

	As of March 31,
	2019	2018
Stock options to purchase common stock	11,903	9,866
Unvested RSUs	170	234
Convertible debt securities	11,492	11,492

As of March 31,
2018 2017
Stock options to purchase common stock 9,866
7,719
Unvested RSUs 234
89
Convertible debt securities 11,492
—

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

The Company is exposed to risks associated with extending credit to customers related to the sale of products. The Company does not require collateral to secure amounts due from its customers. The following table presents the percentage of gross product revenue represented by the Company's three largest customers as of the quarter ended March 31, 2019.



	Percentage of Total Gross Product Revenue
Customer A	33%
Customer B	31%
Customer C	16%

The Company did not have product revenue prior to US FDA approval of ARIKAYCE in September 2018. The Company relies on third-party manufacturers and suppliers for manufacturing and supply of its products. The inability of the suppliers or manufacturers to fulfill supply requirements of the Company could materially impact future operating results. A change in the relationship with the suppliers or manufacturer, or an adverse change in their business, could materially impact future operating results.

Revenue Recognition—In accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers, the Company recognizes revenue when a customer obtains control of promised goods or services, in an

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

Product revenues consist primarily of sales of ARIKAYCE in the US. Product revenues are recognized once the Company performs and satisfies all five steps mentioned above. In October 2018, the Company began shipping ARIKAYCE to its customers in the US, which include specialty pharmacies and specialty distributors. The Company recognizes revenues for product received by its customers, net of allowances for customer credits, including prompt pay discounts, service fees, estimated rebates, including government rebates such as Medicaid rebates and Medicare Part D coverage gap reimbursements in the US, chargebacks and returns.

Customer credits: The Company’s customers are offered various forms of consideration, including service fees and prompt payment discounts. The Company anticipates that its customers will earn prompt payment discounts and, therefore, deducts the full amount of these discounts from total gross product revenues when revenues are recognized. Service fees are also deducted from total gross product revenues as they are earned.

Rebates: The Company contracts with Medicaid, other government agencies and various private organizations, or collectively, third-party payors, so that ARIKAYCE will be eligible for purchase by, or partial or full reimbursement from, such third-party payors. The Company estimates the rebates it will provide to third-party payors and deducts these estimated amounts from total gross product revenues at the time the revenues are recognized.

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

Co-payment assistance: Patients who have commercial insurance and meet certain eligibility requirements may receive co-payment assistance. The Company accrues a liability for co-payment assistance based on actual program participation and estimates of program redemption using data provided by a third-party administrator.

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

The Company has initiated early access programs (EAPs) in Europe and other countries, some of which may be fully reimbursed. EAPs are intended to make products available on a named patient basis before they are commercially available in accordance with local regulations.

Cost of product revenues (excluding amortization of intangible assets) - Prior to FDA approval of ARIKAYCE, the Company expensed all inventory related costs in the period incurred. Inventory used for clinical development purposes is expensed to research and development (R&D) expense when consumed.

Recently Adopted Accounting Pronouncements - In August 2016, the ~~FASB~~Financial Accounting Standards Board (FASB) issued ~~ASU~~Accounting Standard Update (ASU) 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addressed eight specific cash flow issues with the objective of reducing the existing diversity in practice. Among the updates, the standard requires debt extinguishment costs to be classified as cash outflows for

financing activities. This standard update isbecame effective as of the first quarter of 2018. As a result of the adoption of the standard, in the first quarter of 2018, the Company reported a $2.2 million loss on extinguishment of debt in the ~~financing~~operating activities section of its consolidated statement of cash flows. The Company had no material debt extinguishment costs prior to the first quarter of 2018. ~~There were no other significant impacts as a result~~The impact of adopting this ~~standard.~~

~~In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-15,~~ ~~Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern~~, which defines management’s responsibility to perform interim and annual assessments of an entity’s ability to continue as a going concern, and to provide related footnote disclosures if there is substantial doubt about its ability to continue as a going concern. The new standard was effective for the annual period ending after December 15, 2016, and for interim periods thereafter. The Company adopted ASU 2014-15 in the fourth quarter of 2016, which had no impact on the Company’s consolidated financial statements. The interim assessment during the first quarter of 2018 did not have an impact on the consolidated financial statements.

The Company had $686.6 million in cash and cash equivalents as of March 31, 2018 and reported a net loss of $68.5 million for the three months ended March 31, 2018. Historically, the Company has funded its operations through public offerings of equity securities and debt financings. To date, the Company has not generated material revenue from ALIS. The Company does not expect to generate material revenue unless or until marketing approval is received for ALIS. Accordingly, the Company expects to continue to incur losses while funding research and development (R&D) activities, regulatory submissions, potential commercial launch activities and general and administrative expenses. The Company expects its future cash requirements to be substantial, and the Company may need to raise additional capital to fund operations, to develop and commercialize ALIS, to develop INS1007 and INS1009 and to develop, acquire, in-license or co-promote other products that address orphan or rare diseases.

ASU 2014-15 requires the Company to evaluate whether it has sufficient resources to fund operations for 12 months from the filing date of this Quarterly Report on Form 10-Q without regard to whether or not it can raise capital in the future. The Company believes it currently has sufficient funds to meet its financial needs for at least the next 12 months. In September 2017, the Company completed an underwritten offering of 14.1 million shares of its common stock for cash proceeds of $377.7 million, net of fees and expenses related to the offering. Further, in January 2018, the Company completed an underwritten public offering of 1.75% convertible senior notes due 2025 (the Convertible Notes) pursuant to an indenture, dated as of January 26, 2018, between the Company and Wells Fargo Bank, National Association (Wells Fargo), as trustee, as supplemented by the first supplemental indenture, dated January 26, 2018, between the Company and Wells Fargo (as supplemented, the Indenture). The Company sold $450.0 million aggregate principal amount of Convertible Notes, including the exercise in full of the underwriters' option to purchase additional Convertible Notes of $50.0 million. The Company's net proceeds from the offering, after deducting underwriting discounts and commissions and other offering expenses of $14.1 million, were approximately $435.9 million. The source, timing and availability of any future financing or other transaction will depend principally upon continued progress in the Company’s regulatory, development and pre-commercial activities. Any equity or debt financing will also be contingent upon equity and debt market conditions and interest rates at the time. If the Company is unable to obtain sufficient additional funds when required, the Company may be forced to delay, restrict or eliminate all or a portion of its R&D programs, pre-commercialization activities, or dispose of assets or technology.

~~In May 2014, the FASB issued ASU 2014-9,~~ ~~Revenue from Contracts with Customers (Topic 606)~~ which amended the existing accounting standards for revenue recognition. ASU 2014-9 establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. In July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017. The Company adopted ASU 2014-9 in the first quarter of 2018 and the impact of adoption is not material to ~~its consolidated financial statements.~~the Company.

~~New Accounting Pronouncements (Not Yet Adopted)~~—In February 2016, the FASB issued ASU ~~2016-2,~~ 2016-02, Leases (Topic 842) in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous ~~GAAP.~~generally accepted accounting principles. ASU ~~2016-2~~2016-02 requires ~~that~~ a lessee ~~should~~to recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet. ASU ~~2016-2~~2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) ~~using a modified retrospective approach~~ and early adoption iswas permitted. In August 2018, the FASB issued ASU 2018-11, Targeted Improvements to ASC 842, which provided a transition option in which an entity would initially apply ASU 2016-02 at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company ~~expects~~used the new transition option and the package of practical expedients that allowed it to ~~adopt~~not reassess: (1) whether any expired or existing contracts are or contain leases; (2) lease classification for any expired or existing leases; and (3) initial direct costs for any expired or existing leases. The Company also used the practical expedient that allows it to treat the lease and non-lease components of its leases as a single component. The Company adopted ASU ~~2016-2 in~~2016-02 effective January 1, 2019. The impact of the ~~first quarter~~adoption of ~~2019~~ASU 2016-02 on the consolidated balance sheet was $47.4 million. Refer to Note 6 - Leases for additional details about the Company's lease portfolio, including Topic 842 required disclosures.

New Accounting Pronouncements (Not Yet Adopted)—In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses which requires financial assets measured at an amortized cost basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU 2016-13 is ineffective for fiscal years beginning after December 15, 2019. Different aspects of the ~~process of~~guidance require modified retrospective or prospective adoption. The Company is currently evaluating the impact of adoption on its consolidated financial statements.

3.~~Identifiable Intangible Asset~~ Inventory

As of March 31, 2019 and December 31, 2018, the Company's inventory balance consists of the following (in thousands):



	March 31, 2019		December 31, 2018
Raw materials	$	4,454	$	2,145
Work-in-process	7,059		4,567
Finished goods	1,169		320
	$	12,682	$	7,032

Inventory is stated at the lower of cost and net realizable value and consists of raw materials, work-in-process and finished goods. Cost is determined using a standard cost method, which approximates actual cost, and assumes a FIFO flow of goods. The Company began capitalizing inventory costs following FDA approval of ARIKAYCE on September 28, 2018. The Company has not recorded any inventory write downs since that time. The Company currently uses a limited number of third-party contract manufacturing organizations (CMOs) to produce its inventory.

4.Accrued Expenses

~~The Company believes there are no indicators~~As of ~~impairment relating~~March 31, 2019 and December 31, 2018, the Company's accrued expenses balance consist of the following (in thousands):



	March 31, 2019		December 31, 2018
Accrued clinical trial expenses	$	7,632	$	6,635
Accrued professional fees	11,380		13,398
Accrued technical operation expenses	9,536		9,371
Accrued royalty payable	1,000		409
Accrued interest payable	1,663		3,631
Accrued sales allowances and related costs	2,642		818
Accrued construction costs	2,475		2,946
Other accrued expenses	1,989		1,046
	$	38,317	$	38,254

5.Intangible, net

As of March 31, 2019, the Company's identifiable intangible assets consisted of acquired ARIKAYCE R&D and a $1.7 million milestone paid to ~~its in-process R&D~~PARI for the license to use PARI's Lamira® Nebulizer System for the delivery of ARIKAYCE to patients as a result of the FDA approval of ARIKAYCE on September 28, 2018. Total intangible ~~asset~~assets, net was $57.4 million as of March 31, 2019 and $58.7 million as of December 31, 2018.

Intangible assets are measured at their respective fair values on the date they were recorded and, with respect to the acquired ARIKAYCE milestone, at the date of subsequent adjustments of fair value. The Company began amortizing its intangible assets October 1, 2018, over ARIKAYCE's initial regulatory exclusivity period of 12 years. A rollforward of the Company's intangible assets for the three months ended March 31, 2019 follows (in thousands):



	2019
Intangible Asset	January 1,		Additions		Amortization			March 31,
Acquired ARIKAYCE R&D	$	56,988	$	—	$	(1,212	)	$	55,776
PARI milestone upon FDA approval	1,687		—		(36		)	1,651
Intangible assets	$	58,675	$	—	$	(1,248	)	$	57,427

Amortization of intangible assets during each of the next five years is estimated to be approximately $5.0 million per year. The Company performs its annual impairment test as of October 1.

6.Leases

The Company's lease portfolio consists primarily of office space, manufacturing facilities and fleet vehicles. Currently, all of the Company's leases that have commenced are classified as operating leases. The terms of its lease agreements that have commenced range from less than one year to seven years. In its assessment of the term of each such lease, the Company has not included any options to extend or terminate the lease due to the absence of economic incentives in its lease agreements. As permitted by the practical expedient in ASU 2016-02, leases that qualify for treatment as a short-term lease are expensed as incurred. These short-term leases are not material to the Company's financial position. Furthermore, the Company has elected the practical expedient to not separate lease and non-lease components for all classes of underlying assets. The Company's leases do not contain residual value guarantees and it does not sublease any of its leased assets.

