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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion also should be read in conjunction with our consolidated financial statements and the notes thereto contained elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth under the section entitled Risk Factors, Cautionary Note Regarding Forward-Looking Statements and elsewhere herein, our actual results may differ materially from those anticipated in these forward-looking statements.

EXECUTIVE OVERVIEW

We are a global biopharmaceutical company on a mission to transform the lives of patients with serious and rare diseases. Our first commercial product, ARIKAYCE, was approved in the US in September 2018, in the EU in October 2020 and in Japan in March 2021. Our pipeline includes clinical-stage programs, brensocatib and TPIP, as well as other early-stage research programs. Brensocatib is a small molecule, oral, reversible inhibitor of DPP1, which we are developing for the treatment of patients with bronchiectasis and other neutrophil-mediated diseases, including CRSsNP. TPIP is an inhaled formulation of the treprostinil prodrug treprostinil palmitil which may offer a differentiated product profile for PH-ILD and PAH. Our early-stage research programs encompass a wide range of technologies and modalities, including gene therapy, artificial intelligence-driven protein engineering, protein manufacturing, RNA-end joining, and synthetic rescue. We have legal entities in the US, France, Germany, Ireland, Italy, the Netherlands, Switzerland, the UK and Japan.

Refer to Part I, Item 1. "Business" for a summary of our ongoing commercial and clinical programs for ARIKAYCE and our ongoing clinical activities for brensocatib, TPIP and early-stage research programs.

Prior to 2019, we had not generated significant revenue and through December 31, 2023, we had an accumulated deficit of $3.4 billion. We have financed our operations primarily through the public offerings of our equity securities, debt financings and revenue interest financings. Although it is difficult to predict our future funding requirements, based upon our current operating plan, we anticipate that our cash and cash equivalents and marketable securities as of December 31, 2023 will enable us to fund our operations for at least the next 12 months.

Our ability to reduce our operating loss and begin to generate positive cash flow from operations depends on the continued success in commercializing ARIKAYCE and achieving positive results from the ARIKAYCE confirmatory clinical trial program in order to obtain full approval of ARIKAYCE in the US and potentially reach more patients. Additionally, our continued success also depends on bringing additional clinical stage products to market, such as brensocatib, TPIP and our early-stage research programs. We expect to continue to incur substantial expenses related to our research and development activities as we continue the ARIKAYCE confirmatory clinical program, conduct the Phase 3 ASPEN trial for brensocatib, continue the trials for TPIP, and fund development of our early-stage research programs. We also expect to continue to incur significant costs related to the commercialization of ARIKAYCE and our pre-commercialization activities related to brensocatib. Our financial results may fluctuate from quarter to quarter and will depend on, among other factors, the net sales of ARIKAYCE; the scope and progress of our research and development efforts; and the timing of certain expenses. We cannot predict whether or when new products or new indications for marketed products will receive regulatory approval or, if any such approval is received, whether we will be able to successfully commercialize such products and whether or when they may become profitable.

KEY COMPONENTS OF OUR RESULTS OF OPERATIONS

Product Revenues, Net

Product revenues, net, consist of net sales of ARIKAYCE. In October 2018, we began shipping ARIKAYCE to our customers in the US, which include specialty pharmacies and specialty distributors. In December 2020, we began commercial sales of ARIKAYCE in Europe. In July 2021, we began recognizing product revenue from commercial sales of ARIKAYCE in Japan. We recognize revenue for product received by our customers net of allowances for customer credits, including prompt pay discounts, service fees, estimated rebates, including government rebates, such as Medicaid rebates and Medicare Part D coverage gap reimbursements in the US, and chargebacks.

Cost of Product Revenues (Excluding Amortization of Intangible Assets)

Cost of product revenues (excluding amortization of intangible assets) consist primarily of direct and indirect costs related to the manufacturing of ARIKAYCE sold, including third-party manufacturing costs, packaging services, freight, and allocation of overhead costs, in addition to royalty expenses and revenue-based milestones. We began capitalizing inventory upon FDA approval of ARIKAYCEin September 2018.

Research and Development (R&D) Expenses

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

Selling, General and Administrative (SG&A) Expenses

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

Amortization of Intangible Assets

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

Change in Fair Value of Deferred and Contingent Consideration Liabilities

In connection with our acquisitions of Motus and AlgaeneX in August 2021 (the Business Acquisition), we recorded deferred and contingent consideration liabilities related to potential future milestone payments. Adjustments to the fair value are due to changes in: the probability of achieving milestones; our stock price; or certain other estimated assumptions. The change in fair value of deferred and contingent consideration liabilities is calculated quarterly with gains and losses recorded in the consolidated statements of comprehensive loss.

Investment Income and Interest Expense

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

Change in Fair Value of Interest Rate Swap

We record derivative and hedge transactions in accordance with generally accepted accounting principles in the US (GAAP). In the fourth quarter of 2022, we entered into an interest rate swap contract (the Swap Contract) with a notional value of $350 million to economically hedge our variable rate-based term debt for three years, effectively changing the variable rate under the term debt to a fixed interest rate. Our interest rate swap has not been designated as a hedging instrument for accounting purposes. Consequently, all changes in the fair value of the Swap Contract are reported as a component of net loss in the consolidated statements of comprehensive loss.

RESULTS OF OPERATIONS

Comparison of the Years Ended December 31, 2023 and 2022

Overview - Operating Results

Our operating results for the year ended December 31, 2023, included the following:

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•Product revenues, net, increased $59.9 million, or 24.4%, as compared to the prior year as a result of the growth in ARIKAYCE sales;

•Cost of product revenues (excluding amortization of intangibles) increased $10.4 million as compared to the prior year as a result of the increase in sales of ARIKAYCE;

•R&D expenses increased $173.5 million as compared to the prior year primarily resulting from the non-cash costs of the Adrestia and Vertuis acquisitions;

•SG&A expenses increased $78.7 million as compared to the prior year primarily resulting from increases in professional fees and other external expenses;

•Amortization of intangible assets was consistent with the prior year;

•Change in fair value of deferred and contingent consideration liabilities increased $49.5 million primarily as a result of the change in our share price; and

•Interest expense increased $55.2 million as compared to the prior year due to entering into the Term Loan and Royalty Financing Agreement in the fourth quarter of 2022.

Product Revenues, Net

Product revenues, net, consists of net sales of ARIKAYCE. The following table summarizes revenue by geography for the years ended December 31, 2023 and 2022 (in thousands):

For the Year Ended December 31, Increase (decrease)

Product revenues, net, for the year ended December 31, 2023 increased to $305.2 million as compared to $245.4 million in 2022 as a result of the growth in sales of ARIKAYCE in the US, Japan and Europe and the rest of the world. During the fourth quarter of 2022, we reached an agreement with the French authorities on the final reimbursement price related to the ATU program in France and we are required to refund the difference. This final pricing resulted in a change in estimate that reduced revenue by approximately $7.5 million in the fourth quarter of 2022, of which $5.8 million related to periods prior to 2022.

