INSMED Inc (Form: 10-Q, Received: 08/04/2016 08:05:07)

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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 June 30, 2016

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.)

10 Finderne Avenue, Building 10
Bridgewater, New Jersey		08807
(Address of principal executive offices)		(Zip Code)

(908) 977-9900

(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 x		Accelerated filer o

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 August 1, 2016, there were 61,877,905 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 JUNE 30, 2016

INDEX

PART I. FINANCIAL INFORMATION

ITEM 1	Consolidated Financial Statements

	Consolidated Balance Sheets as of June 30, 2016 (unaudited) and December 31, 2015	3

	Consolidated Statements of Comprehensive Loss (unaudited) for the three and six months ended June 30, 2016 and 2015	4

	Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2016 and 2015	5

	Notes to Consolidated Financial Statements (unaudited)	6

ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
ITEM 3	Quantitative and Qualitative Disclosures about Market Risk	26
ITEM 4	Controls and Procedures	26

PART II. OTHER INFORMATION

ITEM 1	Legal Proceedings	27
ITEM 1A	Risk Factors	27
ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	29
ITEM 3	Defaults Upon Senior Securities	29
ITEM 4	Mine Safety Disclosures (Not Applicable)	29
ITEM 5	Other Information	29
ITEM 6	Exhibits	29

SIGNATURE		30
EXHIBIT INDEX		31

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. IPLEX is a registered trademark and ARIKAYCE, INSMED and CONVERT 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
	June 30, 2016			December 31, 2015
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	223,109		$	282,876
Prepaid expenses and other current assets	6,201			5,242
Total current assets	229,310			288,118

In-process research and development	58,200			58,200
Fixed assets, net	9,793			8,092
Other assets	2,374			2,146
Total assets	$	299,677		$	356,556

Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	9,402		$	7,468
Accrued expenses	13,513			10,995
Other current liabilities	716			683
Current portion of long-term debt	8,689			3,113
Total current liabilities	32,320			22,259

Debt, long-term	16,136			22,027
Other long-term liabilities	660			572
Total liabilities	49,116			44,858

Shareholders’ equity:
Common stock, $0.01 par value; 500,000,000 authorized shares, 61,877,905 and 61,813,995 issued and outstanding shares at June 30, 2016 and December 31, 2015, respectively	619			618
Additional paid-in capital	909,004			900,043
Accumulated deficit	(659,074		)	(588,963		)
Accumulated other comprehensive income	12			—
Total shareholders’ equity	250,561			311,698
Total liabilities and shareholders’ equity	$	299,677		$	356,556

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 June 30,						Six Months Ended June 30,
	2016			2015			2016			2015

Revenues	$	—		$	—		$	—		$	—

Operating expenses:
Research and development	23,871			18,246			44,418			35,410
General and administrative	12,262			9,706			24,782			19,248
Total operating expenses	36,133			27,952			69,200			54,658

Operating loss	(36,133		)	(27,952		)	(69,200		)	(54,658		)

Investment income	164			68			334			91
Interest expense	(624		)	(718		)	(1,246		)	(1,440		)
Other income (expense), net	32			(5		)	47			31
Loss before income taxes	(36,561		)	(28,607		)	(70,065		)	(55,976		)

Provision for income taxes	18			—			46			—

Net loss	$	(36,579	)	$	(28,607	)	$	(70,111	)	$	(55,976	)

Basic and diluted net loss per share	$	(0.59	)	$	(0.47	)	$	(1.13	)	$	(1.01	)

Weighted average basic and diluted common shares outstanding	61,878			60,833			61,868			55,425

Net loss	$	(36,579	)	$	(28,607	)	$	(70,111	)	$	(55,976	)
Other comprehensive income:
Foreign currency translation gain	15			—			12			—
Total comprehensive loss	$	(36,564	)	$	(28,607	)	$	(70,099	)	$	(55,976	)

See accompanying notes to consolidated financial statements

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INSMED INCORPORATED

Consolidated Statements of Cash Flows (unaudited)

(in thousands)

	Six months ended June 30,
	2016			2015
Operating activities
Net loss	$	(70,111	)	$	(55,976	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	1,082			879
Stock based compensation expense	8,834			7,961
Amortization of debt discount and debt issuance costs	75			229
Accrual of the end of term charge on the debt	—			38
Changes in operating assets and liabilities:
Prepaid expenses and other assets	(1,176		)	(1,389		)
Accounts payable	1,222			(981		)
Accrued expenses and other	2,309			116
Net cash used in operating activities	(57,765		)	(49,123		)

Investing activities
Purchase of fixed assets	(2,128		)	(2,194		)
Net cash used in investing activities	(2,128		)	(2,194		)

Financing activities
Proceeds from exercise of stock options	128			4,176
Proceeds from issuance of common stock, net	—			222,942
Net cash provided by financing activities	128			227,118

Effect of exchange rates on cash and cash equivalents	(2		)	—
Net (decrease) / increase in cash and cash equivalents	(59,767		)	175,801
Cash and cash equivalents at beginning of period	282,876			159,226

Cash and cash equivalents at end of period	$	223,109		$	335,027

Supplemental disclosures of cash flow information:
Cash paid for interest	$	1,572		$	1,506
Cash paid / (received) for income taxes	$	26		$	(994	)

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 global biopharmaceutical company focused on the unmet needs of patients with rare diseases. The Company’s lead product candidate is ARIKAYCE, or liposomal amikacin for inhalation (LAI), which is in late-stage development for patients with nontuberculous mycobacteria (NTM) lung disease, a rare and often chronic infection that is capable of causing irreversible lung damage and which can be fatal. The Company’s earlier stage pipeline includes INS1009, a nebulized prodrug formulation of treprostinil.

The Company was incorporated in the Commonwealth of Virginia on November 29, 1999 and its principal executive offices are located in Bridgewater, New Jersey. The Company has operations in the United States (US), Ireland, Germany, France, the United Kingdom (UK) and the Netherlands. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and disclosures required by accounting principles generally accepted in the US for complete consolidated financial statements 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 Annual Report on Form 10-K for the year ended December 31, 2015.

The results of operations of any interim period are not necessarily indicative of the results of operations for the full year. The unaudited interim consolidated financial information presented herein reflects all normal adjustments that are, in the opinion of management, necessary for a fair statement of the financial position, results of operations and cash flows for the periods presented. The Company is responsible for the unaudited interim consolidated financial statements included in this report.

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, 2015:

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.

· 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 based upon the lowest level of significant input to the valuations. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Financial instruments in Level 1 generally include US treasuries and mutual funds listed in active markets.

The Company’s only assets and liabilities which were measured at fair value as of June 30, 2016 and December 31, 2015 were Level 1 and such assets were comprised of cash and cash equivalents of $223.1 million and $282.9 million, respectively.

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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 and six months ended June 30, 2016 and 2015, respectively.

As of June 30, 2016 and December 31, 2015, 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 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 and six months ended June 30, 2016 and 2015:

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
	(In thousands, except per share amounts)
Numerator:
Net loss	$	(36,579	)	$	(28,607	)	$	(70,111	)	$	(55,976	)
Denominator:
Weighted average common shares used in calculation of basic net loss per share:	61,878			60,833			61,868			55,425
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	61,878			60,833			61,868			55,425
Net loss per share:
Basic and diluted	$	(0.59	)	$	(0.47	)	$	(1.13	)	$	(1.01	)

The following potentially dilutive securities have been excluded from the computations of diluted weighted average common shares outstanding as of June 30, 2016 and 2015 as their effect would have been anti-dilutive (in thousands):

	2016	2015
Stock options to purchase common stock	7,508	5,374
Unvested restricted stock units	89	44

New Accounting Pronouncements —In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases (Topic 842). This update requires an entity to recognize assets and liabilities for leases with lease terms of more than 12 months on the balance sheet. The Company plans to adopt this standard on January 1, 2019, and is still evaluating the impact that this standard will have on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This update simplifies the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The Company plans to adopt this standard on January 1, 2017, and is evaluating the impact that this standard will have on its consolidated financial statements.

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3. Identifiable Intangible Asset

The Company believes there are no indicators of impairment relating to its in-process research and development intangible asset as of June 30, 2016.

4. Accrued Expenses

Accrued expenses consist of the following:

	As of June 30,		As of December 31,
	2016		2015
	(in thousands)

Accrued clinical trial expenses	$	6,863	$	4,331
Accrued compensation	3,636		4,302
Accrued professional fees	1,879		1,202
Accrued technical operation expenses	704		702
Accrued interest payable	193		199
Other accrued expenses	238		259
	$	13,513	$	10,995

5. Debt

In June 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 to $20.0 million (Loan Agreement) at an interest rate of 9.25%. The interest rate for the term is floating and is defined as the greater of (i) 9.25% or (ii) 9.25% plus the sum of the US prime rate minus 4.50%. In December 2014, the Company and Hercules entered into a third amendment (the Third Amendment) to the Loan Agreement. In connection with the Third Amendment, the Company paid a commitment fee of $25,000, and at the closing, paid a facility fee of $125,000. Under the Third Amendment, the amount of borrowings was increased by $5.0 million to an aggregate total of $25.0 million and the interest-only period was extended through December 31, 2015. In December 2015, the Company entered into a fifth amendment (the Fifth Amendment) to the Loan Agreement, to exercise an option to extend the maturity date to January 1, 2018 with a payment to Hercules of $250,000. The Fifth Amendment extends the interest-only period, with principal repayments beginning in October 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 was required to pay an “end of term” charge of $390,000, which was charged to interest expense (and accreted to the debt) using the effective interest method over the original life of the Loan Agreement. The end of term fee was paid in full as required in January 2016. 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.

The following table presents the components of the Company’s debt balance as of June 30, 2016 (in thousands):

Debt:
Notes payable	$	25,000
Fees paid to lender	(175		)
Current portion of long-term debt	(8,689		)
Debt, long-term	$	16,136

As of June 30, 2016, future principal repayments of the debt for each of the years ending December 31, were as follows (in thousands):

Year Ending in December 31:
2016	$	2,873
2017	12,180
2018 (due in full on January 1, 2018)	9,947
	$	25,000

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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 June 30, 2016 approximates the carrying amount.

6. Shareholders’ Equity

Common Stock — As of June 30, 2016, the Company had 500,000,000 shares of common stock authorized with a par value of $0.01 and 61,877,905 shares of common stock issued and outstanding. In addition, as of June 30, 2016, the Company had reserved 7,508,166 shares of common stock for issuance upon the exercise of outstanding common stock options.

On April 6, 2015, the Company completed an underwritten public offering of 11,500,000 shares of the Company’s common stock, which included the underwriter’s exercise in full of its over-allotment option of 1,500,000 shares, at a price to the public of $20.65 per share. The Company’s net proceeds from the sale of the shares, after deducting the underwriter’s discount and offering expenses of $14.5 million, were $222.9 million.

Preferred Stock — As of June 30, 2016 and December 31, 2015, the Company had 200,000,000 shares of preferred stock authorized with a par value of $0.01 and no shares of preferred stock were issued and outstanding.

7. Stock-Based Compensation

The Company’s current equity compensation plan, the 2015 Incentive Plan, was approved by shareholders at the Company’s Annual Meeting of Shareholders on May 21, 2015. The 2015 Incentive Plan is administered by the Compensation Committee and the Board of Directors of the Company. Under the terms of the 2015 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 options/shares and other stock awards, as well as the payment of incentive bonuses to all employees and non-employee directors. On May 21, 2015, 5,000,000 shares of the Company’s common stock were authorized and as of June 30, 2016, there were 1,928,929 shares available for future grants (or issuances) of stock options, stock appreciation rights, restricted stock, restricted stock units and incentive bonuses under the 2015 Incentive Plan. The 2015 Incentive Plan will terminate on April 9, 2025 unless it is extended or terminated earlier pursuant to its terms. In addition, from time to time, the Company makes inducement grants of stock options. These awards are made pursuant to the NASDAQ inducement grant exception as a component of new hires’ employment compensation in connection with the Company’s equity grant program.

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 all stock options granted:

	Three Months Ended June 30,		Six Months Ended June 30,
	2016	2015	2016	2015

Volatility	76%-77%	79%-81%	76%-77%	79%-82%
Risk-free interest rate	1.24%-1.39%	1.32%-1.71%	1.16%-1.73%	1.31%-1.71%
Dividend yield	0.0%	0.0%	0.0%	0.0%
Expected option term (in years)	6.25	6.25	6.25	6.25
Weighted-average fair value of stock options granted	$7.35	$15.82	$8.77	$14.28

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 in December 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 the actual percentage of option forfeitures since the closing of the Company’s merger with Transave in December 2010, and this is the basis for future forfeiture expectations.

From time to time, the Company grants performance-condition options to certain of the Company’s employees. Vesting of these options is subject to the Company achieving certain performance criteria established at the date of grant and the individuals fulfilling a service condition (continued employment). As of June 30, 2016, the Company had performance options totaling 158,334 shares outstanding which have not met the recognition criteria to date. For the six months ended June 30, 2015, $1.5 million of non-cash compensation expense was recorded related to certain performance based options as the recognition criteria was met upon the marketing authorization application for ARIKAYCE being accepted for filing by the European Medicines Agency in February 2015.

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The following table summarizes the Company’s aggregate stock option activity for the six months ended June 30, 2016:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years	Aggregate Intrinsic Value (in thousands)
Options outstanding at December 31, 2015	5,273,722		$	13.64
Granted	2,317,025		$	12.94
Exercised	(20,356	)	$	6.32
Forfeited or expired	(62,225	)	$	16.48
Options outstanding at June 30, 2016	7,508,166		$	13.42	8.21	$	8,058
Vested and expected to vest at June 30, 2016	7,130,880		$	13.34	8.15	$	8,033
Exercisable at June 30, 2016	2,728,211		$	10.60	7.00	$	6,947

The total intrinsic value of stock options exercised during the three months ended June 30, 2016 and 2015 was $0.1 million and $2.5 million, respectively, and during the six months ended June 30, 2016 and 2015 was $0.1 million and $3.9 million, respectively.

As of June 30, 2016, there was $34.3 million of unrecognized compensation expense related to unvested stock options which is expected to be recognized over a weighted average period of 2.9 years. Included in unrecognized compensation expense was $1.2 million related to outstanding performance-based options. The following table summarizes the range of exercise prices and the number of stock options outstanding and exercisable:

Outstanding as of June 30, 2016					Exercisable as of June 30, 2016
			Weighted
			Average
			Remaining	Weighted
Range of Exercise		Number of	Contractual	Average	Number of	Weighted Average
Prices ($)		Options	Term (in years)	Exercise Price ($)	Options	Exercise Price ($)
3.03	3.40	850,137	6.08	3.34	761,598	3.33
3.60	6.96	673,847	6.45	6.14	514,448	6.02
8.77	10.85	1,271,765	9.87	10.84	3,000	8.77
11.14	12.58	1,099,867	7.62	12.23	557,354	12.26
12.66	16.07	959,500	8.03	14.94	370,151	14.72
16.09	16.09	10,000	9.39	16.09	—	—
16.16	16.16	807,400	9.52	16.16	—	—
16.19	20.49	790,250	8.12	19.25	270,083	19.57
20.92	22.14	106,300	8.64	21.54	30,325	21.54
22.76	27.38	939,100	8.89	22.93	221,252	22.80

Restricted Stock and Restricted Stock Units — The Company may grant Restricted Stock (RS) and Restricted Stock Units (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 are valued at the market price of the Company’s common stock on the date of grant. The Company recognizes noncash compensation expense for the fair values of these RS and RSUs on a straight-line basis over the requisite service period of these awards. The following table summarizes the Company’s RSU award activity during the six months ended June 30, 2016:

			Weighted
	Number of		Average
	RSUs		Grant Price
Outstanding at December 31, 2015	43,554		$	16.07
Granted	89,194		10.85
Released	(43,554	)	16.07
Outstanding at June 30, 2016	89,194		$	10.85

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 and six months ended June 30, 2016 and 2015:

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	Three months ended June 30,				Six months ended June 30,
	2016		2015		2016		2015
	(in millions)				(in millions)

Research and development expenses	$	1.5	$	1.0	$	2.9	$	2.3
General and administrative expenses	3.1		2.5		5.9		5.7

Total	$	4.6	$	3.5	$	8.8	$	8.0

8. Income Taxes

The Company’s provision for income taxes was $18,000 and $46,000 for the three and six months ended June 30, 2016, respectively. The current year provision was a result of certain of the Company’s subsidiaries in Europe, which had taxable income during the three and six months ended June 30, 2016. In jurisdictions where the Company has net losses, there was a full valuation allowance recorded against the Company’s deferred tax assets and therefore no tax benefit was recorded. The Company is subject to US federal, US state and foreign income taxes. The statute of limitations for tax audit is open for the US federal tax returns for the years ended 2012 and later and is generally open for certain states for the years 2011 and later. The Company’s US federal tax return for the year ended December 31, 2013 is currently under audit by the Internal Revenue Service. The Company has incurred net operating losses since inception, with the exception of 2009. Such loss carryforwards are subject to audit in any tax year in which those losses are utilized, notwithstanding the year of origin. As of June 30, 2016 and December 31, 2015, 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.

9. Commitments and Contingencies

Commitments

The Company has an operating lease for office and laboratory space located in Bridgewater, NJ, its corporate headquarters, for which the initial lease term expires in November 2019. Future minimum rental payments under this lease are $3.5 million. The Company also holds a lease that expires in October 2016 for office space in Richmond, VA, the Company’s former corporate headquarters.

Rent expense charged to operations was $0.3 million and $0.2 million for the three months ended June 30, 2016 and 2015, respectively, and $0.5 million and $0.4 million for the six months ended June 30, 2016 and 2015, respectively. Future minimum rental payments required under the Company’s operating leases for the period from July 1, 2016 to December 31, 2016 and for each of the next five years are as follows (in thousands):

Year Ending December 31:
2016 (remaining)	$	698
2017	1,004
2018	1,025
2019	964
2020	—
2021	—
	$	3,691

In July 2016, the Company signed an operating lease for additional laboratory space located in Bridgewater, NJ for which the initial lease term expires in September 2021. Future minimum rental payments under this lease are $2.1 million. The table above does not include lease payments for this recently signed lease.

Legal Proceedings

On July 15, 2016, a purported class action lawsuit was filed in the U.S. District Court for the District of New Jersey against the Company and certain executive officers: Hoey v. Insmed Incorporated, et al. The complaint includes allegations that, during the class period between March 18, 2013 and June 8, 2016, the Company and certain executive officers violated Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), Rule 10b-5 promulgated thereunder, and Section 20(a) of the Exchange Act in making various statements related to the European MAA of ARIKAYCE with the EMA. The complaint seeks unspecified damages.

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The Company believes that the allegations in the complaint are without merit and intends to defend the lawsuit vigorously; however, there can be no assurance regarding the ultimate outcome of the lawsuit.

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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 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, 2015 filed with the Securities and Exchange Commission (SEC) on February 25, 2016, our subsequent quarterly reports on Form 10-Q filed in 2016, and the following: our ability to complete development of, receive regulatory approval for, and successfully commercialize ARIKAYCE, or liposomal amikacin for inhalation (LAI), and INS1009, inhaled treprostinil prodrug; the number of patients enrolled and the timing of patient enrollment in our global phase 3 clinical study of ARIKAYCE, our estimates of expenses and future revenues and profitability; our plans to develop and market new products and the timing of these development programs; status, timing, and the results of preclinical studies and clinical trials and preclinical and clinical data described herein; the sufficiency of our preclinical and clinical data in obtaining regulatory approval for our product candidates, the timing of responses to information and data requests from the US Food and Drug Administration (the FDA), the European Medicines Agency (the EMA), and other regulatory authorities; our clinical development of product candidates; our ability to obtain and maintain regulatory approval for our product candidates; our expectation as to the timing of regulatory review and approval; our estimates regarding our capital requirements and our needs for additional financing; 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 property 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, scope and rate of reimbursement for our product candidates; the impact of any litigation the Company is party to including, without limitation, the class action lawsuit recently filed against us; 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.

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.

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, 2015.

OVERVIEW

We are a global biopharmaceutical company focused on the unmet needs of patients with rare diseases. Our lead product candidate is ARIKAYCE, or liposomal amikacin for inhalation (LAI), which is in late-stage development for patients with nontuberculous mycobacteria (NTM) lung disease, a rare and often chronic infection that is capable of causing irreversible lung damage and can be fatal. Our earlier stage pipeline includes INS1009, a nebulized prodrug formulation of the prostanoid, treprostinil. We believe INS1009 may offer a differentiated product profile with therapeutic potential in rare pulmonary disorders such as pulmonary arterial hypertension (PAH), idiopathic pulmonary fibrosis (IPF), pulmonary sarcoidosis, and severe refractory asthma.

We are conducting a global phase 3 clinical study of ARIKAYCE (the 212 or CONVERT study) in adult patients with treatment refractory NTM lung disease caused by Mycobacterium avium complex (MAC), which is the predominant infective species in NTM lung disease in the United States (US), Europe, and Japan. We have completed a phase 1 study of INS1009 in healthy subjects and the results

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have been accepted for presentation at the European Respiratory Society international congress in September 2016. This first-in-human study of INS1009 was designed to determine the maximum-tolerated dose of a single dose of INS1009 and to characterize the pharmacokinetic profile of free treprostinil and INS1009 in healthy volunteers. In addition to INS1009, our earlier-stage pipeline includes preclinical compounds that we are exploring in multiple rare diseases of unmet medical need, including methicillin-resistant staph aureus (MRSA), NTM, PAH, and sarcoidosis. We are also evaluating additional formulations and delivery options for treprostinil. To complement our internal research and development, we actively seek in-licensing and acquisition opportunities for a broad range of rare diseases.

The following table summarizes the current status of and anticipated milestones for ARIKAYCE and INS1009 development:

Product Candidate/Target
Indications	Status	Next Expected Milestones
ARIKAYCE for adult patients with treatment refractory NTM lung infections caused by MAC	· We are advancing the CONVERT study, a randomized, open-label global phase 3 clinical study of ARIKAYCE in adult patients with treatment refractory NTM lung disease caused by MAC. · In 2015, our Marketing Authorization Application (MAA) for ARIKAYCE for NTM was validated. The filing was based on data from our phase 2 study. In May 2016, we participated in an oral explanation meeting with the European Medicines Agency’s (EMA) Committee for Medicinal Products for Human Use (CHMP). After the oral explanation meeting, the CHMP concluded that the data submitted did not provide enough evidence to support an approval. In June 2016, we withdrew our MAA and we intend to resubmit our MAA when clinical data from our ongoing global CONVERT study are available. · The US Food and Drug Administration (FDA) has designated ARIKAYCE as an orphan drug, a breakthrough therapy, and a qualified infectious disease product (QIDP). Breakthrough therapy features intensive guidance on efficient drug development and offers the potential for a rolling review. A QIDP-designated product qualifies for the same benefits as fast track designation and is typically eligible for priority review. · The European Commission granted an orphan designation for ARIKAYCE for the treatment of NTM lung disease.	· We expect to achieve our enrollment objective in the CONVERT study in 2016. · If approved, we expect ARIKAYCE would be the first inhaled antibiotic specifically indicated for the treatment of NTM lung infections in North America, Europe, and Japan. · If approved, we plan to commercialize ARIKAYCE in the US, certain countries in Europe, Canada, Japan and certain other countries.

INS1009 (nebulized treprostinil prodrug) for rare pulmonary disorders	· We completed a phase 1 study of INS1009. The phase 1 study was a randomized, double-blind, placebo-controlled single ascending dose study of INS1009 for inhalation to determine its safety, tolerability, and pharmacokinetics in healthy volunteers.	· The results of our phase 1 study of INS1009 have been accepted for presentation at the European Respiratory Society international congress in September 2016.

Product Pipeline

ARIKAYCE for patients with NTM lung disease

Our lead product candidate is ARIKAYCE, or LAI, a novel, once-daily formulation of amikacin that is in late-stage clinical development for patients with NTM lung disease, a rare and often chronic infection that is capable of causing irreversible lung damage

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and which can be fatal. Amikacin solution for parenteral administration is an established drug that has activity against a variety of NTM; however, its use is limited by the need to administer it intravenously and by toxicity to hearing, balance, and kidney function (Peloquin et al., 2004). Our advanced liposome technology uses charge-neutral liposomes to deliver amikacin directly to the lung where it is taken up by the lung macrophages where the NTM infection resides. This prolongs the release of amikacin in the lungs while minimizing systemic exposure thereby offering the potential for decreased systemic toxicities. ARIKAYCE’s ability to deliver high levels of amikacin directly to the lung distinguishes it from intravenous amikacin. ARIKAYCE is administered once-daily using an optimized, investigational eFlow® Nebulizer System manufactured by PARI Pharma GmbH, a novel, highly efficient and portable aerosol delivery system.

The CONVERT study

ARIKAYCE is currently being evaluated in a global phase 3 randomized, open-label clinical study designed to confirm the culture conversion results seen in our phase 2 clinical trial. This phase 3 study, which is known as the CONVERT (or 212) study, is enrolling non-cystic fibrosis (non-CF) patients 18 years and older with an NTM lung infection caused by MAC that is refractory to a stable multi-drug regimen for at least six months with the regimen either ongoing or completed within 12 months of screening. In our completed phase 2 study, the subgroup of non-CF patients with NTM lung infection caused by MAC demonstrated the greatest response to treatment with ARIKAYCE. The CONVERT study also excludes subjects whose susceptibility scores indicate that their MAC NTM infection is resistant to amikacin. We believe the CONVERT study will confirm the culture conversion results seen in the phase 2 study and provide the basis for submitting a New Drug Application (NDA) to the FDA, as well as regulatory submissions in Europe, Japan and other countries.

After a screening period of approximately 10 weeks, eligible subjects are randomized 2:1 to once-daily ARIKAYCE plus a multi-drug regimen or a multi-drug regimen without ARIKAYCE. The primary efficacy endpoint is the proportion of subjects who achieve culture conversion by Month 6 in the ARIKAYCE plus multi-drug regimen arm compared to the arm in which subjects receive a multi-drug regimen without ARIKAYCE. A converter is defined as a subject with three consecutive negative sputum cultures collected monthly without relapse or recurrence; all others will be considered non-converters. The study’s key secondary endpoints include the change from baseline in the six-minute walk test and off-treatment assessments to evaluate durability of effect. The study also includes a comprehensive pharmacokinetic sub-study in Japanese subjects in lieu of a separate local pharmacokinetic study in Japan.

At Month 8, after all sputum culture results are known up to and including Month 6, subjects will be assessed as converters or non-converters for the primary efficacy endpoint. All converters will continue on their randomized treatment regimen for 12 months beginning from the first negative culture that defined culture conversion. All converters will return for off-treatment follow-up visits. A 12-month off-treatment study visit will be the last visit for the CONVERT study. All non-converters in the study at Month 8 may be eligible to enter a separate 12-month open-label study (the 312 study). The primary objective of the 312 study is to evaluate the long-term safety and tolerability of ARIKAYCE. The secondary endpoints of the 312 study include evaluating the proportion of subjects achieving culture conversion (three consecutive negative sputum cultures without relapse or recurrence) by Month 6 and the proportion of subjects achieving culture conversion by Month 12 (end of treatment).

The protocol for the CONVERT study incorporates feedback from the FDA and the EMA via its scientific advice working party process, as well as local health authorities in other countries, including Japan’s Pharmaceuticals and Medical Devices Agency. If the CONVERT study meets the primary endpoint of culture conversion at Month 6, we believe we would be eligible to submit an NDA pursuant to 21 CFR 314 Subpart H (Accelerated Approval of New Drugs for Serious or Life-Threatening Illnesses), which permits FDA to approve a drug based on a surrogate endpoint provided the sponsor commits to study the drug further to verify and describe the drug’s clinical benefit. We believe that efficacy data from the CONVERT study after Month 6 will suffice to meet this commitment. We are currently conducting CONVERT at more than 145 sites in North America, Europe, Australia, New Zealand and Asia. The CONVERT study is designed to enroll enough subjects to ensure at least 261 patients are evaluable for the primary endpoint.

Phase 2 study (112 study)

Our completed phase 2 study, which is also known as the 112 study, was a randomized, double-blind, placebo-controlled study that evaluated the efficacy and safety of ARIKAYCE in adults with NTM lung disease due to MAC or Mycobacterium abscessus ( M. abscessus ) that was refractory to guideline-based therapy. Eligibility for the 112 study required patients to have been on the American Thoracic Society/Infectious Disease Society of America (ATS/IDSA) guideline therapy for at least six months prior to screening and to have had persistently positive mycobacterial cultures. The study included an 84-day double-blind phase in which patients were randomized 1:1 either to ARIKAYCE once-daily plus a multi-drug regimen or to placebo once-daily plus a multi-drug regimen. After completing the 84-day double-blind phase, patients had the option of continuing in an 84-day open-label phase during

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which all patients received ARIKAYCE plus a multi-drug regimen. The study also included 28-day and 12-month off-ARIKAYCE follow-up assessments to evaluate durability of effect.

Eighty-nine patients were randomized and dosed in the study. Of the 80 patients who completed dosing in the 84-day study, 78 patients elected to continue in the open-label phase and received ARIKAYCE plus a multi-drug regimen for an additional 84 days. Seventy-six percent (76% or 59/78) of patients who elected to continue in the open-label phase of the study completed the open-label phase.

The primary efficacy endpoint of the study was the change from baseline (day 1) to the end of the double-blind phase of the trial (day 84) in a semi-quantitative measurement of the mycobacterial density on a seven-point scale. ARIKAYCE did not meet the pre-specified level for statistical significance although there was a positive trend (p=0.072) in favor of ARIKAYCE. The p-value for the key secondary endpoint of culture conversion to negative at Day 84 (defined as a negative culture on Day 84) was 0.003, in favor of ARIKAYCE.

After establishing the primary endpoint for the CONVERT study, we explored the microbiologic outcomes from the 112 study using the more stringent definition of culture conversion, which is defined as at least three consecutive monthly sputum samples that test negative for NTM bacteria. This definition of culture conversion is in the ATS/IDSA Guidelines (Griffith et al., 2007) and used in clinical practice. The results of these analyses are summarized below:

· Twenty patients who received ARIKAYCE in the 112 study achieved culture conversion status over the 168-day treatment phase (13 received ARIKAYCE in the double-blind phase and seven received ARIKAYCE in the open-label phase).

· Three additional patients who started ARIKAYCE in the open-label phase achieved culture conversion by the 28-day off-ARIKAYCE follow-up assessment.

· Of the 23 patients who achieved culture conversion by the 28-day end-of-study follow-up visit, four converted at baseline (day 1) prior to the administration of study drug.

The 112 study included a 12-month off-ARIKAYCE follow-up visit in order to collect sputum culture results. These results were collected and analyzed to assess the durability of the ARIKAYCE treatment effect for both the group of subjects who achieved culture conversion and the group of subjects who did not achieve culture conversion during the 168-day treatment phase. The results of these analyses are summarized below:

· Seventeen of the total 23 subjects who achieved culture conversion during the study attended their 12-month off-ARIKAYCE follow-up visit. The NTM sputum culture results at the 12-month visit for the 17 subjects are as follows:

· Eleven subjects remained culture negative; nine of these subjects were non-CF subjects with MAC (eight of these nine subjects were off all NTM treatments at this time), one subject was non-CF M. abscessus, and one subject was CF M. abscessus at the time of study entry (both subjects with M. abscessus were on NTM treatments at this time).

· Three non-CF subjects with MAC could not produce sputum despite reasonable attempts. These same subjects were off all NTM treatments at this time. This is consistent with the achievement of treatment success during the follow-up period as the lack of sputum production is indicative of symptom resolution.

· Two non-CF subjects with MAC were broth culture positive only, which may represent contamination (a false positive) or a new infection rather than a relapse.

· One non-CF subject with M. abscessus was also broth culture positive only.

· Twenty-eight subjects provided sputum at the 12-month follow-up visit and 12 subjects did not provide sputum. Of those who provided sputum, 22 continued to have positive sputum cultures and six had a negative culture.

· Seven patients died during the 12-month follow-up phase. Six of the seven patients did not achieve culture conversion and one patient did achieve culture conversion during the study treatment phases.

During the double-blind phase, the majority of the subjects in both treatment groups experienced at least one treatment-emergent adverse event (TEAE). All of the most common TEAEs, except diarrhea, occurred more frequently in the ARIKAYCE group than in the placebo group. Renal TEAEs were reported infrequently. Audiovestibular TEAEs were reported in similar proportions of subjects in the two treatment groups in the double-blind phase and were reported infrequently in the open-label phase. TEAEs considered related by the investigator were reported more frequently in the ARIKAYCE group than in the placebo group in the double-blind phase (ARIKAYCE: 72.7%, placebo: 37.8%). The overall incidences of adverse events leading to study drug discontinuation and serious adverse events were higher in the ARIKAYCE group than in the placebo group.