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

In order to determine the appropriate discount rate for each lease, the Company determined its public credit rating and constructed debt yield curves. The debt yield curves were adjusted to reflect a collateral borrowing and differences in foreign currencies, where applicable, as well as to match the term of each lease.

The table below summarizes the Company's total lease costs included in its consolidated financial statements, as well as other required quantitative disclosures (in thousands).



	Three Months Ended
	March 31, 2019
Lease cost
Operating lease cost	$	3,078
Total lease cost	$	3,078

Other information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	3,134
Right-of-use assets obtained in exchange for new operating lease liabilities	$	47,396
Weighted average remaining lease term - operating leases (years)	5.5
Weighted average discount rate - operating leases	7.3		%

The table below presents the maturity of lease liabilities on an annual basis for the remaining years of the Company's commenced lease agreements (in thousands).



Year ending December 31,
2019 (remaining)	$	9,344
2020	11,000
2021	10,287
2022	6,000
2023	6,000
Thereafter	12,000
Total	$	54,631
Less: present value discount	9,563
Present value of lease liabilities	$	45,068

In addition to the Company's lease agreements that have previously commenced and are reflected in the consolidated financial statements, the Company has entered into additional lease agreements that have not yet commenced. In September 2018, the Company entered into an agreement to lease its new corporate headquarters in Bridgewater, NJ for which the initial lease term expires in June 2030. Upon commencement of the lease, which is anticipated to occur in the second half of 2019, the lease will ~~begin~~be accounted for as a finance lease.

Additionally, in October 2017, the Company entered into certain agreements with Patheon UK Limited (Patheon) related to ~~amortize~~increasing its long-term production capacity for ARIKAYCE commercial inventory. Similar to the ~~intangible asset upon US Food~~CMO arrangements previously described, the Company has determined that this agreement with Patheon contains an embedded lease for the manufacturing facility and ~~Drug Administration (FDA) approval~~the specialized equipment contained therein. Costs incurred by the Company related to the agreement of ~~ALIS, if received, and include~~$7.1 million, subsequent to the ~~expense~~adoption of ASU 2016-02, have been classified within other assets in the Company's consolidated ~~statement of comprehensive loss.~~balance sheet. Upon the commencement date, the prepaid costs and minimum guarantees specified in the agreement will be combined to establish a right-of-use asset and related lease liability.

4.~~Accrued Expenses~~

~~Accrued expenses consist of the following:~~

As of March 31,
2018 As of December 31,
2017
(in thousands)
Accrued clinical trial expenses $ 5,162
$ 7,837
Accrued compensation 4,496
12,197
Accrued professional fees 5,760
4,500
Accrued technical operation expenses 2,058
2,182
Accrued interest payable 1,422
423
Accrued construction costs 1,185
1,719
Other accrued expenses 991
481
$ 21,074
$ 29,339

5.7.Debt

In January 2018, the Company completed an underwritten public offering of the Convertible Notes, in which the Company sold $450.0 million aggregate principal amount of Convertible Notes, including the exercise in full of the underwriters' option to purchase additional Convertible Notes of $50.0 million. The Company's net proceeds from the offering, after deducting underwriting discounts and commissions and other offering expenses of ~~$14.1~~$14.2 million, were approximately ~~$435.9~~$435.8 million. The Convertible Notes bear interest payable semiannually in arrears on January 15 and July 15 of each year, beginning on July 15, 2018. The Convertible Notes mature on January 15, 2025, unless earlier converted, redeemed, or repurchased.

On or after October 15, 2024, until the close of business on the second scheduled trading day immediately preceding January 15, 2025, holders may convert their Convertible Notes at any time. Upon conversion, holders may receive cash, shares of the Company's common stock or a combination of cash and shares of the Company's common stock, at the Company's option. The initial conversion rate is 25.5384 shares of common stock per $1,000 principal amount of Convertible Notes (equivalent to an initial conversion price of approximately $39.16 per share of common stock). The conversion rate will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest.

Holders may convert their Convertible Notes prior to October 15, 2024, only under ~~certain~~the following circumstances, subject to the conditions set forth in an indenture, dated as of January 26, 2018, between the ~~Indenture, including any one of~~Company and Wells Fargo Bank, National Association (Wells Fargo), as trustee, as supplemented by the ~~following:~~first supplemental indenture, dated January 26, 2018, between the Company and Wells Fargo (as supplemented, the Indenture): (i) during the five business day period immediately after any five consecutive trading day period (the measurement period) in which the trading price per $1,000 principal amount of convertible notes, as determined following a request by a holder of the convertible notes, for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the common stock and the conversion rate on such trading day, (ii) the Company elects to distribute to all or substantially all holders of the common stock (a) any

rights, options or warrants (other than in connection with a stockholder rights plan for so long as the rights issued under such plan have not detached from the associated shares of common stock) entitling them, for a period of not more than 45 days from the declaration date for such distribution, to subscribe for or purchase shares of common stock at a price per share that is less than the average of the last reported sale prices of the common stock for the 10 consecutive trading day period ending on, and including, the trading day immediately preceding the declaration date for such distribution, or (b) the Company’s assets, debt securities or rights to purchase securities of the Company, which distribution has a per share value, as reasonably determined by the board of directors, exceeding 10% of the last reported sale price of the common stock on the trading day immediately preceding the declaration date for such distribution, (iii) if a transaction or event that constitutes a fundamental change or a make-whole fundamental change occurs, or if the Company is a party to (a) a consolidation, merger, combination, statutory or binding share exchange or similar transaction, pursuant to which the common stock would be converted into, or exchanged for, cash, securities or other property or assets, or (b) any sale, conveyance, lease or other transfer or similar transaction in one transaction or a series of transactions of all or substantially all of the consolidated assets of the Company and its subsidiaries, taken as a whole, all or any portion of the Convertible Notes may be surrendered by a holder for conversion at any time from or after the date that is 30 scheduled trading days prior to the anticipated effective date of the transaction, (iv) if during any calendar quarter commencing after the calendar quarter ending on March 31, 2018 (and only during such calendar quarter), the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day, or, (v) if the Company sends a notice of redemption, a holder may surrender all or any portion of its Convertible Notes, to which the notice of redemption relates, for conversion at any time on or

after the date the applicable notice of redemption was sent until the close of business on (a) the second business day immediately preceding the related redemption date or (b) if the Company fails to pay the redemption price on the redemption date as specified in such notice of redemption, such later date on which the redemption price is paid.

The Convertible Notes can be settled in cash, common stock, or a combination of cash and common stock at the Company's option, and thus, the Company determined the embedded conversion options in the convertible notes are not required to be separately accounted for as a derivative. However, since the Convertible Notes are within the scope of the accounting guidance for cash convertible instruments, the Company is required to separate the Convertible Notes into liability and equity components. The carrying amount of the liability component as of the date of issuance was calculated by measuring the fair value of a similar liability that ~~does~~did not have an associated equity component. The fair value was based on data from readily available pricing sources which utilize market observable inputs and other characteristics for similar types of instruments. The carrying amount of the equity component representing the embedded conversion option was determined by deducting the fair value of the liability component from the gross proceeds of the Convertible Notes. The excess of the principal amount of the liability component over its carrying amount is amortized to interest expense over the expected life of a similar liability that does not have an associated equity component using the effective interest method. The equity component is not remeasured as long as it continues to meet the conditions for equity classification in the accounting guidance for contracts in an entity’s own equity. The fair value of the liability component of the Convertible Notes on the date of issuance was estimated at $309.1 million using an effective interest rate of 7.6%, and accordingly, the residual equity component on the date of issuance was $140.9 million. The discount is being amortized to interest expense over the term of the Convertible Notes ~~which results in~~and has a remaining period of approximately ~~6.8~~5.79 years.

For the quarter ended March 31, 2018, total interest expense related to the Convertible Notes was $4.7 million, which includes the contractual interest coupon, the amortization of the issuance costs, and accretion of debt discount, as described in the table below. The following table presents the ~~components~~carrying value of the Company’s debt balance ~~as of March 31, 2018~~ (in thousands):



	March 31, 2019			December 31, 2018
1.75% convertible senior notes due 2025	$	450,000		$	450,000
Debt issuance costs, unamortized	(8,091		)	(8,440		)
Discount on debt	(120,596		)	(125,002		)
Long-term debt, net	$	321,313		$	316,558

1.75% convertible senior notes due 2025 $ 450,000
Debt issuance costs, unamortized (9,424 )
Discount on debt (137,870 )
Long-term debt, net $ 302,706

As of March 31, ~~2018,~~2019, future principal repayments of the debt for each of the fiscal years through maturity were as follows (in thousands):



Year Ending December 31:
2019	$	—
2020	—
2021	—
2022	—
2023	—
2024 and thereafter	450,000
	$	450,000

Year Ending December 31:
2018 $ —
2019 —
2020 —
2021 —
2022 —
2023 and thereafter 450,000
$ 450,000

The estimated fair value of the liability component of the Convertible Notes (categorized as a Level 2 liability for fair value measurement purposes) was determined using current market factors and the ability of the Company to obtain debt at comparable terms to those that are currently in place. The Company believes the estimated fair value at March 31, 2018 approximates the carrying amount.

In February 2018, the Company used part of the net proceeds from the issuance of the Convertible Notes to pay off its outstanding debt to Hercules Capital (Hercules). The payments to Hercules consisted of $55.0 million for the principal amount and an additional $3.2 million in back-end fees, outstanding interest, and prepayment penalty fees, which resulted in a $2.2 million loss on extinguishment of debt in the quarter ended March 31, 2018.

Interest Expense

~~The following table sets forth~~For the ~~total~~three months ended March 31, 2019 and March 31, 2018, interest expense ~~recognized~~related to the Convertible Notes was $6.7 million and $5.6 million, respectively, which includes the contractual interest coupon payable semi-annually in cash, the amortization of the issuance costs, and accretion of debt discount, as described in the ~~periods presented~~table below (in thousands):


	Three Months Ended March 31,				Three Months Ended March 31,
	2018		2017		2019		2018
Contractual interest expense	$	2,272	$	1,272	$	1,971	$	2,272
Amortization of debt issuance costs	299		31		349		299
Accretion of back-end fee on debt	50		171		—		50
Accretion of debt discount	3,021		—		4,406		3,021
Total interest expense	$	5,642	$	1,474	$	6,726	$	5,642

6.8.Shareholders’ Equity

Common Stock — As of March 31, ~~2018,~~2019, the Company had 500,000,000 shares of common stock authorized with a par value of $0.01 per share and ~~76,623,136~~77,596,384 shares of common stock issued and outstanding. In addition, as of March 31, ~~2018,~~2019, the Company had reserved ~~9,865,574~~11,892,800 shares of common stock for issuance upon the exercise of outstanding stock options and ~~234,373~~169,343 shares of common stock for issuance upon the vesting of RSUs. The Company has also reserved 11,492,280 shares of common stock for issuance upon conversion of the Convertible Notes, subject to adjustment in accordance with the Indenture.

