seq., the Older Workers Benefit Protection Act (“OWBPA”), the Family and Medical Leave Act of 1993 (“FMLA”), 29 U.S.C. § 2601 et seq., the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq., the New Jersey Law Against Discrimination, N.J. Stat. § 10:5-1 et seq. (“NJLAD”), the New Jersey Equal Pay Act, N.J.S.A. § 34:11-56.2 et seq., the New Jersey Civil Rights Law, N.J.S.A. § 10:1-1 et seq., the Conscientious Employee Protection Act, N.J. Stat. Ann. § 34:19-1 et seq. (“CEPA”), the New Jersey Family Leave Act (“NJFLA”), N.J. Stat. Ann. § 34:11B-1 et seq., New Jersey Wage and Hour Law, N.J.S.A. § 34:11-56a et seq., New Jersey WARN Laws, N.J.S.A. 34:21-1, et seq., the New Jersey Constitution, the common law of the State of New Jersey (including, but not limited to, “Pierce claims”), and any and all other federal, state, county, or local common laws, statutes, ordinances, or regulations, including, without limitation, claims of unlawful discharge, retaliation, breach of contract, quantum meruit, breach of the covenant of good faith and fair dealing, fraud, violation of public policy, defamation, physical injury, emotional distress, or claims for additional compensation or benefits arising out of your employment or the termination therefrom, and any claims for attorneys’ fees and costs.

b) Notwithstanding the generality of the foregoing, nothing herein constitutes a release or waiver by you of, or prevents you from making or asserting: (i) any claim or right you may have under COBRA; (ii) any claim or right you may have for unemployment insurance or workers’ compensation benefits; (iii) any claim to vested benefits under the written terms of a qualified employee pension benefit plan; (iv) any claim or right that may arise after the execution of this Agreement; or (v) any claim or right you may have under this Agreement. In addition,

nothing herein shall prevent you from filing a charge or complaint with the Equal Employment Opportunity Commission (“EEOC”) or similar federal or state agency or your ability to participate in any investigation or proceeding conducted by such agency; provided, however, that pursuant to Paragraph 6(a), you are waiving any right to recover monetary damages or any other form of personal relief in connection with any such charge, complaint, investigation or proceeding. To the extent you receive any personal or monetary relief in connection with any such charge, complaint, investigation or proceeding, the Company will be entitled to an offset for the payments made pursuant to Section II of Exhibit A attached to this Agreement.

7. Violations of Any Law or of the Company’s Code of Conduct . You hereby agree, promise and covenant that during your employment with the Company, you did not violate any federal, state or local law, statute or regulation while acting within the scope of your employment with the Company, nor did you violate the Company’s Code of Conduct while acting within the scope of your employment with the Company. You acknowledge and understand that if the Company should discover any such violation after your execution of this Agreement and your separation from employment with the Company, it will be considered a material breach of this Agreement, and all of the Company’s obligations to you hereunder will become immediately null and void.

8. Return of Property . Upon termination of your employment, you agree to promptly return to the Company all of its property, including, but not limited to, equipment files, documents, identification cards, credit cards, keys, equipment, software and data, however stored. You agree that this shall apply whether you, or the Company, terminate your employment.

9. Transition . To the extent the CEO deems necessary, you agree that you will assist the Company with the transition of your responsibilities during the Transition Period.

10. Cooperation . You agree that upon the Company’s reasonable notice to you, you shall cooperate with the Company and its counsel (including, if necessary, preparation for and appearance at depositions, hearings, trials or other proceedings) with regard to any past, present or future legal or regulatory matters that relate to or arise out of matters you have knowledge about or have been involved with during your employment with the Company. In the event that such cooperation is required, you will be reimbursed for reasonable expenses incurred in connection therewith. You agree that this provision shall apply with equal force and effect both during and after the Transition Period.

11. Confidentiality of the Agreement . Except as expressly permitted in Paragraph 15 of this Agreement or if otherwise required by law, the parties, including the Company Releasees, shall not disclose the existence of this Agreement, the terms of this Agreement, or the circumstances or allegations giving rise to this Agreement, to any person other than their respective attorneys, immediate family members, accountants, financial advisors or corporate employees who have a business need to know such terms in order to approve or implement such terms.