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During the treatment phases of the study, there were two deaths; one subject died during the double-blind phase of pneumonia and acute respiratory distress syndrome and one subject died during the open-label phase of multi-organ failure, intestinal ischemia, and urosepsis. None of the events in either subject were considered to be related to the study drug by the investigator. All of these events were assessed by the Data Monitoring Committee, with no change in their assessment of the risk benefit of ARIKAYCE. Two additional patients who withdrew from the study (one during the open-label phase and one prior to the 12-month follow-up) later died due to unknown causes. In the double-blind phase, serious adverse events were reported for a greater proportion of subjects in the ARIKAYCE group than in the placebo group (18.2% versus 8.9%, respectively). In the double-blind phase, a greater proportion of subjects in the ARIKAYCE treatment group than in the placebo group reported adverse events leading to study drug discontinuation (ARIKAYCE: 15.9%; placebo: 0%). The most commonly reported TEAEs leading to study drug discontinuation in the ARIKAYCE group were infective exacerbation of underlying bronchiectasis (6.8%) and dyspnea (4.5%). The incidence of adverse events leading to discontinuation did not increase in the ARIKAYCE group with longer exposure to the study drug in the open-label phase compared with the double-blind phase (17.1% and 18.2%, respectively). In the open-label phase, 27.9% of subjects who had received placebo during the double-blind phase of the trial reported adverse events leading to study drug discontinuation.

No clinically significant changes in laboratory values, vital signs, body mass index, and pulmonary function tests were observed over the course of the study. The results discussed above are based on currently available data.

MAA for NTM in the EU

In 2015, our MAA for ARIKAYCE for NTM was validated. The filing was based on data from our phase 2 study. In May 2016, we participated in an oral explanation meeting with the CHMP. After the oral explanation meeting, the CHMP concluded that the data submitted did not provide enough evidence to support an approval. In June 2016, we withdrew our MAA and we intend to resubmit our MAA when clinical data from our ongoing global CONVERT study are available.

NTM Market Opportunity

NTM is a rare and serious disorder associated with increased morbidity and mortality. There is an increasing rate of lung disease caused by NTM and this is an emerging public health concern worldwide. Patients with NTM lung disease may experience a multitude of symptoms such as fever, weight loss, cough, lack of appetite, night sweats, blood in the sputum, and fatigue. Patients with NTM lung disease frequently require lengthy hospital stays to manage their condition. There are no inhaled antibiotic treatments specifically indicated for the treatment of NTM lung disease in North America, Europe or Japan. Current guideline-based approaches involve multi-drug regimens that may cause severe side effects and treatment can be as long as two years or more.

The prevalence of human disease attributable to NTM has increased over the past two decades. In a decade-long study (1997-2007), researchers found that the prevalence of NTM in the US is increasing at approximately 8% per year and that NTM patients on Medicare over the age of 65 are 40% more likely to die over the period of the study than those who did not have the disease (Adjemian et al., 2012). A 2015 publication from co-authors from several US government departments stated that prior year statistics led to a projected 181,037 national annual cases in 2014 costing the US healthcare system approximately $1.7 billion (Strollo et al., 2015).

Our market research indicates that there are approximately 100,000 patients in the US, the EU5 (France, Germany, Italy, Spain and the United Kingdom), and Japan who have a confirmed diagnosis of NTM lung disease, of which an estimated 10 to 30 percent are refractory to current treatments. 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. 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 EU5 and approximately 30,000 in the 28 countries comprising the EU. In addition, there are nearly 32,000 cases in Japan. Although population-based data on the epidemiology of NTM lung disease are limited, studies worldwide have described an increasing prevalence.

NTM currently includes over 165 species. MAC is the predominant pathogenic species in NTM pulmonary disease in the US, Japan and Europe, followed by M. abscessus . Thus far, we have studied ARIKAYCE in both MAC and M. abscessus .

We are studying the economic and societal implications of NTM lung infections. We have conducted a burden of illness study in the US with a major medical benefits provider. This study showed that patients with NTM lung infections are costly to healthcare plans and ATS/IDSA guideline-based treatment results in healthcare savings as opposed to suboptimal treatment.

In partnership with one of the nation’s largest Medicare insurance providers, we presented the results of three claims-based studies.

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· At the Interscience Conference of Antimicrobial Agents and Chemotherapy in September 2015, researchers reported a 36.1% increase in the incidence of NTM lung infections between 2008 and 2013 in US Medicare population of a national managed care health plan, with the greatest incidence increase (56.3%) observed in members 65 to 74 years of age. Following diagnosis with NTM lung infections, over 50% of members were still in the plan after six years (Abraham et al., 2015).

· At the Infectious Disease Week in October 2015, researchers reported that patients with NTM lung infections were using greater healthcare resources than their age and gender-matched controls in the period preceding their initial diagnosis. Ordering mycobacterial testing of sputum earlier may help in preventing a misdiagnosis or delaying a diagnosis (Holt et al., 2015).

· At the Academy of Managed Care Pharmacy conference in October 2015, researchers reported higher resource utilization and costs for patients with NTM lung infections than their age and gender-matched controls both pre- and post-diagnosis. Patients who received treatment regimens conforming to the 2007 ATS/IDSA guidelines showed lower healthcare resource utilization and total medical costs than patients who received suboptimal treatment. These data suggest that healthcare plans should consider mechanisms to identify and appropriately treat patients with NTM lung disease (Abraham et al., 2015).

We plan to repeat this type of research globally in support of our overall disease awareness and education efforts.

The FDA has designated ARIKAYCE as an orphan drug, a breakthrough therapy, and a QIDP for NTM lung disease. Orphan designation features seven years of post-approval market exclusivity, and QIDP features an additional five years of post-approval exclusivity. A QIDP-designated product is eligible for fast track and priority review designations. A priority review designation for a drug means the FDA’s goal is to take action on the NDA within six months as compared to 10 months under a standard review.

INS1009

INS1009 is an investigational sustained-release nebulized treprostinil prodrug that has the potential to address certain of the current limitations of existing inhaled prostanoid therapies. We believe that INS1009 prolongs duration of effect and may provide PAH patients with greater consistency in pulmonary arterial pressure reduction over time. Current inhaled prostanoid therapies must be dosed four to nine times per day for the treatment of PAH. Reducing dose frequency has the potential to ease patient burden and improve compliance. Additionally, we believe that INS1009 may be associated with fewer side effects, including elevated heart rate, low blood pressure, and severity and/or frequency of cough, associated with high initial drug levels and local upper airway exposure when using current inhaled prostanoid therapies. We believe INS1009 may have therapeutic potential in PAH, IPF, pulmonary sarcoidosis, and severe refractory asthma.

In late 2014, we had a pre-investigational new drug (pre-IND) meeting with the FDA for INS1009 and clarified that, subject to final review of the preclinical data, INS1009 could be eligible for an approval pathway under Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act (FDCA) (505(b)(2) approval). Like a traditional NDA that is submitted under Section 505(b)(1) of the FDCA, a 505(b)(2) NDA must establish that the drug is safe and effective, but unlike a traditional NDA the applicant may rely at least in part on studies not conducted by or for the applicant and for which the applicant does not have a right of reference. The ability to rely on existing third-party data to support safety and/or effectiveness can reduce the time and cost associated with traditional NDAs.

In the fourth quarter of 2015, we submitted an IND application and earlier this year completed a phase 1 study of INS1009. The phase 1 study was a randomized, double-blind, placebo-controlled single ascending dose study of INS1009 for inhalation to determine its safety, tolerability, and pharmacokinetics in healthy volunteers. The results of our phase 1 study of INS1009 have been accepted for presentation at the European Respiratory Society international congress in September 2016.

PAH

PAH is a serious, progressive rare disease. There is no cure for PAH. Research has estimated PAH prevalence in Europe at 15 to 52 per million (Peacock et al., 2007). Claims-based research has estimated a higher PAH prevalence in the US at 109 per million for the privately insured (under age 65) population and 451 per million for the Medicare population (Kirson et al., 2011). PAH ultimately leads to heart failure and the disease has a 15% one-year mortality rate (Kirson et al., 2011; Kane et al., 2011; and Thenappan et al., 2007). Several medications are used to treat PAH. Non-specific treatments such as anticoagulants, diuretics, and oxygen may be used. These drugs are not specifically approved for the treatment of PAH, but are commonly utilized. In specific circumstances, drugs such as digoxin or calcium channel blockers may also be used to treat PAH. Several drugs are approved specifically for the treatment of PAH. These drugs address three target pathophysiologic pathways: the endothelin pathway; the nitric oxide pathway; and the prostacyclin pathway. They may be used alone or in combination.

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IPF

IPF is a rare, chronic, progressive, interstitial lung disease of unknown etiology that affects around five million patients worldwide. Patients with IPF are generally middle-aged or older at the time of diagnosis. Disease progression is variable but progressive fibrosis (scarring) leads ultimately to death, with a median survival of three to five years after diagnosis. Symptoms often include shortness of breath, dry cough, unintended weight loss, fatigue, and clubbing of the fingers and toes. Over time, IPF can lead to a debilitating loss of physical ability. The prevalence of IPF in the US ranges from between 90,000 and 190,000 patients, a range similar to that reported in Europe (Lee et al., 2014).

Pulmonary Sarcoidosis

Sarcoidosis is a granulomatous inflammatory disease that is induced by unknown antigen(s) in a genetically susceptible host (Mortaz et al., 2014). This rare, chronic systemic disease most commonly affects the lung. Several features of sarcoidosis tend to obscure the diagnosis, leading to an under-appreciation of the potential impact of the disease on the health care system and society as a whole. Sarcoidosis frequently presents with non-specific complaints, ranging from fatigue and depression, “asthma symptoms” (wheezing, cough), to arthritis and muscle pain or weakness. As such, sarcoidosis can mimic other diseases, leading to misdiagnosis and inappropriate treatments (Erdal et al., 2012).

Severe refractory asthma

Severe refractory asthma is characterized by a difficulty to achieve disease control despite high-intensity treatment. Prevalence figures of severe refractory asthma are lacking, whereas longstanding estimates vary between five and 10% of all asthmatic patients. To make a reliable estimate of the prevalence of severe refractory asthma as defined by the Innovative Medicine Initiative consensus, Hekking et al. analyzed prescription data from 65 Dutch pharmacy databases, representing 500,500 adult inhabitants. Of asthmatic adults, 3.6% qualified for a diagnosis of severe refractory asthma; therefore, the prevalence of severe refractory asthma might be lower than estimated by expert opinion, which implies that currently recognized severe asthma phenotypes could meet the criteria of rare disease (Hekking et al., October 2014).

Our Strategy

Our strategy focuses on the needs of patients with rare diseases. We are currently focused on the development and commercialization of ARIKAYCE. There are currently no inhaled products specifically indicated to treat NTM lung disease in North America, Europe or Japan. While we believe that ARIKAYCE has the potential to treat many different diseases, we are prioritizing securing US regulatory approval of ARIKAYCE in NTM lung disease caused by MAC. We are also advancing earlier-stage programs in other rare disorders.

Our current priorities are as follows:

· Enrolling the global CONVERT study;

· Preparing our US NDA submission, which will be based on the primary endpoint of the CONVERT study;

· Ensuring our product supply chain will support the clinical development and, if approved, commercialization of ARIKAYCE;

· Preparing for potential commercialization of ARIKAYCE in the US and certain European countries;

· Defining further research and lifecycle management strategies for ARIKAYCE, including investigator-initiated studies;

· Presenting the results of the phase 1 study of INS1009, our nebulized treprostinil prodrug, and investigating its use in multiple indications;

· Generating preclinical findings from our earlier-stage program(s); and

· Expanding our rare disease pipeline through corporate development.

Corporate Development

We plan to develop, acquire, in license or co-promote other products that address rare diseases. We are focused broadly on rare disease therapeutics and prioritizing those areas that best align with our core competencies and current therapeutic focus in the area of rare pulmonary diseases.

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Manufacturing

ARIKAYCE is manufactured by Ajinimoto Althea, Inc. (Althea) in the US at a 50 liter scale. In September 2015, we entered into a commercial fill/finish services agreement with Althea to produce ARIKAYCE. Althea has the right to terminate this agreement upon written notice for our uncured material breach, if we are the subject of specified bankruptcy or liquidation events, or without cause with 24 months’ prior written notice. In February 2014, we entered into a contract manufacturing agreement with Therapure Biopharma Inc. (Therapure) for the manufacture of ARIKAYCE at a 200 liter scale which we believe will be necessary to support commercialization. We have also identified certain second source suppliers for our supply chain, and plan to implement supply and quality agreements in preparation for commercialization of ARIKAYCE. In July 2014, we entered into a commercialization agreement with PARI Pharma GmbH (PARI), the manufacturer of our drug delivery nebulizer, to address our commercial supply needs. We currently produce INS1009, our investigational nebulized treprostinil prodrug, and plan to utilize third parties to manufacture INS1009 at a larger scale and the drug delivery device.

KEY COMPONENTS OF OUR STATEMENT OF OPERATIONS

Revenues

In 2015, the French National Agency for Medicines and Health Products Safety granted LAI several nominative Temporary Authorization for Use (Autorisation Temporaire d’Utilisation or ATU). Pursuant to this program, we shipped ARIKAYCE to pharmacies after receiving requests from physicians for patients in France. In 2016, the revenue recorded from the ATU program was immaterial to disclose and is included as a component of “other income, net.” Other than the ATU revenue in France, 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. Expenses also include 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 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 2015, we commenced the CONVERT study for ARIKAYCE for patients with NTM lung disease. In 2015, we also completed an open-label extension study in which CF patients that completed our phase 3 trial received ARIKAYCE for a period of two years. The majority of our research and development expenses have been for our ARIKAYCE development programs. Our development efforts in 2015 and 2016 principally relate to the development of ARIKAYCE in the NTM indication and, to a lesser extent, for INS1009.

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 preparation for 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.

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Investment Income and Interest Expense

Investment income consists of interest and dividend income earned on our cash and cash equivalents. Interest expense consists primarily of interest costs related to our debt.

RESULTS OF OPERATIONS

Comparison of the Three Months Ended June 30, 2016 and 2015

Net Loss

Net loss for the quarter ended June 30, 2016 was $36.6 million, or ($0.59) per common share—basic and diluted, compared with a net loss of $28.6 million, or ($0.47) per common share—basic and diluted, for the quarter ended June 30, 2015. The $8.0 million increase in our net loss for the quarter ended June 30, 2016 as compared to the same period in 2015 was primarily due to:

· Increased research and development expenses of $5.6 million resulting from an increase in clinical trial expenses primarily related to the CONVERT study and higher compensation and related expenses due to an increase in headcount compared to the prior year period; and

· Increased general and administrative expenses of $2.6 million primarily resulting from an increase in pre-commercial activities and higher compensation and related expenses due to an increase in headcount as compared to the prior year period.

Research and Development Expenses

Research and development expenses for the quarters ended June 30, 2016 and 2015 were comprised of the following (in thousands):

	Quarters Ended June 30,				Increase (decrease)
	2016		2015		$			%
External Expenses
Clinical development & research	$	8,432	$	5,996	$	2,436		40.6	%
Manufacturing	5,812		6,076		(264		)	-4.3	%
Regulatory and quality assurance	731		314		417			132.8	%
Subtotal—external expenses	$	14,975	$	12,386	$	2,589		20.9	%
Internal Expenses
Compensation and related expenses	$	6,825	$	4,560	$	2,265		49.7	%
Other internal operating expenses	2,071		1,300		771			59.3	%
Subtotal—internal expenses	$	8,896	$	5,860	$	3,036		51.8	%
Total	$	23,871	$	18,246	$	5,625		30.8	%

Research and development expenses increased to $23.9 million during the quarter ended June 30, 2016 from $18.2 million in the same period in 2015. The $5.6 million increase was due to a $2.4 million increase in external clinical development expenses primarily related to the CONVERT study and a $2.3 million increase in compensation and related expenses due to an increase in headcount, including stock-based compensation. We expect research and development expenses to increase in 2016 as compared to 2015 due primarily to the clinical trial activity related to the CONVERT study.

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General and Administrative Expenses

General and administrative expenses for the quarters ended June 30, 2016 and 2015 were comprised of the following (in thousands):

	Quarters Ended June 30,				Increase (decrease)
	2016		2015		$		%
General & administrative	$	8,667	$	7,566	$	1,101	14.6	%
Pre-commercial expenses	3,595		2,140		1,455		68.0	%
Total general & administrative expenses	$	12,262	$	9,706	$	2,556	26.3	%

General and administrative expenses increased to $12.3 million during the quarter ended June 30, 2016 from $9.7 million in the same period in 2015. The $2.6 million increase was primarily due to an increase of $1.5 million in expenses related to pre-commercial activities and an increase of $1.2 million due to higher compensation related to an increase in headcount, including stock-based compensation.

Interest Expense

Interest expense was $0.6 million during the quarter ended June 30, 2016 as compared to $0.7 million in the same period in 2015. The $0.1 million decrease in interest expense in 2016 relates to a decrease in the amortization of our debt issuance costs in 2016.

Comparison of the Six Months Ended June 30, 2016 and 2015

Net Loss

Net loss for the six months ended June 30, 2016 was $70.1 million, or ($1.13) per common share—basic and diluted, compared with a net loss of $56.0 million, or ($1.01) per common share—basic and diluted, for the six months ended June 30, 2015. The $14.1 million increase in our net loss for the six months ended June 30, 2016 as compared to the same period in 2015 was primarily due to:

· Increased research and development expenses of $9.0 million resulting from an increase in clinical trial expenses primarily related to the CONVERT study and higher compensation and related expenses due to an increase in headcount compared to the prior year period. These increases were partially offset by a decrease in manufacturing expenses primarily due to the completion of the build-out of our production area at Therapure’s facility in 2015; and

· Increased general and administrative expenses of $5.5 million primarily resulting from an increase in pre-commercial activities and higher compensation and related expenses due to an increase in headcount as compared to the prior year period.

Research and Development Expenses

Research and development expenses for the six months ended June 30, 2016 and 2015 were comprised of the following (in thousands):

	Six Months Ended June 30,				Increase (decrease)
	2016		2015		$			%
External Expenses
Clinical development & research	$	16,638	$	11,878	$	4,760		40.1	%
Manufacturing	9,276		10,428		(1,152		)	-11.0	%
Regulatory and quality assurance	965		941		24			2.6	%
Subtotal—external expenses	$	26,879	$	23,247	$	3,632		15.6	%
Internal Expenses
Compensation and related expenses	$	13,377	$	9,331	$	4,046		43.4	%
Other internal operating expenses	4,162		2,832		1,330			47.0	%
Subtotal—internal expenses	$	17,539	$	12,163	$	5,376		44.2	%
Total	$	44,418	$	35,410	$	9,008		25.4	%

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Research and development expenses increased to $44.4 million during the six months ended June 30, 2016 from $35.4 million in the same period in 2015. The $9.0 million increase was due to a $4.8 million increase in external clinical development expenses primarily related to the CONVERT study and a $4.0 million increase in compensation and related expenses due to an increase in headcount. These increases were partially offset by a $1.2 million decrease in manufacturing expenses primarily due to the completion of the build-out of our production area at Therapure’s facility in 2015. We expect research and development expenses to increase in 2016 as compared to 2015 due primarily to the clinical trial activity related to the CONVERT study.

General and Administrative Expenses

General and administrative expenses for the six months ended June 30, 2016 and 2015 were comprised of the following (in thousands):

	Six Months Ended June 30,				Increase (decrease)
	2016		2015		$		%
General & administrative	$	17,692	$	15,332	$	2,360	15.4	%
Pre-commercial expenses	7,090		3,916		3,174		81.1	%
Total general & administrative expenses	$	24,782	$	19,248	$	5,534	28.8	%

General and administrative expenses increased to $24.8 million during the six months ended June 30, 2016 from $19.2 million in the same period in 2015. The $5.5 million increase was primarily due to an increase of $3.2 million in expenses relating to pre-commercial activities and an increase of $1.7 million due to higher compensation related to an increase in headcount.

Interest Expense

Interest expense was $1.2 million during the six months ended June 30, 2016 as compared to $1.4 million in the same period in 2015. The $0.2 million decrease in interest expense relates to a decrease in the amortization of our debt issuance costs in 2016.

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. In recent years, we have funded our operations through public and private placements of equity securities and through debt financing. We expect to continue to incur losses both in our US and certain international entities, as we plan to fund research and development activities and commercial launch activities.

We believe we currently have sufficient funds to meet our financial needs for at least the next twelve months. We may opportunistically raise additional capital and may do so 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. 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 the remainder of 2016, we plan to continue to fund further clinical development of ARIKAYCE and INS1009, support efforts to obtain regulatory approvals, and prepare for commercialization. Our cash requirements in 2016 will be impacted by a number of factors, the most significant of which, being the enrollment rates and other expenses related to the CONVERT study.

Cash Flows

As of June 30, 2016, we had total cash and cash equivalents of $223.1 million, as compared with $282.9 million as of December 31, 2015. The $59.8 million decrease was due primarily to the use of cash in operating activities. Our working capital was $197.0 million as of June 30, 2016 as compared with $265.9 million as of December 31, 2015.

Net cash used in operating activities was $57.8 million and $49.1 million for the six months ended June 30, 2016 and 2015, respectively. The net cash used in operating activities during 2016 and 2015 was primarily for the clinical, manufacturing and pre-commercial activities related to ARIKAYCE, as well as general and administrative expenses.

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Net cash used in investing activities was $2.1 million and $2.2 million for the six months ended June 30, 2016 and 2015, respectively. The net cash used in investing activities during 2016 was primarily related to payments for the build out of our headquarters and lab facility in Bridgewater, New Jersey.

Net cash provided by financing activities was $0.1 million and $227.1 million for the six months ended June 30, 2016 and 2015, respectively. Net cash provided by financing activities in 2016 was cash proceeds received from stock option exercises and in 2015 included net proceeds of $222.9 million received from the issuance of 11.5 million common shares in April 2015 and cash proceeds of $4.2 million received from stock option exercises.

Contractual Obligations

In June 2012, we and our domestic subsidiaries, as co-borrowers, entered into a Loan and Security Agreement with Hercules that allowed us to borrow up to $20.0 million (Loan Agreement) at an interest rate of 9.25%. The interest rate for the term is floating and is defined as the greater of (i) 9.25% or (ii) 9.25% plus the sum of the US prime rate minus 4.50%. In December 2014, we entered into a third amendment (the Third Amendment) to the Loan Agreement with Hercules. In connection with the Third Amendment, we paid a commitment fee of $25,000, and at the closing, paid a facility fee of $125,000. Under the Third Amendment, the amount of borrowings was increased by an additional $5.0 million to an aggregate total of $25.0 million and the interest-only period was extended through December 31, 2015. In December 2015, we entered into a fifth amendment (the Fifth Amendment) to the Loan Agreement to exercise an option to extend the maturity date of the loan to January 1, 2018 with a payment to Hercules of $250,000. The Fifth Amendment extends the interest-only period, with principal repayments beginning in October 2016.

We have an operating lease for office and laboratory space located in Bridgewater, NJ, our corporate headquarters, for which the initial lease term expires in November 2019. Future minimum rental payments under this lease total approximately $3.5 million.

As of June 30, 2016, future payments under our long-term debt agreements, capital leases, minimum future payments under non-cancellable operating leases and minimum future payment obligations are as follows:

			As of June 30, 2016 Payments Due By Period
	Total		Less than 1 year		1 - 3 Years		4 - 5 Years		After 5 Years
	(in thousands)
Debt obligations
Debt maturities	$	25,000	$	8,823	$	16,177	$	—	$	—
Contractual interest	2,792		2,073		719		—		—
Operating leases	3,691		1,200		2,050		441		—
Purchase obligations	4,050		2,700		1,350		—		—
Total contractual obligations	$	35,533	$	14,796	$	20,296	$	441	$	—

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; or (d) any payments related to the agreements mentioned below.

We currently have a licensing agreement with PARI for the use of the optimized eFlow Nebulizer System for delivery of ARIKAYCE in treating patients with NTM infections, CF and bronchiectasis. 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. In addition, PARI is entitled to receive royalty payments in the mid-single digits on commercial net sales of ARIKAYCE pursuant to the licensing agreement, subject to certain specified annual minimum royalties. In July 2014, we entered into a Commercialization Agreement (the PARI Agreement) with PARI for the manufacture and supply of eFlow nebulizer systems and related accessories (the Device) as optimized for use with our proprietary liposomal amikacin for inhalation. The PARI Agreement has an initial term of fifteen years from the first commercial sale of ARIKAYCE pursuant to the licensing agreement (the Initial Term). The term of the PARI Agreement may be extended by us for an additional five years by providing written notice to PARI at the least one year prior to the expiration of the Initial Term.

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In 2004 and 2009, we entered into a 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 patients with CF in the US, we will owe a payment to CFFT of up to $13.4 million that is payable over a three-year period after approval as a commercialized drug in the US. Furthermore, if certain global sales milestones are met within five years of the drug commercialization, we would owe an additional $3.9 million in additional payments. Since there is significant development risk associated with ARIKAYCE, we have not accrued these obligations.

In February 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, we collaborated with Therapure to construct a production area for the manufacture of ARIKAYCE in Therapure’s existing manufacturing facility in Canada. We paid Therapure approximately $12 million for the build out of the construction area and related manufacturing costs. Therapure manufactures 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. Under the agreement, we are obligated to pay certain minimum amounts for the batches of ARIKAYCE produced each calendar year.

In December 2014, we entered into a services agreement with SynteractHCR, Inc. (Synteract) pursuant to which we retained Synteract to perform implementation and management services in connection with the 212 study. We anticipate that aggregate costs relating to all work orders for the 212 study will be approximately $40 million over the period of the study. In April 2015, we entered into a work order with Synteract to perform implementation and management services for the 312 study. We anticipate that aggregate costs relating to all work orders for the 312 study will be approximately $20 million over the period of the study.

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

Future Funding Requirements

We may need to raise additional capital to fund our operations, to develop and commercialize ARIKAYCE, to develop INS1009, and to develop, acquire, in-license or co-promote other products that address orphan or rare diseases. Our future capital requirements may be substantial and will depend on many factors, including:

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

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

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

· the cost of filing, prosecuting, defending 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 April 2015, we generated net proceeds of $222.9 million from the issuance of 11.5 million shares of common stock. 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. 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 material revenue from ARIKAYCE and we do not know when, or if, we will generate material revenue. We do not expect to generate significant revenue unless or until we obtain marketing approval of, and secure reimbursement 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, stock-based compensation, identifiable intangible assets, 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, 2015. 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 June 30, 2016, 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 June 30, 2016, we had $25.0 million of fixed rate borrowings that bear interest at 9.25% outstanding under a Loan and Security Agreement we entered into in June 2012 and amended most recently in December 2015. If a 10% change in interest rates was to have occurred on June 30, 2016, this change 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, British Pounds, and Japanese Yen. Historically, fluctuations in foreign currency exchange rates have not materially affected our results of operations and during the three and six months ended June 30, 2016 and 2015, our results of operations were not materially affected by fluctuations in foreign currency exchange rates.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2016. 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 June 30, 2016, our Chief Executive Officer 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 our 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 June 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On July 15, 2016, a purported class action lawsuit was filed in the U.S. District Court for the District of New Jersey against us and certain executive officers: Hoey v. Insmed Incorporated, et al. The complaint includes allegations that, during the class period between March 18, 2013 and June 8, 2016, we and certain executive officers violated Section 10(b) of the Securities Exchange Act of 1934 (the Exchange Act), Rule 10b-5 promulgated thereunder, and Section 20(a) of the Exchange Act in making various statements related to the European MAA of ARIKAYCE with the EMA. The complaint seeks unspecified damages. We believe that the allegations in the complaint are without merit and intend to defend the lawsuit vigorously; however, there can be no assurance regarding the ultimate outcome of the lawsuit.

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, 2015. 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, 2015, except for the following updates:

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 will depend heavily on the successful completion of development of, receipt of regulatory approval for, and commercialization of, ARIKAYCE.

Positive results from preclinical studies of a drug candidate may not be predictive of similar results in human clinical trials, and promising results 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 our clinical trials currently in progress or other trials.

We are conducting a global phase 3 clinical study of ARIKAYCE (the 212 or CONVERT study) in adult non-CF patients with NTM lung infections caused by MAC that are refractory to treatment. The CONVERT study is designed to confirm the culture conversion results seen in our phase 2 clinical trial (the 112 study). The clinical trial process may fail to demonstrate with statistical significance that our drug product candidates are effective for the proposed indications, or may fail to establish adequate safety. Such failure may cause us to abandon a drug product candidate and may delay development of other drug product candidates.

In the fourth quarter of 2014, we filed an MAA with the EMA seeking approval of ARIKAYCE in the EU for the treatment of NTM lung infections based on the data from the 112 study. In February 2015 the EMA validated our MAA for ARIKAYCE for NTM lung infections, as well as cystic fibrosis (CF) patients with Pseudomonas lung infections. The EMA subsequently requested additional information with respect to the CF indication with respect to the similarity of ARIKAYCE to another product that has an orphan designation for the same indication. In the third quarter of 2015, the EMA adopted our request to withdraw the Pseudomonas indication from our MAA.

In April 2016, we submitted our written responses to the EMA’s 180-day list of outstanding issues (LOI). We subsequently participated in an oral explanation hearing with the CHMP in May 2016 to address the LOI. After the CHMP meeting, the CHMP concluded that the data submitted did not provide enough evidence to support an approval. In June 2016, we withdrew our MAA from the EMA and intend to resubmit the MAA when clinical data from our CONVERT study is available. We do not expect ARIKAYCE

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or any other drug candidates we may develop to be commercially available in any market until we get requisite approval from the EMA, FDA or equivalent regulatory agency. The failure to obtain such approvals may materially adversely affect our business, financial condition, results of operations and our prospects.

We have limited experience operating internationally, are subject to a number of risks associated with our international activities and operations and may not be successful in our efforts to expand internationally.

We have manufacturing, collaboration, clinical trial and other relationships outside the US, but we currently have limited operations outside of the US. Specifically, as of December 31, 2015, we had 11 employees located in Europe, and we expect that number to grow in 2016 and beyond as we prepare for commercialization in Europe. In order to meet our long-term goals, we will need to grow our international operations over the next several years. Consequently, we are and will continue to be subject to additional risks related to operating in foreign countries, including:

· we have limited experience operating our business internationally;

· we may not achieve the optimal pricing and reimbursement for ARIKAYCE;

· there may be fewer addressable NTM patients in international markets than were originally anticipated;

· unexpected adverse events related to ARIKAYCE or our other product candidates that occur in foreign markets that we have not experienced in the US;

· local, economic and political conditions, including geopolitical events, such as war and terrorism, foreign currency fluctuations, which could result in increased or unpredictable operating expenses and reduced revenues and other obligations incident to doing business in, or with a company located in, another country;

· unexpected changes in reimbursement and pricing requirements, tariffs, trade barriers and regulatory requirements;

· any changes resulting from (i) the uncertainty and instability in economic and market conditions caused by the UK’s vote to exit the European Union; and (ii) the uncertainty regarding how the UK’s access to the EU Single Market and the wider trading, legal, regulatory and labor environments, especially in the UK and European Union, will by impacted by the UK’s vote to exit the European Union, including the resulting impact on our business;

· economic weakness, including foreign currency exchange risks, inflation or political instability in particular foreign economies and markets; and

· compliance with foreign or US laws, rules and regulations, including data privacy requirements, labor relations laws, tax laws, anti-competition regulations, import, export and trade restrictions, anti- bribery/anti-corruption laws, regulations or rules, which could lead to actions by us or our licensees, distributors, manufacturers, other third parties who act on our behalf or with whom we do business in foreign countries or our employees who are working abroad that could subject us to investigation or prosecution under such foreign or US laws.

These and other risks associated with our international operations may materially adversely affect our business and results of operations.

Risks Related to our Common Stock and Listing on the Nasdaq Global Select Market

We are subject to a securities class action lawsuit, which may require significant management time and attention and significant legal expenses and may result in an unfavorable outcome, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We and certain of our officers have been named as defendants in a securities class action lawsuit that alleges that we and certain executive officers violated Section 10(b) of the Exchange Act, Rule 10b-5 promulgated thereunder, and Section 20(a) of the Exchange Act by making materially false or misleading statements and omissions relating to the European MAA of ARIKAYCE with the EMA. While we believe that we have substantial legal and factual defenses to the claims in the class action and intend to vigorously defend the case, this lawsuit could divert management’s attention from our ordinary business operations, the outcome of the pending litigation is difficult to predict and quantify, and the defense against the underlying claims could be costly. The ultimate resolution of this matter could result in payments of monetary damages or other costs, materially and adversely affect our business,

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financial condition, results of operations and cash flows, or adversely affect our reputation, and consequently, could negatively impact the trading price of our common stock.

We have insurance policies related to the risks associated with our business, including directors’ and officers’ liability insurance policies. However, there is no assurance that our insurance coverage will be sufficient or that our insurance carriers will cover all claims in that litigation. If we are not successful in our defense of the claims asserted in the putative action and those claims are not covered by insurance or exceed our insurance coverage, we may have to pay damage awards, indemnify our officers from damage awards that may be entered against them and pay the costs and expenses incurred in defense of, or in any settlement of, such claims.

In addition, there is the potential for additional shareholder litigation, and we could be materially and adversely affected by such matters.

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 June 30, 2016.