In January 2018, the Company completed an underwritten public offering of $450.0 million aggregate principal amount of Convertible Notes, including the exercise in full of the underwriter's option to purchase additional Convertible Notes. The fair value of the liability component of the Convertible Notes on the date of issuance was estimated at $309.1 million, and accordingly, the equity component (included in additional paid-in capital) on the date of issuance was calculated as $140.9 million using the residual method, as further described in Note 57 Debt.

In September 2017, the Company completed an underwritten public offering of 14,123,150 shares of the Company’s common stock, which included the underwriter’s exercise in full of its over-allotment option of 1,842,150 shares, at a price to the public of $28.50 per share. The Company’s net proceeds from the sale of the shares, after deducting the underwriter’s discount and offering expenses of $24.8 million, were $377.7 million.

Preferred Stock — As of March 31, ~~2018,~~2019, the Company had 200,000,000 shares of preferred stock authorized with a par value of $0.01 per share and no shares of preferred stock were issued and outstanding.

7.9.Stock-Based Compensation

The Company’s current equity compensation plan, the 2017 Incentive Plan, was approved by shareholders at the Company’s Annual Meeting of Shareholders on May 18, 2017. The 2017 Incentive Plan is administered by the Compensation Committee and the Board of Directors of the Company. Under the terms of the 2017 Incentive Plan, the Company is authorized to grant a variety of incentive awards based on its common stock, including stock options (both incentive stock options and non-qualified stock options), RSUs, performance options/shares and other stock awards, as well as pay incentive bonuses to eligible employees and non-employee directors. On May 18, 2017, upon the approval of the 2017 Incentive Plan by shareholders, 5,000,000 shares were authorized for issuance thereunder, plus any shares subject to then-outstanding awards under the 2015 Incentive Plan and the 2013 Incentive Plan that subsequently were canceled, terminated unearned, expired, were forfeited, lapsed for any reason or were settled in cash without the delivery of shares. As of March 31, ~~2018, 3,643,015~~2019, 909,303 shares remained for future issuance under the 2017 Incentive Plan. The 2017 Incentive Plan will terminate on April 3, 2027 unless it is extended or terminated earlier pursuant to its terms. The Company has submitted a proposal to its shareholders to approve a new equity compensation plan, the 2019 Incentive Plan, at the 2019 Annual Meeting of Shareholders. The 2019 Incentive Plan, if approved, will provide for the issuance of 3,500,000 shares, plus any shares that were subject to outstanding awards under the 2017 Incentive Plan, the 2015 Incentive Plan and the 2013 Incentive Plan, as of the effective date of the 2019 Incentive Plan, that are canceled, terminate unearned, expire, are forfeited, lapse for any reason or are settled in cash without the delivery of shares. If the 2019 Incentive Plan is approved, no additional awards will be granted under the 2017 Incentive Plan. In addition, from time to time, the Company makes inducement grants of stock ~~options. These~~options to new hires, which 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.~~exception. During the three months ended March 31, ~~2018,~~2019, the Company granted inducement stock options covering ~~236,730~~51,870 shares of the Company's common stock to new employees.

On May 15, 2018, the 2018 Employee Stock ~~Options~~ -Purchase Plan (2018 ESPP) was approved by shareholders at the Company’s Annual Meeting of Shareholders. The Company ~~calculates~~has reserved the ~~fair value~~following for issuance under the 2018 ESPP: (i) 1,000,000 shares of common stock, ~~options granted using the Black-Scholes valuation model. The following table summarizes the Company’s grant date fair value~~plus (ii) commencing on January 1, 2019 and ~~assumptions used in determining the fair value~~ending on December 31, 2023, an additional number of ~~all stock options granted during the periods presented:~~

Three Months Ended March 31,
2018 2017
Volatility 67%-68% 73%-74%
Risk-free interest rate 2.25%-2.65% 1.86%-1.99%
Dividend yield 0.0% 0.0%
Expected option term (in years) 5.08 6.25
Weighted average fair value of stock options granted $17.07 $9.18

~~For each period presented, the volatility factor was based~~shares to be added on the ~~Company’s historical volatility during~~first day of each calendar year equal to the ~~expected option term. Estimated forfeitures are based on the actual percentage~~lesser of ~~option forfeitures since the closing~~(A) 1,200,000 shares of common stock, (B) 2% of the ~~Company’s merger with Transave, Inc. in December 2010. The expected option term for these grants was~~number of outstanding shares of common stock on such date and (C) an amount determined ~~using~~by the ~~Company’s historical exercise behavior.~~administrator.

From time to time, the Company grants performance-condition options to certain of its employees. Vesting of these options is subject to the Company achieving certain performance criteria established at the date of grant and the grantees fulfilling a service condition (continued employment).Stock Options - As of March 31, ~~2018, the Company had performance options totaling 133,334 shares outstanding which had not yet met the recognition criteria.~~

~~The following table summarizes the Company’s aggregate stock option activity for the three months ended March 31, 2018:~~

Number of
Shares

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Life in Years

Aggregate
Intrinsic
Value (in
thousands)
Options outstanding at December 31, 2017 8,608,921
$ 14.08

Granted 1,322,350
$ 29.51

Exercised (12,628 ) $ 11.23

Forfeited or expired (53,069 ) $ 15.70

Options outstanding at March 31, 2018 9,865,574
$ 16.14
7.49 $ 73,003
Vested and expected to vest at March 31, 2018 9,499,525
$ 15.97
7.44 $ 71,286
Exercisable at March 31, 2018 4,679,778
$ 12.97
6.17 $ 44,855

~~The total intrinsic value of stock options exercised during the three months ended March 31, 2018 and 2017 was $0.2 million and $0.5 million, respectively.~~

~~As of March 31, 2018,~~2019, there was ~~$44.7~~$43.0 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted average period of ~~2.73~~3.0 years. ~~Included~~During the quarter ended September 30, 2018, performance-condition options totaling $1.1 million, or 133,334 shares, met their recognition criteria as a result of the FDA approval of ARIKAYCE and vested in full. As of March 31, 2019, there were no performance-condition options outstanding.

Restricted Stock Units— As of March 31, 2019, there was $2.8 million of unrecognized compensation expense ~~was $1.1 million~~ related to ~~outstanding performance-condition options. These performance-condition options will vest, and compensation expense will~~unvested RSU awards which is expected to be recognized in the period when FDA approval of ALIS is received in the US. The following table summarizes the range of exercise prices and the number of stock options outstanding and exercisable as of March 31, 2018:

Outstanding as of March 31, 2018 Exercisable as of March 31, 2018
Range of Exercise Prices ($) Number of Options Weighted Average Remaining Contractual Term (in years) Weighted Average Exercise Price ($) Number of Options Weighted Average Exercise Price ($)
$ 3.03
$ 6.90
1,107,302
4.48 $ 4.01
1,069,802
$ 3.91
$ 6.96
$ 10.85
1,068,246
8.01 $ 10.76
419,017
$ 10.62
$ 11.14
$ 12.58
1,085,440
6.12 $ 12.17
799,415
$ 12.17
$ 12.66
$ 13.67
1,031,771
8.46 $ 13.59
329,907
$ 13.53
$ 13.94
$ 16.07
1,191,255
7.24 $ 15.28
666,341
$ 15.12
$ 16.09
$ 17.16
1,489,378
8.47 $ 16.70
350,612
$ 16.18
$ 17.24
$ 22.76
1,436,957
6.77 $ 21.11
1,009,373
$ 21.07
$ 22.84
$ 30.46
1,279,095
9.66 $ 29.05
35,311
$ 23.80
$ 30.86
$ 31.78
155,960
9.74 $ 31.10
—
$ —
$ 32.46
$ 32.46
20,170
9.76 $ 32.46
—
$ —

~~Restricted Stock and Restricted Stock Units~~ ~~— The Company may grant restricted stock (RS) and RSUs to eligible employees, including its executives, and non-employee directors. Each share of RS vests, and each RSU represents~~over a ~~right to receive one share of the Company’s common stock, upon the completion of a specific~~weighted average period of continued service or achievement of a certain milestone. RS and RSU awards 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 RSU awards 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 three months ended March 31, 2018:2.1 years.

Number of
RSUs

Weighted
Average
Grant Price ($)
Outstanding at December 31, 2017 46,914
$ 17.16
Granted 187,549
30.46
Released —
—
Forfeited (90 ) 30.46
Outstanding at March 31, 2018 234,373
$ 27.80

The following table summarizes the aggregate stock-based compensation expense recorded in the ~~Consolidated Statements~~consolidated statements of ~~Comprehensive Loss~~comprehensive loss related to stock options and RSUs during the three months ended March 31, 2019 and 2018, ~~and 2017:~~

respectively (in millions):



	Three Months Ended March 31,
	2019		2018
Research and development expenses	$	2.2	$	1.9
Selling, general and administrative expenses	4.7		3.8
Total	$	6.9	$	5.7

Three Months Ended March 31,
2018 2017
(in millions)
Research and development expenses $ 1.9
$ 1.5
General and administrative expenses 3.8
2.5
Total $ 5.7
$ 4.0

8.10.Income Taxes

The Company’s provision for income taxes was ~~$48,000~~$0.2 million and ~~$30,000~~$0.0 million for the three months ended March 31, ~~2018~~2019 and ~~2017,~~March 31, 2018, respectively. The provision for income taxes in ~~all~~both periods was a result of certain of the Company’s international subsidiaries, ~~in Europe,~~ which had taxable income during the three months ended March 31, ~~2018~~2019 and ~~2017.~~2018. 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 remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. The Company recorded a provisional amount of $94.0 million as of December 31, 2017 related to the remeasurement of certain deferred tax balances, offset by the write-down of the full valuation allowance recorded. Upon further analyses of certain aspects of the Tax Cut and Jobs Act and refinement of the Company's calculations during the three months ended March 31, 2018, the Company determined that the provisional amount would not need to be adjusted.

The Company is subject to US federal, US state and foreign income taxes. In regards to foreign income taxes, the Company was subject to a one-time transition tax based on its total earnings and profits, which are generally deferred from US income taxes under previous US law. Due to the aggregate loss position of our foreign subsidiaries, the Company did not record any provisional amount for the one-time transition tax liability at December 31, 2017.

The Company is subject to US federal and state income taxes and the statute of limitations for tax audit is open for the Company's federal tax returns for the years ended 2014 and later, and is generally open for certain states for the years 2013 and later. The Company has incurred net operating losses since inception, except for the year ended December 31, 2009. Such loss carryforwards would be subject to audit in any tax year in which those losses are utilized, notwithstanding the year of origin. As of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company had recorded no reserves for unrecognized income tax benefits ~~nor had it~~against certain deferred tax assets in the United States. However, given the Company’s valuation allowance position these reserves do not have an impact on the balance sheet as of March 31, 2019 and December 31, 2018 or the income statement for the three months ended March 31, 2019 and March 31, 2018. Due to the noncash impact of the reserve for unrecognized income tax benefits the Company has not recorded any accrued interest or penalties related to uncertain tax positions. The Company does not anticipate any material changes in the amount of unrecognized tax positions over the next 12 months.

9.11.Commitments and Contingencies

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 $1.7 million. 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 December 2021. Future minimum rental payments under this lease are $1.8 million.