Cost of Product Revenues (Excluding Amortization of Intangibles)

Cost of product revenues (excluding amortization of intangibles) for the years ended December 31, 2023 and 2022 were comprised of the following (in thousands):

For the Year Ended December 31, Increase (decrease)

Cost of product revenues, as % of revenues 21.5 % 22.5 %

Cost of product revenues (excluding amortization of intangibles) increased by $10.4 million, or 19.0%, to $65.6 million for the year ended December 31, 2023 as compared to $55.1 million in 2022. The increase in cost of product revenues (excluding amortization of intangibles) in the year ended December 31, 2023 was directly attributable to the increase in total revenues discussed above.

R&D Expenses

R&D expenses for the years ended December 31, 2023 and 2022 were comprised of the following (in thousands):

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For the Years Ended December 31, Increase (decrease)

External Expenses

Internal Expenses

R&D expenses increased to $571.0 million during the year ended December 31, 2023 from $397.5 million in 2022. The $173.5 million increase was primarily due to the $86.7 million one-time, non-cash asset acquisition costs of the Adrestia and Vertuis acquisitions, a $46.3 million increase in compensation and benefit-related expenses and stock-based compensation costs due to an increase in headcount, and a $21.6 million increase in clinical development and research expenses to support the Phase 3 ASPEN trial of brensocatib, the ARIKAYCE MAC lung disease clinical trial program, and the ongoing Phase 2 PAH and Phase 2 PH-ILD studies of TPIP.

External R&D expenses by product for the years ended December 31, 2023 and 2022 were comprised of the following (in thousands):

For the Year Ended December 31, Increase (decrease)

We expect R&D expenses to increase in 2024 relative to 2023 primarily due to our clinical trial activities and related spend including our Phase 3 ASPEN trial of brensocatib, our confirmatory clinical trial of ARIKAYCE in a treatment setting for patients with MAC lung disease, our TPIP clinical trials and other research efforts for future product candidates.

SG&A Expenses

SG&A expenses for the years ended December 31, 2023 and 2022 were comprised of the following (in thousands):

For the Years Ended December 31, Increase (decrease)

SG&A expenses increased to $344.5 million during the year ended December 31, 2023 from $265.8 million in 2022. The $78.7 million increase was primarily due to commercial readiness activities for brensocatib, including a $32.8 million increase in professional fees and other external expenses and a $32.8 million increase in compensation and benefit-related expenses and stock-based compensation costs due to an increase in headcount. We expect SG&A expenses to continue to increase in 2024 relative to 2023 due, in part, to commercial readiness activities for brensocatib.

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Amortization of Intangible Assets

Amortization of intangible assets for the years ended December 31, 2023 and 2022 was $5.1 million and $5.1 million, respectively. Amortization of intangible assets is comprised of amortization of acquired ARIKAYCE R&D and amortization of the milestones paid to PARI for the FDA and EMA approvals of ARIKAYCE.

Change in Fair Value of Deferred and Contingent Consideration Liabilities

The change in fair value of deferred and contingent consideration liabilities for the year ended December 31, 2023 was $28.7 million. The change is related to the fair value of the potential future consideration to be paid to former equityholders of the businesses we acquired. Adjustments to the fair value are due to changes in: the probability of achieving milestones; our stock price; or certain other estimated assumptions.

Investment Income

Investment income was $42.1 million for the year ended December 31, 2023 as compared to $11.1 million for 2022. The $31.1 million increase in investment income for the year ended December 31, 2023 as compared to the prior year period is primarily due to an increase in the marketable securities balance and interest rates in 2023 relative to 2022.

Interest Expense

Interest expense was $81.7 million for the year ended December 31, 2023 as compared to $26.4 million for 2022. The $55.2 million increase in interest expense for the year ended December 31, 2023 as compared to the prior year period is primarily due to entering into the Term Loan and Royalty Financing Agreement in the fourth quarter of 2022. See Note 10 - Debt and Note 11 - Royalty Financing Agreement for further details.

Change in Fair Value of Interest Rate Swap

The change in fair value of interest rate swap for the year ended December 31, 2023 was $0.3 million. Adjustments to the fair value are due to changes in interest rates as of December 31, 2023 relative to the interest rate of our Swap Contract as of December 31, 2022.

Provision for Income Taxes

The income tax provision was $2.6 million for the year ended December 31, 2023 as compared to $1.4 million for the year ended December 31, 2022. The income tax provision for the years ended December 31, 2023 and 2022 reflects the income tax expense recorded as a result of taxable income in certain of our subsidiaries in Europe and Japan as well as a liability for certain state income taxes.

Comparison of the Years Ended December 31, 2022 and 2021

Please refer to the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for a comparative discussion of our fiscal years ended December 31, 2022 and December 31, 2021.

LIQUIDITY AND CAPITAL RESOURCES

Overview

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

In 2021, we entered into a sales agreement with SVB Leerink LLC (now known as Leerink Partners LLC) (Leerink Partners), to sell shares of our common stock, with aggregate gross sales proceeds of up to $250.0 million, from time to time, through an “at the market” equity offering program (the ATM program), under which Leerink Partners acts as sales agent. During the year ended December 31, 2023, we issued and sold an aggregate of 6,503,041 shares of common stock through the ATM program at a weighted-average public offering price of $24.12 per share and received net proceeds of $152.2 million. As of December 31, 2023, an aggregate of $58.7 million of shares of common stock remain available to be issued and sold under the ATM program.

In October 2022, we entered into a $350 million Term Loan with Pharmakon that matures on October 19, 2027. The Term Loan bears interest at a rate based upon the SOFR, subject to a SOFR floor of 2.5%, in addition to a margin of 7.75% per annum. Up to 50% of the interest payable during the first 24 months from the closing of the Term Loan may be paid-in-kind at our election. If elected, paid-in-kind interest will be capitalized and added to the principal amount of the Term Loan. The Term

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Loan, including the paid-in-kind interest, will be repaid in eight equal quarterly payments starting in the 13th quarter following the closing of the Term Loan (i.e., the quarter ending March 31, 2026), except that the repayment start date may be extended at our option for an additional four quarters, so that repayments start in the 17th quarter following the closing of the Term Loan, subject to the achievement of specified ARIKAYCE data thresholds and certain other conditions. Net proceeds from the Term Loan, after deducting the lenders fees and deal expenses of $15.1 million, were $334.9 million.