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: August 4, 2016	By	/s/ Andrew T. Drechsler
		Andrew T. Drechsler
		Chief Financial Officer

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EXHIBIT INDEX

10.1	Lease, dated as of July 1, 2016, by and between CIP II/AR Bridgewater Holdings, LLC and Insmed Incorporated.

10.2	Change in Scope 1 to Work Order 1, dated as of July 1, 2016, by and between Insmed Incorporated and SynteractHCR, Inc.*

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	The following materials from Insmed Incorporated’s quarterly report on Form 10-Q for the quarter ended June 30, 2016 formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015, (ii) Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2016 and 2015, (iii) Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015, and (iv) Notes to the Unaudited Consolidated Financial Statements.

* 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

LEASE AGREEMENT

CIP II/AR BRIDGEWATER HOLDINGS LLC

(LANDLORD)

INSMED INCORPORATED

(TENANT)

Effective Date: July 1, 2016

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LEASE AGREEMENT		1
1.	DEMISE	1
2.	TERM	4
3.	RENT	7
4.	USE OF PREMISES	9
5.	COMMON EXPENSE RENT AND REAL PROPERTY TAXES	9
6.	BUILDING SERVICES AND UTILITIES	14
7.	MAINTENANCE AND REPAIRS	15
8.	INSURANCE AND INDEMNIFICATION	16
9.	LANDLORD’S RIGHT TO PERFORM TENANT’S COVENANTS	19
10.	CONDEMNATION	19
11.	QUIET ENJOYMENT	20
12.	DAMAGE OR DESTRUCTION	20
13.	SUBORDINATION	22
14.	SURRENDER OF PREMISES	22
15.	DEFAULT BY TENANT	23
16.	TENANT’S PROPERTY	24
17.	HOLDING OVER	24
18.	SECURITY DEPOSIT	24
19.	FORCE MAJEURE	27
20.	INTENTIONALLY DELETED	28
21.	ESTOPPEL CERTIFICATES	28
22.	ALTERATIONS OR IMPROVEMENTS BY TENANT	28
23.	ACCESS TO PREMISES	30
24.	PARKING	30
25.	PARTIAL INVALIDITY	30
26.	LEASE BINDING UPON ASSIGNEES	31
27.	LIMITATION OF LANDLORD’S LIABILITY	31

28.	WAIVER	31
29.	ASSIGNMENT AND SUBLETTING	31
30.	ENTIRE AGREEMENT AND MODIFICATIONS	37
31.	BROKER’S COMMISSION	37
32.	NOTICES	37
33.	RECORDING	38
34.	PERSON	38
35.	HEADINGS AND INTERPRETATION	38
36.	MISCELLANEOUS, COUNTERPARTS	38
37.	SURVIVAL OF TENANT’S OBLIGATIONS	38
38.	COMPLIANCE WITH LAWS AND RULES AND REGULATIONS	38
39.	ATTORNEYS’ FEES AND COSTS	43
40.	WAIVER OF TRIAL BY JURY	43
41.	INTENTIONALLY DELETED	43
42.	SIGNAGE	43
43.	INITIAL TENANT IMPROVEMENTS	44
44.	CHANGES TO PROJECT; EASEMENTS	44
45.	ROOF RIGHTS	44
46.	FOOD SERVICE AND FITNESS CENTER	44
47.	CONDOMINIUM	46
48.	FINANCIAL STATEMENTS	46
49.	EXHIBITS	49

EXHIBITS

EXHIBIT A	LAND

EXHIBIT B	EXCLUSION AREA

EXHIBIT C	PREMISES

EXHIBIT D	INTENIONALLY DELETED

EXHIBIT E	RETAINED FFE

EXHIBIT F	BILL OF SALE

EXHIBIT G	COMMENCEMENT DATE AGREEMENT

EXHIBIT H	REAL PROPERTY TAX CALCULATION METHODOLOGY

EXHIBIT I	INTENIONALLY DELETED

EXHIBIT J	RULES AND REGULTIONS

EXHIBIT K	INSMED PROTOCOLS

EXHIBIT L	HAZARDOUS MATERIALS LIST

EXHIBIT M	WORK LETTER

EXHIBIT N	BUILDING C & BUILDING CC

EXHIBIT O	PROHIBITED USES

iii

LEASE AGREEMENT

THIS LEASE, made and entered into this 1 st day of July, 2016, (the “Effective Date”) by and between CIP II/AR BRIDGEWATER HOLDINGS LLC , a Delaware limited liability company, having an office at c/o Advance Realty Development, 1041 U.S. Highway 202/206, Bridgewater, NJ 08807 (the “Landlord”), and INSMED INCORPORATED , a Virginia corporation, having an office at 10 Finderne Avenue, Building 10, Bridgewater, NJ 08807, Attn: SVP HR & Corporate Services, (the “Tenant”).

Background

A. Landlord is the owner in fee simple of a certain tract of land more particularly described on Exhibit “A” attached hereto (the “Land” ) situated in the Township of Bridgewater, County of Somerset and State of New Jersey, which is designated on the official tax map for the Township of Bridgewater as Block 483, Lots 17, 18 and 19 (the “ Tax Lots ”).

B. The Land (excluding the land and buildings shown within the Exclusion Area as shown on Exhibit “B”) is improved with various multi-story buildings dedicated to various uses, including research and development, general offices, and other improvements and structures supporting those uses within the campus which is referred to as the Research and Development project commonly known as the New Jersey Center of Excellence at Bridgewater (the “ Project ”).

C. Landlord is willing to lease a certain portion of the building known as 1019 U.S. Highway 202/206 Bridgewater, New Jersey also known as Building L (the “Building”) within the Project to Tenant and Tenant is willing to lease a certain portion of the Building within the Project from Landlord for the purposes and on the term and conditions set forth in this Lease.

Agreement

In consideration of the mutual covenants and agreements set forth in this Lease, Landlord and Tenant, intending to be legally bound hereby, do hereby covenant and agree as follows:

1. DEMISE . (a) Landlord does hereby lease to Tenant, and Tenant does hereby rent from Landlord, upon and subject to the terms and conditions, covenants and agreements set forth in this Lease, the premises consisting of the entire lower level of the Building, as shown on Exhibit “C” which shall be deemed to be 13,274 rentable square feet (the “ Premises ”), which amount of rentable square feet set forth above shall be definitive for all purposes of this Lease. Landlord grants Tenant a license to the non-exclusive use of the Common Areas. The term “ Common Areas ” is defined as all areas

outside the Premises and within the exterior boundary lines of the Project which are designated by Landlord from time to time for the general non-exclusive use of Landlord, Tenant, and other tenants of the Project and their respective employees, suppliers, customers, and invitees, including, but not limited to access roadways, sidewalks, landscaping and planted areas and parking areas located at the Project. Landlord shall have the exclusive control and management of the Common Areas.

(i) Following the execution and delivery of this Lease by Landlord and Tenant, and Landlord’s obtaining all required building, construction and any other permits, approvals or consents required to comply with all applicable Laws, Landlord shall install card readers for the doors entering the Premises and provide Tenant with access cards for such readers and deliver the Premises, including all building systems, fume hoods, gas lines, HVAC, plumbing, electrical and life safety/security systems for the Building in operating order (the “ Landlord’s Base Building Work ”) and shall perform the Initial Tenant Improvements described as the Initial Tenant Improvements Work in Exhibit “M” attached hereto as part of the preparation of the Premises for Tenant’s occupancy. The Landlord’s Base Building Work shall be at Landlord’s sole cost and expense.

(ii) Landlord shall advise Tenant, in writing, at least two (2) Business Days prior to the anticipated date of Substantial Completion (hereinafter defined) of the Landlord’s Base Building Work and the Initial Tenant Improvements Work. Within two (2) Business Days after Tenant’s receipt of Landlord’s notice of Substantial Completion (hereinafter defined) of Landlord’s Base Building Work and the Initial Tenant Improvements Work, Tenant shall be granted an opportunity to walk-through the Premises, with a representative of Landlord, in order to verify Substantial Completion (hereinafter defined) of the Landlord’s Base Building Work and the Initial Tenant Improvements Work. Tenant shall provide Landlord written notice of any defects or incomplete work within two (2) Business Days following the walk-through. For purposes of this Lease the terms “ Substantial Completion ” or “ Substantially Complete ” when referring to the Landlord’s Base Building Work and the Initial Tenant Improvements Work, shall mean that (x) such work has been completed in accordance with (i) the provisions of this Lease applicable thereto, (ii) the plans and specifications for such work, and (iii) all applicable Laws, except for minor details of construction, decoration and mechanical adjustments, if any, the non-completion of which does not materially interfere with the performance of the Initial Tenant Improvements, or which, in accordance with good construction practice, should be completed after the completion of the Initial Tenant Improvements, and (y) the Premises is broom clean with all construction debris and equipment removed from the Premises, and the Premises is delivered to Tenant, and (z) Landlord has obtained a temporary or permanent certificate of occupancy from the applicable local governing authority (provided that if Landlord procures a temporary certificate of occupancy, Landlord shall thereafter procure a permanent certificate of occupancy), if required by Law. It is agreed that Tenant and Landlord shall promptly review any defects or incomplete work that are described in the written notice given by Tenant to Landlord and based upon such review, Landlord and Tenant shall prepare a list

setting forth those items of Landlord’s Base Building Work and the Initial Tenant Improvements Work which are not completed (these items agreed to by Landlord and Tenant are hereinafter collectively referred to as “Punchlist Items” ). Landlord agrees to cause such Punchlist Items to be completed by the date which shall be thirty (30) days after the date of Substantial Completion; provided, however, if any Punchlist Items cannot be reasonably completed within the applicable thirty (30) period for any reason, including, without limitation, for any Force Majeure Delay or Tenant Delay, then Landlord shall have such longer period of time as shall be reasonably necessary to complete such Punchlist Items so long as Landlord is prosecuting such work with due diligence.

(b) Tenant shall have the rights and obligations set forth in this Section 1(b) with respect to those items of tangible personal property located in the Building on the Effective Date (collectively, the “ Retained FFE ”) listed on Exhibit “E” attached hereto and incorporated by reference herein. Tenant shall have the right to use the Retained FFE without charge to Tenant on the following terms and conditions. Tenant shall, at Tenant’s sole cost and expense, be responsible to maintain the Retained FFE in as good condition as received on the date of this Lease, reasonable wear and tear and damage from casualty excepted, and to make all repairs to, as and when reasonably needed the Retained FFE arising from Tenant’s use and operation of the Retained FFE and/or Premises, any alteration thereto, the moving of the Retained FFE within the Premises or the negligent act, omission or misuse of the Retained FFE by Tenant or any of its employees, agents or contractors; provided, however that except for Tenant’s gross negligence or willful misconduct Tenant shall not be obligated to replace the Retained FFE or make any repairs thereto if Tenant no longer desires to utilize such Retained FFE. Tenant has inspected the Retained FFE and agrees to take same in their “AS-IS” and “WHERE-IS” condition on the Effective Date. Tenant further acknowledges and agrees that Tenant is taking the Retained FFE from Landlord without any representations or warranties of any kind, express or implied, regarding the condition of the Retained FFE or the suitability of same for Tenant’s use; provided Landlord represents and warrants to Tenant that it owns the Retained FFE free and clear and all liens and encumbrances. Landlord shall retain the ownership of the Retained FFE during the Term, except as otherwise expressly provided in this Section 1 (b). During the Term, Tenant shall have the sole right to possession and a license and use of the Retained FFE. If Tenant desires to remove, dispose of, replace, or modify any lab benches, ventilation hoods or equipment listed on Exhibit “E” as Retained FFE during the Term, Tenant first shall notify Landlord which items of Retained FFE Tenant desires to remove, dispose of, or replace, as the case may be. Within twenty-one (21) days after Landlord’s receipt of Tenant’s notice, Landlord shall (i) have the right to remove any or all of the Retained FFE items described in the Tenant’s notice from the Premises at Landlord’s sole cost and expense, or (ii) consent to Tenant’s desired removal, disposition or replacement of any or all of the Retained FFE listed in Tenant’s notice, which consent not to be unreasonably withheld, conditioned or delayed. If Landlord fails to respond during such twenty-one (21) day period, Landlord shall be deemed to have consented to Tenant’s desired removal, disposition or replacement of any or all of the Retained FFE listed in Tenant’s notice.

(i) Notwithstanding anything to the contrary contained herein, so long as no Event of Default exists on the fourth (4 th ) anniversary of the Rent Commencement Date, Landlord shall transfer ownership of the Retained FFE to Tenant by way of executing and delivering a quit-claim bill of sale, in the form attached hereto as “Exhibit F” . If an Event of Default exists on the fourth (4 th ) anniversary of the Rent Commencement Date, Landlord shall retain ownership of the Retained FFE for the Term, and shall not transfer ownership of same the Retained FFE to Tenant, unless and until such Event of Default is thereafter cured.

(ii) In connection with said transfer, Landlord shall retain a duly perfected first priority purchase money or other security interest in the Retained FFE to secure Tenant’s continued performance of its obligations under this Lease. The security interest shall be extinguished by Landlord upon the expiration of the initial Term of the Lease or the earlier date of Tenant removal, disposal, or replacement with Landlord’s consent (each, a “ Removal ”) of any such items by Tenant so long as there is no Event of Default at such time and so long as there is no default then existing under this Lease (that is not cured within the applicable cure period, if any). Tenant shall promptly repair any damage caused to the Premises or Building by the removal of any such Retained FFE, such repairs to be reasonably approved by Landlord.

(iii) Notwithstanding the foregoing, however, if the Removal of any Retained FFE will adversely affect the structure or systems in or of the Building in Landlord’s reasonable judgment, then unless Tenant agrees promptly to repair any damage caused by such Removal to Landlord’s reasonable satisfaction, Landlord shall have the right to prevent such Removal in Landlord’s sole discretion. Tenant’s rights to the Retained FFE are appurtenant to this Lease and Tenant may only transfer, assign, or otherwise convey said rights together with a transfer, assignment, sublease or conveyance of this Lease as otherwise provided in this Lease.

2. TERM . (a) The term of this Lease (the “ Term ”) is five (5) years and three (3) months. The Term shall begin on the date that is seven (7) days after Landlord Substantially Completes the Landlord’s Base Building Work and the Initial Tenant Improvements Work (the “Commencement Date”) and shall, subject to extension in accordance with this Lease, end on the last day of the month which is five (5) years and three (3) months after the Commencement Date occurs, or such earlier date upon which the Term may expire or be terminated pursuant to any of the conditions of this Lease or pursuant to law (the “Expiration Date”). Landlord and Tenant desire the Landlord Substantially Complete the Landlord’s Base Building Work and the Initial Tenant Improvements Work on or about the date which is two (2) months after the Effective Date (the “Estimated Substantial Completion Date”). If for any reason (other than Tenant Delay, as hereafter defined), Landlord’s Work shall not be Substantially Completed on the Estimated Substantial Completion Date, this Lease shall nevertheless continue in full force and effect; the Commencement Date shall be postponed until the day which is seven (7) days after Substantial Completion has occurred; and the Expiration Date shall be adjusted to provide for the full term of this Lease. If Landlord’s Work is delayed because

of any Tenant Delay, then the Commencement Date shall be the day which is seven (7) days after the day the Landlord would have otherwise Substantially Completed Landlord’s Work but for the occurrence of such Tenant Delay.

(b) When the Commencement Date occurs, Landlord and Tenant shall enter into an agreement memorializing the Commencement Date and Expiration Date of this Lease in the form attached hereto as Exhibit “G” (the “Commencement Date Agreement”); provided, however, that the failure to enter into such an agreement shall not effect the Commencement Date or Expiration Date. Tenant shall acknowledge receipt of the Commencement Date Agreement by signing a copy of same and returning it to Landlord within ten (10) Business Days of the receipt thereof. Tenant’s failure to sign the Commencement Date Agreement and return same to Landlord as provided in this Section, or otherwise respond in writing to Landlord during such period, shall be deemed to be Tenant’s acceptance of the Commencement Date and Expiration Date as stated in the Commencement Date Agreement.

(c) Provided that Tenant gives Landlord copies of all insurance required under Section 8, and otherwise complies with all of the terms and conditions of this Lease (excluding payment of Base Rent or Additional Rent), Tenant, its employees, designers, suppliers, invitees and contractors (“ Tenant’s Agents ”) shall have access to the Premises following the Effective Date and thereafter during the performance of Landlord’s Base Building Work and the Initial Tenant Improvements Work, to design, estimate, and plan the Initial Tenant Improvements (as hereafter defined), provided that Tenant and Tenant’s Agents strictly comply with all reasonable conditions and requirements imposed on such access by Landlord, and shall not interfere with the performance of Landlord’s Base Building Work, the Initial Tenant Improvements Work or any other work in the Project by Landlord, Landlord’s contractors, and other tenants of the Project and their contractors. In the event that Tenant or Tenant’s Agents interfere with the performance of Landlord’s Base Building Work or the Initial Tenant Improvements Work, Landlord shall have the right to require Tenant, upon written demand, to remove or cause the removal forthwith of those of Tenant’s Agents from the Premises, and Tenant agrees to comply with such demand promptly. Tenant shall be liable to Landlord in the event Tenant or Tenant’s Agents damage any part of the Premises or the Project, including, without limitation, Landlord’s Base Building Work, the Initial Tenant Improvements Work and the Retained FF&E. Tenant shall hold Landlord harmless from and indemnify, protect and defend Landlord against any loss or damage to the Premises, the Project or the Retained FF&E and against injury to any persons caused by Tenant’s and Tenant’s Agents exercise of Tenant’s rights under this Section 2(c).

(d) Tenant agrees that Landlord shall have no obligation to do any work or perform any services to prepare the Premises for Tenant’s occupancy, other than Landlord’s Base Building Work and the Initial Tenant Improvements Work. Tenant shall accept possession of the Premises on the Commencement Date in its then “as-is” condition, subject to Landlord’s completion of Landlord’s Base Building Work and the Initial Tenant Improvements Work and latent defects.

(e) Landlord hereby grants to Tenant one (1) option to extend the Term for all (but not part) of the Premises in accordance with the provisions of this Section 2(e), Tenant must exercise the option for all of the Premises for a period of five (5) years, and such option to be exercised by Tenant giving written notice of its exercise to Landlord in the manner provided in this Lease not less than twelve (12) months prior to the expiration of the Term. The extension period shall commence on the day immediately following the last day of the initial Term. No extension option may be exercised by Tenant if an Event of Default exists at the time of exercise of the option.

(i) If Tenant exercises its option to extend the Term, Landlord shall, within thirty (30) days after receipt of Tenant’s exercise notice, notify Tenant in writing of Landlord’s reasonable determination of the Base Rent (including increases) and Common Expense Rent for the Premises for the five (5) year option period, which Base Rent amount shall be the Prevailing Market Rate (as hereafter defined) for such space. Tenant shall have thirty (30) days from its receipt of Landlord’s notice setting forth Landlord’s determination of Base Rent and Common Expense Rent to notify Landlord in writing that Tenant (i) agrees with Landlord’s determination of the Base Rent and Common Expense Rent, or (ii) does not agree with Landlord’s determination of the Base Rent and that Tenant elects to determine the Prevailing Market Rate in accordance with the procedure set forth below. If Tenant does not so notify Landlord in writing within thirty (30) days of its receipt of Landlord’s notice, Base Rent and Common Expense Rent for the Premises for the applicable extended term shall be the Base Rent and Common Expense Rent set forth in Landlord’s notice to Tenant. The phrase “ Prevailing Market Rate ” shall mean the then prevailing market rate for the twelve (12) month period prior to Tenant’s renewal notice for base rent for a five (5) year term calculated on a per rentable square foot basis for leases covering buildings comparable to the condition of the Premises including the Initial Tenant Improvements and any subsequent Alteration made by Tenant located in central and northern New Jersey (hereinafter referred to as the “ Market Area ”), and taking into account all other relevant factors, including but not limited to rent concessions. The Prevailing Market Rate shall be determined by an appraisal procedure as follows:

In the event that Tenant notifies Landlord that Tenant disagrees with Landlord’s determination of the Prevailing Market Rate, then Tenant shall specify, in such notice to Landlord, Tenant’s selection of a real estate appraiser, who shall act on Tenant’s behalf in determining the Prevailing Market Rate. Within twenty (20) days after Landlord’s receipt of Tenant’s selection of a real estate appraiser, Landlord, by written notice to Tenant, shall designate a real estate appraiser, who shall act on Landlord’s behalf in the determination of the Prevailing Market Rate. Within twenty (20) days of the selection of Landlord’s appraiser, the two (2) appraisers shall render a joint written determination of the Prevailing Market Rate. If the two (2) appraisers are unable to agree upon a joint written determination within said twenty (20) day period, the two appraisers shall select a third appraiser within such twenty (20) day period. Within twenty (20) days after the appointment of the third appraiser, the third appraiser shall render a written determination

of the Prevailing Market Rate by selecting, without change, the determination of one (1) of the original appraisers as to the Prevailing Market Rate and such determination shall be final, conclusive and binding. All appraisers selected in accordance with this subparagraph shall have at least ten (10) years prior experience in the commercial leasing market of the Market Area and shall be members of the American Institute of Real Estate Appraisers or similar professional organizations. If either Landlord or Tenant fails or refuses to timely select an appraiser, the other appraiser shall alone determine the Prevailing Market Rate. Landlord and Tenant agree that they shall be bound by the determination of Prevailing Market Rate pursuant to this paragraph. Landlord shall bear the fee and expense of its appraiser, Tenant shall bear the fee and expenses of its appraiser, and Landlord and Tenant shall share equally the fee and expenses of the third appraiser, if any.

(ii) Except for the Base Rent, which shall be determined as set forth in subparagraph (e)(i) above and the Common Expense Rent as determined by Landlord in Landlord’s notice to Tenant setting forth Landlord’s determination of Base Rent and Common Expense Rent, the leasing of the Premises by Tenant for the applicable extended term shall be subject to all of the same terms and conditions set forth in this Lease, including Tenant’s obligation to pay Additional Rent; provided , however , that any rent abatements or other concessions applicable to the Premises during the initial Term shall not apply during any such extended term, nor shall Tenant have any additional extension options, beyond the option described in this Section 2(e). Landlord and Tenant shall promptly enter into an amendment to this Lease to evidence Tenant’s exercise of its renewal option, the Base Rent and Common Expense Rent for such renewal term, and the expiration date of such renewal term.

(iii) The option granted to Tenant in this Section 2(e) of the Lease is personal to the original Tenant and may be exercised only by the original Tenant or a Related Entity or Successor Entity, as the case may be, and may not be exercised or assigned, voluntarily or involuntarily, by or to any person or entity other than the original Tenant or a Related Entity or Successor Entity. The option granted to Tenant in this Section 2(e) are not assignable separate and apart from this Lease, nor may any option be separated from this Lease in any manner, either by reservation or otherwise. If at any time an option under this Section 2(e) is exercisable by Tenant, and the Lease has been assigned other than to a Related Entity or Successor Entity, the option shall be deemed null and void.

3. RENT .

(a) Tenant hereby covenants and agrees, without the right of set off or deduction whatsoever, except as otherwise expressly provided in Section 6, Section 10 or Section 12 of this Lease, to pay to Landlord Base Rent, and additional rent , including, without limitation, the Common Expense Rent and Real Property Taxes (collectively, “Additional Rent”) during the Term. The Base Rent shall be paid in advance, on the first day of each calendar month during the Term commencing with the Rent Commencement Date. All payments required to be made by Tenant to Landlord under this Lease shall be made at Landlord’s office at the address set forth above or at such other place as Landlord may from time to time designate to Tenant in writing. If the Rent Commencement Date

is not the first day of a month, then monthly Base Rent for the partial month in which the Rent Commencement Date falls shall be prorated on a per diem basis. The “Rent Commencement Date” shall be the day which shall be three (3) full calendar months after the Commencement Date. For avoidance of doubt, if the Commencement Date shall be August 14, 2016, then the Rent Commencment Date shall be November 14, 2016. During the entire Term, Tenant shall pay to Landlord, as yearly rent (hereinafter “Base Rent”), the following sums, in equal monthly installments, in advance on the first day of each calendar month:

Period	Annual Rent PSF*		Annual Base Rent		Monthly Base Rent
Year 1*	$	29.00	$	384,946.00	$	32,078.83
Year 2	$	29.87	$	396,494.38	$	33,041.20
Year 3	$	30.77	$	408,440.98	$	34,036.75
Year 4	$	31.69	$	420,653.06	$	35,054.42
Year 5	$	32.64	$	433,263.36	$	36,105.28
Year 6**	$	33.62	$	446,271.88	$	37,189.32

*Base Rent to be abated for the first three (3) full calendar months.

**Year 6 represents only three (3) months of the year.

The first monthly installment of Base Rent shall be paid by Tenant to Landlord upon execution of this Lease.

(b) If the payment of any sum required to be paid by Tenant to Landlord under this Lease (including, without limitation any Base Rent and Additional Rent) is not received by Landlord in good funds within five (5) Business Days after the date on which it is due and payable or should any check from Tenant be returned to Landlord as uncollectible, then a delinquency service charge equal to five percent (5%) of the amount overdue (the “Service Charge”) shall become due and payable to Landlord as liquidated damages for Tenant’s failure to make prompt payment to Landlord. Tenant acknowledges and agrees that the actual damages to Landlord due to such late or non-payment exceed the interest cost of money and are difficult to estimate. Such Service Charge shall become payable as Additional Rent within five (5) Business Days after Tenant’s receiving an invoice therefor. If the payment of any sum required to be paid by Tenant to Landlord under this Lease (including, without limitation any Base Rent and Additional Rent) is not received by Landlord in good funds within five (5) Business Days after the date on which it is due and payable, Tenant shall also pay Landlord as Additional Rent interest on such sum at an annual rate equal to 4% in excess of the prime rate announced from time-to-time by Citibank, NA or such other major commercial bank in the United States designated by Landlord (“ Interest ”), but subject to any maximum interest permitted by Law, on any amounts not received by Landlord from the date on which they became due and payable. In the event of nonpayment of any Service Charge and/or Interest provided for above, Landlord shall have, in addition to all other rights and remedies, all the rights and remedies provided for herein and by Law in the case of nonpayment of rent. Tenant’s

obligation to pay any Service Charge and/or Interest as provided in this Section 3 shall continue beyond the expiration or sooner termination of this Lease.

4. USE OF PREMISES.

(a) The Premises shall be used and occupied by Tenant during the entire Term hereof subject to the other terms and conditions of this Lease for pharmaceutical analytical research and development testing lab, pharmaceutical quality control testing lab, pharmaceutical formulation development lab, pharmaceutical manufacturing and process development lab, and general office and related uses incidental thereto (the “Permitted Use”) and for no other purpose. Subject to all applicable Laws, ordinances or regulations of any governmental authority, agency or department having jurisdiction over the Project, the Condominium Documents and the Rules and Regulations Landlord may impose in accordance with this Lease from time to time during the Term, Tenant shall be permitted access to the Premises twenty-four (24) hours per day, seven days per week.

(b) Tenant shall not use, suffer or permit the use of the Premises or any part thereof in any manner or for any purpose or do, bring or keep anything, or suffer or permit anything to be done, brought or kept, therein (i) which would violate any covenant, agreement, term, provision or condition of this Lease or (ii) is unlawful or in contravention of the certificate of occupancy for the Building or (iii) is in contravention of any Laws or (iv) which would overload or could cause an overload of the electrical or mechanical systems of the Building or which would exceed one hundred (100) pounds per square foot, live load or (v) which in the reasonable judgment of the Landlord would impair or interfere with the proper and economic heating, air conditioning of the Building or (vi) suffer or permit the Building or any component thereof to be used in any manner or anything to be done therein or anything to be brought into or kept thereon which, in the reasonable judgment of Landlord, would in any way impair or tend to impair or exceed the design criteria, the structural integrity, character or appearance of the Building, or result in the use of the Building or any component thereof in a manner or for a purpose not intended.

5. COMMON EXPENSE RENT AND REAL PROPERTY TAXES .

(a) In addition to the Base Rent, Tenant shall pay to Landlord as Additional Rent the following sums (the “ Common Expense Rent ”) for costs incurred by Landlord in connection with the operation, maintenance and repair of the Project (hereinafter, collectively “ Common Expense Costs ”), in equal monthly installments, in advance on the first day of each calendar month

Period	Annual Common Expenses PSF*		Annual Common Expense Rent		Monthly Common Expense Rent
Year 1	$	14.00	$	0.00	$	0.00
Year 2	$	14.42	$	5,575.08	$	464.59
Year 3	$	14.85	$	11,282.90	$	940.24
Year 4	$	15.30	$	17,256.20	$	1,438.02
Year 5	$	15.76	$	23,362.24	$	1,946.85
Year 6	$	16.23	$	29,601.02	$	2,466.75

* Common Expense Costs include, without limitation, maintenance of Common Areas, central utility plant operations, Landlord’s insurance premiums, utilities for the Common Areas and utilities to be provided by Landlord pursuant to this Lease and security for the Project. The parties acknowledge that the amount of Common Expense Rent is fixed, Landlord shall not be entitled to reimbursement by Tenant is the actual Common Expense Costs during the year are greater than the amount set forth above, nor shall Tenant be entitled to a refund in the event actual Common Expense Costs during the year are less than the amount set forth above.

(b) The parties acknowledge that on the Effective Date, the Real Property Taxes (as hereafter defined) for the Project (of which the Premises is a part) and the Exclusion Area are a compilation of bills for the Tax Lots. The parties further acknowledge that as of the Effective Date; (i) the Project is located within a condominium project known as Peters Brook Village (the “ Condominium Project ”) pursuant to a Master Deed and By-Laws dated as of November 4, 2013 and recorded in Book 6684, Page 2222, as Instrument No. 2013061980, as same may be amended from time to time (the “ Condominium Documents ”), (ii) the Tax Assessor for Bridgewater Township has not set separate real estate tax assessments for the individual condominium units located within the Condominium Project, and (iii) the Premises is currently one of four (4) separate tenantable buildings located within Unit 2 of the Condominium Project (“ Condominium Unit 2 ”). Landlord shall pay, prior to delinquency, the Real Property Taxes, as defined in Section 5(b), applicable to the Project, or Condominium Unit 2, as applicable, subject to reimbursement by Tenant of Tenant’s proportionate share of such Real Property Taxes in accordance with the provisions of Section 5(b).

(ii) From the Effective Date through the day immediately preceding the Real Property Tax Conversion Date, the term “ Real Property Taxes ” shall include any form of real estate tax or assessment, general, special, ordinary, or extraordinary, and any license fee, commercial rental tax payable by Landlord, improvement bond or bonds, levy, or tax imposed on the Project or any portion thereof by any authority having the direct or indirect power to tax, including any city, township, county, state, or federal government, or any school, agricultural, sanitary, fire, street, drainage, or other improvement district thereof, as against any legal or equitable interest of Landlord in the Project or in any portion thereof, as against Landlord’s right to rent or other income therefrom, or as against Landlord’s business of leasing the Project, but shall exclude the following: inheritance, income, estate, gift, transfer, franchise, excise, capital stock, gains or foreign ownership or control, mortgage recording, transfer or transfer gain or excess profit taxes, and shall exclude any late payment charges and penalties due to Landlord’s late payment of Real Property Taxes. For purposes of this Lease, the “ Real Property Tax Conversion Date ” shall be the date that the Tax Assessor for Bridgewater Township shall set separate real estate tax assessments for, and Bridgewater Township shall issue separate tax bills showing the assessments on the land

and the total assessment of all improvements located within the individual condominium units in the Condominium Project.

(iii) From and after the Real Property Tax Conversion Date, the term “ Real Property Taxes ” shall include any form of real estate tax or assessment, general, special, ordinary, or extraordinary, and any license fee, commercial rental tax payable by Landlord, improvement bond or bonds, levy, or tax imposed on Condominium Unit 2 or any portion thereof by any authority having the direct or indirect power to tax, including any city, township, county, state, or federal government, or any school, agricultural, sanitary, fire, street, drainage, or other improvement district thereof, as against any legal or equitable interest of Landlord in Condominium Unit 2 or in any portion thereof, as against Landlord’s right to rent or other income therefrom, or as against Landlord’s business of leasing Condominium Unit 2, but shall exclude the following: inheritance, income, estate, gift, transfer, franchise, excise, capital stock, gains or foreign ownership or control, mortgage recording, transfer or transfer gain or excess profit taxes, and shall exclude any late payment charges and penalties due to Landlord’s late payment of Real Property Taxes.

(iv) The term “ Real Property Taxes ” shall also include any tax, fee, levy, assessment, or charge (a) in substitution of, partially or totally, any tax, fee, levy, assessment, or charge hereinabove included within the definition of “Real Property Tax,” or (b) the nature of which was hereinbefore included within the definition of “Real Property Tax,” or (c) which is added to a tax or charge hereinbefore included within the definition of Real Property Tax by reason of such change of ownership, or (d) which is imposed by reason of this transaction, any modifications, or changes hereto, or any transfers hereof, or (e) reasonable expenses incurred by Landlord in attempting to protest, reduce, or minimize Real Property Taxes. With respect to the payment of assessments, special or otherwise, payment of installments over the longest possible term shall be deemed to have been elected in any instance where a determinable option so to pay existed, or may exist, notwithstanding that any assessment may be paid in full during the Term.