Rent expense charged to operations was ~~$0.4~~$0.8 million and $0.4 million for the three months ended March 31, 2019 and 2018, ~~and 2017,~~ respectively. Future minimum rental payments required under the Company’s operating leases for the period from April 1, 2018 to December 31, 2018 and for each of the five years thereafter are as follows (in thousands):

Year Ending December 31:
2018 (remaining) $ 1,145
2019 1,421
2020 477
2021 498
2022 —
2023 —
$ 3,541

Legal Proceedings

On July 15, 2016, a lawsuit captioned Hoey v. Insmed Incorporated, et al, No. 3:16-cv-04323-FLW-TJB (D.N.J. July 15, 2016) was filed in the US District Court for the District of New Jersey on behalf of a putative class of investors who purchased the Company’s common stock from March 18, 2013 through June 8, 2016. The complaint alleged that the Company and certain of its executives violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (Exchange Act) by misrepresenting and/or omitting the likelihood of the European Medicines Agency (EMA) approving the Company’s European marketing authorization application (MAA) for use of ALIS in the treatment of NTM lung disease and the likelihood of commercialization of ALIS in Europe.

On October 25, 2016, the Court issued an order appointing Bucks County Employees Retirement Fund as lead plaintiff for the putative class. On December 15, 2016, the lead plaintiff filed an amended complaint that shortened the putative class period for the Exchange Act claims to March 26, 2014 through June 8, 2016 and added claims under Sections 11, 12, and 15 of the Securities Act of 1933 (Securities Act) on behalf of a putative class of investors who purchased common stock in or traceable to the Company’s March 31, 2015 public offering. The amended complaint named as defendants in the Securities Act claims the Company, certain directors and officers, and the investment banks who served as underwriters in connection with the secondary offering. The amended complaint alleged defendants violated the Securities Act by using a purportedly misleading definition of “culture conversion” and supposedly failing to disclose in the offering materials purported flaws in its Phase 2 study that made the secondary offering risky or speculative and sought damages in an unspecified amount. The Company moved to dismiss the amended complaint on March 1, 2017.

On February 15, 2018, the Court issued a decision granting the motion and dismissing the amended complaint without prejudice as to all defendants. On March 22, 2018 after the lead plaintiffs failed to file an amended complaint, the Court entered final judgment in favor of the defendants, and dismissed the case with prejudice. The deadline for appeal has now passed and the Company considers the case closed.

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

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

Cautionary Note Regarding Forward Looking Statements

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

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

~~risks that data from the remainder of the treatment and off-treatment phases of the CONVERT study (the CONVERT study~~failure to successfully commercialize or ~~the 212 study) will not be consistent with the top-line six-month results of the study;~~

maintain United States (US) approval for ARIKAYCE® (amikacin liposome inhalation suspension), our only approved product;

uncertainties in the ~~research~~degree of market acceptance of ARIKAYCE by physicians, patients, third-party payers and development of our existing product candidates, including due to delays in data readouts, such as the full data from the CONVERT study, patient enrollment and retention or failure of our preclinical studies or clinical trials to satisfy pre-established endpoints, including secondary endpointsothers in the ~~CONVERT study and endpoints in the CONVERT extension study (the 312 study);~~health-care community;

~~risks that subsequent data from the 312 study will not be consistent with the interim results;~~

~~failure~~our inability to obtain ~~or delays in obtaining, regulatory~~full approval of ARIKAYCE from the US Food and Drug Administration (FDA), ~~Japan’s Ministry of Health, Labour and Welfare (MHLW) and Pharmaceuticals and Medical Devices Agency (PMDA),~~including the ~~European Medicines Agency (EMA), and other regulatory authorities for our product candidates or their delivery devices, such as~~risk that we will not successfully complete the eFlow Nebulizer System, including due to insufficient clinical data, selection of endpoints that are not satisfactory to regulators, complexity in the review process for combination products or inadequate or delayed data from a human factorsconfirmatory post-marketing study required for ~~US regulatory~~full approval;

~~failure~~inability of us, PARI Pharma GmbH (PARI) or our other third-party manufacturers to ~~maintain regulatory approval for our product candidates, if received, due to a failure to satisfy post-approval~~comply with regulatory requirements ~~such as~~related to ARIKAYCE or the ~~submission~~Lamira Nebulizer System (Lamira);

our inability to obtain adequate reimbursement from government or third-party payers for ARIKAYCE or acceptable prices for ARIKAYCE;

development of ~~sufficient data from confirmatory clinical studies;~~

unexpected safety ~~and~~or efficacy concerns related to ARIKAYCE;

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

~~lack of experience in conducting and managing preclinical development activities and clinical trials necessary for regulatory approval, including the regulatory filing and review process;~~

~~failure to comply with extensive post-approval regulatory requirements or imposition of significant post‑approval restrictions on~~ our ~~product candidates by regulators;~~

~~uncertainties in the rate and degree of market acceptance of product candidates, if approved;~~

inability to create an effective direct sales and marketing infrastructure or to partner with third parties that offer such an infrastructure for distribution of ARIKAYCE;

failure to obtain regulatory approval to expand ARIKAYCE’s indication to a broader patient population;

failure to successfully conduct future clinical trials for ARIKAYCE and our product candidates, ~~if approved;~~including due to our limited experience in conducting preclinical development activities and clinical trials necessary for regulatory approval and our inability to enroll or retain sufficient patients to complete the trials or generate data necessary for regulatory approval;

~~inaccuracies in~~risks that our ~~estimates of~~clinical studies will be delayed or that serious side effects will be identified during drug development;

failure to obtain regulatory approvals for ARIKAYCE outside the ~~size of the potential markets~~US or for our product candidates in the US, Europe, Japan or ~~limitations by regulators on the proposed treatment population for our product candidates;~~other markets;

failure of third parties on which we are dependent to manufacture sufficient quantities of ARIKAYCE or our product candidates for commercial or clinical needs, to conduct our clinical trials, ~~to manufacture sufficient quantities of our product candidates for clinical or commercial needs, including our raw materials suppliers,~~ or to comply with ~~our agreements or~~ laws and regulations that impact our ~~business;~~business or agreements with us;

~~inaccurate estimates regarding~~ our ~~future capital requirements,~~inability to attract and retain key personnel or to effectively manage our growth;

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

our inability to adequately protect our intellectual property rights or prevent disclosure of our trade secrets and other proprietary information and costs associated with litigation or other proceedings related to such matters;

restrictions or other obligations imposed on us by agreements related to ARIKAYCE or our drug candidates, including ~~those necessary to fund~~ our ~~ongoing clinical development, regulatory~~license agreements with PARI and ~~commercialization efforts as well as milestone payments or royalties owed to third parties;~~

AstraZeneca AB (AstraZeneca), and failure to ~~develop,~~comply with our obligations under such agreements;

the cost and potential reputational damage resulting from litigation to which we are or ~~to license for development, additional~~may become a party, including product ~~candidates, including a failure to attract experienced third-party collaborators;~~liability claims;

~~uncertainties in the timing, scope and rate of reimbursement for our product candidates;~~limited experience operating internationally;

changes in laws and regulations applicable to our business and failure to comply with such laws and regulations;

inability to repay our existing indebtedness orand uncertainties with respect to ~~obtain~~our ability to access future capital; and

delays in the execution of plans to build out and move into the leased space at our new headquarters and to build out an additional ~~capital when needed on desirable terms or at all;~~

~~failure to obtain, protect~~third-party manufacturing facility and ~~enforce our patents and other intellectual property and costs~~unexpected expenses associated with ~~litigation or other proceedings related to such matters;~~those plans.

restrictions imposed on us by license agreements that are critical for our product development, including our license agreements with PARI Pharma GmbH (PARI) and AstraZeneca AB (AstraZeneca), and failure to comply with our obligations under such agreements;

~~competitive developments affecting our product candidates and potential exclusivity related thereto;~~

the cost and potential reputational damage resulting from litigation to which we are or may be a party, including, without limitation, the class action lawsuit against us that recently was dismissed without prejudice;

~~loss of key personnel; and~~

~~lack of experience operating internationally.~~

We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. Any forward-looking statement is based on information current as of the date of this Quarterly Report on Form 10-Q and speaks only as of the date on which such statement is made. Actual events or results may differ materially from the results, plans, intentions or expectations anticipated in these forward-looking statements as a result of a variety of factors, many of which are beyond our control. More information on factors that could cause actual results to differ materially from those anticipated is included from time to time in our reports filed with the Securities and Exchange Commission (SEC), including, but not limited to, those described in the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017.~~2018. We disclaim any obligation, except as specifically required by law, and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events,

conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

The following discussion should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the consolidated financial statements and related notes thereto in our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

OVERVIEW

We are a global biopharmaceutical company ~~focused~~ on a mission to transform the ~~unmet needs~~lives of patients with serious and rare diseases. Our ~~lead~~first commercial product, ~~candidate is amikacin~~ARIKAYCE (amikacin liposome inhalation ~~suspension (ALIS)~~suspension), ~~which is~~received accelerated approval in ~~late-stage development~~the US on September 28, 2018 for the treatment of Mycobacterium avium complex (MAC) lung disease as part of a combination antibacterial drug regimen for adult patients with limited or no alternative treatment options in a refractory ~~nontuberculous mycobacteria (NTM)~~setting, as defined by patients who do not achieve negative sputum cultures after a minimum of 6 consecutive months of a multidrug background regimen therapy. MAC lung disease ~~caused by Mycobacterium avium complex (MAC),~~is a rare and often chronic infection that can cause irreversible lung damage and can be fatal. Our ~~earlier~~ clinical-stage pipeline includes INS1007 and INS1009. INS1007 is a novel oral, reversible inhibitor of dipeptidyl peptidase 1 (DPP1)~~, an enzyme responsible for activating neutrophil serine proteases, which are implicated~~ with therapeutic potential in ~~the pathology of chronic inflammatory lung diseases, such as~~ non-cystic fibrosis (non-CF) ~~bronchiectasis.~~bronchiectasis and other inflammatory diseases. INS1009 is an inhaled ~~nanoparticle~~ formulation of a treprostinil prodrug that may offer a differentiated product profile for rare pulmonary disorders, including pulmonary arterial hypertension (PAH).

The table below summarizes the current status and anticipated milestones for ARIKAYCE and our ~~principal~~ product ~~candidates: ALIS,~~candidates INS1007 and INS1009.