12. Protection of Confidential Information .

a) You hereby acknowledge your existing obligation to maintain the confidentiality of the Company’s information along with the other post-employment obligations

contained in Section 7 (“Restrictive Covenants”) of the 2010 Employment Agreement.

b) Without limiting the generality of the foregoing obligations set forth in Paragraph 12(a), you agree that, except as expressly permitted in Paragraph 15 of this Agreement, or if otherwise required by law, you will not at any time, directly or indirectly, disclose any trade secret, confidential or proprietary information you have learned by reason of your association with the Company (the “Confidential Information”) or use any such Confidential Information to the detriment of the Company, its parents, affiliates or subsidiaries, or to the benefit of any business or enterprise that competes with the Company, its parents, affiliates or subsidiaries. Confidential Information is deemed to include, but is not limited to, information pertaining to Company strategic plans, advertising and marketing plans, sales plans, formulae, processes, methods, machines, ideas, concepts, new product developments, proposed launches, discontinuance of existing products, product and consumer testing data, sales and market research, technology research and development, budgets, profit and loss data, raw material costs, identity of suppliers, customer lists, customer information, employee information, improvements, inventions, and associations with other organizations that the Company has not previously made public. Confidential Information does not include information that can be shown by written evidence to be in the public domain at the time of disclosure by you or that is publicized or otherwise becomes part of the public domain through no fault of your own.

13. Non-Disparagement .

a) You agree that you shall not at any time make any written or verbal comments or statements of a defamatory or disparaging nature regarding the Company and/or the Company Releasees or their personnel or products and you shall not take any action that would cause the Company and/or the Company Releasees or their personnel or products any embarrassment or humiliation or otherwise cause or contribute to their being held in disrepute.

b) The Company agrees that it will use its best efforts to ensure that none of its representatives makes any written or verbal comments or statements of a defamatory or disparaging nature regarding you or takes any action that would cause you any embarrassment or humiliation or otherwise cause or contribute to your being held in disrepute while they are employed by the Company and acting in their capacity as Company representatives.

14. Non-Assistance to Sue . You agree that you will not encourage or incite other current or former employees of the Company to assert any complaint, claim or charge, or to initiate any legal proceeding of any kind, against the Company or any former or present director, officer, agent, or employee, thereof.

15. Permitted Conduct . Nothing in this Agreement shall prohibit or restrict you, the Company, or our respective attorneys from: (i) making any disclosure of relevant and necessary information or documents in any action, investigation, or proceeding relating to this Agreement, including all exhibits, or as required by law or legal process; or (ii) participating, cooperating, or testifying in any action, investigation, or proceeding with, or providing information to, any governmental agency or legislative body, including, but

not limited to, the Company’s Legal Department, the Securities & Exchange Commission, and/or pursuant to the Dodd-Frank Act or Sarbanes-Oxley Act; provided that , to the extent permitted by law, upon receipt of any subpoena, court order or other legal process compelling the disclosure of any such information or documents, the disclosing party gives prompt written notice to the other party so as to permit such other party to protect such party’s interests in confidentiality to the fullest extent possible.

16. Non-Admission . It is understood and agreed that neither the execution of this Agreement, including Exhibit A, nor the terms of the Agreement, including Exhibit A, constitute an admission of liability to you by the Company or the Company Releasees, and such liability is expressly denied. It is further understood and agreed that no person shall use the Agreement, including Exhibit A, or the consideration paid pursuant thereto, as evidence of an admission of liability, inasmuch as such liability is expressly denied.

17. Acknowledgments . You hereby acknowledge that:

a) No aspect of your transition from CMO to Special Advisor to the CEO shall constitute, or be construed to fall within the meaning of, “Good Reason” as that term is defined in Section 1(u) of the 2010 Employment Agreement;

b) The Company hereby advises you to consult with an attorney before signing this Agreement;

c) You have obtained independent legal advice from an attorney of your own choice with respect to this Agreement and all exhibits or you have knowingly and voluntarily chosen not to do so;

d) You freely, voluntarily and knowingly entered into this Agreement after due consideration;

e) You have had a minimum of twenty-one (21) days to review and consider this Agreement and all exhibits;

f) You and the Company agree that changes to the Company’s offer contained in this Agreement, whether material or immaterial, will not restart the twenty-one (21) day consideration period provided for in Paragraph 17(e) above;

g) You have a right to revoke this Agreement by notifying the undersigned Company representative in writing, via hand delivery, facsimile or electronic mail, within seven (7) days of your execution of this Agreement;

h) In exchange for your waivers, releases and commitments set forth herein, and in Exhibits A and B, including your waiver and release of all claims arising under the Age Discrimination in Employment Act, the payments, benefits and other considerations that you are receiving pursuant to this Agreement and all Exhibits exceed any payment, benefit or other thing of value to which you would otherwise be entitled, and are just and sufficient consideration for the waivers, releases and commitments set forth herein; and

i) No promise or inducement has been offered to you, except as expressly set forth herein, and you are not relying upon any such promise or inducement in entering into this Agreement and/or Exhibits A and B. Your employment remains at-will and this Agreement does not confer upon you any right or obligation to continue in the employ of the Company for any period of time.