In October 2022, we entered into the Royalty Financing Agreement with OrbiMed, whereby OrbiMed paid us $150 million in exchange for the right to receive, on a quarterly basis, royalties in an amount equal to 4% of ARIKAYCE global net sales prior to September 1, 2025 and 4.5% of ARIKAYCE global net sales on or after September 1, 2025, as well as 0.75% of brensocatib global net sales, if approved. In the event that OrbiMed has not received aggregate Revenue Interest Payments equal to or greater than $150 million on or prior to March 31, 2028, the royalty rate for ARIKAYCE will be increased for all subsequent fiscal quarters to a rate which, if applied retroactively, would have resulted in aggregate Revenue Interest Payments to OrbiMed for all fiscal quarters ended on or prior to March 31, 2028 equal to $150 million. In addition, we must make a one-time payment to OrbiMed in an amount that, when added to the aggregate amount of Revenue Interest Payments received by OrbiMed as of March 31, 2028, would equal $150 million. The total Revenue Interest Payments payable by us to OrbiMed are capped at 1.8x of the purchase price or up to a maximum of 1.9x of the purchase price under certain conditions. Net proceeds from the Royalty Financing Agreement, after deducting the lenders fees and deal expenses of $3.6 million, were $146.4 million.

In October 2022, we also completed an underwritten offering of 13,750,000 shares of our common stock at a public offering price of $20.00 per share. Our net proceeds from the sale of the shares, after deducting the underwriting discounts and offering expense of $16.2 million, were $258.8 million.

In May 2021, we completed an underwritten public offering of $575.0 million aggregate principal amount of the 2028 Convertible Notes, including the exercise in full of the underwriters' option to purchase additional notes. Our net proceeds from the offering, after deducting underwriting discounts and offering expenses of $15.7 million, were $559.3 million. A portion of the net proceeds from the 2028 Convertible Notes was used to repurchase $225.0 million of our outstanding 2025 Convertible Notes. We recorded a loss on early extinguishment of debt of $17.7 million, primarily related to the premium paid on extinguishment of a portion of the 2025 Convertible Notes.

In May 2021, we also completed an underwritten public offering of 11,500,000 shares of our common stock, including 1,500,000 shares issued pursuant to the exercise in full of the underwriters' option to purchase additional shares, at a public offering price of $25.00 per share. Our net proceeds from the sale of the shares, after deducting the underwriting discounts and offering expenses of $17.5 million, were $270.1 million.

We may need to raise additional capital to fund our operations, the continued commercialization of ARIKAYCE, launch readiness activities for the potential launch of brensocatib for the treatment of patients with bronchiectasis, if approved, clinical trials for brensocatib, TPIP, and our future product candidates, and to develop, acquire, in-license or co-promote other products or product candidates, including those that address orphan or rare diseases. While we believe we currently have sufficient funds to meet our financial needs for at least the next 12 months, we may opportunistically raise additional capital and may do so through equity or debt financing(s), strategic transactions or otherwise. Our cash requirements for the next 12 months will be impacted by a number of factors, the most significant of which we expect to be the ASPEN trial, expenses related to our commercialization efforts and our ARISE and ENCORE clinical trials for ARIKAYCE, and other development activities for brensocatib, and to a lesser extent, expenses related to the clinical development of TPIP and our early-research programs.

Cash Flows

As of December 31, 2023, we had cash and cash equivalents of $482.4 million, as compared with $1,074.0 million as of December 31, 2022. In addition, as of December 31, 2023, we had marketable securities of $298.1 million as compared with $74.2 million as of December 31, 2022. The $591.7 million decrease in cash and cash equivalents was primarily due to the cash used in operating activities and purchase of marketable securities. Our working capital was $703.4 million as of December 31, 2023 as compared with $1,083.1 million as of December 31, 2022.

Net cash used in operating activities was $536.2 million and $400.4 million for the years ended December 31, 2023 and 2022, respectively. The net cash used in operating activities during the years ended December 31, 2023 and 2022 was primarily for the commercial, clinical and manufacturing activities related to ARIKAYCE, as well as other SG&A expenses and clinical trial expenses related to brensocatib and TPIP. The increase in cash used in operating activities for the year ended December 31, 2023 compared to 2022 was primarily due to the increase in net loss, excluding the adjustments to reconcile net loss to net cash used in operating activities.

Net cash used in investing activities was $223.6 million and $34.6 million for the years ended December 31, 2023 and 2022, respectively. The increase in cash used for investing activities in 2023 is due to the purchases of marketable securities, partially offset by maturity of certain marketable securities.

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Net cash provided by financing activities was $168.4 million and $793.3 million for the years ended December 31, 2023 and 2022, respectively. The decrease in 2023 is due to net cash proceeds from our Term Loan, Royalty Financing Agreement, and the issuance of our common stock in October 2022.

Contractual Obligations

In October 2022, we entered into financings resulting in aggregate gross proceeds of $500 million. We entered into the $350 million senior secured Term Loan with funds managed by Pharmakon, which matures on October 19, 2027. The Term Loan bears interest at a rate based upon SOFR, subject to a SOFR floor of 2.5%, in addition to a margin of 7.75% per annum. We also entered into a $150 million Royalty Financing Agreement with OrbiMed. Under the Royalty Financing Agreement, OrbiMed will be entitled to receive royalties of 4% on ARIKAYCE global net sales until September 1, 2025, and royalties of 4.5% on ARIKAYCE global net sales on or after September 1, 2025, as well as royalties of 0.75% on brensocatib global net sales, if approved. The total royalty payable to OrbiMed is capped at 1.8x of the $150 million purchase price or up to a maximum of 1.9x of the $150 million purchase price under certain conditions. For more information, see Note 10 - Debt and Note 11 - Royalty Financing Agreement in our notes to the consolidated financial statements.

In May 2021, we completed an underwritten public offering of $575.0 million aggregate principal amount of the 2028 Convertible Notes pursuant to an indenture between the Company and Wells Fargo Bank, National Association, as trustee (the Indenture). Net proceeds from the offering, after deducting underwriting discounts and offering expenses of $15.7 million, were $559.3 million. The 2028 Convertible Notes bear interest payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2021. The 2028 Convertible Notes mature on June 1, 2028, unless earlier converted, redeemed, or repurchased. The 2028 Convertible Notes are convertible into common stock of the Company under certain circumstances described in the indenture. For more information, see Note 10 - Debt in our notes to the consolidated financial statements.

In January 2018, we completed an underwritten public offering of $450.0 million aggregate principal amount of the 2025 Convertible Notes pursuant to the Indenture. Net proceeds from the offering, after deducting underwriting discounts and commissions and other offering expenses of $14.2 million, were approximately $435.8 million. A portion of the net proceeds from the 2028 Convertible Notes was used to repurchase $225.0 million of the Company's outstanding 2025 Convertible Notes. The Company recorded a loss on early extinguishment of debt of $17.7 million, primarily related to the premium paid on extinguishment of a portion of the 2025 Convertible Notes. The 2025 Convertible Notes bear interest payable semiannually in arrears on January 15 and July 15 of each year, beginning on July 15, 2018. The 2025 Convertible Notes mature on January 15, 2025, unless earlier converted, redeemed, or repurchased. The 2025 Convertible Notes are convertible into common stock of the Company under certain circumstances described in the Indenture. For more information, see Note 10 - Debt in our notes to the consolidated financial statements.