Principal Product/Product ~~Candidate/Target~~ ~~Indications~~ Candidate	Status	Next Expected Milestones
~~ALIS~~ARIKAYCE for ~~NTM~~MAC lung ~~infections~~disease	• We ~~announced top-line data~~continue to focus on having a successful commercial launch of ARIKAYCE in the US for appropriate patients. We began commercial shipments of ARIKAYCE in October 2018. • In September 2018, the FDA granted accelerated approval of ARIKAYCE for the ~~CONVERT study in September 2017. Based on top-line results, the CONVERT study met its primary endpoint~~treatment of ~~culture conversion, which we defined~~refractory MAC lung disease as ~~three consecutive negative monthly sputum cultures by month six with statistical and clinical significance, with 29%~~part of a combination antibacterial drug regimen for adult patients ~~in the ALIS plus current guideline-based therapy (GBT) arm achieving culture conversion, compared to 9% of patients in the GBT-only arm (p<0.0001).~~ • We announced interim data from the CONVERT study and the 312 extension study in January 2018, which we view as consistent with the six-month results of the CONVERT study. The recent data included interim long-term durability data for the CONVERT study and interim efficacy data for the 312 study. ~~• We filed a new drug application (NDA) for approval of ALIS with the US Food and Drug Administration (FDA) at the end of March 2018.~~ who have limited or no alternative treatment options. • The FDA has designated ~~ALIS~~ARIKAYCE as an orphan drug ~~a breakthrough therapy,~~ and a ~~qualified~~qualified infectious disease product (QIDP), for nontuberculous mycobacterial (NTM) lung disease, and the European Commission has granted an orphan designation for ~~ALIS~~ARIKAYCE for the treatment of NTM lung disease.	• The FDA has 60 days from its receipt of our NDA to review the submission to determine if it is complete and acceptable for filing. We are pursuing accelerated approval of ALIS pursuant to Section 506(c) of the Federal Food Drug and Cosmetic Act and 21 C.F.R. Part 314 Subpart H (Accelerated Approval of New Drugs for Serious or Life-Threatening Illnesses) (Subpart H) based on the six-month data from the CONVERT study. • We intend to ~~seek marketing approvals~~submit regulatory filings for ~~ALIS~~ARIKAYCE in ~~certain countries outside~~Europe in mid-2019 and Japan in the ~~US, such as Japan, when sufficient data are available.~~first half of 2020. If approved, we expect ~~ALIS~~ARIKAYCE would be the first inhaled therapy specifically indicated for the treatment of ~~NTM~~MAC lung disease ~~caused by MAC~~ in ~~North America, Japan~~Europe and ~~Europe.~~ Japan. • If approved, we plan to commercialize ~~ALIS~~ARIKAYCE in ~~the US, Japan,~~ certain countries in Europe, Japan and certain other countries. • We intend to collaborate with the FDA on, and invest in, the post-approval confirmatory clinical trial required by the FDA to support full approval and intend to complete the design and protocol of the confirmatory study during the first half of 2019. We also intend to collaborate with the FDA on lifecycle management programs.
INS1007 (oral reversible inhibitor of DPP1) for non-CF bronchiectasis and other rare diseases	• We are enrolling patients in the WILLOW study, a global phase 2, randomized, double-blind, placebo-controlled, parallel-group, multi-center clinical study to assess the efficacy, safety and tolerability, and pharmacokinetics of INS1007 administered once daily for 24 weeks in subjects with non-CF bronchiectasis. ~~• We are currently assessing regulatory strategies which could expedite the development and regulatory reviews of INS1007 in the US and the EU.~~	• We expect to ~~continue to advance~~complete enrollment in the WILLOW clinical study of INS1007 ~~during 2018.~~in mid-2019. • We are exploring the potential of INS1007 in various neutrophil-driven inflammatory ~~conditions.~~conditions, including treating granulomatosis with polyangiitis.
INS1009 (inhaled ~~nanoparticle~~ formulation of a treprostinil prodrug) for rare pulmonary disorders	• The results of our phase 1 study of INS1009 were presented at the European Respiratory Society international congress in September 2016.	• We believe INS1009 may offer a differentiated product profile for rare pulmonary disorders, including PAH, and we are currently evaluating our options to advance its development including exploring its use as an inhaled dry powder formulation.

Our earlier-stage pipeline includes preclinical compounds that we are evaluating in multiple rare diseases of unmet medical need, including ~~methicillin-resistant staph aureus (MRSA)~~gram positive pulmonary infections in CF, NTM lung disease and ~~NTM.~~refractory localized infections involving biofilm. To complement our internal research and development, we actively evaluate in-licensing and acquisition opportunities for a broad range of rare diseases.

Our Strategy

Our strategy focuses on the needs of patients with rare diseases. We secured US regulatory approval of ARIKAYCE for the treatment of refractory MAC lung disease in patients with limited or no alternative treatment options. We are currently primarily focused on the ~~development and commercialization~~US commercial launch of ~~ALIS.~~ARIKAYCE. We are not aware of any other approved inhaled therapies specifically indicated to treat ~~NTM~~MAC lung disease in North America, ~~Japan~~Europe or ~~Europe. While we~~Japan. We believe that ~~ALIS~~ARIKAYCE has the potential to ~~treat a number of different bacterial infections, we are prioritizing securing US regulatory approval of ALIS for adult~~prove beneficial in other patients with ~~treatment refractory NTM lung disease caused by MAC.~~MAC, as well as in other infections. We are also advancing earlier-stage programs in other rare pulmonary disorders.

Our current priorities are as follows:

~~Completing~~Continue our efforts to ensure a successful US launch of ARIKAYCE;

Complete the ~~CONVERT study~~design and protocol of the ~~312 study;~~

~~Securing approval~~confirmatory clinical trial required for the ~~ALIS NDA from~~full US approval of ARIKAYCE by the FDA ~~under Subpart H, based on~~in patients with MAC during the first half of 2019;

Accelerate our global expansion efforts to support potential regulatory filings for ARIKAYCE in Europe in mid-2019 and Japan in the first half of 2020;

Advance our pipeline, which is intended to bring additional therapies to market for patients with serious and rare diseases, including completing enrollment in the WILLOW study, our six-month ~~data from the CONVERT study;~~Phase 2 trial of INS1007 in patients with non-cystic fibrosis bronchiectasis, in mid-2019;

~~Ensuring~~Ensure our product supply chain will support the global commercialization ~~if approved,~~ and potential future ~~life cycle~~lifecycle management programs of ~~ALIS;~~ARIKAYCE;

~~Preparing for potential commercialization of ALIS in the US, Japan, certain countries in Europe, and certain other countries;~~

~~Developing~~Develop the core value dossier to support the ~~global~~ reimbursement for ARIKAYCE in the US, Europe and Japan;

Obtain determinations of ~~ALIS;~~coverage and reimbursement in the US for ARIKAYCE from governmental and other third-party payors;

~~Supporting~~Support further research and lifecycle management strategies for ~~ALIS,~~ARIKAYCE in the US, including exploring the potential use of ~~ALIS~~ARIKAYCE as part of a front-line, multi-drug regimen and as a maintenance ~~monotherapy~~therapy to prevent recurrence (defined as true relapse or reinfection) of ~~NTM~~MAC lung disease;

~~Enrolling patients in the WILLOW phase 2 study of INS1007 in non-CF bronchiectasis;~~

~~Exploring~~Explore INS1009 for use as an inhaled dry powder formulation and ~~generating~~generate preclinical findings from our earlier-stage ~~program(s);~~programs; and

~~Expanding~~Expand our rare disease pipeline through corporate development.

~~Product Pipeline~~

~~ALIS~~ARIKAYCE for Patients with ~~NTM~~MAC Lung Disease

~~Our lead product candidate~~ARIKAYCE is ~~ALIS,~~our first approved product. ARIKAYCE received accelerated approval in the US on September 28, 2018 for the treatment of refractory MAC lung disease as part of a ~~novel, once-daily liposomal formulation of amikacin that is in late-stage clinical development~~combination antibacterial drug regimen for adult patients with limited or no alternative treatment ~~refractory NTM~~options. MAC lung disease ~~caused by MAC,~~is a rare and often chronic infection that can cause irreversible lung damage and can be fatal. Amikacin solution for parenteral administration is an established drug that has activity against a variety of NTM; however, its use is limited by the need to administer it intravenously and by toxicity to hearing, balance, and kidney function (Peloquin et al., 2004). Unlike amikacin solution for intravenous administration, our ~~advanced liposome~~proprietary Pulmovance™ technology uses charge-neutral liposomes to deliver amikacin directly to the ~~lung~~lungs where itliposomal amikacin is taken up by the lung macrophages where the ~~NTM~~MAC infection resides. This technology also prolongs the release of amikacin in the lungs, while minimizing systemic exposure, thereby offering the potential for decreased systemic toxicities. ~~ALIS’s~~ARIKAYCE's ability to deliver high levels of amikacin directly to the lung and sites of MAC infection via the use of our Pulmovance technology, distinguishes it from intravenous amikacin. ~~ALIS~~ARIKAYCE is administered once-daily, using ~~a portable aerosol delivery system, via~~Lamira®, an ~~optimized, investigational eFlow® Nebulizer System~~inhalation device developed and manufactured by PARI. Lamira is a portable nebulizer that enables aerosolization of liquid medications via a vibrating, perforated membrane, and was designed specifically for ARIKAYCE delivery.

The FDA has designated ~~ALIS~~ARIKAYCE as an orphan drug ~~a breakthrough therapy,~~ and a QIDP for NTM lung disease. Orphan designated drugs are eligible for seven years of exclusivity for the orphan indication. QIDP designation features an additional five years of exclusivity for the designated indication. ~~As a result, if ALIS is approved in the US, we expect~~The FDA ~~to grant~~granted a total of 12 years of exclusivity in the indication for which ~~ALIS is~~ARIKAYCE was approved. ~~A QIDP-designated product is eligible~~

Accelerated Approval

In March 2018, we submitted a new drug application (NDA) for ~~fast track status~~ARIKAYCE to the FDA pursuant to Section 506(c) of the Federal Food Drug and ~~is often granted priority review status. A priority review designation~~Cosmetic Act and 21 C.F.R. Part 314 Subpart H (Accelerated Approval of New Drugs for Serious or Life-Threatening Illnesses) (Subpart H). Accelerated approval allows drugs that (i) are being developed to treat a ~~drug~~serious or life-threatening disease or condition and (ii) provide a meaningful therapeutic benefit over existing treatments to be approved substantially based on an intermediate endpoint or a surrogate endpoint that is ~~not~~reasonably likely to predict clinical benefit, rather than a ~~new molecular entity means~~clinical endpoint such as survival or irreversible morbidity. On September 28, 2018, the ~~FDA’s goal is to take action on~~FDA granted approval for ARIKAYCE under the ~~NDA within six months following receipt~~Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD) for the treatment of ~~the NDA.~~

~~The CONVERT Study and 312 Study~~

~~CONVERT Top‑Line Efficacy Data~~

~~The CONVERT study is~~refractory MAC lung disease as part of a ~~randomized, open-label global phase 3 clinical study of ALIS in~~combination antibacterial drug regimen for adult patients with limited or no alternative treatment ~~refractory NTM lung disease caused by MAC. We announced top-line data for~~options via the ~~CONVERT study~~accelerated approval pathway. LPAD, which was enacted as part of the 21st Century Cures Act, serves to advance the development of new antibacterial drugs to treat serious or life-threatening infections in ~~September 2017. The CONVERT study enrolled 336 adult~~limited populations of patients with ~~NTM lung disease caused by MAC who were refractory~~unmet needs. As required for drugs approved under the LPAD pathway, labeling for ARIKAYCE includes certain statements to ~~at least six months' treatment~~convey that the drug has been shown to be safe and effective only for use in a limited population.

As a condition of accelerated approval, we must conduct a post-approval confirmatory clinical trial. The required confirmatory trial, which is currently under discussion with FDA, is proposed to be a ~~multi-drug, guideline-based therapy (GBT). After a screening period of up~~randomized, double-blind, placebo-controlled clinical trial to 10 weeks, eligible patients were randomized 2:1 to once-daily ALIS plus GBT or GBT only. The primary endpoint of the study was the proportion of patients achieving culture conversion, which we defined as three consecutive monthly negative sputum cultures, by month six. Based on top-line results, the CONVERT study met its primary endpoint, with 29% of patients in the ALIS plus GBT arm achieving culture conversion, compared to 9% of patients in the GBT-only arm (p<0.0001).