18. Revocation by the Company . You agree that if you fail to execute and return this Agreement to the Company within the time specified herein for your review and consideration, the promises and agreements made by the Company herein will be revoked.

Miscellaneous .

a) Entire Agreement . This Agreement, including all exhibits, sets forth the entire agreement between you and the Company and replaces any other oral or written agreement between you and the Company relating to the subject matter of this Agreement, Exhibit A, or Exhibit B, except for your prior obligations of confidentiality as provided for in Paragraph 12 above, which shall continue in full force and effect.

b) Governing Law . This Agreement, shall be construed, performed, enforced and in all respects governed in accordance with the laws of the State of New Jersey, without giving effect to the principles of conflicts of law thereof. Additionally, all disputes arising from or related to this Agreement and/or exhibits shall be brought in a state or federal court situated in the State of New Jersey, Mercer County and the parties hereby expressly consent to the jurisdiction of such courts for all purposes related to resolving such disputes.

c) Severability . Should any provision of this Agreement, including any exhibit, be held to be void or unenforceable, the remaining provisions shall remain in full force and effect, to be read and construed as if the void or unenforceable provisions were originally deleted.

d) Amendments . This Agreement may not be modified or amended, except upon the express written consent of both you and the Company.

e) Breach . You acknowledge that if you breach your commitments to the Company agreed upon in Paragraphs 2, 6, 7, 8, 9, 10, 11, 12, 13, and/or 14, you will forfeit all eligibility to receive the Supplemental Severance set forth in Paragraph 5 and Section II of Exhibit A attached hereto, and be subject to suit by the Company for damages and equitable relief relating to such breach.

f) Waiver . A waiver by either party hereto of a breach of any term or provision of the Agreement, including all exhibits, shall not be construed as a waiver of any subsequent breach.

g) Effective Date . This Transition and Separation Agreement shall become effective upon your execution below, and until the seven (7) day revocation period provided for in Paragraph 17(g) has expired. Further, you will not be entitled to the Supplemental Severance set forth in Paragraph 5 and in Section II of Exhibit B attached hereto unless and until you execute the agreement and release attached hereto as Exhibit B (which must be executed on but not before your last day of employment with the Company.)

If the above accurately states our agreement, including the separation, waiver and release, kindly sign below and return this original Agreement to me by no later than April 16, 2014. I will sign it and return a copy to you. Please sign and return Exhibit B on, but not before, your Last Day of Employment with the Company.

Sincerely,

INSMED, INC.


By:	/s/ William H. Lewis
William H. Lewis
President & CEO

Date:		16 April 2014

UNDERSTOOD, AGREED TO
AND ACCEPTED WITH THE
INTENTION TO BE LEGALLY BOUND:

/s/ Renu Gupta, M.D.
Renu Gupta, M.D.

Date:		16 April 2014

Enclosures

EXHIBIT A

NAME: Renu Gupta, M.D.

SUMMARY OF PAYMENTS AND BENEFITS.

SECTION I: SUMMARY OF PAYMENTS AND BENEFITS:

(1) Regardless of whether you sign the Transition and Separation agreement embodied in the attached letter dated March 26, 2014, and provided that you remain an employee in good standing, abide by the terms of the 2010 Employment Agreement and continue to satisfactorily perform your duties and responsibilities, and only upon the termination of your employment with the Company ,

(a) You will receive as follows:

(i) all accrued unpaid Base Salary under the 2010 Employment Agreement through your Last Day as CMO;

(ii) any unpaid or unreimbursed expenses incurred in accordance with Company policy, including amounts due under Section 5(a) of the 2010 Employment Agreement, to the extent incurred during your employment with the Company;

(iii) any accrued by unpaid benefits provided under the Company’s employee benefits plans, subject to and in accordance with the terms of those plans;

(iv) any unpaid Bonus in respect to the completed fiscal year that ended prior to your Last Day as CMO;

(v) rights to indemnification by virtue of your position as an officer or director of the Company or its subsidiaries and the benefits under any directors’ and officers’ liability insurance policy maintained by the Company, in accordance with the terms thereof; and

(v) any accrued but unused vacation pay.