In April 2020, we entered into a master services agreement with PPD pursuant to which we retained PPD to perform clinical development services in connection with certain of our clinical research programs. The master services agreement has an initial term of five years. Either party may terminate (i) any project addendum under the master services agreement for any reason and without cause upon 30 days’ written notice, (ii) any project addendum in the event of the other party’s breach of the master services agreement or such project addendum upon 30 days’ written notice, provided that such breach is not cured within such 30-day period, (iii) the master services agreement or any project addendum immediately upon the occurrence of an insolvency event with respect to the other party or (iv) any project addendum upon 30 days’ written notice if (a) the continuation of the services under such project addendum would post material ethical or safety risks to study participants, (b) any approval from a regulatory authority necessary to perform the applicable study is revoked, suspended or expires without renewal or (c) in the reasonable opinion of such party, continuation of the services provided under such project addendum would be in violation of applicable law. We have entered into project addenda with PPD to perform clinical development services over several years for, but not limited to, our ARISE, ENCORE, ASPEN studies and other brensocatib and TPIP studies. We currently expect to incur approximately $430.1 million of costs related to these project addenda.

In September 2018, we entered into an agreement (the Lease) with Exeter 700 Route 202/206, LLC to lease 117,022 square feet of office space located in Bridgewater, New Jersey for our corporate headquarters. Subject to certain conditions, we have the one-time option to expand the leased premises by up to 50,000 rentable square feet, exercisable prior to the fifth anniversary of the Commencement Date, which was October 1, 2019. The initial Lease term runs 130 months from the Commencement Date and we have the option to extend that term for up to three additional five-year periods. In addition, we are responsible for operating expenses and taxes pursuant to the Lease. Future minimum payments under the Lease during the initial Lease term are approximately $17.9 million. The Lease contains customary default provisions, including those relating to payment defaults, performance defaults and events of bankruptcy.

In October 2017, we entered into certain agreements with Patheon related to the increase of our long-term production capacity for ARIKAYCE. The agreements provide for Patheon to manufacture and supply ARIKAYCE for our anticipated commercial needs. Under these agreements, we are required to deliver to Patheon the required raw materials, including active pharmaceutical ingredients, and certain fixed assets needed to manufacture ARIKAYCE. Patheon's supply obligations will

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commence once certain technology transfer and construction services are completed. Our manufacturing and supply agreement with Patheon will remain in effect for a fixed initial term, after which it will continue for successive renewal terms unless either we or Patheon have given written notice of termination. The technology transfer agreement will expire when the parties agree that the technology transfer services have been completed. The agreements may also be terminated under certain other circumstances, including by either party due to a material uncured breach of the other party or the other party’s insolvency. These early termination clauses may reduce the amounts due to the relevant parties. The aggregate investment to increase our long-term production capacity, including under the Patheon agreements and related agreements or purchase orders with third parties for raw materials and fixed assets, is estimated to be approximately $104 million.

In October 2016, we entered into the AZ License Agreement, pursuant to which AstraZeneca granted us exclusive global rights for the purpose of developing and commercializing AZD7986 (which we renamed brensocatib). In consideration of the licenses and other rights granted by AstraZeneca, we made an upfront payment of $30.0 million, which was included as research and development expense in the fourth quarter of 2016. In December 2020, we incurred a $12.5 million milestone payment obligation upon first dosing in a Phase 3 clinical trial of brensocatib. Upon the earlier of our notification to AstraZeneca that we intend to file an NDA or releasing an official public statement that we intend to file an NDA, we will owe AstraZeneca an additional $12.5 million. Subsequent to this milestone, we are also obligated to make a series of additional contingent milestone payments totaling up to an additional $60.0 million upon the achievement of regulatory filing milestones. If we elect to develop brensocatib for a second indication, we will be obligated to make an additional series of contingent milestone payments totaling up to $42.5 million, the first of which occurs at the initiation of a Phase 3 trial in the additional indication. We are not obligated to make any additional milestone payments for any additional indications. In addition, we have agreed to pay AstraZeneca tiered royalties ranging from a high single-digit to mid-teens on net sales of any approved product based on brensocatib and one additional payment of $35.0 million upon the first achievement of $1 billion in annual net sales. The AZ License Agreement provides AstraZeneca with the option to negotiate a future agreement with us for commercialization of brensocatib in chronic obstructive pulmonary disease or asthma.

We have a licensing agreement with PARI for the use of optimized Lamira for delivery of ARIKAYCE in treating patients with NTM lung infections, CF and bronchiectasis. Under the licensing agreement, we have rights under several US and foreign issued patents, and patent applications involving improvements to optimized Lamira, to exploit the system with ARIKAYCE for the treatment of such indications, but we cannot manufacture the nebulizers except as permitted under our Commercialization Agreement with PARI, as described below. Lamira has been approved for use in the US (in combination with ARIKAYCE), the EU and Japan. Under the licensing agreement, we made an upfront license fee and milestone payments to PARI. Upon the FDA acceptance of our NDA and the subsequent FDA and EMA approvals of ARIKAYCE, we made additional milestone payments of €1.0 million, €1.5 million, and €0.5 million, respectively, to PARI. In October 2017, we exercised an option to buy-down the royalties payable to PARI, which was included within selling, general and administrative expenses in the fourth quarter of 2017. PARI is entitled to receive royalty payments in the mid-single digits on the annual global net sales of ARIKAYCE, pursuant to the licensing agreement, subject to certain specified annual minimum royalties.

In July 2014, we entered into a Commercialization Agreement with PARI for the manufacture and supply of Lamira as optimized for use with ARIKAYCE. Under the Commercialization Agreement, PARI manufactures Lamira except in the case of certain defined supply failures, when the Company will have the right to make Lamira and have it made by third parties (but not certain third parties deemed under the Commercialization Agreement to compete with PARI). The Commercialization Agreement has an initial term of 15 years that began in October 2018. The term of the Commercialization Agreement may be extended by us for an additional five years by providing written notice to PARI at least one year prior to the expiration of the Initial Term.

In February 2014, we entered into a contract manufacturing agreement with Therapure Biopharma Inc., which has been assumed by Resilience, for the manufacture of ARIKAYCE, on a non-exclusive basis, at a 200 kg scale. Pursuant to the agreement, we collaborated with Resilience to construct a production area for the manufacture of ARIKAYCE in Resilience's existing manufacturing facility in Canada. The agreement has an initial term of five years, which began in October 2018, and will renew automatically for successive periods of two years each, unless terminated by either party by providing the required two years' prior written notice to the other party. Under the agreement, we are obligated to pay certain minimum amounts for the batches of ARIKAYCE produced each calendar year.