We also reported top-line data for certain secondary and exploratory endpoints for the first six months of the study. Top‑line data for the six-minute walk test indicated no statistically significant difference between patients in the two arms of the study. However, an analysis of these data (per a pre-specified exploratory endpoint) showed that patients who achieved culture conversion in either arm demonstrated an improvement in six-minute walk distance when compared to patients who did not culture convert (p=0.0108). Top-line data for the secondary endpoint of time to conversion demonstrated that patients in the GBT-only arm took approximately 30% longer to convert when compared to patients on ALIS plus GBT (p<0.0001). We are continuing our analysis of the impact of conversion on a variety of other clinical measures.

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 PMDA. Because the CONVERT study met the primary endpoint of culture conversion at month six based on the top-line results, we submitted an NDA for ALIS to the FDA at the end of March 2018 pursuant to Subpart H, which permits the FDA to approve a product candidate based on a surrogate or intermediate endpoint subject to the requirement that we conduct post-approval studies to verifyassess and describe the clinical benefit of ARIKAYCE in patients with MAC lung disease. The trial will evaluate the ~~product. We expect~~effect of ARIKAYCE on a clinically meaningful endpoint, as compared to ~~receive a six-month priority review from~~an appropriate control, in the ~~FDA. We believe that efficacy~~intended patient population of patients with MAC lung disease. Pursuant to the timetable agreed upon with the FDA, the study protocol is expected to be finalized during the first half of 2019, with trial results to be reported by 2024. Continued approval of ARIKAYCE will be contingent upon verification and description of clinical benefit in this study.

Clinical Trials

Accelerated approval of ARIKAYCE was supported by preliminary data from ~~the~~our CONVERT study, ~~at month six will be sufficient to support~~a global Phase 3 study evaluating the ~~accelerated approval~~safety and efficacy of ~~ALIS. We expect that full approval would be contingent on FDA review~~ARIKAYCE in adult patients with refractory MAC lung disease, using achievement of ~~among other things, the final analyses of durability of~~sputum culture conversion ~~for converters.~~

~~CONVERT Top-Line Safety and Tolerability Data~~

~~Approximately 98% of patients in~~(defined as three consecutive negative monthly sputum cultures) by Month 6 as the ALIS plus GBT arm of the CONVERT study experienced at least one treatment-emergent adverse event (TEAE), compared to 91% of patients in the GBT-only arm, with most events being mild or moderate in severity. A greater percentage of patients in the ALIS plus GBT arm than in the GBT-only arm experienced TEAEs involving dysphonia, cough, haemoptysis, dyspnoea, oropharyngeal pain, diarrhea, nausea, and fatigue. Based on our review of the top-line study safety data, the incidence of dysphonia, cough and dyspnoea among patients in the ALIS plus GBT arm generally decreased after the second study month. Approximately 20% and 18% of patients in the ALIS plus GBT arm and GBT-only arm of the study, respectively, experienced at least one serious treatment emergent adverse event (STEAE). The table below provides additional information regarding certain STEAEs experiencedprimary endpoint. Patients who achieved sputum culture conversion by ~~patients in the CONVERT study.~~



		~~2:1 Randomization~~
~~Patients Reporting STEAEs >3% in Either Arm~~		~~ALIS + GBT (n=223)~~	~~GBT (n=112)~~
~~Patients Reporting At Least One STEAE~~		~~20.2% (45)~~	~~17.9% (20)~~
~~System Organ Class~~	~~Preferred Term~~
~~Respiratory, Thoracic, Mediastinal Disorders~~		~~11.7% (26)~~	~~9.8% (11)~~
	~~Hemoptysis~~	~~2.7% (6)~~	~~4.5% (5)~~
	~~COPD (exacerbation)~~	~~3.1% (7)~~	~~0.9% (1)~~
~~Infections and Infestations~~		~~9.0% (20)~~	~~5.4% (6)~~
	~~Pneumonia~~	~~3.6% (8)~~	~~1.8% (2)~~
~~Cardiac Disorders~~		~~0.4% (1)~~	~~4.5% (5)~~
~~Patient Deaths~~		~~2.7% (6)~~	~~4.5% (5)~~

There were no distinctions between treatment arms for adverse events of hearing loss or renal impairment, side effects commonly associated with the intravenous use of amikacin. As of September 2017, the overall dropout rateMonth 6 continued in the CONVERT study ~~was 16.1%, with~~for an ~~8.9% dropout rate~~additional 12 months of treatment following the first monthly negative sputum culture in ~~the GBT-only arm and a 19.6% dropout rate in the ALIS plus GBT arm. As of December 2017, the overall dropout rate in the CONVERT study was 18% (n=60/336).~~

~~CONVERT Long-Term Durability Data~~

~~In January 2018 we announced interim data on~~order to assess the durability of culture conversion, as defined by patients that have completed treatment and continued in the CONVERT study off all therapy for three ~~months, which we expect will be the endpoint necessary to support full regulatory approval in the US. The following~~months. We previously reported interim durability data are interim results observed through December 2017, and have not been further analyzed. As of December 2017, of the 75 patients achieving culture conversion in the CONVERT study, 53 of these patients were evaluable for durability of culture conversion three months after the completion of treatment. Interim data for durability of culture conversion as of December 2017, ~~on these 53 patients are detailed below:~~



	~~Evaluable Number of Patients~~ as of December 2017 (At Least Three Months Post Treatment)*	~~Percent with Durable Culture~~ ~~Conversion Three Months~~ ~~After Completion~~ ~~of All Treatment~~
~~Converters in the ALIS + GBT arm (n=65)~~	46	in which 60.9% ~~(28/46)~~
~~Converters in the GBT‑only arm (n=10)~~	7	~~0.0% (0/7)~~

* Evaluable number of patients ~~includes all patients~~(28/46) who ~~reached~~had achieved the primary endpoint at Month 6 on ARIKAYCE plus guidelines-based therapy (GBT) remained culture negative three months ~~post-treatment and~~off all therapy, compared to 0.0% of patients (0/7) who ~~discontinued prior to~~had achieved the primary endpoint at Month 6 on GBT only. Final durability data for patients three months ~~post-treatment.~~

~~312 Study~~off all therapy were consistent with these interim data, and safety data for these patients were consistent with safety data previously reported for patients by Month 6 of the CONVERT study. The CONVERT study is ongoing.

~~All non-converters in the CONVERT study, as determined at the month eight visit,~~Patients who did not culture convert by Month 6 may behave been eligible to ~~enter the~~enroll in our 312 study, ~~which is a separate 12-month, single-arm,~~an open-label ~~study. The purpose of the 312~~extension study ~~is to further evaluate the safety and tolerability of long-term treatment with ALIS added to GBT. The secondary endpoints of the 312 study include evaluating the proportion of~~for these non-converting patients ~~achieving culture conversion (three consecutive monthly negative sputum cultures) by month six and the proportion of patients achieving culture conversion by month 12 (end of treatment).~~

~~312 Study Interim Efficacy Data~~

~~In January 2018, we also announced interim data for the 312 study, which enrolled 163 adult patients with NTM lung disease caused by MAC~~ who completed six months of treatment in the CONVERT study. The primary objective of the 312 study ~~but did not demonstrate~~was to evaluate the long-term safety and tolerability of ARIKAYCE in combination with a standard multi-drug regimen. The secondary objectives of the 312 study included evaluating the proportion of subjects achieving culture conversion (defined in the same way as the CONVERT study) by Month 6 and the proportion of subjects achieving culture conversion by Month ~~6. The following data are~~12, which was the end of treatment. We previously reported interim results observed through December 2017, and have not been further analyzed. Patients in the ALIS plus GBT arm of the CONVERT study and patients in the GBT-only arm of the CONVERT study who did not achieve culture conversion by Month 6 had the option to enroll in the 312 study at Month 8. Under the study protocol, non-converting patients from both arms of the CONVERT study will receive 12 months of ALIS plus GBT in the 312 study. We will also use the data from this trial to further assess the impact of the addition of ALIS to background GBT on sputum culture conversion, by Month 6.

~~As of December 2017, of the 163 patients enrolled in the 312 study, 124 patients were evaluable for culture conversion. Descriptive interim culture conversion~~ data as of December 2017 for ~~these 124~~ patients ~~are detailed below. The interim~~in the 312 study, with 28.4% of patients who received GBT only in the CONVERT study (19/67) and 12.3% of patients who had received ARIKAYCE plus GBT in the CONVERT study (7/57) achieving culture conversion ~~data has not been statistically analyzed.~~



	~~Number~~by Month 6 of Patients Completing Six Months of Treatment in the 312 study as of December 2017 **	~~Percent Achieving Sputum~~ ~~Culture Conversion by~~ ~~Month 6 in the 312 study~~
~~Patients who received GBT only in the 212 study and crossed over to receive six months of treatment with ALIS + GBT (n=90)~~	67	~~28.4% (19/67)~~
~~Patients who received ALIS + GBT in the 212 study and crossed over to continue treatment in the 312 study, to receive a combined total of 14 months of ALIS + GBT treatment in both studies (n=73)~~	57	~~12.3% (7/57)~~

** Includes all patients completing six months of treatment, all patients who discontinued prior to six months and all ongoing patients prior to six months who completed two months of treatment.

~~312 Study Interim Safety and Tolerability Data~~

~~We have not yet performed a final analysis of any safety data for~~ the 312 study. ~~However, based on an~~The 312 study has concluded. Final efficacy data regarding culture conversion were consistent with these interim ~~review of~~data. We are continuing to analyze the safety and efficacy data ~~available~~ from the 312 study, but we believe that STEAEs were similar to the STEAEs we reported in September 2017 as part of our top-line data results for the 212 study. As of December 2017, the overall dropout rate in the 312 study was 24% (n=39/163).have not identified any new safety signals.

Further Research and Lifecycle Management ~~for ALIS~~

We are currently exploring and supporting research and lifecycle management programs for ~~ALIS~~ARIKAYCE in the US beyond treatment of refractory ~~NTM~~MAC lung ~~infections caused by MAC.~~disease as part of a combination antibacterial regimen for adult patients who have

limited or no treatment options. Specifically, we are evaluating future study designs focusing on the MAC lung disease treatment pathway, including front-line treatment and ~~monotherapy~~ maintenance to prevent recurrence (defined as true relapse or reinfection) of ~~NTM~~MAC lung disease. ~~In addition,~~As noted above, we ~~are evaluating~~plan to conduct our required confirmatory trial to assess and describe the clinical benefit of ARIKAYCE in patients with MAC lung disease. We intend to submit regulatory filings for ARIKAYCE in Europe in mid-2019 and Japan in the first half of 2020.

Subsequent lifecycle management studies could also potentially enable us to reach more patients. For instance, the use of ARIKAYCE to treat infections caused by non-MAC NTM species, such as M. abscessus,. If the data from the CONVERT study are sufficient to support our marketing authorization applications (MAAs) and regulatory bodies approve ALIS, such lifecycle management studies could enable us to reach more potential patients. is being evaluated. These initiatives ~~may~~ include ~~new clinical studies sponsored by us or~~ investigator-initiated studies, which are clinical studies initiated and sponsored by physicians or research institutions with funding from us, and may also include new clinical studies sponsored by us.