(v) If at any time during the Term, the method of taxation for Real Property Taxes prevailing on the Effective Date, or the Real Property Tax Conversion Date, as the case may be, is altered so that any new tax, assessment, levy, imposition or charge shall be substituted therefor, or shall be imposed upon Landlord in addition thereto (including, without limitation, any tax, assessment or levy based in whole or in part upon the Lease, the Premises, or the Base Rent, Additional Rent, or other income therefrom), then all such taxes, assessments, levies, impositions or charges, or the part thereof, shall be deemed be included within the term “Real Property Taxes” for the purposes of this Lease, and Landlord shall pay and discharge the same prior to delinquency, subject to reimbursement by Tenant of Tenant’s proportionate share of such Real Property Taxes in accordance with the provisions of Section 5.

(c) From the Commencement Date through the day immediately preceding the Real Property Tax Conversion Date, Tenant’s proportionate share of Real Property Taxes shall be calculated based upon the amount by which the Real Property

Taxes allocated to the Building utilizing the methodology described in Exhibit “H” attached hereto for any calendar year during the Term subsequent to the Base Tax Year (as hereafter defined) exceeds the Real Property Taxes allocated to the Building utilizing the methodology described in Exhibit “H” for the 2016 calendar year (the “Base Tax Year”). For purposes of the Section 5(c), Tenant’s proportionate share shall mean a fraction the numerator of which is the total rentable square footage of the Premises, as same may change from time to time during the Term and the denominator of which shall be the total rentable square footage of the Building. On or before the January 1, 2017 and thereafter within one hundred twenty (120) days following the first day of each successive calendar year within the Term that occurs prior to the Real Property Tax Conversion Date, Landlord shall reasonably determine or estimate amount by which the Real Property Taxes allocated to the Building utilizing the methodology described in Exhibit “H” for such calendar year exceed the Real Property Taxes allocated to the Building utilizing the methodology described in Exhibit “H” for the Base Tax Year (the “ Projected Pre-Conversion Real Property Taxes ”) and shall submit such information to Tenant in a written statement, together with copies of the applicable tax bill(s) and documentation evidencing the calculation prepared by Landlord (“ Landlord’s Tax Statement ”). Beginning on the January 1, 2017, following the giving of a Landlord’s Tax Statement and continuing thereafter until Landlord renders the next Landlord’s Tax Statement, Tenant shall pay to Landlord on account of its obligation under this Section of this Lease, a sum (the “ Monthly Tax Payment ”) equal to one-twelfth (1/12) of Tenant’s proportionate share of the Projected Pre-Conversion Real Estate Taxes for such calendar year. Tenant’s first Monthly Tax Payment after receipt of Landlord’s Tax Statement shall be accompanied by the payment of an amount equal to the product of the number of full months, if any, within the calendar year which shall have elapsed prior to such first Monthly Tax Payment, times the Monthly Tax Payment. Each Landlord’s Tax Statement shall reconcile the payments made by Tenant pursuant to the preceding Landlord’s Tax Statement with Tenant’s proportionate share of the actual Real Property Taxes imposed for the period covered thereby. Any balance due to Landlord shall be paid by Tenant within thirty (30) days after Tenant’s receipt of Landlord’s Tax Statement; and Landlord shall credit any surplus due to Tenant against the next accruing Monthly Tax Payment(s) of Tenant, or if the Term shall have expired, the amount of such overpayment shall be refunded to Tenant within thirty (30) days following delivery of Landlord’s Tax Statement. Notwithstanding anything to the contrary contained in this subsection, if the Term shall have expired as a result of a default by Tenant, or Tenant shall be in default of its obligations under this Lease on the Expiration Date, then Landlord shall have the right to retain the amount of such surplus and apply it against any Base Rent or Additional Rent that Tenant owes Landlord. Tenant’s proportionate share of Real Property Taxes for the calendar year within which the Expiration Date occurs shall be prorated based upon the number of days in such year falling within the Term.

(d) Notwithstanding anything to the contrary contained in Section 5(c) above, from and after the Real Property Tax Conversion Date, the Tenant’s proportionate share of Real Property Taxes shall mean the amount by which the sum of (i) (A) the product of the then assessed valuation for Building L (as determined by the valuation of Building L set forth on the Property Record Card maintained in the office Tax Assessor

for Bridgewater Township, or any successor thereto) and a fraction, the numerator of which is the rentable square footage of the Premises, and the denominator of which is the rentable square footage of Building L, multiplied by (B) the then applicable tax rate for Bridgewater Township, and (ii) the product of the then assessed valuation of the land located within Condominium Unit 2 and the then applicable tax rate for Bridgewater Township, which product shall then be multiplied by the fraction, the numerator of which shall be the then current rentable square footage of the Premises, and the denominator of which shall be the then current rentable square footage of all tenantable buildings located within Condominium Unit 2, exceeds the Real Property Taxes allocated to the Building utilizing the methodology described in Exhibit “H” for the Base Tax Year. Promptly following the Real Property Tax Conversion Date and thereafter within one hundred twenty (120) days following the first day of each successive calendar year within the Term that occurs after the Real Property Tax Conversion Date, Landlord shall reasonably determine or estimate the Real Property Taxes for such calendar year (the “ Projected Post-Conversion Real Property Taxes ”) and shall submit such information to Tenant in a Landlord’s Tax Statement . Beginning on the Commencement Date following giving of a Landlord’s Tax Statement and continuing thereafter until Landlord renders the next Landlord’s Tax Statement, Tenant shall pay to Landlord on account of its obligation under this Section of this Lease, a Monthly Tax Payment equal to one-twelfth (1/12) of Tenant’s proportionate share of the Projected Post-Conversion Real Estate Taxes for such calendar year. Tenant’s first Monthly Tax Payment after receipt of Landlord’s Tax Statement shall be accompanied by the payment of an amount equal to the product of the number of full months, if any, within the calendar year which shall have elapsed prior to such first Monthly Tax Payment, times the Monthly Tax Payment. Each Landlord’s Tax Statement shall reconcile the payments made by Tenant pursuant to the preceding Landlord’s Tax Statement with Tenant’s proportionate share of the actual Real Property Taxes imposed for the period covered thereby. Any balance due to Landlord shall be paid by Tenant within thirty (30) days after Tenant’s receipt of Landlord’s Tax Statement; and Landlord shall credit any surplus due to Tenant against the next accruing Monthly Tax Payment(s) of Tenant, or if the Term shall have expired, the amount of such overpayment shall be refunded to Tenant within thirty (30) days following delivery of Landlord’s Tax Statement. Notwithstanding anything to the contrary contained in this subsection, if the Term shall have expired as a result of a default by Tenant, or Tenant shall be in default of its obligations under this Lease on the Expiration Date, then Landlord shall have the right to retain the amount of such surplus and apply it against any Base Rent or Additional Rent that Tenant owes Landlord. Tenant’s proportionate share of Real Property Taxes for the calendar year within which the Expiration Date occurs shall be prorated based upon the number of days in such year falling within the Term.

(e) Landlord shall have the exclusive right to contest any valuation of Condominium Unit 2, or any part thereof (including the Premises), or the amount of any Real Property Taxes, by legal proceedings, or in such other manner as it deems suitable. If Landlord obtains a refund or abatement of Real Property Taxes for (i) the Building, or (ii) for the land portion of Condominium Unit 2, as the case may be, then Landlord shall first be entitled to receive a reimbursement from any refund or abatement for all expenses, including reasonable attorneys’ fees, incurred by it in connection with

obtaining such refund or abatement. After deduction of the expenses described in the immediately preceding sentence, the Landlord shall credit Tenant’s proportionate share of the net refund or abatement of Real Property Taxes for (i) the Building, or (ii) for the land portion of Condominium Unit 2, as the case may be, for any year in which Tenant contributed to Real Property Taxes pursuant to the terms hereof, against the next accruing Monthly Tax Payment(s) of Tenant, or if the Term shall have expired, Tenant’s proportionate share of the net refund or abatement shall be refunded to Tenant within thirty (30) days after receipt thereof by Landlord. Notwithstanding anything to the contrary contained in this subsection, if the Term shall have expired as a result of a default by Tenant, or Tenant shall be in default of its obligations under this Lease on the Expiration Date, then Landlord shall have the right to retain Tenant’s proportionate share of the net refund or abatement and apply it against any Base Rent or Additional Rent that Tenant owes Landlord.

6. BUILDING SERVICES AND UTILITIES . Landlord shall at its sole cost and expense, furnish to the Premises reasonable quantities of heating, ventilation and air conditioning during and after “ Business Hours ” (hereafter defined) on “Business Days” and non-Business Days (hereafter defined) through the Building heating ventilation and air-conditioning systems (the “HVAC Systems”). It is the intent of the parties that all services and utilities set forth in this Section 6 to be provided by Landlord shall be provided by the Landlord to Tenant at no cost to Tenant (other than the payment of Common Expense Rent) twenty four hours a day, seven day per week and 365 days per year, except as otherwise expressly provided in this Section 6. For purposes of this Lease, (i) “Business Hours” shall mean the hours of 8:00 a.m. through 6:00 p.m. Monday-Friday and the hours 8:00 a.m. through 1:00 p.m. on Saturday, and (ii) “Business Days” shall mean all days, excluding Sundays and all days observed as legal holidays by the State of New Jersey. Non-Business Days and After Business Hours shall mean all other times and days without limitation. Landlord shall make available at the Premises electric service, city water for ordinary lavatory and cleaning purposes, sanitary sewer, storm sewer, steam (for Building heating equipment only), chilled water (for Building ventilation and air-conditioning equipment only), compressed air and natural gas, which costs are included in Common Expense Costs (collectively, the “Utilities”) . Landlord shall provide service elevator service during Business Hours on Business Days. Landlord shall provide passenger elevator service. Landlord shall provide for gated access to the Project with a security guard on duty twenty four hours a day, seven day per week and 365 days per year. Tenant shall provide for all cleaning and extermination services required by Tenant, and shall furnish, install and replace all lighting tubes, lamps, bulbs and ballasts required by Tenant during the Term, at Tenant’s sole cost and expense. Tenant shall be solely responsible for the replacement, repair and maintenance of any utility equipment within the Premises that only services the Premises. Tenant’s use of electrical energy and any other utility in the Premises shall not, at any time, exceed the capacity of either or both of (x) any of the electrical or any other utility equipment in or otherwise servicing the Premises; and (y) the HVAC Systems of the Premises. Landlord reserves the right, without any liability to Tenant and without affecting Tenant’s covenants and obligations hereunder, to stop service of any or all of the HVAC, electric, sanitary, and other systems serving the Premises, or to stop any other services required by

Landlord under this Lease, whenever and for so long as may be necessary by reason of (i) accidents, emergencies, strikes, or the making of repairs or changes which Landlord deems necessary in its reasonable discretion or (ii) any other cause beyond Landlord’s reasonable control; provided Landlord shall use commercially reasonable efforts to minimize interference with Tenant’s use and occupancy of the Premises. Landlord shall not be liable to Tenant for interference in or interruption or any utility or other services beyond Landlord’s reasonable control, nor shall any curtailment or interruption beyond Landlord’s reasonable control constitute a constructive eviction or grounds for rental abatement in whole or in part hereunder.

(b) In the event that Tenant is prevented from using, and does not use the Premises or any portion thereof, as a result of any failure to provide any Utilities resulting from any negligent or willful act or omission of Landlord or its agents or employees (an “ Abatement Event ”), then Tenant shall give Landlord notice (an “ Abatement Event Notice ”) of such Abatement Event, Landlord shall thereafter use commercially diligent efforts to cause such Abatement Event to be cured as soon as reasonably possible, and if such Abatement Event continues for the Eligibility Period (defined below), then the Base Rent and Additional Rent shall be abated or reduced, as the case may be, after expiration of the Eligibility Period for such time that Tenant continues to be so prevented from using, and does not use, the Premises or a portion thereof, in the proportion that the rentable square footage of the portion of the Premises that Tenant is prevented from using, and does not use, bears to the total rentable square footage of the Premises. Notwithstanding anything to the contrary contained herein, if Tenant resumes using any portion of the Premises it had previously been prevented from using, and did not use, then the Base Rent and Additional Rent allocable to such used portion, based on the proportion that the rentable square footage of such used portion of the Premises bears to the total rentable square footage of the Premises, shall be payable by Tenant to Landlord from the date Tenant resumed use of such portion of the Premises. The “ Eligibility Period ” means a period of five (5) consecutive Business Days after Landlord receives an Abatement Event Notice from Tenant with respect to any Abatement Event.

7. MAINTENANCE AND REPAIRS .

(a) Landlord shall make all repairs and replacements to the foundation, the bearing walls, the structural columns and beams, the exterior walls, the exterior windows, the roof (excluding any rooftop antennas or other telecommunications facilities permitted to be maintained by Tenant on the roof of the Building, if any, pursuant to the terms of this Lease), the service elevator, the common portions of the Building interior and the Building HVAC, electric, sanitary, and other systems serving the Premises, and the Common Areas of the Project to keep the same in good working order and condition; provided, however, that if such repairs and replacements are necessitated by the intentional acts or negligence of Tenant or Tenant’s Agents, then Tenant shall reimburse Landlord, upon demand, for the reasonable cost thereof.

(b) Subject to Section 7(a), Tenant shall take such action as may be reasonably necessary or appropriate to keep and maintain the Premises in at least the

same order and condition as delivered to Tenant on the Commencement Date (except for ordinary wear and tear and damage from casualty or condemnation). Tenant acknowledges and agrees that all maintenance and repairs not required to be made by Landlord pursuant to Section 7(a) hereof, shall be made at the sole cost and expense of Tenant. Except as expressly provided in this Lease, Landlord shall not be obligated in any way to maintain, alter or repair the Premises. Notice is hereby given that, except with respect to repairs or restoration undertaken by Landlord, Landlord will not be liable for any labor, services or materials furnished or to be furnished to Tenant, or to anyone holding the Premises or any part thereof through or under Tenant, and that no mechanics’ or other liens for any such labor or materials shall attach to or affect the interest of Landlord in and to the Building.

(c) All maintenance and repair performed by, on behalf of or for the account of Tenant (i) shall not, individually or in the aggregate or adversely affect the Building, (ii) shall be completed expeditiously in a good and workmanlike manner, and in compliance with all applicable Laws, (iii) shall be completed free and clear of all liens and (iv) shall be performed by contractors reasonably approved by Landlord.

8. INSURANCE AND INDEMNIFICATION .

(a) Tenant shall obtain, and shall keep in full force and effect during the Term, the following insurance coverages on a primary and non-contributory basis, with insurers which are authorized to do business in the State of New Jersey and which are rated at least A- VIII in Best’s Key Rating Guide:

(i) commercial general liability insurance on an occurrence form (including, during any period when Tenant is making alterations or improvements to the Premises, coverage for any construction on or about the Premises), against claims for bodily injury, personal injury, death or property damage occurring on, in or about the Premises, or as a result of ownership of facilities located on the Premises, insurance premise operations and products and completed operations in an amount per occurrence of not less than Five Million Dollars ($5,000,000) combined single limit for any bodily injury, personal injury, death or property damage with a per location aggregate. The limit required may be achieved by the combination of general liability and umbrella / excess liability. Any umbrella / excess liability will provide coverage excess of the underlying CGL, Auto liability and employer’s liability insurance;

(ii) workers’ compensation insurance coverage for the full statutory liability of Tenant and employers liability insurance coverage;

(iii) business interruption insurance in such amounts as will reimburse Tenant for direct and indirect loss of earnings attributable to those events commonly insured against by reasonable prudent tenants and/or attributable to Tenant’s inability to access or to occupy (all or part of) the Premises; and

(iv) Special Form coverage, including, but not limited to, standard fire and extended coverage insurance with vandalism and malicious mischief endorsements, on all personal property of Tenant and on all improvements and alterations made by, on behalf of and/or at the expense of Tenant in or about the Premises or other

portions of the Building (including, without limitation, that portion of the Initial Tenant Improvements Work completed at the sole cost and expense of Tenant) to the extent of their full replacement value; and

(v) comprehensive automobile liability insurance coverage, including hired and non-owned vehicles with a combined single limit of not less than $1,000,000.

Tenant shall cause, via a written agreement, any contractor working for or on behalf of Tenant in or about the Premises to maintain the same levels of insurance as required of Tenant in this Section 8 as to coverage types, limits and terms. Such requirements shall include contractor adding Landlord and Landlord’s managing agent as additional insured per Section 8 (b), and contractor’s insurance being primary and non-contributory as respects those additional insureds, waiver of subrogation clauses as required of Tenant and contractor including and maintaining products and completed operations coverage for not less than 3 years after completion of work. Tenant and or contractor shall provide evidence of such insurance to Landlord prior to entering the Premises, prior to each renewal and otherwise upon such reasonable request by Landlord.

(b) The policies of insurance required to be maintained by Tenant pursuant to Section 8(a) shall name Tenant as named insured and shall name Landlord and Landlord’s managing agent as additional insured parties (except for workers’ compensation insurance and business interruption insurance). In addition, said policies of insurance (except for worker’s compensation insurance) shall not contain a provision relieving the insurer thereunder of liability for any loss by reason of the existence of other policies of insurance covering the Premises against the peril involved, whether collectible or not; and the policies of insurance required to be maintained by Tenant pursuant to subsection (a) shall also include a contractual liability endorsement evidencing coverage of Tenant’s obligation to indemnify Landlord pursuant to Section 8(f)(ii) hereof. In addition to the foregoing, Landlord may, to the extent permitted by law, require that Tenant name as additional insureds such other persons or entities as Landlord may designate in writing, and original or duplicate policies evidencing the addition of such parties as additional insureds shall be delivered to Landlord not later than ten (10) days following Landlord’s notice designating such additional insureds.

(c) On or prior to the Commencement Date, Tenant shall deliver to Landlord certificates of insurance evidencing all the insurance which is required to be maintained hereunder by Tenant, and, within ten (10) days prior to the expiration of any such insurance, other certificates evidencing the renewal of such insurance.

(d) Tenant shall not obtain or carry separate insurance concurrent in form or contributing in the event of loss with that required by Section 8(a) unless Landlord and Tenant are named as insureds and additional insureds as applicable therein.

(e) Landlord shall keep in force at its expense, insurance in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and leasing similar properties to the Project. Such insurance will be with financially sound and reputable insurance companies. Further, the insurance coverages required by Landlord in this Section 8 may be provided

by a blanket policy covering the Buildings, the Project, and other properties leased or owned by Landlord.

(f) Landlord hereby waives and releases Tenant, and Tenant hereby waives and releases Landlord, from any and all liabilities, claims and losses for which the released party is or may be held liable to the extent of any insurance proceeds received by said injured party. Each party hereto shall have included in each of its insurance policies (insuring the Building in the case of Landlord, and insuring Tenant’s personal property, trade fixtures, equipment and improvements in the case of Tenant, against loss, damage or destruction by fire or other casualty) a waiver of the insurer’s right of subrogation against the other party to this Lease. If there is any extra charge for such waiver, the party requesting the waiver shall pay the extra charge therefor. If such waiver is not enforceable or is unattainable, then such insurance policy shall contain either an (A) express agreement that such policy shall not be invalidated if Landlord or Tenant, whichever the case may be, waives the right of recovery against the other party to this Lease or (B) any other form for the release of Landlord or Tenant, whichever the case may be. If such waiver, agreement or release shall not be, or shall cease to be, obtainable from Landlord’s insurance company or from Tenant’s insurance company, whichever the case may be, then Landlord or Tenant shall notify the other party of such fact and shall use its best efforts to obtain such waiver, agreement or release from another insurance company satisfying the requirements of this Lease.

(g) Subject to Sections 8 (f) and (i), Tenant hereby indemnifies, and shall pay, protect and hold Landlord harmless from and against all liabilities, losses, claims, demands, costs, expenses (including reasonable attorneys’ fees and expenses) and judgments of any nature, (except to the extent Landlord is compensated by insurance maintained by Landlord or Tenant hereunder and except for such of the foregoing as arise from the negligence, recklessness or willful misconduct of Landlord, its agents, servants or employees), arising, or alleged to arise, from or in connection with (a) any breach or default in the performance of any obligation of Tenant to be performed under the terms of this Lease, (b) any act or negligence of Tenant, or any of Tenant’s Agents, arising from any activity, work or things done by Tenant, or any of Tenant’s Agents, in or about the Project, or (c) Tenant’s use of the Project, or from the conduct of Tenant’s business in or about the Project. Tenant will resist and defend any action, suit or proceeding brought against Landlord by reason of any such occurrence by independent counsel selected by Tenant, which is reasonably acceptable to Landlord. The obligations of Tenant under this Section 8(g) shall survive any termination of this Lease.

(h) Subject to Sections 8 (f) and (i), Landlord hereby indemnifies, and shall pay, protect and hold Tenant harmless from and against all liabilities, losses, claims, demands, costs, expenses (including reasonable attorneys’ fees and expenses) and judgments of any nature, (except to the extent Tenant is compensated by insurance maintained by Landlord or Tenant hereunder and except for such of the foregoing as arise from the negligence, recklessness or willful misconduct of Tenant or Tenant’s agents), arising, or alleged to arise, from or in connection with (a) any breach or default in the performance of any obligation of Landlord to be performed under the terms of this Lease,

or (b) any act or negligence of Landlord, or any of its agents, servants or employees, arising from any activity, work or things done by Landlord, or any of its agents, servants or employees, in or about the Project. Landlord will resist and defend any action, suit or proceeding brought against Tenant by reason of any such occurrence by independent counsel selected by Landlord, which is reasonably acceptable to Tenant. The obligations of Landlord under this Section 8(h) shall survive any termination of this Lease.

(i) Notwithstanding any provision contained herein to the contrary, Landlord and Tenant each hereby waives any and all rights of recovery, claims, actions or causes of action against the other, its agents, servants, partners, shareholders, officers, or employees, for any loss or damage that may occur to the Premises, the Buildings, the Common Areas, the parking areas or the Project, or any improvements thereto, or any personal property of such party therein, caused or occasioned by any peril which is or could be insured under the special form coverage insurance policies required to be carried by any party under this Lease, or which is otherwise insured, regardless of cause or origin, including the negligence of the other party hereto, its agents, officers, partners, shareholders, servants or employees, and Tenant shall require the same from its contactors.

9. LANDLORD’S RIGHT TO PERFORM TENANT’S COVENANTS . Tenant covenants and agrees that if Tenant shall at any time fail to perform any of the covenants on its part to be made or performed under this Lease, and such failure continues for a period of five (5) Business Days after notice (except in the event of emergency, in which case prior notice shall not be required), Landlord may, but shall not be obligated, without waiving or releasing Tenant from any obligation under this Lease, perform such act to the extent that Landlord may deem desirable and any such act shall not constitute an eviction of Tenant. All expenses reasonably incurred by Landlord in connection therewith shall be deemed Additional Rent hereunder and be payable to the Landlord within five (5) days after demand.

10. CONDEMNATION .

(a) If the whole, or any part of the Premises (or any part of the Project which, in Landlord’s reasonable discretion is necessary for Tenant’s use and occupancy of the Premises) shall be taken by any public, or quasi-public authority under any statute or by power or right of eminent domain, the Term shall cease from the day the possession of the condemned portion shall be taken by the condemning authority.

(b) The entire compensation award for any taking shall belong to and be the property of Landlord, including but not limited to, all damages as compensation for diminution in value of the leasehold, reversion, and fee, without any deduction therefrom for any present or future estate of Tenant, and Tenant hereby assigns such award to Landlord, except that Tenant shall be entitled to receive such portion thereof as may be allocated to compensation paid for Tenant’s Property, provided that Tenant so proves in any such condemnation proceeding. Tenant shall be entitled to pursue its own separate claim against the condemning authority for loss of business and the cost of relocation, so long as such claim does not reduce the award to which Landlord is entitled.

(c) For the purpose of this Section 10, a sale to such public or quasi-public authority under threat of condemnation shall constitute a vesting of title and shall be construed as a taking by such condemning authority.

11. QUIET ENJOYMENT . Landlord covenants and agrees that Tenant upon paying the Base Rent and Additional Rent and all other charges herein provided for and performing and fulfilling the covenants, agreements, and conditions of this Lease on the Tenant’s part to be performed and fulfilled, shall peaceably and quietly hold, occupy and enjoy the Premises during the Term without hindrance or molestation by the Landlord or any person(s) claiming through the Landlord, subject, however, to the terms and conditions of this Lease.

12. DAMAGE OR DESTRUCTION .

(a) In the event the Premises (or a portion of the Project which, in Landlord’s reasonable discretion is necessary for Tenant’s use and occupancy of the Premises) are damaged by fire or other casualty, Landlord shall retain a reputable, independent third-party contractor reasonably acceptable to Tenant who, within ninety (90) days of such casualty, shall give written notice (the “ Determination Notice ”) to Landlord and Tenant of its determination of how long it will take to rebuild and restore the damaged Premises or portion of the Project to the Delivery Condition (as hereafter defined). In addition, Landlord shall, within such ninety (90) day period, obtain written confirmation from the mortgagee of the Premises, if any, as to whether it will make all or substantially all of the insurance proceeds payable in connection with such casualty available for restoration (the “ Mortgagee Notice ”), and Landlord shall promptly deliver the Mortgagee Notice to Tenant. In the event that the Premises or portion of the Project is so destroyed that it cannot be repaired or rebuilt to the Delivery Condition within twelve (12) months after the expiration of ninety (90) days after the date of such casualty, or if there are less than twelve (12) months remaining in the Term and the Premises is so damaged that it cannot be repaired or rebuilt within sixty (60) days after the expiration of ninety (90) days after the date of such casualty, or the mortgagee of the Premises has informed Landlord that such mortgagee will not make all or substantially all of the insurance proceeds payable in connection with such casualty available for restoration, then, within thirty (30) days of delivery of the Determination Notice and Mortgagee Notice, by delivery of a notice to the other, either Landlord or Tenant may terminate this Lease. Upon the giving of any termination notice pursuant to this Section, all obligations hereunder with respect to periods from and after the effective date of termination shall thereupon cease and terminate, and in such event the Base Rent and all Additional Rent and other sums payable under this Lease shall be apportioned and paid in full by Tenant to Landlord to that date, and neither party shall thereafter have any liability hereunder, except that any obligation or liability of either party, actual or contingent, under this Lease which has accrued on or prior to such termination shall survive. For purposes of this Lease, the term the “ Delivery Condition ” shall mean the Premises at the time the Premises is made available to Tenant with Landlord’s Base Building Work and the Initial Tenant Improvements completed or the portion of the Project which, in Landlord’s reasonable discretion is necessary for Tenant’s use and occupancy of the Premises is restored such that Tenant can use and occupy the Premises for the Permitted Use.

(b) If this Lease is not terminated pursuant to Section 12(a), Landlord shall expeditiously (subject to Force Majeure and Tenant Delays and taking into account the time necessary to adjust insurance proceeds, prepare plans and specifications, and obtain all required governmental approvals) restore the Premises to the Delivery Condition, subject to modifications required by applicable Laws. Landlord and Tenant shall cooperate and coordinate with each other regarding the performance of their respective restoration obligations. In the event that Tenant is prevented from using, and does not use, all or any portion of the Premises as a result of any such casualty, then, from the date of such casualty until the Abatement Expiration Date (as defined below), (a) Base Rent shall abate in proportion to the portion of the Premises rendered unusable, utilizing the Base Rent rate applicable to any such portion of the Premises, (b) the Additional Rent consisting of Common Expense Costs shall abate in proportion to the rentable square footage of the portion of the Premises rendered unusable and (c) Additional Rent consisting of Tenant’s proportionate share of Real Property Taxes shall abate in proportion to the portion of the Premises rendered unusable. The “Abatement Expiration Date” shall mean the earlier of (i) the date Tenant commences to use the portion of the Premises rendered unusable or (ii) the date when Landlord has substantially completed all of its restoration obligations with respect to such casualty.

(c) Landlord shall not be required to repair any damage to, or to make any repairs or replacements of, the Alterations made by or for the benefit of Tenant after the completion of Landlord’s Base Building Work and the Initial Tenant Improvements, the Retained FFE or any fixtures, furniture or equipment installed in the Premises that Landlord is not otherwise required to repair or restore in order to restore the Premises to the Delivery Condition.

(d) Tenant waives the provisions of any statutes which relate to the termination of leases when leased property is damaged or destroyed and agrees that such event shall be governed by the terms of this Lease, and the abatement of Rent set forth above is Tenant’s exclusive remedy against Landlord in the event of any casualty.

(e) Notwithstanding the foregoing, Tenant shall have the right to terminate this Lease within thirty (30) days after the Tenant’s sending of a written notice of termination (the “Termination Notice”) to Landlord within thirty (30) days after the Outside Date (as hereinafter defined) if the Premises are not in the Delivery Condition by such Outside Date. “Outside Date” means the date which shall be sixty (60) days after the date set forth in the Determination Notice for the completion of the repair work; provided, however if any Force Majeure Delay or Tenant Delay shall occur during the Period that Landlord is performing the repair work, then the Outside Date shall be delayed for such longer period of time as shall be reasonably necessary to complete the repairs, so long as Landlord is prosecuting such work with due diligence. Anything to the contrary notwithstanding, if the Premises are in the Delivery Condition within thirty (30) days after the Landlord’s receipt of Tenant’s Termination Notice, the such Termination Notice shall be deemed null and void, and the Term of this Lease shall remain in full force and effect.

13. SUBORDINATION . This Lease is and shall be subject and subordinate to any and all mortgages or deeds of trust now existing upon or that may be hereafter placed upon the Premises and the land and Building and to all advances made or to be made thereon and all renewals, modifications, consolidations, replacements or extensions thereof and the lien of any such mortgages, deeds of trust and land leases shall be superior to all rights hereby or hereunder vested in Tenant, to the full extent of all sums secured thereby. This provision shall be self-operative and no further instrument of subordination shall be necessary to effectuate such subordination, and the recording of any such mortgage or deed of trust shall have preference and precedence and be superior and prior in lien to this Lease, irrespective of the date of recording. To confirm such subordination, Tenant shall upon request of Landlord or the holder of any such mortgage or deed of trust execute and deliver to Landlord and any such holder within ten (10) days after any such request, any reasonable instrument that Landlord or such holder may reasonably request, including, but not limited to a subordination and attornment agreement wherein Tenant specifically agrees that its interest in the Premises is subordinate and inferior to such mortgage or deed of trust and that Tenant will attorn to the holder of such mortgage or deed of trust or any purchaser of the Building at a foreclosure sale in the event the mortgage or deed of trust is foreclosed, provided that such instrument provides that Tenant’s possession of the Premises shall not be disturbed so long as no Event of Default exists. On the Effective Date, the Bank of America is the holder of a mortgage encumbering the Premises, Land and Building (the “BOA Mortgage”). Landlord shall use commercially reasonable efforts post Lease execution to have Bank of America enter into a subordination, non-disturbance and attornment agreement (an “SNDA”) with Tenant on the Bank of America’s customary form. With respect to any and all mortgages, or deeds of trust that may be placed upon the Premises, Land and Building which shall be subordinate to the BOA Mortgage, including any amendment, extension or other modification thereof (a “Subsequent Interest”), Landlord shall use commercially reasonable efforts to have the holder(s) of all Subsequent Interests enter into a subordination, non-disturbance and attornment agreement (an “SNDA”) with Tenant in such holders(s) customary form. For purposes of this Section 13, “commercially reasonable efforts” shall mean that Landlord shall request that the holder(s) of any Subsequent Interest enter into and SNDA with Tenant in such holders(s) customary form, without any obligation on Landlord to obtain such SNDA, or commence any actions or legal proceeding to compel the holder(s) of any Subsequent Interest to enter into and SNDA with Tenant.

14. SURRENDER OF PREMISES . On or before the Expiration Date, whether by forfeiture or expiration of time, Tenant shall surrender the Premises to Landlord in as good condition as when received by Tenant from Landlord on the Commencement Date except for reasonable wear and tear and damage from casualty or condemnation, and Tenant shall remove (i) all Tenant’s Property in accordance with the provisions of Section 16, and (ii) any Specialty Installation (as hereinafter defined) that Landlord notified Tenant in accordance with Section 22 would be required to be removed prior to the Expiration Date. Notwithstanding anything to the contrary contained herein, Landlord agrees that Tenant shall have no obligation to remove the Initial Tenant Improvements, or any of the office or laboratory improvements located in the Premises

prior to the performance of Landlord’s Base Building Work and the Initial Tenant Improvements Work.

15. DEFAULT BY TENANT .

(a) The occurrence of any of the following shall constitute an Event of Default:

(i) Any installment of Base Rent or Additional Rent required to be paid by Tenant hereunder, or any part thereof shall at any time be in arrears and unpaid for five (5) days after the date due, or

(ii) There is any default or breach on the part of Tenant in the observance or performance of any of the other covenants, agreements, or conditions of this Lease on the part of Tenant to be kept and performed and said default or breach shall continue for a period of thirty (30) days after written notice thereof from Landlord to Tenant (unless such default cannot reasonably be cured within thirty (30) days and in such case, Tenant shall have commenced to cure said default within said thirty (30) days and thereafter continue diligently to pursue to completion the curing of same, but in no event to exceed ninety (90) days after notice from Landlord to Tenant), or

(iii) The leasehold estate hereby created shall be taken on execution or by other process of law, or

(iv) Tenant shall fail to deliver within ten (10) days after a request therefor any document described in Sections 13 or 21 hereof.