In 2004 and 2009, we entered into research funding agreements with CFFT whereby we received $1.7 million and $2.2 million in research funding for the development of ARIKAYCE. As a result of the US approval of ARIKAYCE and in accordance with the agreements, as amended, we owe milestone payments to CFFT of $13.4 million in the aggregate payable through 2025, of which $7.4 million has been paid as of December 31, 2023. Furthermore, if certain global sales milestones were met within five years of the commercialization of ARIKAYCE, we would have owed up to an additional $3.9 million. Through December 31, 2023, we have met and paid $1.7 million of these additional global sales milestone payments.

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Future Funding Requirements

We may need to raise additional capital to fund our operations, including the development and potential commercialization of brensocatib, continued commercialization of ARIKAYCE, current and future clinical trials related to ARIKAYCE, development of TPIP, and the potential development, acquisition, in-license or co-promotion of other products or product candidates, including those that address orphan or rare diseases. We expect that our future capital requirements may be substantial and will depend on many factors, including:

•The timing, outcome, and cost of our ongoing and anticipated clinical trials for our product candidates, including our Phase 3 ASPEN trial;

•The timing and cost of our current and future clinical trials of ARIKAYCE for the treatment of patients with NTM lung infections, including the ARISE and ENCORE trials;

•The cost of discovering or in-licensing additional product candidates;

•The costs of activities related to the regulatory approval process and the timing of approvals, if received;

•The cost of supporting the sales and marketing efforts necessary to support the continued commercial efforts of ARIKAYCE;

•The timing and costs of supporting the commercial launch activities of brensocatib;

•The cost of eventually supporting the commercial launches of TPIP and our other product candidates;

•The cost of filing, prosecuting, defending, and enforcing patent claims;

•The costs of our manufacturing-related activities;

•The cost of hiring more personnel to support our ongoing development and commercialization efforts; and

•The levels, timing and collection of revenue earned from sales of ARIKAYCE and other products approved in the future, if any.

We have raised $1.8 billion in net proceeds from securities offerings since 2021. We believe we currently have sufficient funds to meet our financial needs for at least the next 12 months. However, our business strategy may require us to raise additional capital at any time through equity or debt financing(s), strategic transactions or otherwise.

Off-Balance Sheet Arrangements

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

CRITICAL ACCOUNTING ESTIMATES

Preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenues and expenses and the disclosures of contingent assets and liabilities. We use our historical experience and other relevant factors when developing our estimates and assumptions and we regularly evaluate these estimates and assumptions. The amounts of assets and liabilities reported in our consolidated balance sheets and the amounts reported in our consolidated statements of comprehensive loss are affected by estimates and assumptions, which are used for, but not limited to, the accounting for revenue recognition and indefinite-lived intangible assets. The accounting estimates discussed below involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. Actual results could differ materially from our estimates. For additional accounting policies, see Note 2 - Summary of Significant Accounting Policies in our notes to the consolidated financial statements..

Revenue Recognition

In accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers, we recognize revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration we expect to receive in exchange for the goods or services provided. To determine revenue recognition for arrangements within the scope of ASC 606, we perform 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, we assess the goods or services promised within each contract and determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize 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, we have identified one performance obligation: the sale of ARIKAYCE to its customers. We have not incurred or capitalized any incremental costs associated with obtaining contracts with customers.

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Product revenues, net, consist of net sales of ARIKAYCE. Our customers in the US include specialty pharmacies and specialty distributors. In December 2020, we began recognizing product revenue from commercial sales of ARIKAYCE in Europe. In July 2021, we began recognizing product revenue from commercial sales of ARIKAYCE in Japan. Globally, product revenues are recognized once we perform and satisfy all five steps of the revenue recognition criteria mentioned above.

Revenue is recorded at net selling price (transaction price), which includes estimates of variable consideration for which reserves are established for estimated government rebates, such as Medicaid and Medicare Part D reimbursements, and estimated managed care rebates. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as a current liability. Where appropriate, these estimates take into consideration a range of possible outcomes which are probability-weighted for relevant factors such as our historical experience, current contractual and statutory requirements, and forecasted customer buying and payment patterns. Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the applicable contract. The amount of variable consideration included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from estimates, we adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.

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

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

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of December 31, 2023, our cash and cash equivalents were in cash accounts or were invested in money market funds. Our investments in money market funds are not insured by the federal government. As of December 31, 2023, our marketable securities were invested in US treasury notes with an original maturity of 90 days.

As of December 31, 2023, we had $225 million and $575 million of 2025 Convertible Notes and 2028 Convertible Notes outstanding, respectively. Our 2025 Convertible Notes and our 2028 Convertible Notes bear interest at a coupon rate of 1.75% and 0.75%, respectively. In addition, as of December 31, 2023, we had our $350 million term loan and a $150.0 million Royalty Financing Agreement outstanding. The Term Loan accrues interest quarterly at the SOFR plus a margin of 7.75% per annum. We entered into the Swap Contract as a hedge to the Term Loan variable interest rate. The Royalty Financing Agreement pays interest at 4% of ARIKAYCE global net sales prior to September 1, 2025 and 4.5% thereafter as well as 0.75% of brensocatib global net sales, if approved. If a 10% change in interest rates had occurred on December 31, 2023, it would not have had a material effect on the fair value of our debt as of that date, nor would it have a material effect on our future earnings or cash flows.

The majority of our business is conducted in US dollars. However, we do conduct certain transactions in other currencies, including Euros, British Pounds and Japanese Yen. Historically, fluctuations in foreign currency exchange rates have not materially affected our results of operations. During the years ended December 31, 2023, 2022 and 2021, our results of operations were not materially affected by fluctuations in foreign currency exchange rates.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by Item 8 is included in our Financial Statements and Supplementary Data set forth in Item 15 of Part IV of this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2023. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act means controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit with the SEC is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms, and to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of December 31, 2023 at the reasonable assurance level.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act, as a process designed by, or under the supervision of, our principal executive and principal financial and accounting officers and effected by our board of directors and management to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

•Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with US generally accepted accounting principles, and that receipts and expenditures of our company are being made only in accordance with authorizations of our management and board of directors; and

•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023, based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on management's assessment, management concluded that the Company's internal control over financial reporting was effective as of December 31, 2023.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Attestation Report on Internal Control over Financial Reporting

Ernst & Young LLP, our independent registered public accounting firm, issued an attestation report on our internal control over financial reporting. The report of Ernst & Young LLP is contained in Item 15 of Part IV of this Annual Report on Form 10-K.