~~Market Opportunity for ALIS in NTM Lung Disease in 2018~~Product Pipeline

NTM lung disease is associated with increased rates of morbidity and mortality, and MAC is the predominant pathogenic species in NTM lung disease in the US, Japan and Europe. The prevalence of NTM lung disease has increased over the past two decades, and we believe it is an emerging public health concern worldwide. Based on currently available information from external sources, including market research funded by us and third parties, and internal analyses and calculations, we estimate potential patient populations in the US, Japan and EU5 (comprised of France, Germany, Italy, Spain and the United Kingdom) for 2018 as follows:

Potential Market Estimated Number of Patients with Diagnosed NTM Lung Disease Estimated Number of Patients Treated for NTM Lung Disease Caused by MAC Estimated Number of Patients Refractory to Treatment
United States 75,000-105,000 40,000-50,000 10,000-15,000
Japan 125,000-145,000 60,000-70,000 15,000-18,000
EU5 14,000 4,400 1,400

We are not aware of any approved inhaled therapies specifically indicated for NTM lung disease in North America, Japan or Europe. Current guideline-based approaches for NTM lung disease, including those from the American Thoracic Society and Infectious Diseases Society of America, involve multi-drug regimens not approved for the treatment of NTM lung disease and treatment that could last two years or more. Based on a burden of illness study that we conducted in the US with a major medical benefits provider, we previously concluded that patients with NTM lung disease are costly to healthcare plans, while a recent claims-based study in the US has shown that patients with NTM lung disease have higher resource utilization and costs than their age and gender-matched controls. Accordingly, we believe that a significant market opportunity for ALIS in NTM lung disease exists in the US and internationally.

We are currently exploring the NTM market opportunity for ALIS in Japan. The CONVERT study included a comprehensive pharmacokinetic sub-study in Japanese subjects in lieu of a separate local pharmacokinetic study in Japan, as agreed with the PDMA. If the data from the CONVERT study are sufficient to support our MAAs, and the FDA approves ALIS, we expect our first regulatory filing outside the US to be in Japan. We have established a Japanese legal entity and began hiring local employees in 2018 to closely manage our regulatory and pre-commercial activities.

INS1007

INS1007 is a small molecule, oral, reversible inhibitor of DPP1, which we licensed from AstraZeneca in October 2016. DPP1 is an enzyme responsible for activating neutrophil serine proteases in neutrophils when they are formed in the bone

marrow. Neutrophils are the most common type of white blood cell and play an essential role in pathogen destruction and inflammatory mediation. Neutrophils contain the neutrophil serine proteases (including neutrophil elastase, proteinase 3, and cathepsin G,G) that have been implicated in a variety of inflammatory diseases. In chronic inflammatory lung diseases, neutrophils accumulate in the airways and release active neutrophil serine proteases in excess that cause lung destruction and inflammation. INS1007 may decrease the damaging effects of inflammatory diseases, such as non-CF bronchiectasis, by inhibiting DPP1 and its activation of neutrophil serine proteases. Non-CF bronchiectasis is a progressive pulmonary disorder in which the bronchi become permanently dilated due to chronic inflammation and infection. Currently, there is no cure, and we are not aware of any FDA-approved therapies specifically indicated for non-CF bronchiectasis.We are exploring the potential of INS1007 in various neutrophil-driven inflammatory conditions, including treating granulomatosis with polyangiitis.

The WILLOW Study

The WILLOW study is a global phase 2, randomized, double-blind, placebo-controlled, parallel group, multi-center clinical study to assess the efficacy, safety and tolerability, and pharmacokinetics of INS1007 administered once daily for 24 weeks in subjects with non-CF bronchiectasis. We commenced enrollment in the WILLOW study in December ~~2017.~~2017, which we expect to complete in mid-2019. In addition, we are exploring the potential of INS1007 in various neutrophil-driven inflammatory conditions.

~~Phase 1 Study Results~~

In a phase 1 study of healthy volunteers conducted by AstraZeneca, INS1007 (previously AZD7986) was well tolerated and demonstrated inhibition of the activity of the neutrophil serine protease neutrophil elastase in a dose and concentration dependent manner. In preclinical studies, it was shown to reversibly inhibit DPP1 and the activation of neutrophil serine proteases within maturing neutrophils.

INS1009

INS1009 is an investigational ~~sustained-release~~ inhaled treprostinil prodrug ~~nanoparticle~~ formulation that has the potential to address certain of the current limitations of existing 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 offer a differentiated product profile for rare pulmonary disorders, including PAH, and we are currently evaluating our options to advance its development, including exploring its use as an inhaled dry powder formulation.

~~Phase 1 Study Results~~

In late 2014, we had a 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.

We have 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. Twenty-four (24) patients were enrolled and received INS1009 with cohorts of eight patients receiving doses of 85 micrograms (mcg), 170 mcg, 340 mcg or placebo. Participants in the first cohort (8 patients) received a single dose of open label treprostinil (Tyvaso®) at 54 mcg 24 hours prior to receiving INS1009 at 85 mcg. The 85 mcg dose of INS1009 provides an equivalent amount of treprostinil on a molar basis as the 54 mcg dose of Tyvaso. The peak treprostinil serum concentration was approximately 90% lower after INS1009 administration compared with Tyvaso, which could indicate a reduced future adverse event (AE) profile. The pharmacokinetic characteristics also supported once- or twice-daily dosing. The longer half-life of treprostinil for INS1009 was likely due to a sustained pulmonary release. The AE profile was consistent with other inhaled prostanoids. These data were presented at the European Respiratory Society international congress in September 2016.

KEY COMPONENTS OF OUR ~~STATEMENT~~RESULTS OF OPERATIONS

Revenues

Product revenues consist primarily of net sales of ARIKAYCE in the US. In October 2018, we began shipping ARIKAYCE to our customers in the US, which include specialty pharmacies and specialty distributors. We recognize revenue for product received by our customers net of allowances for customer credits, including prompt pay discounts, service fees, estimated rebates, including government rebates, such as Medicaid rebates and Medicare Part D coverage gap reimbursements in the US, chargebacks and returns. We also began recognizing revenue related to early access programs (EAPs) in Europe, consisting of sales to the French National Agency for Medicines and Health Products Safety (ANSM), which has granted ARIKAYCE a Temporary Authorization for Use (Autorisation Temporaire d'Utilisation or ATU) and from the named patient program in Germany, both compassionate use programs.

Cost of Product Revenues (excluding amortization of intangible assets)

Cost of product revenues (excluding amortization of intangible assets) consist primarily of direct and indirect costs related to the manufacturing of ARIKAYCE sold, including third-party manufacturing costs, packaging services, freight, allocation of overhead costs, and inventory adjustment charges, in addition to royalty expenses due to PARI. We began capitalizing inventory upon FDA approval of ARIKAYCE.

Research and Development (R&D) Expenses

R&D expenses consist of salaries, benefits and other related costs, including stock-based compensation, for personnel serving in our research and development functions, including medical affairs. Expenses also include other internal operating expenses, the cost of manufacturing our drug candidate(s) for clinical study, the cost of conducting clinical studies, and the cost of conducting preclinical and research activities. In addition, our R&D expenses include payments to third parties for the license rights to products in development (prior to marketing approval), such as for INS1007. Our expenses related to manufacturing our drug candidate(s) for clinical ~~studies and commercial inventory prior to regulatory approvals~~study are primarily related to activities at contract manufacturing organizations (CMOs) that manufacture our product candidates for our use, including purchases of active pharmaceutical ingredients. ~~R&D expenses also include spending to build-out the CMO facilities to prepare for our future global production requirements.~~ Our expenses related to clinical trials are primarily related to activities at contract research organizations that conduct and manage clinical trials on our behalf.

Since 2011, we have focused our development activities principally on our proprietary, advanced liposomal technology designed specifically for inhaled therapies. Our development efforts since 2015 have principally related to the development of ALIS in the NTM lung disease indication described above.

Selling, General and Administrative (SG&A) Expenses

~~General and administrative~~SG&A expenses consist primarily of salaries, benefits and other related costs, including stock-based compensation, for our non-employee directors and personnel serving in our executive, finance and accounting, legal and compliance, commercial and pre-commercial, corporate development, field sales, information technology, program management and human resource functions. ~~General and administrative~~SG&A expenses also include professional fees for legal services, including fees incurred in connection with the securities litigation discussed in Note 9 to our Consolidated Financial Statements - “Commitments and Contingencies - Legal Proceedings” and patent-related expenses, consulting services, including ~~for~~ pre-commercial planning activities such as ~~non-branded~~ disease awareness, insurance, board of director fees, tax and accounting services.

Amortization of Intangible Assets

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

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 the accretion of debt discount, contractual interest ~~expense,~~costs and the amortization of debt issuance costs ~~and~~related to our accretion of debt. Debt discount is accreted, and debt ~~discount. Debt~~ issuance costs are amortized, ~~and the debt discount is accreted~~ to interest expense using the effective interest rate method over the term of the debt. Our balance sheet reflects debt, net of the debt discount, debt issuance costs paid to the lender, and other third-party costs. Unamortized debt issuance costs associated with extinguished debt are expensed in the period of the extinguishment.

RESULTS OF OPERATIONS

Comparison of the Three Months Ended March 31, ~~2018~~2019 and ~~2017~~2018

~~Net Loss~~Overview - Operating Results

~~Net loss~~Our operating results for the quarter ended March 31, ~~2018 was $68.5~~2019, included the following:

Total revenues from sales of ARIKAYCE of $21.9 million ~~or $0.89 per share—basic and diluted, compared with a net loss of $37.4 million, or $0.60 per share—basic and diluted, for~~during the quarter ended March 31, ~~2017. The $31.1~~2019;

Cost of product revenues (excluding amortization of intangibles) of $4.2 million ~~increase in our net loss for~~during the quarter ended March 31, ~~2018~~2019 related to sales of ARIKAYCE;

Increased R&D expenses of $1.1 million as compared to the same period in ~~2017 was primarily due to:~~

~~Increased R&D expenses of $7.8 million,~~the prior year primarily resulting from an increase in ~~external manufacturing~~compensation and related expenses ~~and~~due to an increase in headcount;

Increased SG&A expenses of $22.2 million as compared to the same period in the prior year resulting from higher compensation and related expenses due to an increase in ~~headcount;~~headcount, and

~~Increased general and administrative expenses of $18.9 million, resulting from~~ an increase in ~~consulting fees relating~~commercial activities related to ~~pre-commercial planning activities~~ARIKAYCE;

Amortization of intangible assets of $1.2 million during the quarter ended March 31, 2019; and ~~higher compensation and related expenses due to an increase in headcount.~~

~~In addition, there was a $4.2 million increase in~~Increased interest expense ~~resulting from~~of $1.1 million as compared to the ~~issuance of~~same period in the prior year related to interest on the $450.0 million aggregate principal amount of 1.75% convertible senior notes due 2025 (the Convertible Notes).

Revenues

Total revenue consists of net sales of ARIKAYCE, which was approved by the FDA on September 28, 2018 and launched in ~~connection with~~ the ~~public offering~~US in October 2018. The following table summarizes the sources of revenue for the three months ended March 31, 2019 (in thousands):



	For the Three Months Ended March 31, 2019
Net product revenues, US	$	20,983
Net product revenues, EAPs	919
Total revenues	$	21,902

Cost of Product Revenues (excluding amortization of intangibles)

Cost of product revenues (excluding amortization of intangible assets) consist primarily of direct and indirect costs related to the manufacturing of ARIKAYCE sold, including third-party manufacturing costs, packaging services, freight, production-related overhead costs, and inventory adjustment charges, in addition to royalty expenses due to PARI. We began capitalizing inventory upon FDA approval of ARIKAYCE. Cost of product revenues (excluding amortization of intangible assets) was $4.2 million during the quarter ended March 31, 2019.