(b) If and whenever any Event of Default shall exist, Landlord shall have the right at its election then or at any time thereafter which such Event of Default exists to pursue any one or more of the following remedies in addition to all other rights or remedies provided herein or at law or in equity:

(i) Re-enter the Premises, take possession of all buildings, improvements, additions, alterations, equipment and fixtures thereon, and eject all parties in possession therefrom, using, to the extent permitted by law, such force for that purpose as may be necessary, without being liable to any prosecution for said re-entry or the use of such force, and, without terminating this Lease, at any time and from time to time relet the Premises or any part thereof for the account of Tenant or otherwise, receive and collect the rents therefor, applying the same first to payment of such reasonable expenses as Landlord may have paid, assumed or incurred in recovering possession of the Premises, including, without limitation, costs, expenses and reasonable attorney’s fees, brokerage and reasonable remodeling of the Premises, paid, assumed or incurred by Landlord in connection with reletting the Premises, and then to the fulfillment of the covenants of Tenant. Any such reletting as provided for herein may be for the remainder of the Term as originally granted or for a longer or shorter period. Landlord may execute any lease made pursuant to the terms hereof in Landlord’s own name and Tenant shall have no right or authority whatever to collect any rent whatever from such tenant. In any case and whether or not the Premises or any part thereof be relet, Tenant shall pay to Landlord all sums required to be paid by Tenant up to the time of re-entry by Landlord, and thereafter Tenant shall, if required by Landlord, pay to Landlord until the end of the

Term, the equivalent amount of all rent and other charges required to be paid by Tenant under the terms of this Lease, less the avails of any such reletting during the Term, if any, after payment of the expenses of Landlord as aforesaid, and the same shall be due and payable on the several rent days herein specified. No such re-entry by Landlord shall constitute an election to terminate this Lease unless and until Landlord thereafter gives Tenant written notice of Landlord’s election to terminate this Lease. Actions to collect any amounts due by Tenant as provided in this Section 15 may be brought from time to time on one or more occasions without the necessity of Landlord’s waiting until expiration of the Term;

(ii) Terminate this Lease, and with or without process of law, expel and remove Tenant, or any other person or persons in occupancy from the Premises, together with their goods and chattels, using, to the extent permitted by law, such force as may be necessary in the judgment of Landlord or its agents in so doing, and repossess and enjoy said Premises together with all improvements, additions, alterations, equipment and fixtures thereon, and in addition to any other remedy it may have, Landlord may recover from Tenant all reasonable damages it may incur by reason of such breach by Tenant.

16. TENANT’S PROPERTY . Upon termination of this Lease by expiration of time or otherwise, Tenant shall remove all of its furniture, furnishings, trade fixtures, equipment and personal property, including, without limitation the Retained FFE if Landlord has transferred same to Tenant in accordance with the provisions of Section 1(b)(i) of the Lease (collectively, the “Tenant’s Property”) from the Premises. Tenant shall be obligated to repair any damage to the Premises, Building and Common Areas caused by such removal.

17. HOLDING OVER In the event Tenant remains in possession of the Premises after termination of this Lease, such holding over shall not be deemed to extend the Term and Tenant shall be deemed to be occupying the Premises as a holdover Tenant, at a Rent equal to one and one half (1.5) times the Base Rent and Additional Rent for the last month prior to the expiration of the Term for each calendar month or portion thereof that Tenant holds over, subject to all the other conditions, provisions and obligations of this Lease. The parties recognize and agree that the damage to Landlord resulting from any failure by Tenant to timely surrender possession of the Premises will be extremely substantial, will exceed the amount of the monthly Base Rent payable hereunder and will be impossible to accurately measure. If the Premises are not surrendered upon the expiration of this Lease, Tenant shall indemnify, defend and hold harmless Landlord against any and all losses and liabilities resulting therefrom, including, without limitation, any claims made by any succeeding tenant founded upon such delay. Nothing contained in this Lease shall be construed as a consent by Landlord to the occupancy or possession by Tenant of the Premises beyond the Expiration Date, and Landlord, upon said Expiration Date, shall be entitled to the benefit of all legal remedies that now may be in force or may be hereafter enacted relating to the immediate repossession of the Premises. The provisions of this Section 17 shall survive the expiration or sooner termination of this Lease.

18. SECURITY DEPOSIT

(a) Concurrently with the execution of this Lease, Tenant shall deposit with Landlord a one (1) year, irrevocable unconditional letter of credit issued by an Approved Bank for the benefit of Landlord in the amount of Two Hundred Fifty-Six Thousand Six Hundred Thirty and 64/100 Dollars ($256,630.64), subject to reduction in accordance with this Section 18, (collectively, the “Security Deposit”), containing (i) an “evergreen clause” providing that it shall automatically renew as of its initial and each subsequent expiry date unless the issuing bank gives Landlord written notice of the non-renewal at least sixty (60) days prior to the then applicable expiry date, (ii) a provision obligating the issuing bank to issue a new letter of credit, without charge to Landlord, to any assignee of Landlord’s interest under the Lease, (iii) a provision stating that the letter of credit shall not in any way be modified or amended without Landlord’s prior written consent, and (iv) such other commercially reasonable provisions as Landlord may require from time to time. The face amount of the original letter of credit and any replacement letter of credit delivered to Landlord shall be equal to the amount of the Security Deposit then required under this Section 18. The Security Deposit shall be held by Landlord as security for the full and faithful performance by Tenant of the terms and conditions by it to be observed and performed hereunder. If any Base Rent, Additional Rent or other sum payable by Tenant to Landlord becomes overdue and remains unpaid, or should Landlord make any payments on behalf of Tenant in accordance with the terms of this Lease, or should Tenant fail to perform any of the terms and conditions of this Lease after notice and the expiration of any applicable cure period, then Landlord, at its option, and without prejudice to any other remedy which Landlord may have on account thereof, shall appropriate and apply the Security Deposit toward the payment of Base Rent, Additional Rent or other such sum payable hereunder, or loss or damage sustained by Landlord due to the breach or failure to perform on the part of Tenant. For purposes of this Lease, “ Approved Bank ” shall mean any commercial bank having an office within the New York City/New Jersey metropolitan area which is rated A or better by Standard & Poor’s or any successor thereto (or having a comparable rating issued by another reputable and comparable rating agency if Standard & Poor’s or any successor thereto no longer exists or no longer publishes such ratings). The Security Deposit shall be held by Landlord without liability for interest and it is expressly understood that the Security Deposit shall not be considered an advance payment of rental or a measure of Landlord’s damages in case of default by Tenant. Landlord may commingle the Security Deposit with Landlord’s other funds.

(b) Conditioned upon the full compliance by Tenant of all of the terms of this Lease (including, without limitation, leaving the Premises in the condition required on the Expiration Date) and the prompt payment of all sums due hereunder, as and when they fall due, the Security Deposit (or the unapplied portion thereof) shall be returned in full to Tenant within forty five (45) days after the Expiration Date. Landlord’s obligations under this Section 18(b) shall survive the expiration or earlier termination of the Term.

(c) In the event of bankruptcy or other debtor-creditor proceeding against Tenant, the Security Deposit shall be deemed to be applied first to the payment of rent and other charges then due and owing Landlord for all periods prior to filing of such proceedings.

(d) In the event of any transfer or any assignment of Landlord’s interest under this Lease, Landlord shall have the right to transfer the Security Deposit to said transferee or assignee, and Landlord shall thereupon be automatically released from all liability for the return of the Security Deposit provided that the transferee or assignee has assumed in writing all of Landlord’s obligations under this Lease which arise from and after the date of the transfer or assignment. In such event, Tenant agrees to look to the new lessor for the return of the Security Deposit. Landlord shall furnish Tenant with an executed copy of any such assumption agreement. It is hereby agreed that the provisions of this Section shall apply to every transfer or assignment made of the Security Deposit to a new lessor.

(e) Upon the occurrence of a default by Tenant under this Lease after notice and the expiration of any applicable cure period, Landlord shall have the right to draw down the letter of credit for any of the reasons set forth in this Section 18 for the application of Security Deposit. To exercise such right, (i) Landlord shall present the letter of credit to the issuing bank at the office in New York City/New Jersey set forth on the letter of credit and (ii) Landlord shall deliver to the issuing bank a statement from Landlord setting forth the amount of the draw and stating that Landlord is entitled to draw down the letter of credit pursuant to the provisions of Section 18 of this Lease. Landlord shall apply the proceeds thereof towards the payment of the Base Rent, Additional Rent or such other sum payable hereunder, or any payments made by Landlord on behalf of Tenant, or any loss or damage sustained by Landlord due to the breach or failure to perform on the part of Tenant, and Landlord shall hold the balance, if any, pursuant to the provisions of this Section 18. Within ten (10) Business Days after demand, Tenant shall deposit with Landlord an amount (in the form of cash or a replacement letter of credit) equal to the portion of the Security Deposit applied pursuant to the provisions of the immediately preceding sentence and if Tenant shall provide a replacement letter of credit for the full amount of the Security Deposit, Landlord shall return to Tenant the original letter of credit or the balance of any cash then being held by Landlord in accordance with Section 18 above within ten (10) Business Days after Landlord’s receipt of such replacement letter of credit.

(f) Notwithstanding anything to the contrary contained herein, Tenant hereby expressly acknowledges that the drawing down of said letter of credit shall not operate as a waiver of or preclude Landlord from exercising any of Landlord’s other rights and remedies under this Lease. In addition, Tenant hereby agrees that Landlord shall not be required to give Tenant any prior notice of the drawing down of the letter of credit (provided this sentence shall not be construed to waive any notice Landlord is required to provide in connection with any alleged default).

(g) In the event of an assignment of this Lease by Landlord, Tenant shall, at Tenant’s sole cost and expense, obtain either (i) a new letter of credit from the issuing bank containing the same terms and for the same face amount as the letter of credit then held by Landlord which names the new lessor as the beneficiary or (ii) the written consent of the issuing bank to the assignment of the then existing letter of credit from Landlord to the new lessor in form and substance reasonably satisfactory to the new lessor, provided the bank’s transfer forms are properly completed and delivered. If Tenant obtains a new letter of credit, Landlord shall surrender the existing letter of credit to Tenant

simultaneously with Landlord’s receipt of the new letter of credit and the parties agree to coordinate such delivery and surrender so that it is done on the effective date of the assignment of this Lease by Landlord.

(h) Notwithstanding anything to the contrary contained herein, (i) the original amount of the Security Deposit ($256,630.64) shall be reduced by $32,078.83, so that the amount of the Security Deposit shall be $224,551.81 as of the first (1st) anniversary of the Rent Commencement Date, provided no Event of Default shall have occurred during the period beginning on the Commencement Date and ending on the first (1st) anniversary of the Rent Commencement Date (the “ Initial Security Period ”), and (ii) the amount of the Security Deposit shall be further reduced following the Initial Security Period, then reduced amount of the Security Deposit ($224,551.81) shall be reduced by $32,078.83, so that the amount of the Security Deposit shall be $192,472.98 as of the second (2nd) anniversary of the Rent Commencement Date, provided no Event of Default shall have occurred during the period beginning on the first (1 st ) anniversary of the Rent Commencement Date and ending on the second (2nd) anniversary of the Rent Commencement Date (the “ Second Security Period ”). If an Event of Default shall have occurred during the Initial Security Period, then the Security Deposit shall not be reduced by the scheduled amount, and all further reductions shall be deemed forever waived even though the Event of Default in question is subsequently cured. If no Event of Default shall have occurred during the Initial Security Period, but an Event of Default shall have occurred during the Second Security Period, then the amount of the Security Deposit shall not be reduced by the scheduled amount, the reductions shall be deemed forever waived even though the Event of Default in question is subsequently cured and the amount of the Security Deposit shall revert back to the original amount of $256,630.64. No earlier than thirty (30) days prior to the (i) first (1st) anniversary of the Rent Commencement Date with respect to the Initial Security Period, and/or (ii) the second (2 nd ) anniversary of the Rent Commencement Date with respect to the Second Security Period, as the case may be, Tenant shall notify Landlord that Tenant desires to reduce the amount of the Security Deposit by the scheduled amount in accordance with the provisions of this Section 18(h) (the “ Security Reduction Request Notice ”). Within forty five (45) days following Landlord’s receipt of a Security Reduction Request Notice, Landlord shall (i) notify Tenant that the conditions set forth in this Section 18(h) have been satisfied in all respects and confirm that the amount of the letter of credit may be reduced by $32,078.83 by amendment or replacement, or (ii) notify Tenant that the conditions set forth in this Section 18(h) have not been satisfied in all respects, in which case Landlord’s notice shall set forth in reasonable detail why the amount of the letter of credit shall not be reduced. If Landlord’s notice confirms that conditions set forth in this Section 18(h) have been satisfied in all respects and that the amount of the letter of credit may be reduced by $32,078.83, and Tenant shall obtain and deliver to Landlord a replacement letter of credit, then Landlord shall surrender the existing letter of credit to Tenant within five (5) Business Days after Landlord’s receipt of the replacement letter of credit and the parties agree to coordinate such delivery and surrender so that it is done in an efficient manner.

19. FORCE MAJEURE Except to the extent expressly set forth herein, in no event shall either party by deemed to be in default of its non-monetary obligations

hereunder to the extent such party is prevented from or delayed in performing such non-monetary obligation by reason of acts of God, fire, earthquake, flood, explosion, action of the elements, war, hostilities, invasion, acts of terrorism, insurrection, riot, mob violence, sabotage, reasonably unforeseen governmental regulation, unusual scarcity of or inability to obtain labor or materials, labor difficulties, or other causes reasonably beyond such party’s control (“Force Majeure”).

20. INTENTIONALLY DELETED

21. ESTOPPEL CERTIFICATES . Tenant shall, within ten (10) days after written request from Landlord, execute, acknowledge, and deliver to Landlord or to Landlord’s mortgagee, proposed mortgagee, land lessor or proposed purchaser of the Building or any part thereof, any estoppel certificates reasonably requested by Landlord, from time to time, which estoppel certificates shall show, among other thing, whether the Lease is in full force and effect and whether any changes may have been made to the original Lease; whether the Term of the Lease has commenced and full rental is accruing; whether there are, to Tenant’s knowledge, any defaults by Landlord and, if so, the nature of such defaults, whether possession has been assumed and all improvements to be provided by Landlord have been completed; whether rent has been paid more than thirty (30) days in advance and that, to Tenant’s knowledge there are no liens, charges, or offsets against rental due or to become due.

22. ALTERATIONS OR IMPROVEMENTS BY TENANT .

(a) Except for Minor Alterations (as defined below), Tenant may, from time to time, at its expense, make alterations or improvements and install any Tenant’s Property, in and to the Premises (hereinafter collectively referred to as “ Alterations ”) provided that Tenant first obtains the written consent of Landlord, which consent shall not be unreasonably withheld, delayed or conditioned; and provided further that all of the following shall apply with respect to all Alterations: (1) the Alterations shall be of a non-structural nature and the structural integrity of the Building shall not be affected; (2) the Alterations shall only be to the interior of the Premises; (3) the proper functioning of the HVAC, sanitary and other service systems of the Premises shall not be affected and the usage of such systems by Tenant shall not be increased; and (4) Tenant shall have appropriate insurance coverage, reasonably satisfactory to Landlord, regarding the performance and installation of the Alterations. Additionally, before proceeding with any Alterations, Tenant shall (i) at Tenant’s expense, obtain all necessary governmental permits and certificates for the commencement and prosecution of Alterations; (ii) submit to Landlord, for its written approval, working drawings, plans and specifications and all permits for the work to be done and Tenant shall not proceed with such Alterations until it has received Landlord’s approval (which consent shall not be unreasonably withheld, delayed or conditioned); and (iii) cause those contractors, materialmen and suppliers engaged to perform the Alterations to deliver to Landlord certificates of insurance (in a form and content reasonably acceptable to Landlord) evidencing policies of commercial general liability insurance (providing the same coverages as required in Section 8 above) and workers’ compensation insurance. The term “ Minor Alterations ” means (a) cosmetic and non-structural Alterations to the Premises, which (i) do not affect any Building systems, structure, or areas outside of the Premises and (ii) the cost of which, in the

aggregate, during any twelve (12)-month period during the Lease Term do not exceed $25,000.00. Tenant may make Minor Alterations without Landlord’s consent, but upon not less than ten (10) Business Days prior written notice to Landlord.

(b) Tenant shall cause the Alterations to be performed in compliance with all applicable permits, Laws, requirements of public authorities, plans and specifications and with Landlord’s Rules and Regulations or any other reasonable conditions that Landlord may impose on the Alterations. Tenant shall cause the Alterations to be diligently performed in a good and workmanlike manner, using new materials and equipment at least equal in quality and class to the standards for the Building established by Landlord, and shall cause all Alterations to be paid for in full free and clear of all construction and any and all other liens and encumbrances. Tenant shall provide Landlord with “as built” plans, copies of all construction contracts, governmental permits and certificates and proof of payment for all labor and materials, including, without limitation, copies of paid invoices and final lien waivers. Landlord and Landlord’s representatives shall have the right, without the obligation, from time to time, to enter upon the Premises during the course of the performance of the Alterations, and upon completion of the Alterations, to observe and inspect the Alterations; however, by doing so, Landlord shall not be deemed to have passed upon the performance of the Alterations nor assumed any liability or responsibility with respect thereto. Landlord shall have the right to require Tenant to remove any Specialty Installations made by Tenant before the expiration or termination of the Lease, at Tenant’s sole cost and expense. If Landlord provides its written consent, at the time of giving such consent, to the extent the Alteration includes any “Specialty Installation” (as defined herein), Landlord shall advise Tenant whether Landlord will require such Specialty Installation or Specialty Installations to be removed at the expiration or earlier termination of this Lease. As used in this Lease the term “ Specialty Installation ” means any Alteration, fixture or equipment made or installed by Tenant or Tenant’s Agents that is intended specifically for the use of Tenant or Tenant’s operations in the Premises and is not readily marketable or reusable by another office, laboratory, R&D, or general use tenant in the Premises and specifically shall include items which require special governmental permits, approvals, or consents for the installation or removal of same.

(c) Tenant shall have the right to place and install Tenant’s Property in and upon the Premises, and fasten the same to the Premises. All Tenant’s Property whether acquired by Tenant at the commencement of the Term or placed or installed on the Premises by Tenant thereafter, shall remain Tenant’s Property. Tenant shall have the right to remove the same at any time during the term of this Lease (and Tenant shall remove all such Tenant’s Property on or before the Expiration Date), provided that all damage to the Premises, Building and Common Areas caused by such removal shall be repaired by Tenant at Tenant’s sole cost and expense.

(d) Landlord acknowledges that Tenant may desire to construct a clean room in the Premises during the Term. Landlord shall not unreasonably withhold its consent to such an Alteration, provided (i) Tenant shall comply with all of the terms and conditions of this Lease in all respects, including without limitation the provisions of this Section 22, and (ii) Landlord shall have the right to designate the construction of such

clean room as a Specialty Installation and require Tenant to remove same before the expiration or termination of this Lease, at Tenant’s sole cost and expense, and repair any damage caused by such removal.

23. ACCESS TO PREMISES . Landlord and Landlord’s agents shall have the right to enter the Premises during Business Hours for the purpose of inspecting the same, for the purpose of maintenance, repair, and for making additions to and running pipes, conduits and ducts through the Premises and for showing the Premises to prospective tenants, purchasers and lenders, and Tenant hereby waives any claim against Landlord for damage or inconvenience caused by any of the above. Except in the case of an emergency (in which case no prior notice shall be required), Landlord shall give Tenant not less than 24 hour advance notice of Landlord’s intent to enter the Premises and shall use commercially reasonable efforts to minimize the interference with Tenant’s operations during the exercise of Landlord’s rights under this Section 23, but Landlord shall not be required to use after hours labor. Notwithstanding the foregoing to the contrary, Landlord shall not be required to enter only during Business Hours in the event Landlord, in its good faith judgment, believes it would be injured by failure to take rapid action or if the necessity for repairs constitutes an emergency. If Tenant does not want Landlord to have the right to enter the clean room unattended, then Tenant shall provide a representative of Tenant to accompany Landlord’s agents at all times during the exercise of Landlord’s rights under this Section 23 within such clean room, and in such event Landlord and Landlord’s agents shall comply with Tenant’s reasonable procedures for such access to minimize any risk of contamination in the clean room.

24. PARKING .

(a) S ubject to the Rules and Regulations attached hereto as Exhibit “J” as same may be modified by Landlord from time to time during the Term, in accordance with this Lease, Tenant shall have the right to use thirty- two (32) non-exclusive parking spaces in the parking garage located in the Project for non-commercial vehicles in common with other tenants of the property.

(b) Landlord reserves the right at any time, on at least 15 days prior notice (except in the case of an emergency, in which case no notice shall be necessary), to temporarily relocate all or any portion of the parking garage spaces in case of emergencies or the repair or maintenance of same. If Tenant commits or allows any of the activities prohibited by this Lease or the Rules and Regulations in connection with its use of the non-exclusive parking spaces, then Landlord shall have the right, following such notice to Tenant, whether written or oral, as is reasonable under the circumstances, in addition to such other rights and remedies that Landlord may have, to remove or tow away the vehicle(s) involved and charge the cost to Tenant, which cost shall be payable by Tenant within five (5) days after demand by Landlord. Tenant’s parking rights are appurtenant to the Lease and Tenant may only transfer, assign, or otherwise convey its parking rights together with a transfer, assignment, or conveyance of this Lease as otherwise provided in this Lease.

25. PARTIAL INVALIDITY . If any term, covenant or condition of this Lease or the application thereof to any person or circumstance shall to any extent be

invalid or unenforceable, the remainder of this Lease or the application of such term, covenant or condition of this Lease shall be valid and enforceable to the fullest extent permitted by law.

26. LEASE BINDING UPON ASSIGNEES . This Lease and all covenants, provisions and conditions herein contained shall inure to the benefit of and be binding upon the heirs, executors, administrators, personal representatives, successors and assigns, respectively of the parties hereto; provided, however, that no sublease, assignment or transfer by, from, through or under Tenant in violation of the provisions hereof shall vest in the sublessee, assignee or transferee any right, title or interest whatever.

27. LIMITATION OF LANDLORD’S LIABILITY . Anything in the Lease to the contrary notwithstanding, no recourse or relief shall be had under any rule of law, statute or constitution or by any enforcement of any assessments or penalties, or otherwise or based on or in respect of this Lease (whether by breach of any obligation, monetary or non-monetary), against Landlord, it being expressly understood that all obligations of Landlord under or relating to this Lease are solely obligations payable out of Landlord’s interest in the Building and are compensable solely therefrom. It is expressly understood that all such liability is and is being expressly waived and released as a condition of and as a condition for the execution of this Lease, and Tenant expressly waives and releases all such liability as a condition of, and as a consideration for, the execution of this Lease by Landlord.

28. WAIVER . The failure of Landlord or Tenant to insist in any one or more cases upon the strict performance or observance of any of the covenants, agreements or conditions of this Lease or to exercise any option herein contained shall not be construed as a waiver or a relinquishment for the future performance, observance or exercise of such covenant, agreement, condition or option. No waiver of any default hereunder shall be implied from any omission by Landlord or Tenant to take any action on account of such default, and no condition or covenant shall be deemed waived by Landlord or Tenant unless such waiver is in writing signed by the waiving party. One or more waivers of any breach of any covenant, term or condition of this Lease by Landlord or Tenant shall not be construed as a waiver of any subsequent breach of the same covenant, term or condition.

29. ASSIGNMENT AND SUBLETTING . (a) Tenant shall not sell, assign, transfer, hypothecate, mortgage, encumber, grant concessions or licenses, sublet, or otherwise dispose of any interest in this Lease or the Premises, by operation of law or otherwise, without the prior written consent of Landlord, which consent shall not be unreasonably withheld, delayed or conditioned. Any consent granted by Landlord in any instance shall not be construed to constitute a consent with respect to any other instance or request. If the Premises or any part thereof should be sublet, used, or occupied by anyone other than Tenant, or if this Lease should be assigned by Tenant, while an Event of Default exists, Landlord shall have the right to collect rent from the assignee, subtenant, user or occupant, but no such assignment, subletting, use, occupancy or collection shall be deemed a waiver of any of Landlord’s rights under the provisions of this Section, a waiver of any of Tenant’s covenants contained in this Section, the

acceptance of the assignee, subtenant, user or occupant as tenant, or a release of Tenant from further performance by Tenant of Tenant’s obligations under the Lease.

(a) If Tenant shall desire to sublet the Premises or to assign this Lease, it shall first submit to Landlord a written notice (“ Tenant’s Notice ”) setting forth in reasonable detail:

(i) the name and address of the proposed subtenant or assignee;

(ii) the terms and conditions of the proposed subletting or assignment (including the proposed commencement date of the sublease or the effective date of the assignment, which shall be at least thirty (30) days after Tenant’s Notice is given);

(iii) the nature and character of the business of the proposed subtenant or assignee;

(iv) banking, financial, and other credit information relating to the proposed subtenant or assignee, in reasonably sufficient detail, to enable Landlord to determine the proposed subtenant’s or assignee’s financial responsibility; and

(v) in the case of a subletting, a description of any and all work to be done to prepare the Premises to be sublet.

(b) Within thirty (30) days after Landlord’s receipt of Tenant’s Notice, Landlord agrees that it shall notify Tenant whether Landlord (i) consents to the proposed sublet or assignment, (ii) does not consent to the proposed sublet or assignment, (iii) elects to exercise its recapture right, as described in Section (e) below, or (iv) requires further information consistent with the information to be furnished as part of Tenant’s Notice. In the event Landlord does not elect to exercise its recapture right, then Landlord agrees not to unreasonably withhold its consent to the proposed sublet or assignment.

(i) no assignment or sublease shall be permitted if, at the effective date of such assignment or sublease, an Event of Default exists;

(ii) no assignment or sublease shall be permitted unless Tenant agrees, at the time of the proposed assignment or sublease and in Tenant’s Notice, to pay to Landlord, immediately upon receipt thereof, fifty percent (50%) of all Net Rental Proceeds, of whatever nature, payable by the prospective assignee or subtenant to Tenant pursuant to such assignment or sublease. For purposes of this Lease, “ Net Rental Proceeds ” shall mean: in the case of a sublease, the amount by which the aggregate of all rents, additional charges or other consideration payable under a sublease to Tenant by the subtenant (including sums paid for the sale or rental of Tenant’s fixtures, leasehold improvements, equipment, furniture or other personal property) exceeds the sum of (i) the Base Rent plus all amounts payable by Tenant pursuant to the provisions hereof during the term of the sublease in respect of the subleased space, (ii) brokerage commissions at prevailing rates due and owing to a real estate brokerage firm, and (iii) other customary and reasonable costs incurred by Tenant in connection with the subleasing; and in the case of an

assignment, the amount by which all sums and other considerations paid to Tenant by the assignee of this Lease for or by reason of such assignment (including sums paid for the sale of Tenant’s fixtures, leasehold improvements, equipment, furniture or other personal property) exceeds the sum of (i) brokerage commissions at prevailing rates due and owing to a real estate brokerage firm, and (ii) other customary and reasonable costs incurred by Tenant in connection with the assignment.

(iii) no assignment or sublease shall be permitted to any existing tenant or occupant in the Building or Project;

(iv) no sublease or assignment shall be permitted if the proposed subtenant’s or assignee’s use of the Premises; (i) is a Prohibited Use shown on Exhibit “O” (as same may be further supplemented and amended by Landlord from time to time during the Term by written notice to Tenant provided that in no event shall the Permitted Use be a Prohibited Use), (ii) is for any use other than the Permitted Use, (iii) would cause Landlord to be in violation of its obligations under another lease or agreement in connection with the Project to which Landlord is a party, including, without limitation any exclusive or restrictions granted to any tenant or occupant pursuant to a lease or other agreement entered into prior to Tenant’s request for Landlord’s consent, (iv) is not consistent with Landlord’s operation of the Project as a first class research and development project including general office use, or (v) violates the Condominium Documents;

(v) no sublease or assignment shall be permitted if, in Landlord’s reasonable business judgment, the proposed subtenant or assignee lacks sufficient business reputation or experience to operate a successful business of the type and quality permitted under this Lease;

(vi) no sublease or assignment shall be permitted if, in Landlord’s reasonable business judgment, the proposed subtenant or assignee does not have the financial strength to perform its obligations under the sublease or this Lease, as applicable;

(vii) no sublease or assignment shall be permitted if the assignment or sublease would breach any covenant of Landlord respecting radius, location, use or exclusivity in any lease, financing agreement or other agreement relating to the Project; and

(viii) no sublease or assignment shall be permitted to any prospective tenant of the Building or the Project who has been shown space in the Building for lease during the nine (9) months prior to the Tenant’s request for consent if Landlord has comparable space in the Building available for leasing to such prospective tenant.

(d) Landlord shall have the right, to be exercised by giving written notice (the “ Recapture Notice ”) to Tenant within thirty (30) days after receipt of Tenant’s Notice, to recapture the space described in Tenant’s Notice (the “ Recapture Space ”). The Recapture Notice shall cancel and terminate this Lease with respect to the Recapture Space as of the date stated in Tenant’s Notice for the commencement of the proposed

assignment or sublease as fully and completely as if that date had been herein definitively fixed as the Expiration Date, and Tenant shall surrender possession of the Recapture Space as of such date. Thereafter, the Base Rent and Additional Rent shall be equitably adjusted based upon the square footage of the Premises then remaining, after deducting the square footage attributable to the Recapture Space. In the event Landlord elects to exercise its recapture right and the Recapture Space is less than the entire Premises, then Landlord, at its sole expense, shall have the right to make any alterations to the Premises required, in Landlord’s reasonable judgment, to make such Recapture Space a self-contained rental unit. Landlord agrees to perform all such work, if any, with as little inconvenience to Tenant’s business as is reasonably possible; provided, however, Landlord shall not be required to perform such work after normal business hours or on weekends; and provided further, Landlord shall not be deemed guilty of an eviction, partial eviction, constructive eviction or disturbance of Tenant’s use or possession of the Premises, and shall not be liable to Tenant for same.

(e) In addition to the foregoing requirements, any sublease must contain the following provisions:

(i) the sublease shall be subject and subordinate to all of the terms and conditions of this Lease;

(ii) at Landlord’s option, in the event of cancellation or termination of this Lease for any reason or the surrender of this Lease, whether voluntarily, involuntarily, or by operation of law, prior to the expiration of such sublease, including extensions and renewals of such sublease, the subtenant shall make full and complete attornment to Landlord for the balance of the term of the sublease. The attornment shall be evidenced by an agreement in form and substance satisfactory to Landlord which the subtenant shall execute and deliver at any time within five (5) days after request by Landlord or its successors and assigns;

(iii) the term of the sublease shall not extend beyond a date which is one day prior to the Termination Date;

(iv) no subtenant shall be permitted to further sublet all or any portion of the subleased space or to assign its sublease without Landlord’s prior written consent; not to be unreasonably withheld; and

(v) the subtenant shall waive the provisions of any law now or subsequently in effect which may give the subtenant any right of election to terminate the sublease or to surrender possession of the space subleased in the event that any proceeding is brought by Landlord to terminate this Lease.

(f) Each of the following events shall be deemed to constitute an assignment of this Lease and each shall require the prior written consent of Landlord:

(i) any assignment or transfer of this Lease by operation of law; or

(ii) any hypothecation, pledge, or collateral assignment of this Lease; or

(iii) any involuntary assignment or transfer of this Lease in connection with bankruptcy, insolvency, receivership, or similar proceeding; or

(iv) any assignment, transfer, disposition, sale or acquisition of a controlling interest in Tenant to or by any person, entity, or group of related persons or affiliated entities, whether in a single transaction or in a series of related or unrelated transactions; or

(v) any issuance of an interest or interests in Tenant (whether stock, partnership interests, or otherwise) to any person, entity, or group of related persons or affiliated entities, whether in a single transaction or in a series of related or unrelated transactions, which results in such person, entity, or group holding a controlling interest in Tenant. For purposes of the immediately foregoing, a “controlling interest” of Tenant shall mean 50% or more of the aggregate issued and outstanding equitable interests (whether stock, partnership interests, membership interests or otherwise) of Tenant. Notwithstanding the foregoing, clauses (iv) and (v) shall not apply with respect to the transfer of any publicly traded interests.

(g) It is a further condition to the effectiveness of any assignment otherwise complying with this Section that the assignee execute, acknowledge, and deliver to Landlord an agreement in form and substance reasonably satisfactory to Landlord whereby the assignee assumes all of the obligations of Tenant under this Lease and agrees that the provisions of this Section shall continue to be binding upon it with respect to all future assignments and deemed assignments of this Lease.

(h) No assignment of this Lease nor any sublease of all or any portion of the Premises shall release or discharge Tenant from any liability, whether past, present, or future, under this Lease and Tenant shall continue to remain primarily liable under this Lease.

(i) Tenant shall be responsible for obtaining all permits and approvals required by any governmental or quasi-governmental agency in connection with any assignment of this Lease or any subletting of the Premises, and Tenant shall deliver copies of these documents to Landlord prior to the commencement of any work, if work is to be done. Tenant is also responsible for and is required to reimburse Landlord within thirty (30) days after demand for all out-of-pocket fees, costs and expenses, including, but not limited to, reasonable attorneys’ fees and disbursements and architects’, accountants’, engineers’, or other consultants’ fees, which Landlord incurs in reviewing any proposed assignment of this Lease, any proposed sublease of the Premises, and any permits, approvals, and applications for construction within the Premises.