ITEM 9B. OTHER INFORMATION

Rule 10b5-1 Trading Plans

During the three months ended December 31, 2023, certain of our officers and directors adopted or terminated Rule 10b5-1 trading plans as follows:

Michael A. Smith, our Chief Legal Officer, entered into a prearranged stock trading arrangement (the Trading Plan) on December 14, 2023. Mr. Smith’s Trading Plan provides for the sale of an aggregate number of up to 44,722 shares of the Company's common stock between March 15, 2024 and September 16, 2024. The Trading Plan was entered into during an open insider trading window and is intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Exchange Act and the Company’s policies regarding insider transactions.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by Item 10 of Form 10-K is incorporated by reference from the discussion responsive thereto under the captions Election of Class II Directors, Corporate Governanceand Delinquent Section 16(a) Reports in our definitive proxy statement for our 2024 annual meeting of shareholders to be filed with the SEC no later than 120 days after the close of the fiscal year covered by this Annual Report on Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

The information required by Item 11 of Form 10-K is incorporated by reference from the discussion responsive thereto under the captions Compensation Discussion and Analysis, Compensation Committee Report, Compensation Committee Interlocks and Insider Participation and Director Compensation in our definitive proxy statement for our 2024 annual meeting of shareholders to be filed with the SEC no later than 120 days after the close of the fiscal year covered by this Annual Report on Form 10-K.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by Item 12 of Form 10-K is incorporated by reference from the discussion responsive thereto under the captions Compensation Discussion and Analysis, Security Ownership of Certain Beneficial Owners and Directors and Management in our definitive proxy statement for our 2024 annual meeting of shareholders to be filed with the SEC no later than 120 days after the close of the fiscal year covered by this Annual Report on Form 10-K.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by Item 13 of Form 10-K is incorporated by reference from the discussion responsive thereto under the captions Corporate Governance and Certain Relationships and Related Transactions in our definitive proxy statement for our 2024 annual meeting of shareholders to be filed with the SEC no later than 120 days after the close of the fiscal year covered by this Annual Report on Form 10-K.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by Item 14 of Form 10-K is incorporated by reference from the discussion responsive thereto under the caption Corporate Governance and Ratification of the Appointment of Independent Registered Public Accounting Firm in our definitive proxy statement for our 2024 annual meeting of shareholders to be filed with the SEC no later than 120 days after the close of the fiscal year covered by this Annual Report on Form 10-K.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)Documents filed as part of this report.

1. FINANCIAL STATEMENTS. The following consolidated financial statements of the Company are set forth herein, beginning onpage 87:

(i) Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42)

(ii) Consolidated Balance Sheets as of December 31, 2023 and 2022

(iii) Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2023, 2022 and 2021

(iv) Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2023, 2022 and 2021

(v) Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022 and 2021

(vi) Notes to Consolidated Financial Statements

2. FINANCIAL STATEMENT SCHEDULES.

None required.

3. EXHIBITS.

The exhibits that are required to be filed or incorporated by reference herein are listed in the Exhibit Index.

EXHIBIT INDEX

4.5 Form of 1.75% Convertible Senior Note due 2025 (included in Exhibit 4.3).

4.6 Form of 0.75% Convertible Senior Note due 2028 (included in Exhibit 4.4).

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21.1 Subsidiaries of Insmed Incorporated (filed herewith).

23.1 Consent of Ernst & Young LLP (filed herewith).

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97 Compensation Recovery Policy (filed herewith).

* Certain portions of this exhibit have been redacted.

** Management contract or compensatory plan or arrangement.

ITEM 16. FORM 10-K SUMMARY

Not applicable.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on February 22, 2024.

INSMED INCORPORATEDa Virginia corporation(Registrant)

By: /s/ WILLIAM H. LEWIS

William H. Lewis Chair and Chief Executive Officer(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on February 22, 2024.

Signature Title

William H. Lewis

Sara Bonstein

/s/ DAVID R. BRENNAN Lead Independent Director

David R. Brennan

/s/ ALFRED F. ALTOMARI Director

Alfred F. Altomari

/s/ ELIZABETH MCKEE ANDERSON Director

Elizabeth McKee Anderson

/s/ CLARISSA DESJARDINS, PH.D. Director

Clarissa Desjardins, Ph.D.

/s/ LEO LEE Director

Leo Lee

/s/ DAVID W.J. MCGIRR Director

David W.J. McGirr

/s/ CAROL A. SCHAFER Director

Carol A. Schafer

/s/ MELVIN SHAROKY, M.D. Director

Melvin Sharoky, M.D.

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Insmed Incorporated

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Insmed Incorporated (the Company) as of December 31, 2023 and 2022, the related consolidated statements of comprehensive loss, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 22, 2024 expressed an unqualified opinion thereon.

Adoption of ASU No. 2020-06

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for convertible notes in 2022 due to the adoption of Accounting Standards Update (ASU) No. 2020-06, Debt— (Subtopic 470-20 & 815-40), and the related amendments.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

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Variable consideration in contracts with customers

/s/ Ernst & Young LLP

We have served as the Company’s auditor since at least 1999, but we are unable to determine the specific year.

Iselin, New Jersey

February 22, 2024

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Insmed Incorporated

Opinion on Internal Control Over Financial Reporting

We have audited Insmed Incorporated’s internal control over financial reporting as of December 31, 2023,based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Insmed Incorporated (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based onthe COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as ofDecember 31, 2023 and 2022, the related consolidated statements of comprehensive loss, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and our report dated February 22, 2024 expressed an unqualified opinion.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Iselin, New Jersey

February 22, 2024

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INSMED INCORPORATED

Consolidated Balance Sheets

(in thousands, except par value and share data)

As of December 31,

Assets

Current assets:

Prepaid expenses and other current assets 24,179 25,468

Liabilities and shareholders' equity

Current liabilities:

Operating lease liabilities, long-term 11,013 14,853

Shareholders' equity:

Accumulated other comprehensive (loss) income (745) 756

See accompanying notes to consolidated financial statements

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INSMED INCORPORATED

Consolidated Statements of Comprehensive Loss

(in thousands, except per share data)

Years Ended December 31,

Operating expenses:

Change in fair value of interest rate swap 320 (1,526) —

Loss on extinguishment of debt — — (17,689)

Basic and diluted net loss per share $ (5.34) $ (3.91) $ (3.88)

Other comprehensive income (loss):

Foreign currency translation and other (losses) gains (2,214) 303 775

Unrealized gain (loss) on marketable securities 713 (515) —

See accompanying notes to audited consolidated financial statements

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INSMED INCORPORATED

Consolidated Statements of Shareholders' Equity

(in thousands)

Shares Amount

Comprehensive loss:

Other comprehensive income 775 775

Equity component of convertible debt issuance 196,358 196,358

Equity component of convertible debt redemption (37,846) (37,846)

Issuance of common stock for vesting of RSUs 217 2 2

Comprehensive loss:

Other comprehensive loss (212) (212)

Issuance of common stock for vesting of RSUs 377 4 4

Comprehensive loss:

Issuance of common stock for vesting of RSUs 543 5 5

See accompanying notes to audited consolidated financial statements

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INSMED INCORPORATED

Consolidated Statements of Cash Flows

(in thousands)

Years Ended December 31,

Operating activities

Adjustments to reconcile net loss to net cash used in operating activities:

Loss on extinguishment of debt — — 17,689

Accretion of debt discount — — 29,149

Paid-in-kind interest capitalized 23,372 4,165 —

Royalty Financing non-cash interest expense 18,846 3,687 —

Accretion of discount on marketable securities, net (9,383) — —

Change in fair value of interest rate swap (320) 1,526 —

Vertuis acquisition 10,250 — —

Adrestia acquisition 76,481 — —

Changes in operating assets and liabilities:

Prepaid expenses and other current assets 2,265 2,528 (5,549)

Investing activities

Cash acquired in asset acquisition 3,417 — —

Cash paid for Business Acquisition, net — — (6,704)

Financing activities

Payment of principal of 1.75% convertible senior notes due 2025 — — (225,000)

Proceeds from issuance of 0.75% convertible senior notes due 2028 — — 575,000

Proceeds from issuance of Term Loan — 350,000 —

Proceeds from issuance Royalty Financing Agreement — 150,000 —

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INSMED INCORPORATED

Consolidated Statements of Cash Flows

(in thousands)

Payments of finance lease principal (1,217) (601) (1,081)

Effect of exchange rates on cash and cash equivalents (250) (996) (933)

Supplemental disclosures of cash flow information:

See accompanying notes to audited consolidated financial statements

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INSMED INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. The Company and Basis of Presentation

Insmed is a global biopharmaceutical company on a mission to transform the lives of patients with serious and rare diseases. The Company's first commercial product, ARIKAYCE, is approved in the US as ARIKAYCE® (amikacin liposome inhalation suspension), in Europe as ARIKAYCE Liposomal 590 mg Nebuliser Dispersion and in Japan as ARIKAYCE inhalation 590mg (amikacin sulfate inhalation drug product). ARIKAYCE received accelerated approval in the US in September 2018 for the treatment of MAC lung disease as part of a combination antibacterial drug regimen for adult patients with limited or no alternative treatment options in a refractory setting. In October 2020, the EC approved ARIKAYCE for the treatment of NTM lung infections caused by MAC in adults with limited treatment options who do not have CF. In March 2021, Japan's MHLW approved ARIKAYCE for the treatment of patients with NTM lung disease caused by MAC who did not sufficiently respond to prior treatment with a multidrug regimen. NTM lung disease caused by MAC (which the Company refers to as MAC lung disease) is a rare and often chronic infection that can cause irreversible lung damage and can be fatal. The Company's pipeline includes brensocatib, TPIP and early-stage research programs. Brensocatib is a small molecule, oral, reversible inhibitor of DPP1, which the Company is developing for the treatment of patients with bronchiectasis and other neutrophil-mediated diseases, including CRSsNP. TPIP is an inhaled formulation of the treprostinil prodrug treprostinil palmitil which may offer a differentiated product profile for PH-ILD and PAH. The Company is also advancing its early-stage research programs encompassing a wide range of technologies and modalities, including gene therapy, artificial intelligence-driven protein engineering, protein manufacturing, RNA-end joining, and synthetic rescue.

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

The Company had $482.4 million in cash and cash equivalents and $298.1 million of marketable securities as of December 31, 2023 and reported a net loss of $749.6 million for the year ended December 31, 2023. The Company has funded its operations through public offerings of equity securities, debt financings and revenue interest financings. The Company expects to continue to incur consolidated operating losses, including losses in its US and certain international entities, while funding R&D activities for ARIKAYCE, brensocatib, TPIP and its other pipeline programs, continuing commercialization and regulatory activities for ARIKAYCE and pre-commercial, regulatory and, if approved, commercialization activities for brensocatib, and funding other general and administrative activities.

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

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Celtrix Pharmaceuticals, Inc., Insmed Holdings Limited, Insmed Gene Therapy LLC, Insmed Ireland Limited, Insmed France SAS, Insmed Germany GmbH, Insmed Limited, Insmed Netherlands Holdings B.V., Insmed Netherlands B.V., Insmed Godo Kaisha, Insmed Switzerland GmbH, Insmed Italy S.R.L., Insmed Innovation UK Limited, and Adrestia Therapeutics Inc. All intercompany transactions and balances have been eliminated in consolidation.

2. Summary of Significant Accounting Policies

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

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Cash and Cash Equivalents—The Company considers cash equivalents to be highly liquid investments with maturities of three months or less from the date of purchase.

Accounts Receivable—Accounts receivable are recorded net of customer allowances for prompt pay discounts, chargebacks, and any estimated expected credit losses. The Company's measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. To date, credit losses have not been material.

Marketable Securities—Marketable securities consists of available-for-sale investments in US Treasury Notes with an original maturity of greater than 90 days. Marketable securities under this classification are recorded at fair value and unrealized gains and losses are recorded within accumulated other comprehensive (loss) income. The estimated fair value of available-for-sale marketable securities is determined based on quoted market prices. Marketable securities maturing in one year or less are classified as current assets and marketable securities maturing in more than one year are classified as non-current assets. The Company did not have available-for-sale securities with a maturity of more than one year as of December 31, 2023. As of December 31, 2022, management did not expect the Company's available-for-sale securities with a maturity of more than one year to be sold or redeemed within the next year and therefore has classified the marketable securities as long-term assets in the consolidated balance sheet.

Fixed Assets, Net—Fixed assets are recorded at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets. Estimated useful lives of three years to five years are used for computer equipment. Estimated useful lives of seven years are used for laboratory equipment, office equipment, manufacturing equipment and furniture and fixtures. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the asset.

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

Impairment Assessment—The Company reviews the recoverability of its finite-lived intangible assets and long-lived assets for indicators of impairments. Events or circumstances that may require an impairment assessment include negative clinical trial results, a significant decrease in the market price of the asset, or a significant adverse change in legal factors or the manner in which the asset is used. If such indicators are present, the Company assesses the recoverability of affected assets by determining if the carrying value of such assets is less than the sum of the undiscounted future cash flows of the assets. If such assets are found to not be recoverable, the Company measures the amount of the impairment by comparing the carrying value of the assets to the fair value of the assets. The Company determined that no indicators of impairment of finite-lived intangible assets or long-lived assets existed at December 31, 2023.