All product costs incurred prior to FDA approval of ARIKAYCE in September 2018 were expensed as R&D expenses. As mentioned above, our cost of product revenues includes certain expenses which are fixed, other expenses that ~~occurred~~were incurred after FDA approval and royalties based on net sales. We expect our cost of product revenues (excluding amortization of intangible assets) to continue to be positively impacted during 2019, as we sell through certain inventory that was expensed prior to FDA approval of ARIKAYCE in ~~January~~September 2018.

R&D Expenses

R&D expenses for the quarters ended March 31, ~~2018~~2019 and ~~2017~~March 31, 2018 were comprised of the following ~~components~~ (in thousands):


	Quarters Ended March 31,				Increase (decrease)					Quarters Ended March 31,				Increase (decrease)
	2018		2017		$			%		2019		2018		$			%
External Expenses
Clinical development & research	$	7,818	$	8,488	$	(670	)	(7.9	)%	$	10,529	$	7,818	$	2,711		34.7	%
Manufacturing	7,934		2,744		5,190			189.1	%	556		7,934		(7,378		)	(93.0	)%
Regulatory and quality assurance	1,630		1,356		274			20.2	%
Regulatory, quality assurance, and medical affairs										1,792		1,630		162			9.9	%
Subtotal—external expenses	$	17,382	$	12,588	$	4,794		38.1	%	$	12,877	$	17,382	$	(4,505	)	(25.9	)%
Internal Expenses
Compensation and related expenses	$	9,883	$	7,650	$	2,233		29.2	%
Compensation and benefit related expenses										$	12,757	$	7,953	$	4,804		60.4	%
Stock-based compensation										2,191		1,930		261			13.5	%
Other internal operating expenses	2,833		2,016		817			40.5	%	3,378		2,833		545			19.2	%
Subtotal—internal expenses	$	12,716	$	9,666	$	3,050		31.6	%	$	18,326	$	12,716	$	5,610		44.1	%
Total	$	30,098	$	22,254	$	7,844		35.2	%	$	31,203	$	30,098	$	1,105		3.7	%



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)



Large accelerated filer x		Accelerated filer o
Non-accelerated filer o		Smaller reporting company o
Emerging growth company o
~~Non-accelerated filer~~ o ~~(Do not check if a smaller reporting company)~~		~~Smaller reporting company~~ o
		~~Emerging growth company~~ o



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



PART I. FINANCIAL INFORMATION

ITEM 1	Consolidated Financial Statements

	Consolidated Balance Sheets as of March 31, ~~2018~~2019 (unaudited) and December 31, ~~2017~~2018	3

	Consolidated Statements of Comprehensive Loss (unaudited) for the three months ended March 31, ~~2018~~2019 and ~~2017~~2018	4

	Consolidated Statements of ~~Cash Flows~~Shareholders' Equity (unaudited) for the three months ended March 31, ~~2018~~2019 and ~~2017~~2018	5

	~~Notes to~~ Consolidated ~~Financial~~ Statements of Cash Flows (unaudited) for the three months ended March 31, 2019 and 2018	6

	~~ITEM 2~~Notes to Consolidated Financial Statements (unaudited)	7

ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1517
ITEM 3	Quantitative and Qualitative Disclosures about Market Risk	27
ITEM 4	Controls and Procedures	27

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	27
ITEM 6	Exhibits	28

~~PART II. OTHER INFORMATION~~

~~ITEM 1~~	~~Legal Proceedings~~	28
~~ITEM 1A~~	~~Risk Factors~~	28
~~ITEM 2~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	28
~~ITEM 6~~	~~Exhibits~~SIGNATURE	29

~~SIGNATURE~~		30


	As of			As of			As of			As of
	March 31, 2018			December 31, 2017			March 31, 2019			December 31, 2018
	(unaudited)						(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	686,581		$	381,165		$	420,231		$	495,072
Accounts receivable							9,347			5,515
Inventory							12,682			7,032
Prepaid expenses and other current assets	9,832			8,279			12,372			11,327
Total current assets	696,413			389,444			454,632			518,946

In-process research and development	58,200			58,200
Intangibles, net							57,427			58,675
Fixed assets, net	15,816			12,432			27,933			22,636
Right-of-use assets							44,609			—
Other assets	2,724			1,971			11,314			4,299
Total assets	$	773,153		$	462,047		$	595,915		$	604,556

Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	13,176		$	14,671		$	30,223		$	17,741
Accrued expenses	21,074			29,339			38,317			38,254
Accrued compensation							16,271			22,208
Lease liabilities							9,359			—
Other current liabilities	556			646			82			1,529
Total current liabilities	34,806			44,656			94,252			79,732

Long-term debt, net	302,706			55,567
Debt, long-term							321,313			316,558
Long-term lease liabilities							35,709			—
Other long-term liabilities	785			765			504			—
Total liabilities	338,297			100,988			451,778			396,290

Shareholders’ equity:
Common stock, $0.01 par value; 500,000,000 authorized shares, 76,623,136 and 76,610,508 issued and outstanding shares at March 31, 2018 and December 31, 2017, respectively	766			766
Common stock, $0.01 par value; 500,000,000 authorized shares, 77,596,384 and 77,307,521 issued and outstanding shares at March 31, 2019 and December 31, 2018, respectively							776			773
Additional paid-in capital	1,460,460			1,318,181			1,499,646			1,489,664
Accumulated deficit	(1,026,409		)	(957,885		)	(1,356,315		)	(1,282,162		)
Accumulated other comprehensive income (loss)	39			(3		)	30			(9		)
Total shareholders’ equity	434,856			361,059			144,137			208,266
Total liabilities and shareholders’ equity	$	773,153		$	462,047		$	595,915		$	604,556


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


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



	Common Stock			Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total
	Shares	Amount		Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total
Balance at January 1, 2018	76,611	$	766	$	1,318,181	$	(957,885	)	$	(3	)	$	361,059
Comprehensive loss:
Net loss						(68,524		)				(68,524		)
Other comprehensive income									42			42
Exercise of stock options	12			142								142
Equity component of convertible debt issuance				136,463								136,463
Stock compensation expense				5,674								5,674
Balance at March 31, 2018	76,623	$	766	$	1,460,460	$	(1,026,409	)	$	39		$	434,856

Balance at January 1, 2019	77,308	$	773	$	1,489,664	$	(1,282,162	)	$	(9	)	$	208,266
Comprehensive loss:
Net loss						(74,153		)				(74,153		)
Other comprehensive income									39			39
Exercise of stock options and ESPP shares	253	3		3,046								3,049
Issuance of common stock for vesting of RSUs	35											—
Stock compensation expense				6,936								6,936
Balance at March 31, 2019	77,596	$	776	$	1,499,646	$	(1,356,315	)	$	30		$	144,137



	As of March 31, 2019
			Fair Value
	Carrying Value		Level 1		Level 2		Level 3
Cash and cash equivalents	$	420.2	$	420.2	$	—	$	—



	As of March 31, 2018		As of December 31, 2017
	(in thousands)
Accrued clinical trial expenses	$	5,162	$	7,837
Accrued compensation	4,496		12,197
Accrued professional fees	5,760		4,500
Accrued technical operation expenses	2,058		2,182
Accrued interest payable	1,422		423
Accrued construction costs	1,185		1,719
Other accrued expenses	991		481
	$	21,074	$	29,339



	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years	Aggregate Intrinsic Value (in thousands)
Options outstanding at December 31, 2017	8,608,921		$	14.08
Granted	1,322,350		$	29.51
Exercised	(12,628	)	$	11.23
Forfeited or expired	(53,069	)	$	15.70
Options outstanding at March 31, 2018	9,865,574		$	16.14	7.49	$	73,003
Vested and expected to vest at March 31, 2018	9,499,525		$	15.97	7.44	$	71,286
Exercisable at March 31, 2018	4,679,778		$	12.97	6.17	$	44,855



Outstanding as of March 31, 2018								Exercisable as of March 31, 2018
Range of Exercise Prices ($)				Number of Options	Weighted Average Remaining Contractual Term (in years)	Weighted Average Exercise Price ($)		Number of Options	Weighted Average Exercise Price ($)
$	3.03	$	6.90	1,107,302	4.48	$	4.01	1,069,802	$	3.91
$	6.96	$	10.85	1,068,246	8.01	$	10.76	419,017	$	10.62
$	11.14	$	12.58	1,085,440	6.12	$	12.17	799,415	$	12.17
$	12.66	$	13.67	1,031,771	8.46	$	13.59	329,907	$	13.53
$	13.94	$	16.07	1,191,255	7.24	$	15.28	666,341	$	15.12
$	16.09	$	17.16	1,489,378	8.47	$	16.70	350,612	$	16.18
$	17.24	$	22.76	1,436,957	6.77	$	21.11	1,009,373	$	21.07
$	22.84	$	30.46	1,279,095	9.66	$	29.05	35,311	$	23.80
$	30.86	$	31.78	155,960	9.74	$	31.10	—	$	—
$	32.46	$	32.46	20,170	9.76	$	32.46	—	$	—



	Number of RSUs		Weighted Average Grant Price ($)
Outstanding at December 31, 2017	46,914		$	17.16
Granted	187,549		30.46
Released	—		—
Forfeited	(90	)	30.46
Outstanding at March 31, 2018	234,373		$	27.80



Year Ending December 31:
2018 (remaining)	$	1,145
2019	1,421
2020	477
2021	498
2022	—
2023	—
	$	3,541



Potential Market	Estimated Number of Patients with Diagnosed NTM Lung Disease	Estimated Number of Patients Treated for NTM Lung Disease Caused by MAC	Estimated Number of Patients Refractory to Treatment
United States	75,000-105,000	40,000-50,000	10,000-15,000
Japan	125,000-145,000	60,000-70,000	15,000-18,000
EU5	14,000	4,400	1,400



	Total		Less than 1 year		1 ‑ 3 Years		4 ‑ 5 Years		After 5 Years
	(in thousands)
Debt obligations
Debt maturities	$	450,000	$	—	$	—	$	—	$	450,000
Contractual interest	54,906		7,328		15,750		15,750		16,078
Operating leases	3,541		1,518		1,648		375		—
Purchase obligations	4,725		2,700		2,025		—		—
Total contractual obligations	$	513,172	$	11,546	$	19,423	$	16,125	$	466,078



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

3.2		Amended and Restated Bylaws of Insmed Incorporated (incorporated by reference from Exhibit 3.1 to Insmed Incorporated’s Quarterly Report on Form 10-Q filed on August 6, 2015).

10.1		Form of Award Agreement for Restricted Stock Units issued to directors pursuant to the Insmed Incorporated 2017 Incentive Plan.

10.2		First Amendment to Lease, dated October 1, 2016, between CIP II/AR Bridgewater Holdings LLC and Insmed Incorporated

10.3		Second Amendment to Lease, dated October 17, 2018, between CIP II/AR Bridgewater Holdings LLC and Insmed Incorporated

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

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

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

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

101		The following materials from Insmed Incorporated’s quarterly report on Form 10-Q for the quarter ended March 31, ~~2018~~2019 formatted in ~~XBRL (eXtensible~~iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, (ii) Consolidated Statements of Comprehensive Loss for the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, (iii) Consolidated Statements of Cash Flows for the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, and (iv) Notes to the Unaudited Consolidated Financial Statements.



		INSMED INCORPORATED


Date: May ~~2, 2018~~7, 2019	By	/s/ Paolo Tombesi
		Paolo Tombesi
		Chief Financial Officer
		(Principal Financial and Accounting Officer)