(j) Tenant agrees that under no circumstances shall Landlord be liable in damages or subject to liability by reason of Landlord’s failure or refusal to grant its consent to any proposed assignment of this Lease or subletting of the Premises, and Tenant’s sole remedy shall be limited to injunctive relief or a declaratory judgment. If

Landlord withholds its consent of any proposed assignment or sublease, Tenant shall defend, indemnify, and hold Landlord harmless from and reimburse Landlord for all liability, damages, costs, fees, expenses, penalties, and charges (including, but not limited to, reasonable attorneys’ fees and disbursements) arising out of any claims that may be made against Landlord by any brokers or other persons claiming a commission or similar compensation in connection with the proposed assignment or sublease.

(k) Notwithstanding anything to the contrary contained herein, provided no Event of Default exists at the time Tenant gives Landlord the RSE Notice (as hereafter defined) Tenant, without Landlord’s prior consent, but upon not less than ten (10) Business Days prior notice to Landlord (the “ RSE Notice ”), may (i) assign this Lease to, or sublet all or part of the Premises to, or permit a portion of the Premises to be occupied by, any corporation or other business entity which controls, is controlled by, or is under common control with Tenant and also including any other entity which acquires all or substantially all of the business operation of Tenant being conducted at the Premises or any other entity which forms a joint venture or other business arrangement with Tenant to acquire all or substantially all of a business operation of Tenant being conducted within the Premises ( a “ Related Entity ”) and (ii) assign this Lease and the leasehold estate hereby created to a successor entity of Tenant (a “ Successor Entity ”). Notwithstanding the foregoing, if Tenant is unable to provide a RSE Notice prior to the sublease or assignment due to applicable Laws or contractual restrictions, Tenant may consummate such transaction without sending a RSE Notice and Tenant will send written notice of such transaction to Landlord promptly following the consummation thereof. A Successor Entity, as used in this Lease, shall mean (x) a corporation or other business entity into which or with which Tenant, its successors or assigns, is merged or consolidated, in accordance with applicable statutory provisions for the merger or consolidation of corporations, provided that by operation of law or by effective provisions contained in the instruments of merger or consolidation, the liabilities of the corporations or other business entities participating in such merger or consolidation are assumed by the corporation or other business entity surviving such merger or consolidation, or (y) a corporation or other business entity acquiring all or substantially all of the assets or outstanding shares of stock of Tenant, its corporate successors or assigns, including the leasehold estate created by this Lease, and assuming the obligations of Tenant under this Lease, or (z) any corporate successor or other business entity successor to a successor entity becoming such by either of the methods described in subdivisions (x) and (y) above; provided that (1) such merger or consolidation, or such acquisition and assumption, as the case may be, is not principally for the purpose of transferring the leasehold estate created hereby, and (2) immediately after giving effect to any such merger or consolidation, or such acquisition and assumption, as the case may be, the successor corporation surviving such merger or created by such consolidation or acquiring such assets and assuming such liabilities as the case may be, shall have a net worth, as determined in accordance with generally accepted accounting principles consistently applied, equal to or greater than the net worth of Tenant immediately preceding such merger, consolidation or acquisition. Any assignment, subletting or occupancy by a Related Entity of Tenant or a Successor Entity of Tenant shall not be deemed to relieve, release, impair or discharge any of Tenant’s obligations hereunder. For

the purposes hereof, “control” shall be deemed to mean possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such corporation or other business entity, through the ownership of voting securities, by contract, or otherwise. Landlord acknowledges that the Premises may be occupied by one or more Related Entities and their employees and that such use of the Premises shall not be considered an assignment or sublease, unless Tenant elects to treat it as such. From time to time during any subletting to a Related Entity, upon written request by Landlord, a duly authorized senior officer of Tenant shall certify in writing to Landlord, and shall substantiate by reasonable evidence, that such subtenant continues to control, be controlled by or be under the common control with Tenant. Tenant hereby acknowledges and agrees that an assignment of this Lease shall be deemed to have occurred at such time as such Related Entity subtenant ceases to be controlled, controlling or under common control with Tenant, and that such assignment shall be subject to all the provisions of this Section 29 (including, without limitation, the obligation to obtain Landlord’s prior written consent).

30. ENTIRE AGREEMENT AND MODIFICATIONS . This Lease and the covenants and agreements set forth herein are and shall constitute the entire agreement between the parties. Each party to this Lease hereby acknowledges and agrees that the other party has made no warranties, representations, covenants or agreements, express or implied, to such party other than those expressly set forth herein and that each party, in entering into and executing this Lease, has relied upon no warranties, representations, covenants or agreements, express or implied, to such party other than those expressly set forth herein and that each party, in entering into and executing this Lease, has relied upon no warranties, representations, covenants or agreements, express or implied, to such party other than those expressly set forth herein. None of the terms, covenants, and agreements of this Lease shall in any manner be altered, waived or changed, except by written instrument signed and delivered by the parties hereto.

31. BROKER’S COMMISSION .

(a) Landlord and Tenant represent and warrant to each other that they have dealt and negotiated solely and only with Jones Lang LaSalle for this Lease and with no other broker. Landlord shall pay Jones Lang LaSalle a brokerage commission pursuant to a separate agreement

(b) Landlord and Tenant hereby agree to indemnify, defend and hold the other harmless from and against any and all claims, suits, damages, liabilities, counsel fees, costs, expenses, orders and judgments imposed upon, incurred by or asserted against Landlord or Tenant by reason of the actions or inactions of the indemnifying party.

32. NOTICES . All correspondence and notices provided for in this Lease shall be in writing and shall be delivered (a) by hand delivery (b) by a recognized overnight courier providing evidence of receipt, or (c) deposited in the United States mail, registered or certified, return receipt requested, postage prepaid, to the Landlord or the Tenant, as the case may be, at the address stated in the preamble hereof, or at such other address as may be specified from time to time in writing, delivered to or sent to the other

party as provided herein. Notices by registered or certified mail shall be considered delivered and become effective upon the earlier of receipt or three (3) Business Days after mailing thereof. For purposes of this Section 32 only, “ Business Days ” shall mean any day except Saturday, Sunday and all days observed as legal holidays by the State of New Jersey. Notice by hand delivery shall be considered delivered and become effective on the day delivered or refused. Notices by overnight courier service shall be considered delivered and become effective the next Business Day. Copies of all notices given to Landlord shall also be sent to: (i) Windels Marx Lane & Mittendorf, LLP, 120 Albany Street, New Brunswick, New Jersey 08901 Attention: Karl Piirimae, (ii) CIP II Bridgewater Investor LLC, One Boston Place, Suite 2310, Boston, MA 02108, Attention: J. Frederic Begien, Jr., and (iii) Mansour Law Offices LLC, One Boston Place, Suite 2310, Boston, MA 02108, Attention: Lauree E. Mansour. Copies of all notices given to Tenant shall also be sent to: Insmed Incorporated, 10 Finderne Avenue, Building 10, Bridgewater, NJ 08807, Attn: General Counsel.

33. RECORDING Neither party shall record this Lease or any memorandum or “short form” of this Lease.

34. PERSON . The term “person” as used in this Lease shall, as appropriate, be deemed to include any natural person, firm, corporation, association, partnership and/or any other entity whatsoever.

35. HEADINGS AND INTERPRETATION . The paragraph headings used throughout this instrument are for convenience and reference only, and the words contained therein shall in no way be held to explain, modify, amplify or aid in the interpretation, construction, or meaning of the provisions of this Lease. Whenever herein the masculine gender is used, the same shall include the feminine and neuter gender.

36. MISCELLANEOUS, COUNTERPARTS . This Lease has been negotiated by Landlord and Tenant and this Lease, together with all of the terms and provisions hereof, shall not be deemed to have been prepared by either Landlord or Tenant, but by both equally. This Lease may be executed in any number of counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

37. SURVIVAL OF TENANT’S OBLIGATIONS . All obligations of Tenant which by their nature involve performance, in any particular, after the end of the Term or which cannot be ascertained to have been fully performed until after the end of the Term, shall survive the expiration or sooner termination of the Term.

38. COMPLIANCE WITH LAWS AND RULES AND REGULATIONS .

(a) Tenant shall, at its sole expense, comply with all local, state and federal statutes, codes, ordinances, regulations, rules, orders, directives and requirements of any governmental entity, authority, agency and/or department, which now or at any time hereafter is applicable to the Premises, including, but not limited to, all environmental laws (collectively, “ Laws ”), pertaining to any or all part of the Premises, Tenant, Tenant’s use of the Premises or Tenant’s occupancy thereof, and including, but not limited to, all Laws concerning or addressing matters of an environmental nature.

Tenant shall give prompt notice to Landlord of any written notice it receives of the alleged violation of any Laws with respect to any or all of the Premises, Tenant’s use of the Premises or Tenant’s occupation thereof. Notwithstanding the foregoing, in no event shall Tenant be required to make any alterations or improvements to the Premises to comply with Laws unless required due to Alterations made by Tenant pursuant to Section 22 or Tenant’s particular use of the Premises (as opposed to laboratory and general office use).

(b) Landlord and Tenant acknowledge and agree that Tenant shall be handling Hazardous Materials (as defined below) at the Premises in connection with the Permitted Use. As a material inducement to Landlord, in order to allow Hazardous Materials to be brought upon, kept, used, stored, handled, treated, generated on, or released or disposed from the Premises by Tenant and/or Tenant Parties (as defined below) in connection with the Permitted Use, Tenant shall: (i) operate its business according to prudent industry practices, in accordance with all Laws (as defined above, including, without limitation, Laws relating to the preparation, maintenance and filing of all required documentation relating to the acquisition, use, storage, handling, treatment, generation, release and/or disposition of all Hazardous Materials at the Premises), the Materials Handling Protocols (as defined below), the provisions of this Section 38, and Insmed’s Standard Operating Procedures (collectively, the “ Insmed Protocols ”), which are attached hereto as Exhibit “K” , as the same may be modified from time to time, (ii) never discharge any Hazardous Materials into the Building waste water system, (iii) complete and certify disclosure statements as reasonably requested by Landlord from time to time relating to Tenant’s acquisition, use, storage, handling, treatment, generation, release and/or disposition of all Hazardous Materials at the Premises, and (iv) provide Landlord with a list identifying each type of Hazardous Materials to be brought upon, kept, used, stored, handled, treated, generated on, or released or disposed of from the Premises and setting forth any and all governmental approvals or permits required in connection with the presence, use, storage, handling, treatment, generation, release or disposal of such Hazardous Materials on or from the Premises (“ Hazardous Materials List ”). Tenant shall deliver to Landlord an updated Hazardous Materials List at least once a year and shall also deliver an updated list before any new Hazardous Material is brought onto, kept, used, stored, handled, treated, generated on, or released or disposed of from, the Premises. The initial Hazardous Materials List is attached hereto as Exhibit “L” . For purposes of this Lease, the “Center of Excellence Materials Handling Protocols” shall be the reasonable rules and procedures hereafter established by Landlord from time to time during the Term for the use, storage, handling, treatment, generation, release or disposition of Hazardous Materials within the Project (the “ Materials Handling Protocols ”).

(c) Tenant shall, at its sole expense, comply with the Materials Handling Protocols and with all Rules and Regulations Landlord may impose from time to time in accordance with this Lease. If any certificate, license or permit is required for the conduct of Tenant’s business in the Premises other than the certificate of occupancy, Tenant, at its expense, shall procure such certificate, license and permit prior to the Commencement Date, and shall maintain such certificate, license or permit in good

standing throughout the Term. Tenant shall give prompt notice to Landlord of any written notice it receives of the alleged violation of any Law or requirement of any governmental or administrative authority with respect to any or all of the Premises, Tenant, Tenant’s use of the Premises or Tenant’s occupation thereof.

(d) If, at any time or from time to time during the Term (or any extension thereof), any Hazardous Material (defined below) is generated, transported, stored, used, treated or disposed of at, to, from, on or in either or both of the Premises and the Project by, or as a result of any act or omission of, any or all of Tenant and any or all of the Tenant Parties: (i) Tenant shall, at its own cost, at all times comply with all Laws relating to such Hazardous Materials, and Tenant shall further, at its own cost, obtain and maintain in full force and effect at all times all certificates, licenses and permits and other approvals required in connection therewith; (ii) Tenant shall promptly provide Landlord with complete copies of all communications, certificates, licenses, permits or agreements with, from or issued by any governmental authority or agency (federal, state or local) or any private entity relating in any way to such Hazardous Materials; (iii) Landlord, Agent and their respective agents and employees shall have the right, without the obligation, to either or both (x) enter the Premises upon reasonable prior notice to Tenant (except in cases of emergency in which no prior notice shall be required) and (y) conduct such sampling, tests and investigations as Landlord may elect, in its sole discretion, all at Tenant’s expense if Landlord has a reasonable basis for believing that Tenant has breached this Section 38, for the purposes of ascertaining Tenant’s compliance with all applicable Laws or certificates, licenses, permits or agreements relating in any way to such Hazardous Materials; and (iv) if Landlord has a reasonable basis for believing that Tenant has breached this Section 38, upon written request by Landlord, Tenant shall cause to be performed, and shall provide Landlord with the results of such sampling, tests and investigations as Landlord may elect, in its reasonable discretion, of air, water, groundwater and soil to demonstrate that Tenant complies with all applicable Laws or certificates, licenses, permits or agreements relating in any way to such Hazardous Materials.

(e) Tenant covenants to investigate, clean up and otherwise remediate, at Tenant’s sole expense, any release of Hazardous Materials caused, contributed to, or created by any or all of (A) Tenant and (B) any or all of Tenant’s shareholders, officers, directors, members, managers, partners, invitees, guests, agents, employees, contractors or representatives (“ Tenant Parties ”) during the Term. Such investigation and remediation (the “ Required Remediation ”) shall be performed only after Tenant has obtained Landlord’s prior written consent, which consent shall not be deemed a waiver by Landlord of its remedies under this Lease or Law for any Event of Default; provided, however, that Tenant shall be entitled to respond (in a reasonably appropriate manner) immediately to an emergency without first obtaining such consent. All Required Remediation shall be performed in strict compliance with Laws and to the reasonable satisfaction of Landlord (provided Landlord may not impose requirements more strict than those required by Laws). Notwithstanding anything to the contrary contained herein, in no event shall any remediation of either or both of the Premises or the Project involve

the use of any engineering control, institutional control, a groundwater classification exception area, a well restriction area or natural attenuation. All Required Remediation shall only be deemed complete upon the delivery to Landlord of a response action outcome, or equivalent issued by a Licensed Site Remediation Professional (a “ Response Action Outcome ”). Tenant shall be solely responsible for and shall pay for any and all Natural Resource Damages attributable to the actions or omissions of Tenant or Tenant Parties. For purposes of this Lease, “Natural Resource Damages” shall mean any governmental claim for damages to natural resources asserted against Landlord, including, without limitation, any such claim under Section 107(f) of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, or the New Jersey Spill Compensation and Control Act, as the case may be Tenant shall not enter into any settlement agreement, consent decree or other compromise with respect to any claims relating to any Hazardous Materials in any way connected with either or both of the Premises and the Project without first obtaining Landlord’s written consent (which consent may be given or withheld in Landlord’s sole, but reasonable, discretion) and affording Landlord the reasonable opportunity to participate in any such proceedings, all at the cost and expense of Tenant, which Tenant shall pay (including, but not limited to, all legal and other professional and expert fees and expenses incurred by Landlord in connection therewith) as Additional Rent, upon demand. As used herein, the term, “ Hazardous Materials ” shall mean any regulated substance, toxic substance, hazardous substance, hazardous waste, pollution, pollutant or contaminant, as defined or referred to in any Law or Laws pertaining to the protection of human health or the environment, including, without limitation, radon, asbestos, polychlorinated biphenyls, urea formaldehyde and petroleum products and petroleum based derivatives. Where a Law defines any of these terms more broadly than another Law, the broader definition shall apply. Notwithstanding anything to the contrary hereunder, and without waiving all other requirements set forth in this Lease and without this provision being deemed a permission for Tenant to generate, transport, store, use, treat or dispose of any Hazardous Materials at, to, from, on or in either or both of the Premises and the Project, Tenant shall be deemed the owner and generator of Hazardous Materials caused by Tenant to be located at the Premises, and Tenant shall have sole responsibility for all legal and regulatory compliance concerning such Hazardous Materials, including, without limitation, responsibility for proper training, storage, handling, labeling, distribution and off-Project disposal.

(f) Tenant hereby represents and warrants to Landlord, and covenants with Landlord, that the Tenant’s North American Industrial Classification Number (“ NAICS ”) is 325412, and that throughout this Term, Tenant shall not change the nature of Tenant’s operations at the Premises in a manner that shall result in a change of Tenant’s NAICS number. If, prior to the expiration or earlier termination of the Lease, Tenant: (i) fails, pursuant to the Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et seq., the regulations promulgated there under, and any and all amending and successor legislation and regulations (“ ISRA ”) and this Lease, to obtain and deliver to Landlord, either (A) written approval of a de minimis quantity exemption application issued by the New Jersey Department of Environmental Protection, or (C) a Response Action Outcome issued by a Licensed Site Remediation Professional relating to all areas of concern

(“ AOCs ”) caused, contributed to, or created by any or all of (x) Tenant or (y) any Tenant Parties (the “ Tenant’s ISRA Clearance ”); or (ii) fails to perform all Required Remediation pursuant to the requirements of this Section 38, and deliver to Landlord a Response Action Outcome relating to such Required Remediation (the “ Environmental Clearance ”), then upon the expiration or earlier termination of the Lease, Landlord shall have the option, in addition to all other remedies available to Landlord under this Lease and Law, either to consider the Lease as having ended or, if the Premises cannot be leased on fair market terms to another tenant due to the existence of AOCs caused or created by Tenant or Tenant Parties, to treat Tenant as a hold-over tenant in possession of the Premises. If Landlord considers the Lease as having ended, then Tenant shall nevertheless be obligated to promptly obtain and deliver to Landlord the ISRA Clearance or the Environmental Clearance, as the case may be, and otherwise fulfill all of the obligations of Tenant set forth in this Section 38. If Landlord treats Tenant as a hold-over tenant in possession of the Premises, then Tenant shall pay, monthly to Landlord, the Base Rent and Additional Rent which Tenant would otherwise have paid under the Lease, until such time as Tenant delivers to Landlord the ISRA Clearance or the Environmental Clearance, as the case may be, and otherwise fulfills its obligations to Landlord under this Section 38 and during the holdover period, all of the terms of this Lease shall remain in full force and effect. Except as provided above in this Section 38, Landlord shall be solely responsible, as between Tenant and Landlord, for compliance with ISRA and for remediation of any AOCs at the Premises or the Project with respect to any contamination present at the Premises prior to the commencement of the Term or caused during the Term by Landlord or a tenant at the Project other than Tenant. Tenant shall, at no cost to Landlord, cooperate with Landlord by supplying any information or signing any documentation that may be requested by Landlord, and otherwise assisting Landlord with respect to compliance with ISRA by Landlord or any other tenant of the Project.

(g) The undertakings, covenants and obligations imposed on Landlord and Tenant under this Section 38 shall survive the termination or expiration of this Lease.

(h) Tenant and its employees, suppliers, customers, and invitees agree to abide by and conform to the Rules and Regulations attached hereto as Exhibit “J” , as Landlord shall have the right to enforce these Rules and Regulations and from time to time, to modify and amend the Rules and Regulations in its reasonable discretion provided that such rules and regulations are generally applicable to all similarly situated tenants of the Project, are provided in writing and do not materially interfere with Tenant’s use and occupancy of the Premises in accordance with this Lease. Landlord shall not be responsible to Tenant for the failure of other persons, including, but not limited to, other tenants, their agents, employees, and invitees, to comply with the Rules and Regulations. In the event of any conflict between the Rules and Regulations and this Lease, the terms and provisions of this Lease shall govern.

(i) Except as otherwise documented in the Environmental Baseline Report (as hereafter defined), Landlord represents and warrants, as of the Effective Date and to Landlord’s knowledge, there are no Hazardous Materials located at the Premises,

the Building or the Project in violation of applicable Law. Landlord hereby indemnifies, and shall pay, protect and hold Tenant harmless from and against all liabilities, losses, claims, demands, costs, expenses (including reasonable attorneys’ fees and expenses) and judgments of any nature arising, or alleged to arise, from or in connection with (a) any Hazardous Materials or violations of Law affecting the Premises, the Building or the Project prior to the Commencement Date, or (b) any Hazardous Materials or violations of Law affecting the Premises, the Building or the Project after the Commencement Date to the extent directly caused by the negligence of Landlord, or any of its agents or employees. Landlord will resist and defend any action, suit or proceeding brought against Tenant by reason of any such Hazardous Materials in violation of applicable Law, which are not the result of Tenant’s operations at, or occupancy of the Premises or the acts or negligence of any Tenant Parties, by independent counsel selected by Landlord, which is reasonably acceptable to Tenant. For purposes of this Lease, the “Environmental Baseline Report” shall mean and refer to that certain “Phase I Environmental Site Assessment” by AEI Consultants dated April 9, 2013.

39. ATTORNEYS’ FEES AND COSTS . In the event either Landlord or Tenant shall file any proceeding against the other, whether at law or in equity, to enforce the provisions of this Lease, the prevailing party shall be entitled to collect its reasonable attorney fees and costs from the other party.

40. WAIVER OF TRIAL BY JURY . THE LANDLORD AND THE TENANT, TO THE FULLEST EXTENT THAT THEY MAY LAWFULLY DO SO, HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT BY ANY PARTY TO THIS LEASE WITH RESPECT TO THIS LEASE, THE PREMISES, OR ANY OTHER MATTER RELATED TO THIS LEASE OR THE PREMISES.

41. INTENTIONALLY DELETED

42. SIGNAGE .

(a) Tenant may not erect, install, place, or display any sign or advertising material upon the exterior of the Premises (including but not limited to any exterior doors, walls, or windows), Buildings, Common Areas, parking areas, or any other part of the Project without the prior written consent of Landlord, which consent shall not be unreasonably withheld; provided , however , that Tenant shall have the right to erect and maintain interior signs on the first floor of the Building. The size, style/design, location and method of installation of such signage shall be subject to Landlord’s reasonable approval and applicable Laws in all respects. Any and all signs installed or constructed by or on behalf of Tenant in accordance with this subsection (a) shall be installed, maintained in good condition and repair, and removed by Tenant at the expiration or earlier termination of this Lease, at Tenant’s sole cost and expense. Tenant shall repair any damage to the Premises caused by such signs or installation or removal thereof. Landlord reserves the right to adopt uniform rules and regulations relating to and governing signage at the Project provided such rules and regulations do not interfere with Tenant’s rights pursuant to this subsection.

(b) Landlord shall install such signage within the Project as Landlord reasonably determines as is required for the ease of visitors and delivery people to locate the Premises. Landlord reserves the right to reconfigure the Project site directory in connection with the development of the Exclusion Area.

43. INITIAL TENANT IMPROVEMENTS .

(a) Subject to the provisions of this Lease, Landlord agrees to undertake the work more particularly described in the Work Letter attached hereto as Exhibit “M” (the “ Initial Tenant Improvements Work ”).

44. CHANGES TO PROJECT; EASEMENTS . Landlord shall have the right at its sole discretion, from time to time, to make changes to the Building, the Common Areas and the Project, including but not limited to changes to the size, shape, location, number, and extent of the improvements comprising the Project (hereinafter referred to as “ Changes ”) including, but not limited to, the exterior of the buildings including the Building, the Common Areas including, without limitation the parking garages and parking areas, the parking and traffic control systems, driveways, roads, entrances, exits, parking spaces, loading and unloading areas, ingress, egress, walkways, and utility and landscaped areas. Not in limitation of the foregoing, Landlord shall have the right to remove or demolish the helipad and all buildings and improvements in the Project (excluding the Building), and to sell all or any part of the Project. In addition, Landlord can close temporarily any of the Common Areas for maintenance purposes, can use all Common Areas while engaged in making additional improvements, repairs or alterations to the Project or any part thereof, and can do and perform such other acts and make such other changes in, to, or with respect to the Common Areas and the Project as Landlord may, in Landlord’s sole discretion, deem to be appropriate. Not in limitation of the foregoing, Landlord shall have the right to restrict or eliminate Tenant’s right to use certain of the roads in the Project, so long as Tenant’s access to the Premises is not materially affected. In connection with the Changes, Landlord may, among other things, erect scaffolding or other necessary structures at the Project, limit access to portions of the Project, including portions of the Common Areas, and perform work in or on the buildings, which work may create noise, dust, or leave debris in the Building; provided that Landlord shall not be entitled to materially adversely affect Tenant’s access to or use of the Premises or the Common Areas. Tenant hereby agrees that such Changes and Landlord’s actions in connection with such Changes in accordance with the provisions of this Section shall in no way constitute a constructive eviction of Tenant or entitle Tenant to any abatement of rent. Provided such Changes comply with this Section, Landlord shall have no responsibility or for any reason be liable to Tenant for any direct or indirect injury to or interference with Tenant’s business arising from the Changes, nor shall Tenant be entitled to any compensation or damages from Landlord for any inconvenience or annoyance occasioned by such Changes or Landlord’s actions with such Changes in compliance with the provisions of this Section 44.

45. INTENTIONALLY DELETED

46. FOOD SERVICE AND FITNESS CENTER

(a) Landlord and/or a third-party vendor, determined in Landlord’s sole discretion, shall provide breakfast and lunch food service in Building CC (as such Building CC is shown on Exhibit “N” ), the level, type of service, and hours of which operation shall be reasonably determined by Landlord and/or the third-party provider. Tenant agrees to make its employees aware of such food service. The food service operation shall be made available to other tenants of the Project. Landlord expressly reserves the right to relocate the above-described food service area to another location within the Project or the Exclusion Area, create an alternative food service area within the Project or the Exclusion Area, or terminate providing breakfast and lunch food service at the Project at any time during the Term, in Landlord’s sole discretion. The food service area, as same may be relocated in accordance with the provisions of this Section 46(a) shall be open for breakfast and lunch Monday through Friday, excluding legal holidays throughout the Term.

(b) (i) Subject to the provisions of this Section 46, Landlord and/or a third-party vendor, determined in Landlord’s sole discretion, and at no cost to Tenant or its employees, shall provide Tenant’s employees (and the employees of all other occupants of the Project) with access to the existing fitness center located in Building C (as such Building C is shown on Exhibit “N” ), the type and level of amenities, and hours of which operation, shall be reasonably determined by Landlord and/or the third-party provider. The use of this fitness center shall be subject to the reasonable Rules and Regulations of Landlord now or hereafter imposed, as to manner of usage, frequency of usage, fees and expenses thereof and such other similar and reasonable Rules and Regulations as Landlord shall, from time to time, impose. Landlord expressly reserves the right to relocate the above-described fitness center to another location within the Project, or to the Exclusion Area, or terminate providing the fitness center at the Project at any time during the Term, in Landlord’s sole judgment. The fitness center, as same may be relocated in accordance with the provisions of this Section 46(b)(i) shall be operated on Business Days during hours reasonably determined by Landlord, excluding legal holidays throughout the Term.

(ii) Tenant shall not grant to any employee the right, and no employee of Tenant shall be permitted, to use the fitness center facilities unless and until Tenant (i) shall have notified Landlord that Tenant has granted such right to such employee and (ii) shall have caused such employee to complete and execute a waiver of liability on Landlord’s standard form and delivered such executed document to Landlord. Tenant acknowledges that all users of the health club facilities do so at their own risk and agrees that it shall be solely Tenant’s obligation to fully inform each of Tenant’s employees to whom the right to use the health club facilities may be granted of such risk. Tenant acknowledges and agrees that Landlord shall have no liability to Tenant for any personal injury or property damage arising from or in connection with (A) the use of the health club facilities by any of Tenant’s employees or (B) Landlord’s operation and/or maintenance of the health club facilities, including any such claim arising out of negligence, and Landlord shall have no liability to Tenant for any claims arising from Landlord’s election to discontinue providing the fitness center within the Project. In addition, Landlord reserves the right to discontinue providing the fitness center as an amenity to an employee of Tenant

at any time if such employee violates any of the rules, regulations or conditions governing the use of the health club facilities (including the Rules and Regulations of Landlord now or hereafter imposed as set forth above).

47. CONDOMINIUM

(a) Landlord represents and warrants to Tenant that (i) the Condominium Documents are in full force and effect and have not been amended and no rules or regulations that may be created pursuant to the Condominium Documents currently exist, (ii) Landlord holds all of the rights of the Grantor under the Condominium Documents and has not assigned any of them, in whole or in part, (iii) while Peters Brook Village Association, Inc., the New Jersey nonprofit corporation formed to administer the Condominium Project (the “Association”), has been formed, the Association has been inoperative to date. Tenant has reviewed and approved the Condominium Documents and Tenant acknowledges and agrees that this Lease is subject and subordinate to the Condominium Documents in all respects. Tenant shall, at no cost to Landlord, execute an agreement in recordable form confirming that this Lease is subject and subordinate to the Condominium Documents within ten (10) days following Landlord’s request therefor. Tenant shall, at Tenant’s sole cost and expense, comply with the provisions of the Condominium Documents and all Rules and Regulations regarding the use of the Premises and the Common Areas, and the operation of Tenant’s business therein as may be established from time to time pursuant to the Condominium Documents. Landlord shall have the right at any time after the Effective Date to modify the terms of the Condominium Documents as Grantor and/or the Owner of all of the Units located within the Condominium Project, or as Grantor consent to or approve an amendment to, or vote as an Owner to amend, the Condominium Documents, without the consent of Tenant. Landlord shall notify Tenant of any amendments made by Landlord to the Condominium Documents. Notwithstanding anything to the contrary contained herein, if Landlord wants to amend the Condominium Documents and such modifications would materially and adversely interfere with Tenant’s use of the Premises for the Permitted Use, or materially and adversely affect the rights of Tenant under this Lease, then Landlord shall request Tenant’s consent to such modifications to the Condominium Documents, which consent may be withheld in Tenant’s sole discretion.

(b) Tenant shall defend, indemnify and hold harmless Landlord from and against any and all claims, demands, causes of action, suits, damages, liabilities and expenses of any nature, including reasonable attorney’s fees, arising out of or in connection with the enforcement by the Association of any covenant, term, condition or provision of the Condominium Documents arising from (i) Tenant’s use of the Premises or the conduct of Tenant’s business at the Project, or (ii) Tenant’s failure to comply with Tenant’s obligations under this Lease.

48. FINANCIAL STATEMENTS. Within twenty (20) days after Landlord’s written request (but not more than one (1) time per year so long as no Event of Default exists), Tenant at its expense shall deliver to Landlord copies of Tenant’s most recent annual financial statements. The financial statements shall include a balance sheet and a statement of profit and loss. All financial statements shall be prepared in accordance with Tenant’s normal accounting methods applied on a consistent basis from year-to-year and

shall be certified by Tenant’s Chief Financial Officer, or the equivalent. Notwithstanding anything to the contrary contained herein, if at any time during the Term the Tenant or any other successor thereto, shall have their financial statements audited by an independent certified public accountant, then Tenant shall be required to provide such audited financial statements to Landlord’s pursuant to the terms of this Section 48. Notwithstanding the foregoing, Tenant shall not be required to deliver financial statements pursuant to this Section 48 if such financial statements are publicly available to Landlord.

[REMAINDER OF PAGE INTENTIONALLY BLANK]

IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease on the day and year first above written.

	LANDLORD

	CIP II/AR BRIDGEWATER HOLDINGS LLC
	A Delaware limited liability company

	By:	CIP I2I/AR Bridgewater LLC,
		a Delaware limited liability company,
		its sole member

	By:	AR at Bridgewater LLC
		a New Jersey limited liability company,
		its Administrative Manager

	By:	ACP Land Holdings, LLC
		a New Jersey limited liability company,
		its sole member

	By:	Padco Management, Inc.,
		a New Jersey corporation,
		its managing member

	By:	/s/ Kurt Padavano
		Name: Kurt Padavano
		Title: Senior Vice President


	TENANT


	INSMED INCORPORATED

	By:	/s/ Andrew T. Drechsler
		Name: Andrew T. Drechsler
		Title:CFO

EXHIBIT “A”

LAND

EXHIBIT “B”

EXCLUSION AREA

EXHIBIT “C”

PREMISES

EXHIBIT “D”

[INTENTIONALLY DELETED]

EXHIBIT “E”

RETAINED FFE

Location/Room /Present or NA	Name Brand	Name Model	Serial Number	Sanofi Asset	New Asset Tag
1303 Present *	A & A	A245 Flammable cabinet		US.000.000.0 00.329	21089
2242 Present *	REVCO Freezer	UGL 232A19-20
2243 Present *	BECKMAN COULTER	TJ25 refrigerated centrifuge	TJC99M044	US.000.000.0 02.704	21218
2203 Present *	Fisher	Isotemp Frig	13986227G
2246 Present *	Double Door Fridge	Isotemp Frig	13986249GA
2242 Present *	Hozizachi	Ice Machine
1212	Y	Agilent	G1315B Dad	DE14915232	US.000.00 0.000.589
G-102	Y	ATLAS	Suntest CPS+	9907029	US.000.00 0.010.728

EXHIBIT “F”

BILL OF SALE

THIS BILL OF SALE is made and entered into as of this day of , 2021, by and between CIP II/AR BRIDGEWATER HOLDINGS LLC, a Delaware limited liability company, having an office at c/o Advance Realty Development, 1041 U.S. Highway 202/206, Bridgewater, NJ 08807 ( “Bridgewater”), and INSMED INCORPORATED, a Virginia corporation, having an office at New Jersey Center for Excellence, Building L, Lower Level, U.S. Highway 202/206 Bridgewater, New Jersey 08807 (“Insmed”).