(vi) the Company will reimburse Executive for legal services in connection with the review of separation materials, up to a maximum of $5,000. In order to receive this benefit, Executive will submit documentation of such expenses within 90 days after the expenses are incurred.

SECTION II: SUPPLEMENTAL SEVERANCE :

(1) Provided that you sign the Transition and Separation Agreement embodied in the attached letter by April 16, 2014, do not revoke your acceptance of the Agreement during

the seven day revocation period as provided in Paragraph 17(g), abide by the terms and conditions of the Transition and Separation Agreement, carry out all the advisor duties required by the CEO, and return all Company property immediately after the Transition Period ends or you are terminated, and in consideration for your execution of the waiver and release in Exhibit B on but not before your Last Day of Employment, you will be eligible to receive the Supplemental Severance and transition arrangements set forth below only upon the termination of your employment as Special Advisor:

(2) You will receive Supplemental Severance as follows:

(a) Any and all “Accrued Obligations,” as that term is defined in Section 1(a) of the 2010 Employment Agreement, between April 21, 2014 and your last day of employment.

(b) The “Termination Year Bonus” as that term is defined in Section 1(hh) of the 2010 Employment Agreement.

(d) Equity Awards granted to you at least one year prior to the termination of your employment with the Company that have not previously vested will vest in full, effective upon your last day of employment. All unvested RSUs will vest in full upon the expiration of the revocation period, without revocation. You will have one hundred eighty (180) days from the last day of employment to exercise all of your vested Stock Options. RSUs will be delivered in shares within 30 days following your last day of employment.

(e) Provided that you timely elect continued coverage under COBRA health and dental coverage for you and your covered dependents may be continued during the Severance Term (as that term is defined in Section 1(cc) of the 2010 Employment Agreement), in accordance with the terms of the applicable Company plan in effect from time to time. The Company will reimburse the you for the monthly COBRA cost of continued health and dental coverage paid by the Executive under the health and dental plans of the Company, less the amount that you would be required to contribute for health and dental coverage if you were an active employee of the Company; provided that such reimbursements shall not continue beyond the earlier of: (A) the eighteenth (18th) month anniversary of your Last Day of Employment, or (B) the date you commence employment with any person or entity and, thus, are eligible for health insurance benefits.

The payments provided for in Section II of this Exhibit A constitute “Supplemental Severance.” It is understood that the Company will not make any 401(k) deductions or other benefit deductions from Severance. The Company shall withhold all applicable state and federal tax from all payments made pursuant to the terms of Section II, above.

If you have any questions on your Benefit Plans, please call Nicole Schaeffer at (732-997-4524) or via e-mail at Nicole.Schaeffer@insmed.com.

EXHIBIT B

GENERAL RELEASE TO BE EXECUTED NOT EARLIER THAN

THE LAST DAY OF EMPLOYMENTWITH THE COMPANY

1. In consideration of (i) the Company continuing to employ you in the role of Special Advisor to the CEO, (ii) the continued vesting during your employment as Special Advisor of all Equity Awards provided for under the 2010 Employment Agreement, and (iii) the Supplemental Severance provided for in Section II of Exhibit A to the Transition and Separation Agreement, you agree to the fullest extent permitted by law to waive, release and forever discharge the Company and each of its past and current parents, subsidiaries, affiliates and each of its and their respective past and current directors, officers, trustees, employees, representatives, agents, employee benefit plans and such plans’ administrators, fiduciaries, trustees, record-keepers and service providers, and each of its and their respective successors and assigns, each and all of them in their personal and representative capacities (collectively the “Company Releasees”) from any and all claims legally capable of being waived, grievances, injuries, controversies, agreements, covenants, promises, debts, accounts, actions, causes of action, suits, arbitrations, sums of money, attorneys’ fees, costs, damages, or any right to any monetary recovery or any other personal relief, whether known or unknown, in law or in equity, by contract, tort, law of trust or pursuant to federal, state or local statute, regulation, ordinance or common law, which you now have, ever have had, or may hereafter have, based upon or arising from any fact or set of facts, whether known or unknown to you, from the beginning of time until my last day of employment with the Company, arising out of or relating in any way to your employment relationship with the Company or the Company Releasees or other associations with the Company or the Company Releasees or any termination thereof. Without limiting the generality of the foregoing, this waiver, release, and discharge includes any claim or right based upon or arising under any federal, state or local fair employment practices or equal opportunity laws, including, but not limited to, Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq., the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. (“ERISA”) (excepting claims for vested pension benefits, to the extent such vested benefits may exist), the Americans with Disabilities Act (“ADA”), 42 U.S.C. § 12101, et seq., the Age Discrimination in Employment Act (“ADEA”), 29 U.S.C. § 621 et seq., the Older Workers Benefit Protection Act (“OWBPA”), the Family and Medical Leave Act of 1993 (“FMLA”), 29 U.S.C. § 2601 et seq., the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq., the New Jersey Law Against Discrimination, N.J. Stat. § 10:5-1 et seq. (“NJLAD”), the New Jersey Equal Pay Act, N.J.S.A. § 34:11-56.2 et seq., the New Jersey Civil Rights Law, N.J.S.A. § 10:1-1 et seq., the Conscientious Employee Protection Act, N.J. Stat. Ann. § 34:19-1 et seq. (“CEPA”), the New Jersey Family Leave Act (“NJFLA”), N.J. Stat. Ann. § 34:11B-1 et seq., New Jersey Wage and Hour Law, N.J.S.A. § 34:11-56a et seq., New Jersey WARN Laws, N.J.S.A. 34:21-1, et seq., the New Jersey Constitution, the common law of the State of New Jersey (including, but not limited to, “Pierce claims”), and any and all other federal, state, county, or local common laws, statutes, ordinances, or regulations, including, without limitation, claims of unlawful discharge, retaliation, breach of contract, quantum meruit, breach of the