WHEREAS , Bridgewater and Insmed have executed that certain Lease Agreement dated as of , 2016 (the “ Lease ”); and

WHEREAS , in accordance with the terms and subject to the conditions of the Lease, Bridgewater now desires to transfer and convey to Insmed all of Bridgewater’s right, title, and interest in and to the tangible personal property described on Exhibit A attached hereto and incorporated by reference herein (the “ Retained FFE ”), and Insmed desires to accept the transfer and conveyance thereof.

NOW, THEREFORE , for and in consideration of the mutual covenants contained herein and in the Lease and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and upon and subject to the terms and conditions set forth in the Lease, Bridgewater and Insmed agree as follows:

Bridgewater hereby transfers, conveys to Insmed and its successors and assigns all of Bridgewater’s right, title, and interest in and to the Retained FFE, without representation, warranty or recourse except as expressly provided herein, and Insmed hereby accepts the transfer and conveyance of all of Bridgewater’s right, title, and interest in the Retained FFE.

Bridgewater hereby represents and warrants to Insmed that it has good and marketable title to the Retained FFE and each component thereof free and clear of any security interest, liens or other monetary encumbrances except those that have arisen out of the acts or omissions of Tenant.

Bridgewater hereby specifically disclaims, and, except as expressly stated in the prior paragraph, has not made, and does not now make, any representations, warranties, covenants, or guarantees, oral or written, as to the past, present or future condition, income, expenses, operation, or any other matter or thing relating in any way to the Retained FFE and Insmed acknowledges that no such representations, warranties, guarantees, agreements, covenants and conditions were made or have been made by

Bridgewater or by any party on Bridgewater’s behalf. Insmed acknowledges that Insmed has had an opportunity to fully inspect, and has fully inspected, the Retained FFE.

SUBJECT TO THE PARAGRAPH BELOW, INSMED ACCEPTS THE RETAINED FFE IN ITS PRESENT CONDITION, “AS IS” “WHERE IS,” WITH ANY AND ALL FAULTS, AND, WITHOUT ANY REPRESENTATIONS OR WARRANTIES BY BRIDGEWATER, EXPRESS OR IMPLIED, OF MERCHANTABILITY, FITNESS, CONDITION, QUALITY OR CAPACITY THEREOF, AND ACKNOWLEDGES AND AGREES THAT BRIDGEWATER AND ITS EMPLOYEES AND AGENTS HAVE MADE NO REPRESENTATIONS, WARRANTIES, COVENANTS, OR AGREEMENTS OF ANY KIND OR CHARACTER WHATSOEVER, EXPRESS OR IMPLIED, AS TO THE RETAINED FFE OR ANY OTHER MATTER OR THING WHATSOEVER RELATING IN ANY WAY TO THE RETAINED FFE, AND NOT IN LIMITATION OF THE FOREGOING, BRIDGEWATER DOES NOT MAKE ANY REPRESENTATIONS, WARRANTIES, COVENANTS OR GUARANTEES REGARDING HAZARDOUS MATERIALS OR THE PRESENCE OR DISPOSAL OF ANY HAZARDOUS MATERIALS OR ANY OTHER HAZARDOUS OR TOXIC SUBSTANCES IN OR ON THE RETAINED FFE.

SUBJECT TO THE NEXT PARAGRAPH, FROM AND AFTER THE OF DATE OF THIS BILL OF SALE, INSMED HEREBY EXPRESSLY ASSUMES ALL RISKS, LIABILITIES, CLAIMS, DAMAGES AND COSTS (AND AGREES THAT BRIDGEWATER SHALL NOT BE LIABLE FOR ANY SPECIAL, DIRECT, INDIRECT, CONSEQUENTIAL OR OTHER DAMAGES) RESULTING OR ARISING FROM, OR RELATED TO, THE OWNERSHIP, USE, CONDITION, LOCATION, MAINTENANCE, REPAIR OR OPERATION OF THE RETAINED FFE. INSMED ACKNOWLEDGES THAT ANY CONDITION OF THE RETAINED FFE THAT INSMED DISCOVERS OR DESIRES TO CORRECT OR IMPROVE PRIOR TO OR AFTER THE DATE OF THIS BILL OF SALE SHALL BE AT INSMED’S SOLE EXPENSE. INSMED EXPRESSLY WAIVES (TO THE EXTENT ALLOWED BY APPLICABLE LAW) ANY CLAIMS UNDER FEDERAL, STATE OR OTHER LAW THAT INSMED MIGHT OTHERWISE HAVE AGAINST BRIDGEWATER RELATING TO THE USE, CHARACTERISTICS, OR CONDITION OF THE RETAINED FFE. THE TERMS OF THIS SECTION SHALL SURVIVE THE EXECUTION AND DELIVERY OF THIS BILL OF SALE.

THE PRIOR TWO PARAGRAPHS ARE IN ALL RESPECTS SUBJECT TO THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS BILL OF SALE.

IN WITNESS WHEREOF, Bridgewater and Insmed have executed this Bill of Sale in two (2) counterparts as of the date set forth above.

CIP II/AR BRIDGEWATER HOLDINGS LLC,
a Delaware limited liability company


By:		CIP II/AR Bridgewater LLC,
		a Delaware limited liability company,
		its sole Member

		By:	AR at Bridgewater LLC,
			a New Jersey limited liability company,
			its Administrative Manager

			By:		ACP Land Holdings, LLC,
					a New Jersey limited liability company,
					its sole Member

				By:			Padco Management, Inc.,
							a New Jersey corporation,
							its Managing Member

				By:
						Name:		Kurt Padavano
						Title:		Senior Vice President


INSMED INCORPORATED


By:
	Name:
	Title:

EXHIBIT “G”

COMMENCEMENT DATE AGREEMENT

Date:

Tenant:	INSMED INCORPORATED

Address:	1019 U.S. Highway 202/206
	Bridgewater, New Jersey 08807

Re: Lease Agreement by and between CIP II/AR BRIDGEWATER HOLDINGS LLC, a Delaware limited liability company, as Landlord, and INSMED INCORPORATED, a Virginia corporation, as Tenant, for 13,274 rentable square feet of Building L located at 1029 U.S. Highway 202/206, Bridgewater, New Jersey.

Dear :

In accordance with the terms and conditions of the above referenced Lease, Tenant accepts possession of the Premises and Landlord and Tenant agree:

1. The Commencement Date of the Lease is ;

2. The Expiration Date of the Lease is , subject to extension in accordance with the Lease.

Please acknowledge your acceptance of possession and agreement to the terms set forth above by signing all three (3) counterparts of this Commencement Date Agreement in the space provided and returning two (2) fully executed counterparts to my attention.

Sincerely,

Agreed and Accepted:

	Tenant: INSMED INCORPORATED

	By:
	Name:
	Title:
	Date:

EXHIBIT “H”

REAL PROPERTY TAX CALCULATION METHODOLOGY

EXHIBIT “I”

[INTENTIONALLY DELETED]

EXHIBIT “J”

RULES AND REGULATIONS

GENERAL RULES

Capitalized terms as used in the Rules and Regulations shall have the meanings therefor as set forth in the Lease. The following Rules and Regulations shall apply, where applicable, to the Premises, the Buildings, all Common Areas of the Project, and the appurtenances thereto. Tenant shall faithfully observe and comply with the following Rules and Regulations:

1. Tenant shall not alter any locks or install any new or additional locks or bolts on any doors or windows of the Premises without obtaining Landlord’s prior written consent, which will not be unreasonably withheld. Tenant shall bear the cost of any lock changes or repairs required by Tenant. Keys required by Tenant must be obtained from Landlord at a reasonable cost to be established by Landlord.

2. The toilet rooms, urinals, and wash bowls shall not be used for any purpose other than that for which they were constructed, and no foreign substance of any kind whatsoever shall be thrown therein. The expense of any breakage, stoppage, or damage resulting from the violation of this rule shall be borne by the tenant who, or whose employees or agents, shall have caused it.

3. Tenant shall not bring into or keep within the Premises or Project any animals, birds, reptiles, etc. (except for service animals).

4. Landlord reserves the right to exclude or expel from the Project any person who, in the reasonable judgment of Landlord, is intoxicated or under the influence of liquor or drugs or who shall in any manner do any act in violation of any of these Rules and Regulations.

5. Tenant shall not, without the prior written consent of Landlord, which consent shall not be unreasonably withheld, use any method of heating or air conditioning other than that permitted by Landlord.

6. All trash, garbage, and refuse disposal by Tenant shall be made at the sole expense of Tenant in compliance with applicable laws and ordinances and in a manner that is reasonably acceptable to Landlord, including without limitation, the size, location and appearance of dumpsters or other receptacles.

7. Tenant shall comply with all safety, fire protection, and evacuation procedures and regulations established by Landlord in its reasonable discretion or any governmental agency.

8. No awnings or other projection shall be attached to the outside walls or windows of the Buildings by Tenant other than signs that Tenant is permitted to install pursuant to the Lease.

9. Except with the prior written consent of Landlord, which will not be unreasonably withheld, no person or persons other than those approved by Landlord shall be permitted to enter the Project for the purpose of cleaning same. Landlord shall in no way be responsible to Tenant for any loss of property on the Premises by cleaning personnel, notwithstanding Landlord’s approval of same.

10. Sidewalks, entrances, passageways, courts, corridors, vestibules, halls, elevators, electrical and fire panels and stairways in and about the Buildings shall not be obstructed nor shall objects be placed against glass partitions, doors or windows which would be unsightly from or from the exterior of the Buildings.

11. No part of the Buildings shall be defaced or damaged by Tenant.

12. If movement in or out of the Buildings or Project of furniture or equipment, or dispatch or receipt by Tenant of any merchandise or materials, causes equipment, property and/or personnel of Landlord or of any other tenant damage or injury as a result of or in connection with such activity, Tenant shall be solely liable for any and all damage or loss resulting therefrom.

13. Tenant shall keep all electrical and mechanical apparatus owned by Tenant free of vibration, noise and airwaves which may be transmitted beyond the Premises.

14. Canvassing, soliciting and peddling in or about the Buildings or Project are prohibited. Tenant shall cooperate and use its best efforts to prevent the same.

15. Tenant shall not use the Premises in any manner which would overload the heating, ventilating or air conditioning systems, electrical and fire systems, and all utilities of the Building.

16. Tenant shall, if necessary, utilize a pest extermination service to control pests in the Premises. Tenant shall bear the cost and expense of such extermination services.

17. Landlord shall have the right to prohibit the use of the name of the Premises or any other publicity by Tenant referring to the Project that in Landlord’s opinion may tend to impair the reputation of the Premises or Project or Landlord or the desirability of the Project for Landlord’s other tenants. Upon written notice from Landlord, Tenant shall refrain from and/or discontinue such publicity immediately.

18. Neither Tenant nor any of its Tenant’s Agents shall smoke in the Premises.

PARKING RULES

1. Parking areas in which Tenant has exclusive rights may be used for parking of vehicles as determined by Tenant in Tenant’s sole discretion. Other Tenant parking areas shall be used only for parking by vehicles no longer than full-size, passenger automobiles (herein called “ Permitted Size Vehicles .”)

2. Tenant shall not permit or allow any vehicles that belong to or are controlled by Tenant or Tenant’s employees, suppliers, shippers, customers, or invitees to be loaded, unloaded, or parked in areas other than those designated by Landlord for such activities. Users of the parking areas will obey all posted signs and park only in the areas designated for vehicle parking.

3. Landlord will not be responsible for any damage to vehicles, injury to persons, or loss of property, all of which risks are assumed by the party using the parking areas.

4. The maintenance, washing, waxing, or cleaning of vehicles in the parking areas or Common Areas is prohibited.

5. Tenant shall be responsible for seeing that all of Tenant’s Agents comply with the applicable parking rules, regulations, laws, and agreements.

6. The parking areas shall only be used for daily or short term parking and no vehicle or other property shall be stored in the parking areas.

Subject to the terms and provisions of the Lease, Landlord reserves the right at any time to change or rescind any one or more of these Rules and Regulations, or to make such other and further Rules and Regulations as in Landlord’s reasonable judgment may from time to time be necessary for the management, safety, care, and cleanliness of the Project, and for the preservation of good order therein as well as for the convenience of other occupants and tenants therein.

EXHIBIT “K”

INSMED PROTOCOLS

EXHIBIT “L”

HAZARDOUS MATERIALS LIST

· Methanol [67-56-1]

· n-Propanol [71-23-8]

· Isopropanol [67-63-0]

· Acetonitrile [75-05-8]

· 1-Butanol [71-36-3]

· Hexane [110-54-3]

· Ethanol [64-17-5]

· Glacial Acetic Acid [64-19-7]

· Palmitic Acid [57-10-3]

· Formic Acid [64-18-6]

· Triethylamine [121-44-8]

· Perfluoropentanoic Acid [2706-90-3]

· 10N NaOH

· 200 proof Ethanol

· Cholesterol

EXHIBIT “M”

WORK LETTER

This Exhibit “M” is attached to and made a part of that certain Lease Agreement dated June , 2016 (the “Lease”), between CIP II/AR BRIDGEWATER HOLDINGS LLC (“Landlord”) and INSMED INCORPORATED (“Tenant”). The terms used in this Exhibit that are defined in the Lease shall have the same meanings as provided in the Lease.

The purpose of this Exhibit “M” is to set forth the relative rights and obligations of Landlord and Tenant with respect to the preparation and approval of working drawings, final plans and the construction and installation of the initial tenant improvements in the Premises (the “Initial Tenant Improvements”). This Exhibit “M” contemplates that the performance of this work will proceed in accordance with the following terms and conditions.

A. Final Plans

(1) The plans for the Initial Tenant Improvements are attached hereto as Schedule 1 (the “Final Plans”).

(2) As soon as reasonably practicable after the Effective Date, Landlord shall submit the Final Plans to at least three (3) subcontractors for the following primary trades, mechanical, plumbing, flooring, painting, ventilation, and carpentry in connection with the Initial Tenant Improvements Work, who shall be requested to submit a fixed price contract bid on a straight time basis. Due to the vague nature in the scope of the electrical work, which cost is not anticipated to exceed $10,000, Landlord will not bid that work to 3 contractors. The following “other” work, due to the anticipated low cost will not be bid to 3 contractors: (i) Refinishing of the stainless steel walk in box door; (ii) Laborers to remove furniture; (iii) Moving company to remove the glass washing machine; (iv) Stripping and Waxing of the VCT flooring; (v) Chemical hood commissioning; and (vi) Final cleaning. On or before the date the Lease is executed and delivered by both parties, Tenant shall have the right to provide Landlord with a list of subcontractors which Tenant desires to obtain bids from, which subcontractors shall be subject to Landlord’s reasonable approval. Landlord and Tenant shall monitor the bidding process and jointly review the bids and shall adjust the bids based upon any inconsistent assumptions to reflect an “apple to apples” comparison. Within ten (10) Business Days following the joint review and adjustment of the bids, Landlord shall pick the subcontractors to perform the Initial Tenant Improvements Work with Tenant’s involvement and Tenant shall approve the budget for Initial Tenant Improvements. Landlord may, at its election, designate a list of approved contractors and subcontractors for the performance of those portions of the Landlord’s Base Building Work involving electrical, mechanical, plumbing, heating, air conditioning, ventilation, life safety or other

Building systems, from which list the contractors or subcontractors, as the case may be, must be selected.

B. Tenant Improvements

(1) As soon as reasonably practicable after selection of the contractors and subcontractors to perform the Initial Tenant Improvements Work, and Landlord’s contractor’s receipt of all required permits and approvals for the Initial Tenant Improvements Work, Landlord’s contractor shall construct the installations and improvements and complete the Initial Tenant Improvements Work in accordance with the approved Final Plans, (excluding the Initial Tenant Installations as hereinafter defined). In connection with the performance of Initial Tenant Improvements Work, Landlord shall be responsible for the Cost of the Initial Tenant Improvements Work as defined in paragraph 2(a) below up to $66,370.00 (representing $5.00 per rentable square foot of the Premises the “Construction Credit”). The Cost of the Initial Tenant Improvements Work in excess of the Construction Credit shall be referred to as an “Additional Cost” and paid by Tenant in accordance with Paragraph 2(c).

(2) (a) The term “Cost of the Initial Tenant Improvements Work ” as used in this Lease shall mean all costs of demolition and constructing the Initial Tenant Improvements Work pursuant to the Final Plans, including, without limitation, materials, labor, subcontract costs and general conditions (excluding all soft costs, including, without limitation, legal fees, moving expenses, telephone and data systems and expenses, security systems, and all furniture, fixtures and equipment) and a construction supervision fee payable to Landlord in the amount of three percent (3%) of the total Cost of the Initial Tenant Improvements.

(b) Any changes requested by Tenant from the work indicated on the Final Plans shall be performed by Landlord pursuant to a change order approved and executed by Landlord and Tenant. All changes to the Final Plans requested by Tenant must be approved by Landlord in advance, which approval shall not be unreasonably withheld, delayed or conditioned. Landlord shall respond to changes to the Final Plans within ten (10) Business Days. All increases in the cost of the Initial Tenant Improvements Work resulting from such change orders shall be borne by Tenant, subject to payment as part of the Construction Credit.

(c) Tenant shall pay to Landlord (i) fifty percent (50%) of the total of any Additional Cost incurred by Landlord in connection with the Initial Tenant Improvements Work within ten (10) days after Tenant approves the budget for Landlord’s Work, and (ii) fifty percent (50%) of the total of any Additional Cost incurred by Landlord in connection with the Initial Tenant Improvements Work within ten (10) days after the day the Initial Tenant Improvements Work is Substantially Completed.

(3) The Landlord’s Base Building Work and the Initial Tenant Improvements Work, excluding any Initial Tenant Installations, constitutes all of the

improvements to be Substantially Completed by Landlord in order to prepare the Premises for occupancy by Tenant.

C. Tenant Installations

(1) Tenant, at its own cost and expense, shall perform all work related to installation of furniture, moveable furnishings, telephone systems (including, without limitation, voice and data cabling and telecommunications equipment) and office equipment (the “Tenant Installations” ), subject to the provisions of Paragraph C(2) below, commencing fourteen (14) days prior to the date Landlord anticipates Substantially Completing the Initial Tenant Improvements Work. All Tenant Installations which adversely affect the structure of the Building, require any permit from a governmental authority, involve electrical work or adversely affect the Building systems shall require the prior written consent of Landlord, which consent shall not be unreasonably withheld. All Tenant Installations shall be performed in accordance with Section 22 of the Lease and accomplished in a good and workmanlike manner so as not to damage the Premises or the Building or the plumbing, electrical line or other utilities. Notwithstanding anything to the contrary contained herein, Landlord’s Contractor shall coordinate the performance of the Initial Tenant Improvements Work and the Tenant’s performance of the Tenant Installations in accordance with customary and prudent construction practices in order to effectuate such installations in an orderly and efficient manner, subject to the provisions of Paragraph C(2) below.

(2) In the event that Tenant performs any Tenant Installations pursuant to this Lease, Tenant agrees promptly to notify Landlord in writing of the names of its agents, contractors or subcontractors who are to work in the Premises, and to furnish Landlord with such other information as Landlord may reasonably require. All work done by Tenant, its agents, contractors, subcontractors or employees shall be scheduled and performed so as not to conflict, interfere with, or delay any work undertaken by Landlord in the Building or Landlord’s completion of the Initial Tenant Improvements Work. In the event that Tenant, its agents, contractors, subcontractors or employees do not work in harmony with, or interfere with, labor employed by Landlord, its agents, contractors, subcontractors or employees or in the event any work stoppage, jurisdictional labor dispute or other interference with Landlord, its agents, contractors, subcontractors or employees occurs Landlord shall have the right to require Tenant, upon written demand, to remove or cause the removal forthwith all of Tenant’s agents, contractors and employees from the Premises and Tenant agrees to comply with such demand immediately. Any of Tenant’s Installations shall be installed solely at Tenant’s risk. Tenant shall be liable to Landlord in the event Tenant, its employees, agents, contractors or subcontractors damage the Initial Tenant Improvements Work, the Premises or the Building.

D. Tenant Delay

Notwithstanding anything to the contrary contained herein, Tenant shall be responsible, in accordance with the provisions of this Paragraph D, for all costs and

expenses incurred by Landlord in connection with any delay on Tenant’s part, or any of Tenant’s employees or agents, which prevents Landlord from Substantially Completing the Landlord’s Base Building Work and the Initial Tenant Improvements Work by the Estimated Substantial Completion Date by reason of (a) failure of any of them to unreasonably cooperate with Landlord; (b) delays in approving drawings or specifications within the applicable time periods specified in this Work Letter; (c) any change order requested by Tenant; or (d) Tenant’s performance of any Tenant’s Installation; and/or (e) the failure to provide clarifications or additional information requested by Landlord regarding the Final Plans within a reasonable time period following Landlord’s request (each a “Tenant Delay” ).

100

SCHEDULE 1

FINAL PLANS

101

102

EXHIBIT “N”

BUILDING C & BUILDING CC

103

EXHIBIT “O”

PROHIBITED USES

1. Offices of any division, agency or bureau of the United States or any state or local government or of any foreign government or subdivision thereof.

2. Offices of any health care professionals or for the provision of any health care services or other therapeutic or diagnostic services.

3. Any school, educational, or other training facility (except for in house training of Tenant’s employees).

4. Any restaurant use or retail use (meaning a business whose primary patronage arises from the generalized solicitation of the general public to visit Tenant’s offices in person) including, without limitation, a health spa, gymnasium, fitness center, bank or savings and loan association, or retail facilities of any financial, lending, securities brokerage or investment activity.

5. Any residential use, living quarters or lodging or sleeping use.

6. Any communications uses (such as broadcasting radio and/or television stations).

7. Any “executive suite” type uses where office suites are maintained for individual rental.

8. Any use of the Premises or any portion thereof for any occupancy density which is materially greater than the average occupancy density associated with the occupancy of Tenant.

9. Any church, house of worship or related religious facility.

10. Any use which emits an obnoxious odor, discharge or sound which can be heard, seen or smelled outside the Premises

in the Project.

11. Any use that will cause damage to the Premises or materially impair the appearance of the exterior of the Premises or other portions of the Project outside of the Premises.

104

Exhibit 10.2

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.

Insmed Incorporated

SynteractHCR, Inc.

CHANGE IN SCOPE 1

WORK ORDER 1

Comprehensive Services for Protocol INS-212

A Randomized, Open-Label, Multicenter Study of Liposomal Amikacin for Inhalation (LAI) in Adult Patients with Nontuberculous Mycobacterial (NTM) lung infections caused by Mycobacterium avium complex (MAC) that are refractory to treatment

This Change in Scope 1 to Work Order 1 ( “WO#1 CIS#1”) made and entered on 27 May 2016 (“Effective Date”) between Insmed Incorporated (“Sponsor”) and SynteractHCR, Inc. (“SynteractHCR”) SynteractHCR and Sponsor may each be hereinafter referred to as a “Party” or collectively as the “Parties”.

WHEREAS , Sponsor and SynteractHCR are Parties to a certain Master Agreement for Services, effective 27 August 2014, and first amendment thereto, effective December 23, 2014 (collectively the “Agreement”) that governs the provision of services between the Parties;

WHEREAS , Sponsor and SynteractHCR are Parties to a certain Work Order 1, effective December 24, 2014 (“WO#1”) that relates to the provision of comprehensive clinical trial services performed by SynteractHCR in support of Sponsor’s protocol INS-212; and

WHEREAS , both Parties desire to amend WO#1 in certain respects as detailed below.

NOW, THEREFORE , the Parties agree as follows:

1. Unless otherwise defined herein, all initially capitalized terms shall have the meanings ascribed to such terms in WO#1.

2. Section 2 of WO#1 entitled Statement of Services shall be renamed Services Checklist & Transfer or Obligations and the information thereunder replaced in its entirety with the following:

The table below outlines the obligations between certain involved parties and associated activities (“Services”) of each party under this WO#1 CIS#1 in support of Sponsor’s protocol INS-212, entitled A Randomized, Open-Label, Multicenter Study of Liposomal Amikacin for Inhalation (LAI) in Adult Patients with Nontuberculous Mycobacterial (NTM) lung infections caused by Mycobacterium avium complex (MAC) that are refractory to treatment (the “Study”).

2.1 Sponsor /SynteractHCR

Services Checklist & Transfer of Obligations

X=Responsibility (Primary); (X)=Responsibility (Secondary); A=Approve; R=Review; NA=Not Applicable

Activity	Sponsor	SynteractHCR	Comments
REGULATORY (for )*
Investigational New Drug (IND) Preparation/ Submission (***)	X
IND Ongoing Maintenance (***)	X
Annual Update/Report to the IND (***)	X
Annual Update/Report to the IND — Preparation of the		X

Insmed Incorporated

WO#1 CIS#1

SynteractHCR, Inc.

Services Checklist & Transfer of Obligations

X=Responsibility (Primary); (X)=Responsibility (Secondary); A=Approve; R=Review; NA=Not Applicable

Activity	Sponsor	SynteractHCR	Comments
T/L/Fs (***)
New Drug Application (NDA) or Biologics License Application (BLA) Preparation/Submission (***)	NA	NA
Drug Submission Application (***)	NA	NA
Document Submission to Regulatory Authority (* or *)		X	CTA and Clinical Trial Site Information Form (CTSIF) which includes REB approval
REGULATORY ()*
Obtain a * Clinical Trials (*) Database Number		X
Application for Clinical Trial Authorization (CTA) Preparation/Submission		X
Investigational Medicinal Product Dossier (IMPD) Preparation/Submission	X	X	CRO will review and submit
Application for Ethics Committee (EC) Approval Preparation/Submission		X
Qualified Person (QP) Release	X
Investigational Drug Import Licensure	X
Investigational Drug Export Licensure	X
Local Warehouse(s)	X
Clinical Trial Insurance (Provide/Arrange For)		X
REGULATORY ()*
Ethics Committee Submission	A	X
Regulatory Authority Notification (***)	A	X
Regulatory (for ***)	X
CTN Submission to ***	X
PROJECT START-UP/INITIATION: Assume CRO SOPs to be used
Protocol Development	X	R
Protocol Amendment(s) Development	X	R	To be costed if applicable
Protocol Review	X	R
Protocol Amendment(s) Review & Approval	X	R
Protocol/Protocol Amendment(s) Printing/ Distribution		X	To be costed if applicable
Investigator Drug Brochure (IDB) Development	X	R
IDB Printing/Distribution		X
Model Informed Consent Form (ICF) Development	A	X
Model ICF Review	A	X
Model ICF Distribution		X
Country-Specific ICF	A	X	Sponsor managed: ***: 3 rd party vendor
Country-Specific ICF Distribution		X	Sponsor managed: ***: 3 rd party vendor
Case Report Form (CRF) Screens Development	A	X
CRF Printing/Shipping		NA
CRF Review	A	X
CRF Completion Guidelines	A	X
Translation of Study Documents		X	SynteractHCR will manage translation vendor

Insmed Incorporated

WO#1 CIS#1

SynteractHCR, Inc.

Services Checklist & Transfer of Obligations

X=Responsibility (Primary); (X)=Responsibility (Secondary); A=Approve; R=Review; NA=Not Applicable

Activity	Sponsor	SynteractHCR	Comments
Site Feasibility/Report	R	X	Sponsor managed: ***: 3 rd party vendor
Site Identification/Selection	A	X	Sponsor managed: ***: 3 rd party vendor
Document Submission to Appropriate Review Committee (i.e., IRB/EC)		X
Regulatory/Essential Document Collection/Review		X	Sponsor managed: ***: 3 rd party vendor
Regulatory/Essential Document Maintenance (Ongoing Collection/Review)		X	Sponsor managed: ***: 3 rd party vendor
Trial Master File (TMF) Set-up/Maintenance	A	X	Sponsor managed: ***: 3 rd party vendor
Site Regulatory Binder/Study Procedures Manual	A	X	Sponsor responsible for *** modifications / SynteractHCR review
Other Study Documents/Tools	R	X
Investigator (Site) Agreements/Contracts	A	X	SynteractHCR will sign site contracts after Sponsor review/approval
Investigator Fee Negotiation	A	X	Sponsor managed: ***: 3 rd party vendor
Investigator Fee Payment/Tracking	A	X	Sponsor managed: ***: 3 rd party vendor
Investigator’s Meeting (Organization/Conduct)	X	X	3 IMs, SynteractHCR will manage meeting planning vendor (*, , , * *. Sponsor responsible for meeting planning associated with , , , and *
Prepare Investigator’s Meeting Binders	X		Sponsor responsible for *, , , and * ***
Investigator’s Meeting (Attend/Participate)	X	X
Aggregate spend/Sunshine Data Reporting	A	X
CLINICAL MONITORING Assume CRO SOPs to be used
Monitoring Plan	A	X	Sponsor managed: ***: 3 rd party vendor
Pre-Study Qualification Visits		X	On site or via telephone
Site Initiation Visits		X	Sponsor managed: ***: 3 rd party vendor
Interim Monitoring Visits		X	Sponsor managed: ***: 3 rd party vendor
Site Close-out Visits		X	Sponsor managed: ***: 3 rd party vendor
Monitoring Visit Reports/Follow-up Letters	R	X	Sponsor managed: ***: 3 rd party vendor
Site Management/Contact		X	Sponsor managed: ***: 3 rd party vendor
Query Resolution		X	Sponsor managed: ***: 3 rd

Insmed Incorporated

WO#1 CIS#1

SynteractHCR, Inc.

Services Checklist & Transfer of Obligations

X=Responsibility (Primary); (X)=Responsibility (Secondary); A=Approve; R=Review; NA=Not Applicable

Activity	Sponsor	SynteractHCR	Comments
			party vendor
Study Drug Management (Storage/Distribution/Destruction)		X	Site level

Nebulizer and cleaning supplies Management (Storage/Distribution/Return/Destruction)		X	Site level

MEDICAL MONITORING
Medical Monitoring/Support to Project Team/Sites	X
After-Hours Medical Coverage	X
AE Coding	A	X
SAE Coding	X		Sponsor Managed 3 rd Party Vendor
Medical Review of Routine Laboratory Reports	X
Review (Medical) of Data Listings	X
Review (Medical) of CRFs	X
Review (Medical) of Routine ECG Reports	NA
Safety Management Plan	X	R	Sponsor Managed 3 rd party vendor
SAE Receipt/Review	X		Sponsor Managed 3 rd party vendor
SAE Documentation (SAE Narrative Form)	X
Collection of Safety Data (SAE Data)	X	X	SynteractHCR: Work with 3 rd party vendor to obtain information from sites, but *** sites (Sponsor managed 3 rd party vendor)
Preparation of */* Form (Safety Reports) North America	X		3 rd party vendor
Preparation of */* Form (Suspected Unexpected Serious Adverse Reactions [SUSARs] Reports) (***)	X		3 rd party vendor
Safety Reporting to Health/Regulatory Authorities	X		3 rd party vendor
SUSARs Reporting to Competent Authorities (***)	X		3 rd party vendor
Electronic Reporting of SUSARs to * * * () (**)	X		3 rd party vendor
Preparation/Submission of Registration Package for Electronic Reporting of SUSARs ***	X		3 rd party vendor
Notify Sites of SAEs/Distribute Safety Reports	X		3 rd party vendor will provide notifications
Notify Sites and ECs of SAEs and SUSARs/ Distribute Safety Reports (***) SynteractHCR to notify local ECs	X	X	SynteractHCR: Work with 3 rd party vendor for all but *** sites (Sponsor managed 3 rd party vendor)
Notify Sites and ECs of SAEs and SUSARs/ Distribute Safety Reports (***) SHCR to notify local ECs	X	X	SynteractHCR: work with 3 rd party vendor responsible to provide notifications for but *** sites (Sponsor managed 3 rd party vendor)

Insmed Incorporated

WO#1 CIS#1

SynteractHCR, Inc.

Services Checklist & Transfer of Obligations

X=Responsibility (Primary); (X)=Responsibility (Secondary); A=Approve; R=Review; NA=Not Applicable

Activity	Sponsor	SynteractHCR	Comments
SAE Reconciliation		(X)	Synteract to assume collaboration with Sponsor managed 3 rd party vendor
BIOSTATISTICAL SERVICES Assume CRO SOPs to be used
Develop Randomization Code	A	X
Statistical Analysis Plan (SAP)	A	X
T/L/Fs	A	X
Dry Runs		X	*** dry runs prior to first interim analysis
Interim Statistical Analysis/Summary	A	X
Statistical Analysis	A	X
Final Summary T/L/Fs	A	X
Final Statistical Report	NA	NA
Analysis Datasets Transfers (ADaM)	A	X	ADaM reviewers guide at end of study
DMC TLFs		X	SynteractHCR statistician attendance (via teleconference) at DSMB meetings
DMC Plan		X	Analysis plan for DSMB
Population PK Analysis	X
MEDICAL WRITING Assume CRO SOPs to be used
Patient Narratives (for Study Report)	X		Provided by Sponsor managed 3rd party vendor
CSR with appendices	A	X
Activation of Hyperlinks		X	Assumes *** links per TLF, section cross-references, external links
Final Integrated Study Report	A	X
Subject Profiles	A	X
Manuscript	NA	NA
Preparation of Periodic and Annual Safety Reports	X
Submission of Periodic and Annual Safety Reports to the Health/Competent Authorities and Ethics Committees (ECs) (***)	A	X
IWRS
IWRS for randomization, tracking enrollment and drug supplies, nebulizers and cleaning supplies	X
Drug Supply, Nebulizer and Cleaning Supplies Management — tracking through IWRS	X
QUALITY ASSURANCE (QA)
GCP/ICH Site Audits	X
Vendor Audits	X	X	Vendor audits may occur for those sponsor designated vendors that SynteractHCR will hold the contract for

Insmed Incorporated

WO#1 CIS#1

SynteractHCR, Inc.

Services Checklist & Transfer of Obligations

X=Responsibility (Primary); (X)=Responsibility (Secondary); A=Approve; R=Review; NA=Not Applicable

Activity	Sponsor	SynteractHCR	Comments
PROJECT MANAGEMENT Assume CRO SOPs to be used
Project Management		X
Project Management Plan	A	X
Project Set-up/Maintenance		X
Face-to-Face Meeting(s)	X	X	*** per year, per sponsor, Global PM, Global CL, regional PMs
Team Teleconference(s) (Frequency: weekly)	X	X
Enrollment Updates/Project Status Reports	A	X	Posted on project website
Project Newsletters	NA	NA	Regular, frequent eBlasts
Trial Master File (TMF) Reconciliation	A	X
Training of Project Team	X	X
Vendor Management		X
SUB-CONTRACTING SERVICES
Central IRB Selection		X
Drug Packaging/Labeling/Depot	X
Central Laboratory (Select/Contract)		X
Vendor Management	A	X	Includes contracting and payment administration

2.2 Sponsor /***/SynteractHCR

Services Checklist & Transfer of Obligations

X=Responsibility; A=Approve; R=Review

Activity	Sponsor	*******	SynteractHCR	Comments
DATA MANAGEMENT
Data Management Plan	A		X
CRF Design	A	X	X
Data Edit Specs — Access to Rapid Study Builder	A	X	R
Data Edit Specs — Write Edit Checks	A		X
Data Listings — J Review/Reports	X
Data Listings — BOXI Reports	A
*** Annotated CRF	A	X
CCG Creation	A		X
Database Dev. — Core Configuration	A	X	R
Database Dev. — Reporter	A	X	R
Database Dev. — URL	X	X	R
Database Dev. — Programming	A	X	R	SynteractHCR review via SDS
Database Dev. — Central Lab result uploads	A	X
Create Data Transfer Agreement for Central Lab result uploads	A	R	X
Confirm Central Lab result uploads occurring as expected		X	X	Will require load success/failure information from ***

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WO#1 CIS#1

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Services Checklist & Transfer of Obligations

X=Responsibility; A=Approve; R=Review

Activity	Sponsor	*******	SynteractHCR	Comments
User Administration	A		X	Sponsor approves SynteractHCR to manage both Balance and ***
UAT Testing	R/A	X	X
Electronic Data Capture (EDC)	A	X		Sponsor url
EDC Training — e Learning	A	X	R
EDC Training — Site Study Specific Training (ex: CCGs)	A		X
EDC Helpdesk		X
eCRF Completion Questions			X
CRF Processing, Tracking, and Receipting	NA	NA
Data Entry/Verification	NA	NA
Query Generation/Resolution — Manual Queries	X		X
Query Generation/Resolution — System Queries		X
Query Generation/Resolution—DM/coding queries	A		X	Sponsor approves SynteractHCR to generate
Coding Dictionaries (*; *	X	X	X	All parties have licenses for dictionaries
Medical Coding (AEs; med hx; concomitant drugs)	A		X
Monthly SAE Reconciliation	R		X	PV to provide monthly listings
Receipt of Local Lab Data (Paper)	NA	NA
Receipt of Vendor Electronic Data (Micro Labs)			X
Define Critical Variables	NA	NA
Critical Variable Audit	NA	NA
Final Database QC Audit	NA	NA
Interim Data Transfer(s)	A		X	To be further defined in DMP
QC Final Structure of SAS Datasets			X	Subject CRF as entered against SAS data output
Final Database Closure/Transfer	A		X	To be further defined in DMP
QC and Send CDs (pdfs of final subject casebook)	A		X	To sites and sponsor
Archive CRFs and Database of Record	X	X
Oversight: Global Planning & Coordination	X		X	Sponsor oversight of vendors and study at large; SynteractHCR to also provide oversight of day to day tasks from vendors that

Insmed Incorporated

WO#1 CIS#1

SynteractHCR, Inc.

Services Checklist & Transfer of Obligations

X=Responsibility; A=Approve; R=Review

Activity	Sponsor	*******	SynteractHCR	Comments
				are managed by SynteractHCR
***/Sponsor adherence to DB build timelines	X	X
SynteractHCR adherence to DB build timelines —SynteractHCR tasks/deliverables			X
Routine Status Reports	A		X
DM review of status reports	R		X	Status reports will be run *** and reviewed by SynteractHCR DM and provided to Insmed
External Data Reconciliations (Safety Labs, PK, Microbiology)			X
Migrations/Publish Checks	A	X	R
Download Raw SAS Datasets for SDTM programming			X
Create and transfer CDISC compliant datasets (SDTM)	A		X	*** SDTM transfers to sponsor, SDTM data should be run through Open CDSIC and output reviewed by SynteractHCR. SDTM reviewers guide at end of study

SDTM Annotated CRF (blank.crf)	A		X
Balance (RTSM)	X	X	X
Build for Balance (RTSM) for randomization, and drug supplies, nebulizers and cleaning supplies	X	X	X	SynteractHCR to be involved in all Balance meetings and trainings
Balance Build Specification	A	X	R
RTSM Testing (UAT)	X	X	X	* to provide UAT environment and Guidance; SynteractHCR to develop test scripts covering integration with * and trial supply assignments.
Management of Drug Supply, Nebulizer and Cleaning Supplies through RTSM	X		X
Activating Inventory lists in RTSM	A			Nebulizers, cleaning supplies, IP, all other ancillary supplies
Balance HelpDesk		X		This is pure tech support
Balance User Support			X	Triaging user’s questions and concerns regarding Balance
Balance Training - e Learning	A	X	R	SynteractHCR to present at Investigator Meetings
Study Specific Balance Training and Documentation	A		X

Insmed Incorporated

WO#1 CIS#1

SynteractHCR, Inc.

Services Checklist & Transfer of Obligations

X=Responsibility; A=Approve; R=Review

Activity	Sponsor	*******	SynteractHCR	Comments
Supply Depot Management	X
Define data fields that can be updated in Balance	A		X
Balance Contingency Plan	A		X	SynteractHCR to create plan, Sponsor to approve
Adherence to RTMS build timeline	X	X	X

3. Section 5 of WO#1 entitled Project Costs shall be renamed Project Assumptions and the information thereunder replaced in its entirety with the following:

5.1 Specifications

Specifications	WO #1	WO#1 CIS #1
GENERAL STUDY INFORMATION
Number of Screened Patients	***	***
World Wide (Minus *)	***	***
Total Number of Enrolled Patients	***	***
World Wide (Minus *) Number of Evaluable Subjects at V9 (M8) Number of Subjects V9 to V17 Number of Subjects Eligible for INS-312	***	* * * *
Project Number of Randomized Subjects By Region	***	***
***	***	***
***	***	***
***	***	***
***	***	***
Total Number of Sites	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***
***	***	***

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Specifications	WO #1	WO#1 CIS #1
Project Duration (Months)	***	***
* Subject * Visit * () — * Subjects Visit * () — * Subject * Visit * (*) — * * Subject * Visit * () — * Subject * Visit * (*) — * * Subject * Visit * — * Clinical Study Report	***	* * * * * * ***
Clinical Operations (Months)	***	***
Patient Enrollment Duration	***	***
Per Patient Randomized Open-Label Treatment Duration	***	***
Per Patient Off-Treatment Duration	***	***
PROJECT MEETINGS
Kick-Off Meeting at Sponsor office in ***	***	***
Investigator Meetings	***	***
* * meeting * (including CRA Training Meeting; * of travel; attendees: Global Program Manager, Global Project Manager, * Clinical Lead, * Project Manager, CRA team, and Lead Data Manager	***	***
* * meeting * (including CRA Training Meeting); * of travel; attendees: Global Program Manager, Global Project Manager, Global Clinical Lead, * Clinical Lead, * Project Manager, * Project Manager, * Clinical Leads, the CRA team, and Lead Data Manager	***	***
* * meeting * (including CRA Training Meeting); attendees: Global Program Manager, Global Project Manager, Global Clinical Lead, Regional Project Managers, * Clinical Lead, * Project Manager, * Project Manager, the CRA team, and Lead Data Manager	***	***
* * meeting *** (including CRA Training Meeting); attendees: Global Program Manager, and Lead Data Manager		***
* * meeting *** (including CRA Training Meeting); attendees: Third Party Project Manager and third party CRA team.	***	***
* * meeting *; attendees: * Project Manager, *** CRAs and 1 Senior CRA.	***	***
Refresher Meetings		***
* () - * meeting ***	***	***
* Refresh Meeting () - * meeting ***		***
Number of Face-to-Face Meetings	***	***
Total Number of Separate Team Teleconferences with Sponsor

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WO#1 CIS#1

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Specifications	WO #1	WO#1 CIS #1
Global Project Team: ~ SynteractHCR attendees per teleconference through , ** thereafter*	Not Defined	***
Project Start to ***		* (*)
* * to * *		* (*)
* to * (***)		* (*)
To Clinical Study Report (* *)		* (*)
Data Management Team		***
Project Start to December 2015: ~*** SynteractHCR attendees		* (*)
* * to * * (* ): ** SynteractHCR attendee		* (*)
To Clinical Study Report (* ): ** SynteractHCR attendees		* (*)
Clinical Operations Team		***
Project Start to * : ** SynteractHCR attendees		* (*)
Vendor Specific Project Teams		***
Project Start to * : ~ * *** SynteractHCR attendees		* (*)
* * to * : ~** SynteractHCR attendees		* (*)
* * to * ( * *): ~* *** SynteractHCR attendees		* (*)
To Clinical Study Report (* *): SynteractHCR attendees TBD		* (*)
DATA MANAGEMENT
Number of Unique CRF Pages	***	***
Number of CRF Pages per Screened Patient per Sponsor	***	***
Number of CRF Pages per Completed Patient	***	***
Total Number of CRF Pages	***	***
Number of Edit Checks	***	***
Number of Queries per Patient	***	***
Number of Complex BOXI Reports	***	***
Number of Non-Complex BOXI Reports	***	***
Number of Data Review Listings	***	***
SITE IDENTIFICATION/ FEASIBILITY
Site ID Duration (Months)	***	***
Number of Sites Contacted with Survey/Questionnaire/Qualification Calls	***	***
Number of Sites for Debarment Verification	***	***
Number of Countries (Minus *Plusand**	***	***
SITE CONTRACTS
Total Number of Site Contracts	***	***
Total Number of Ancillary Agreements	***	***
Total Number of Agreement Amendments	***	***
CLINICAL OPERATIONS
Total Number of Clinical Leads	***	***
Global Clinical Lead	***	***
Regional Clinical Leads — ***	***	***
Regional Clinical Lead — *.//**	***	***
Regional Clinical Lead — ** (Sponsor Support)*	***	***
Total Number of Regional CRAs	***	***
Number of CRAs — */*	***	***
Number of CRAs — ***	***	***
Number of CRAs — ***	***	***
Total Number of Site Qualification Visits (Minus ***)	***	***

Insmed Incorporated

WO#1 CIS#1

SynteractHCR, Inc.

Specifications	WO #1	WO#1 CIS #1
***	***	***
***	***	***
***		***
***	***	***
Total Number of Telephone Qualification Visits (Minus ***)	***	***
***	***	***
***	***	***
Total Number of Initiation Visits (Minus ***)	***	***
***	***	***
***	***	***
***		***
***	***	***
Total Number of Interim Monitoring Visits (Minus ***)	***	***
***	***	***
***	***	***
***		***
***	***	***
Total Number of Additional Days on Site (Minus ***)	***	***
***	***	***
***	***	***
***	***	***
Total Number Close-out Visits (Minus ***)	***	***
***	***	***
***	***	***
***		***
***	***	***
QUALITY ASSURANCE AUDITS
Number of Site Audits — */*	***	***
Number of Site Audits — ***	***	***
Number of Site Audits — ***	***	***
Number of Vendor Audits — */*	***	***
Number of Vendor Audits — ***	***	***
Number of Vendor Audits — ***	***	***
MEDICAL SAFETY
Number of SAEs	***	***
Number of Coded Items per Patient	***	***
BIOSTATISTICS
Number of Outside Data Vendors	***	***
Number of Outside Vendor Data Transfers (Monthly)	***	***
Number of Unique Efficacy Tables	***	***
Number of Unique Safety Tables	***	***
Number of Repeat Tables	***	***
Number of DSMB Tables	***	***
Number of Annual Report Tables	***	***
Number of Unique Graphs	***	***
Number of Repeat Graphs	***	***
Number of DSMB Graphs	***	***
Number of Listings	***	***
Number of DSMB Listings	***	***
Number of Annual Report Listings	***	***
Number of ADaM Datasets	***	***

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WO#1 CIS#1

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Specifications	WO #1	WO#1 CIS #1
Number of SDTM Domains	***	***
Number of TDM Datasets	***	***
Number of Interim Analyses	***	***
Number of DMC Meetings	***	***
Number of Transfers of SDTMs to Sponsor	***	***
Number of Annual Reports	***	***

Notes:

i. All assumptions are based on the Protocol Amendment #2 and schedule of events dated ***. Study start-up and maintenance activities reflect the overall protocol development timeline:

· Protocol, dated *** *** ***

· Protocol Amendment 1, dated ***

· Protocol Amendment 2, dated ***

· Protocol Clarification Memorandum, dated ***

ii. Costs are included for SynteractHCR to perform activities in the regions and service areas and with the vendors as detailed in this amended Work Order 1. Activities requested by Sponsor not included in this amended Work Order 1 will be included in a Change in Scope.

iii. Clinical Lead time is assumed to include the following:

1. Project Meeting Preparation/Attendance (Internal and External Project Teams)

2. Clinical Operations Team Coordination

· Site Selection and Activation Processes

· Team Training Oversight

· Monitoring Plan Compliance

· Visit Calendar Oversight

· Visit Conduct Supervision

· Visit Report Review/Approval

· Site Management Supervision

· Quality Oversight

· Deviation Management/Issue Escalation

· Key Performance Indicator and Trend Management

· Site Audit Response Management

3. Study Specific Documentation Development

4. Study Specific Tracking, and associated processes

iv. The following Clinical Operations activities are not assumed for the purposes of this agreement:

1. Changes to agreed upon study specific tracking reports, including increased frequency

2. Interaction with Sponsor’s regional/marketing groups, managed vendors, or Site Account Managers

3. Clinical Research Associate site interactions beyond the requirements of the approved Clinical Monitoring Plan

4. Sponsor staff training

v. All deliverables and project materials will be in English (this includes all documents provided to SynteractHCR). If translations are needed, translation activities will be handled by a third party vendor and SynteractHCR.

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vi. All SynteractHCR activities will be conducted according to SynteractHCR SOPs.

vii. SynteractHCR templates will be used for all appropriate project documents.

viii. Sponsor will retain responsibility for all activities that are not assigned to SynteractHCR.

ix. Estimates assume four rounds of revisions for project documents requiring review/approval by Sponsor. All Sponsor comments/changes will be collated and provided to SynteractHCR in one document.

x. SynteractHCR may perform vendor audits; exact sites/locations will be determined by SynteractHCR and Sponsor and costs may be adjusted accordingly.

xi. Site CDAs and contracts will be between SynteractHCR and the sites, after Sponsor has reviewed and approved.

xii. Sponsor and SynteractHCR hold a current *** license and a current WHODDE license.

xiii. Data for screen failure patients will be entered into *** on eCRFs by site personnel.

xiv. EDC training will be web-based.

xv. Costs include User Acceptance Testing (UAT) of the clinical database performed by SynteractHCR.

xvi. Web Access includes access to the reports portion of the project web page for eight Sponsor personnel. Additional users will incur additional costs.

xvii. All Central Laboratory results will be provided to SynteractHCR as electronic data transfers.

xviii. Costs have been included for central laboratory data to be integrated into *** via *** Web Services.

xix. Costs include database migrations occurring before ***. Additional costs for database migrations will be included in a subsequent CIS.

xx. SynteractHCR will receive and reconcile PK header information on a quarterly basis for this study.

xxi. DM site payment report programming assumes monthly site payments.

xxii. For the interim analyses, SynteractHCR will provide a subset of the final tables, listings and figures.

xxiii. The database will be locked for the *** Interim Analysis of primary endpoints. For the DSMB analyses and the *** safety follow up analysis, the tables, listings, and figures will be run on dirty data (a database soft-lock will not occur prior to the analyses).

xxiv. SynteractHCR will provide SDTM datasets, ADaM datasets, TDM, blankcrf.pdf, DEFINE.XML for SDTM and DEFINE.XML for ADaM and user guides.

xxv. Sponsor (or designee) will provide SynteractHCR with the final patient SAE narratives for inclusion in the final study report. The SynteractHCR medical writer will not revise or re-format the patient SAE narratives.

xxvi. Non-SAE narratives are generally written and included in the CSR for patients with AEs that lead to discontinuation of the study and/or study drug, or for AEs of special interest. Depending on the number and complexity of these narratives, additional time may be required to produce and QC. This is usually determined during CSR development.

xxvii. The compiled CSR will have a hyperlinked and bookmarked Table of Contents. Collection and filing of CSR appendix documents will be completed per ICH guidelines.

xxviii. Project Management costs include Sponsor meeting attendance, managing team meetings and conference calls and providing meeting minutes, vendor management, and overall project administration tasks.

xxix. Project Administration includes the creation and maintenance of the clinical document database, maintenance of regulatory documents, review and processing of expense reports, generation of regular reports, and processing of site and vendor payments.

xxx. If reasonably requested by Sponsor, periodic face to face internal management meetings between SynteractHCR and ***, *** SynteractHCR and *** SynteractHCR, and

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SynteractHCR and Sponsor may occur during the life of the study. Sponsor will be billed for pass-through travel costs if applicable.

xxxi. Clinical monitoring visits are costed based upon the following visit unit assumptions:

· Qualification Visits

· ***: average *** travel, *** on site, *** preparation/follow-up/report-writing

· Initiation Visits

· *** average *** travel, *** on site, *** preparation/follow-up/report-writing

· ***: average *** travel, *** on site, *** preparation/follow-up/report-writing

· Routine Monitoring Visits

· *** average *** travel, *** on site, *** preparation/follow-up/report-writing

· ***: average *** travel, *** on site, *** preparation/follow-up/report-writing

· Close-Out Visits

· *** average *** travel, *** on site, *** preparation/follow-up/report-writing

· ***: average *** travel, *** on site, *** preparation/follow-up/report-writing

xxviv. Enrollment prompting and motivation clinical monitoring visits are not contemplated in this agreement.

xxx. SynteractHCR Vendor Management Responsibilities

· *** — Investigator Agreement and Grant Management

· *** — *** CRO

· *** — *** Laboratory

· *** — Safety Laboratory

· *** — *** Study Coordinator Assistance

· *** *** — Investigator Meeting Services / Site Feasibility

· *** — *** Regulatory Services

· *** — Translation Services

5.2 Project Budget Summary

The project budget is based on the sites, countries and timeline included in the project Specifications. Changes to these specifications will impact the hourly rates and fees used to determine the milestones and related pass-through expenses.

Insmed Incorporated

WO#1 CIS#1

SynteractHCR, Inc.

The rates used to create the budget in this WO#1 CIS#1 are based on a fixed inflation factor of *** per year beginning *** through study end ***. As of *** of each year starting in ***, SynteractHCR will compare the budgeted inflation factor to the inflation factor given in the most recent Radford CRO-Pharmaceutical Trends Report (“RCPTR”). If, on a cumulative basis for any given year, the ratio of the RCPTR-based inflation factor to the budgeted inflation factor is greater than *** or less than ***, an inflation adjustment charge or credit will be invoiced.

SynteractHCR will not exceed the project budget without an approved Change Notification Form in accordance with Section 2.1 of the Agreement.

Professional Service Fees (USD)

Service Category	Original Contract			Change in Scope #1*
Clinical Operations	$	***		$	***
Site/Vendor Audits	$	***		$	***
Regulatory Affairs	$	***		$	***
Central Randomization/ Inventory Management	***			$	***
Data Management	$	***		$	***
Biostatistics	$	***		$	***
Medical Writing	$	***		$	***
Project Management	$	***		$	***
Sub-Total Professional Service Fees	$	*******		$	*******
FX Adjustment in 2015	$	***		$	(***	)
FX Adjustment 2016 to Study End	$	***		$	(***	)
Inflation 2016 to Study End	$	***		$	***
***% Discount on Invoicing	$	(***	)	$	(***	)
Total Professional Service Fees	$	*******		$	*******

* Upon completion of Patient Randomization, a cost reduction will be reviewed as a result of a reduction in the number of sites for any site that has not randomized a patient for the study.

The fees for services provided by resources in the *** and presented in this WO#1 CIS#1 are based on a fixed exchange rate between *** and *** *** (*** = *** or the “Base Rate”). If the exchange value of the *** *** rises or falls by *** or more from the Base Rate during the course of the project, the costs for ***-resourced services shall be adjusted accordingly.

The fees for services provided by resources in the *** and presented in this CIS#1 are based on an identified fixed exchange rate dated *** *** *** using http://www.oanda.com between *** *** and *** ***, *** *** = *** ***”). If the exchange value of the US Dollar rises or falls by *** or more from the Base Rate during the course of the project, the costs ***-resourced services shall be adjusted accordingly.

5.3 Estimated Pass Through Expenses

Travel-related expenses, mailing/courier costs, translation costs, IRB/EC and other regulatory submission fees, site fees, patient recruitment/retention fees, Investigator Meeting planning fees, laboratory fees, and miscellaneous project costs (e.g., binders, folders, tabs, labels, packaging materials, printing) are

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considered project-related pass-through expenses and are not included in the professional Service fees. These costs will be invoiced directly to Sponsor without markup. Additional pass-through expenses that are not listed in the table below will require pre-approval from Sponsor before incurring and invoicing.

Estimated Pass Through Expenses (USD)

Original Contract

Change in Scope #1

Item

Unit

No of
Units

Cost per
Unit

Total

No of
Units

Cost per
Unit

Total

TRAVEL

Travel (*** Visits)

visit

***

Travel (*** Visits)

visit

***

Travel (*** Visits — Air, etc.)

visit

***

Travel (*** Visits — Local)

visit

***

Meeting Travel — ***

meeting

***

Meeting Travel — ***

meeting

***

Meeting Travel — ***

meeting

***

Ad hoc Visit Travel — ***

visit

***

Site Audit Travel - ***

audit

***

Site Audit Travel - ***

audit

***

Site Audit Travel - ***

audit

***

Vendor Audit Travel - ***

audit

***

Vendor Audit Travel - ***

audit

***

Vendor Audit Travel - ***

audit

***

Regulatory/EC/IRB Fees

***

Central IRB Fees ***/***

study

***

Local and Central EC Fees ***

study

***

Fees for Central Authority Notification - ***

country

***

Regulatory/EC Submission Fees ***

study

***

Other

***

Protocol and ICF Printing

*** sites

***

Teleconferencing

month

***

Shipping

month

***

Printing

study

***

study

***

Miscellaneous Project Expenses

month

***

*** *** — ***

study

***

Legal Representation - ***

study

***

Investigator Fees — ***/***

patient

***

Investigator Fees — ***

patient

***

Investigator Fees — ***

patient

***

Site Start-up Fees — ***

site

***

Site Start-up Fees — ***

site

***

Site Start-up Fees — ***

site

***

Trial Insurance

study

***

Central Laboratory (***)

laboratory

***

Regional Laboratories (***)

laboratory

***

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Estimated Pass Through Expenses (USD)

Original Contract

Change in Scope #1

Item

Unit

No of
Units

Cost per
Unit

Total

No of
Units

Cost per
Unit

Total

Investigator Meeting — ***

meeting

***

Investigator Meeting — ***

meeting

***

Investigator Meeting — ***

meeting

***

Translation Vendor (estimate)

language

***

***: Professional Service Fee

study

***

***: Hosting Fee for ***

month

***

CTA Submission - SPharm (CTA review and signature)

CTA

***

Total

***

SynteractHCR assumes that Sponsor ’s teleconference number(s) will be used for regular project team calls, otherwise SynteractHCR will pass through conference call costs directly to Sponsor. International wire fees for site/vendor payments will be passed through to Sponsor. *** pass-through costs are estimates subject to change, and exclude any applicable VAT.

5.4 Payment Terms

An advance of *** percent (***%) of the Professional Service Fees after discount (the “WO#1 Advance” equal to $***) has been paid under the Letter of Intent in the amount of *** ($***) and Work Order 1 in the amount of *** ($***). No further advance payment is due under WO#1 CIS#1. The WO #1 Advance will be adjusted on an annual basis, beginning *** (***) year from the Effective Date until all payments have been made/credited under this Work Order 1, such that the WO#1 Advance will equal *** (***) of the Professional Service Fees payments made during the prior year after discount. If the WO#1 Advance exceeds *** (***) of the remaining Professional Service Fees, Sponsor may, at its option, receive a refund of the amount exceeding *** within *** (***) days, or credit the amount exceeding *** against any outstanding invoice(s) and then any subsequent invoice(s) until expended.

In line with Sponsor’s request to convert to a milestone payment and unit billing system for Professional Service Fees, SynteractHCR will invoice Sponsor the following amounts upon achievement of the associated milestones:

Milestone**	Estimated Date	% of Milestones	Amount
Fees invoiced on a time and materials basis through December 2015 *	***	***	$	***
*** of Subjects Randomized	***	***	$	***
*** of Subjects Randomized	***	***	$	***
*** of Subjects Randomized	***	***	$	***
* of Subjects Randomized (defined as *)	***	***	$	***
* Randomized Subjects’ CRF Pages cleaned and locked (for Analysis *)	***	***	$	***
* Randomized Subjects’ CRF Pages cleaned and locked (for Analysis *)	***	***	$	***
* of Randomized Subjects’ CRF Pages cleaned and locked (Final Database Lock for Primary Endpoint Analysis *)	***	***	$	***
Final TLFs for Analysis ***	***	***	$	***
Final CSR for Primary Endpoint Analysis ***	***	***	$	***

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Milestone**	Estimated Date	% of Milestones	Amount
*** of Randomized Subjects’ CRF Pages (for Final Analysis) cleaned and locked	***	***	$	***
*** of Randomized Subjects’ CRF Pages (for Final Analysis) cleaned and locked	***	***	$	***
*** of Randomized Subjects’ CRF Pages cleaned and locked (Final Database Lock for Final Analysis)	***	***	***
Final CSR — Supplemental	***	***	***
TMF Transfer	***	***	***
Total		*******	*******

*Includes FX adjustments for ***. Amount before adjustments is $***

** CRF pages cleaned and locked is defined as expected data entered (no missing pages), all data SDV’d, all data reviewed, including Sponsor review, no outstanding queries, all coding (AE, MH, CM) performed and approved by Insmed, all SAE reconciliation completed and approved by Insmed, all vendor (safety labs, microbiology labs, PK) reconciliation performed and final transfers received (microbiology data final transfer should have unblinded data), PI signatures obtained, all forms frozen and locked.

In addition, SynteractHCR will invoice Sponsor a fixed monthly management charge, and will invoice for completed routine monitoring visits on a unit fee basis, at the following rates:

Monthly Management

# of Project Months	Monthly Fee		Total
* (* * through * ***)	$	***	$	***
* (* * through * ***)	$	***	$	***
Total			$	*******

Units for Monitoring Visits

Type	Total RMVs	Unit Cost		Total
*/* Site Qualification Visits	***	$	***	$	***
*/* Telephone Site Qualification Visits	***	$	***	$	***
*/* Site Initiation Visits	***	$	***	$	***
*/* Interim Monitoring Visits	***	$	***	$	***
*/* Additional *** on Site	***	$	***	$	***
*/* Close Out Visits	***	$	***	$	***

*** Site Qualification Visits	***	$	***	$	***
*** Telephone Site Qualification Visits	***	$	***	$	***
*** Site Initiation Visits	***	$	***	$	***
*** Interim Monitoring Visits	***	$	***	$	***
* Additional * on Site	***	$	***	$	***
*** Close Out Visits	***	$	***	$	***

*** Site Qualification Visits	***	$	***	$	***
*** Site Initiation Visits	***	$	***	$	***
*** Interim Monitoring Visits	***	$	***	$	***
*** Close Out Visits	***	$	***	$	***

Insmed Incorporated

WO#1 CIS#1

SynteractHCR, Inc.

Type	Total RMVs	Unit Cost		Total
*** Site Qualification Visits	***	$	***	$	***
*** Site Initiation Visits	***	$	***	$	***
*** Interim Monitoring Visits	***	$	***	$	***
* Additional * on Site	***	$	***	$	***
*** Close Out Visits	***	$	***		***
Total				$	***

The following table summarizes the maximum Professional Service Fees to be paid under WO#1 CIS#1:

Payment Type	Amount
Milestone Payments	$	***
Monthly Management and Maximum RMV Payments	$	***
*** Discount	$	(***	)
Maximum Total Professional Service Fees	$	*******

At the completion of the project, if payments received by SynteractHCR exceed the cost of the work completed, SynteractHCR will reimburse Sponsor for the amount overpaid within *** (***) days.

Additionally, prior to the payment of sites, Sponsor and SynteractHCR will agree upon the site/investigator grant schedule and budget that corresponds with the schedule and budget in the executed Site Agreement and Sponsor will provide adequate funds to SynteractHCR in advance for site payments. All payments from SynteractHCR to investigators will be made from funds provided in advance by Sponsor. SynteractHCR will make payment to sites upon presentation of an invoice at the frequency detailed within the site agreement.

5.5 Changes in Scope

If, in the opinion of SynteractHCR, and mutually agreed to by Sponsor, the scope of the work exceeds, or is reduced from, what is described in this amended Work Order 1, SynteractHCR will generate a Change in Scope in accordance with Section 2.1 of the Agreement.

5.6 Invoices and Payment Correspondence

SynteractHCR will send invoices via US Mail and email to the following mailing address:

Insmed Incorporated

10 Finderne Avenue

Building 10

Bridgewater, NJ 08807-3365

Attn: Accounts Payable

Phone: ***

Email: ***

With an email copy to *** at ***

Phone or email correspondence in regard to payment inquiries should be addressed to the following individuals:

If to Sponsor:

If to SynteractHCR:

Insmed Incorporated

WO#1 CIS#1

SynteractHCR, Inc.

Insmed Incorporated	SynteractHCR, Inc.
10 Finderne Avenue	5759 Fleet Street
Building 10	Suite 100
Bridgewater, NJ 08807-3365	Carlsbad, CA 92008
Attn: Accounts Payable	Attn: Accounts Receivable
Phone: ***	Phone: ***
Email: ***	***

Either Party may change its address and/or contact person for such notices and communications by written notice to the other party in accordance with this Section.

To pay an invoice via wire transfer, Sponsor will use the following information to process the payment:

Account Name: SynteractHCR, Inc.

Bank Name: ***

Account Number: ***

Routing Number: ***

For invoices paid via wire transfer or ACH, Sponsor will send a remittance of the payment to Accounts Receivable at *** or fax number ***.

4. Attachment 1 to WO#1 entitled Detailed Budget is hereby deleted in its entirety.

5. Except as amended hereby, Work Order 1 shall remain in full force and effect.

6. This WO#1 CIS#1 shall become binding when any one (1) or more counterparts hereof, individually or taken together, shall bear the signatures of both parties. This WO#1 CIS#1 may be executed by facsimile or exchange of PDF copies, and in two (2) or more counterparts, each of which will be deemed an original document, and all of which, together with this writing, will be deemed one (1) instrument.

IN WITNESS WHEREOF , the parties have caused this WO#1 CIS#1 to be executed by duly authorized representatives as of the Effective Date.

SynteractHCR, Inc.		Insmed Incorporated


/s/ Stewart Bieler		/s/ Renilde Heyrman
Name: Stewart Bieler		Name: Renilde Heyrman
Title: CAO		Title: Senior VP, Clinical Development and Operations
Signature Date: July 5, 2016		Signature Date: June 30, 2016

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: August 4, 2016
	/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: August 4, 2016
	/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 June 30, 2016 (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)

August 4, 2016

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)

August 4, 2016