covenant of good faith and fair dealing, fraud, violation of public policy, defamation, physical injury, emotional distress, or claims for additional compensation or benefits arising out of your employment or the termination therefrom, and any claims for attorneys’ fees and costs.

2. Notwithstanding the generality of the foregoing, nothing herein constitutes a release or waiver by you of, or prevents you from making or asserting: (i) any claim or right you may have under COBRA; (ii) any claim or right you may have for unemployment insurance or workers’ compensation benefits; (iii) any claim to vested benefits under the written terms of a qualified employee pension benefit plan; (iv) any claim or right that may arise after the execution of this Agreement; or (v) any claim or right you may have under this Agreement. In addition, nothing herein shall prevent you from filing a charge or complaint with the Equal Employment Opportunity Commission (“EEOC”) or similar federal or state agency or your ability to participate in any investigation or proceeding conducted by such agency; provided, however, that pursuant to Paragraph 1(a) of this Exhibit B, you are waiving any right to recover monetary damages or any other form of personal relief in connection with any such charge, complaint, investigation or proceeding. To the extent you receive any personal or monetary relief in connection with any such charge, complaint, investigation or proceeding, the Company will be entitled to an offset for the payments made pursuant to Section II of Exhibit A of the Transition and Separation Agreement.

THIS RELEASE MUST BE SIGNED ON, BUT NOT BEFORE, YOUR LAST DAY OF EMPLOYMENT WITH THE COMPANY AS DEFINED IN SECTION 4 OF THE TRANSITION AND SEPARATION AGREEMENT.

	UNDERSTOOD, AGREED TO
	AND ACCEPTED WITH THE
	INTENTION TO BE LEGALLY BOUND:


	Renu Gupta, M.D.

	Date:

EXHIBIT 31.1

Section 302 Certification

I, William H. Lewis, Chief Executive Officer of Insmed Incorporated, certify that:

(1) I have reviewed this Quarterly Report on Form 10-Q of Insmed Incorporated;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2014
	/s/ William H. Lewis
	William H. Lewis
	Chief Executive Officer
	(Principal Executive Officer)

EXHIBIT 31.2

Section 302 Certification

I, Andrew T. Drechsler, Chief Financial Officer of Insmed Incorporated, certify that:

(1) I have reviewed this Quarterly Report on Form 10-Q of Insmed Incorporated;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2014
	/s/ Andrew T. Drechsler
	Andrew T. Drechsler
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2003

Solely for the purposes of complying with 18 U.S.C. § 1350, I, William Lewis, Chief Executive Officer of Insmed Incorporated (the “Company”), hereby certify, based on my knowledge, that:

(1) the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2014 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ William H. Lewis
William H. Lewis
Chief Executive Officer
(Principal Executive Officer)

May 8, 2014

This certification accompanies the Quarterly Report on Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Insmed Incorporated under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing. A signed original of this statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2003

Solely for the purposes of complying with 18 U.S.C. § 1350, I, Andrew T. Drechsler, Chief Financial Officer of Insmed Incorporated (the “Company”), hereby certify, based on my knowledge, that:

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Andrew T. Drechsler
Andrew T. Drechsler
Chief Financial Officer
(Principal Financial and Accounting Officer)

May 8, 2014