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

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

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

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

Indefinite-lived Intangible Assets—Indefinite-lived intangible assets consist of IPR&D. IPR&D acquired directly in a transaction other than a business combination is capitalized if the projects will be further developed or have an alternative future use; otherwise, they are expensed. The fair values of IPR&D project assets acquired in business combinations are capitalized. The Company generally utilizes the Multi-Period Excess Earning Method to determine the estimated fair value of the IPR&D assets acquired in a business combination. The projections used in this valuation approach are based on many factors, such as relevant market size, patent protection, and expected pricing and industry trends. The estimated future net cash flows are then discounted to the present value using an appropriate discount rate. These assets are treated as indefinite-lived intangible assets until completion or abandonment of the projects, at which time the assets are amortized over the remaining useful life or written off, as appropriate. Intangible assets with indefinite lives, including IPR&D, are tested for impairment if impairment indicators arise and, at a minimum, annually. However, an entity is permitted to first assess qualitative factors to determine if a quantitative impairment test is necessary. Further testing is only required if the entity determines, based on the qualitative assessment, that it is more likely than not that an indefinite-lived intangible asset’s fair value is less than its carrying amount. The indefinite-lived intangible asset impairment test consists of a one-step analysis that compares the fair value of the intangible asset with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The Company considers many factors in evaluating whether the value of its intangible assets with indefinite lives may not be recoverable, including, but not limited to, expected growth rates, the cost of equity and debt capital, general economic conditions, the Company’s outlook and market performance of the Company’s industry and recent and forecasted financial performance. The Company performs a qualitative test for its indefinite-lived intangible assets annually as of October 1. During the year ended December 31, 2023, the Company concluded that no impairment exists.

Goodwill—Goodwill represents the amount of consideration paid in excess of the fair value of net assets acquired as a result of the Company’s business acquisitions accounted for using the acquisition method of accounting. Goodwill is not amortized and is subject to impairment testing at a reporting unit level on an annual basis or when a triggering event occurs that may indicate the carrying value of the goodwill is impaired. An entity is permitted to first assess qualitative factors to determine if a quantitative impairment test is necessary. Further testing is only required if the entity determines, based on the qualitative assessment, that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. The Company reassesses its reporting units as part of its annual segment review. As of December 31, 2023, the Company concluded that it continues to operate as one reporting unit. As of October 1, 2023, the Company's single reporting unit for purposes of its goodwill impairment test had a negative carrying value and the Company performed a qualitative impairment test for goodwill. During the year ended December 31, 2023, the Company concluded that no impairment exists.

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

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when the lease payment is payable to the vendor. Variable lease payments are recognized at the time when the event giving rise to the payment occurs and are recognized in the consolidated statements of comprehensive loss in the same line item as expenses arising from fixed lease payments.

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

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

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

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

Derivatives—In the normal course of business, the Company is exposed to the effects of interest rate changes. The Company may enter into derivative instruments, including interest rate swaps and caps, to manage or hedge interest rate risk. Derivative instruments are recorded at fair value on the balance sheet date. The Company has not elected hedge accounting treatment for the changes in the fair value of derivatives. Changes in the fair value of derivatives are recorded each period and are included in change in fair value of interest rate swap in the consolidated statements of comprehensive loss and consolidated statements of cash flows.

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 Company uses an expected loss methodology to calculate allowances for trade receivables. The Company's measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The Company does not currently have a material allowance for uncollectible trade receivables.The following table presents the percentage of gross product revenue represented by the Company's three largest customers as of the year ended December 31, 2023 and their respective percentages for the year ended December 31, 2022.

December 31,

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

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

Cost of product revenues (excluding amortization of intangible assets) consist primarily of direct and indirect costs related to the manufacturing of ARIKAYCE sold, including third-party manufacturing costs, packaging services, freight, and allocation of overhead costs, in addition to royalty expenses and revenue-based milestone payments. Cost is determined using a standard cost method, which approximates actual cost, and assumes a FIFO flow of goods.

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 R&D expense when consumed.

Research and Development—R&D expenses consist primarily of salaries, benefits and other related costs, including stock-based compensation, for personnel serving in the Company's research and development functions, including medical affairs. R&D expense also includes other internal operating expenses, the cost of manufacturing a product candidate, including the medical devices for drug delivery, for clinical study, the cost of conducting clinical studies, and the cost of conducting preclinical and research activities. In addition, R&D expenses include payments to third parties for the license rights to products in development (prior to marketing approval), such as brensocatib, and may include the cost of asset acquisitions (as described further above). The Company's expenses related to manufacturing its product candidates and medical devices for clinical study are primarily related to activities at CMOs that manufacture its clinical product supply of ARIKAYCE, brensocatib, TPIP and early-stage research. The Company's expenses related to clinical trials are primarily related to activities at CROs that conduct and manage clinical trials on the Company's behalf. These contracts set forth the scope of work to be completed at a fixed fee or amount per patient enrolled. Payments under these contracts primarily depend on performance criteria such as the successful enrollment of patients or the completion of clinical trial milestones as well as time-based fees. Expenses are accrued based on contracted amounts applied to the level of patient enrollment and to activity according to the clinical trial protocol. Nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities are deferred and capitalized. Such amounts are then recognized as an expense as the related goods are delivered or the services are performed, or when the goods or services are no longer expected to be provided.

Stock-based Compensation—The Company recognizes stock-based compensation expense for awards of equity instruments to employees and directors based on the grant-date fair value of those awards. The grant-date fair value of the award is recognized as compensation expense ratably over the requisite service period, which generally equals the vesting period of the award. The Company may also grant performance-based stock options and performance stock units (PSUs) to employees from time to time. The grant-date fair value of performance-based stock options is recognized as compensation expense over the implicit service period using the accelerated attribution method once it is probable that the performance condition will be achieved. The grant-date fair value of performance stock units is recognized as compensation expense on the date the performance conditions become probable, with an initial recording of the cumulative expense that would have been recognized if the PSU expense had been recognized on a straight-line basis since the date of grant. The remaining unamortized fair value of the awards will then be expensed prospectively on a straight-line basis over the remaining service period. Stock-based compensation expense is included in both R&D and SG&A expenses in the consolidated statements of comprehensive loss.

Investment Income and Interest Expense—Investment income consists of interest income earned on the Company's cash and cash equivalents and marketable securities. Interest expense consists primarily of contractual interest costs related to the Company's debt, non-cash interest expense related to the Company's Royalty Financing Agreement (see Note 11) and amortization of debt issuance costs related to the Company's debt.

Income Taxes—The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

A valuation allowance is recorded to reduce the deferred tax assets to the amount that is expected to be realized. In evaluating the need for a valuation allowance, the Company takes into account various factors, including the expected level of

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future taxable income and available tax planning strategies. If actual results differ from the assumptions made in the evaluation of a valuation allowance, the Company records a change in valuation allowance through income tax expense in the period such determination is made.

The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based solely on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that is more likely than not to be sustained upon ultimate settlement. As any adjustment to the Company’s uncertain tax positions would not result in a cash tax liability, it has not recorded any accrued interest or penalties related to its uncertain tax positions.

The Company's policy for interest and penalties related to income tax exposures is to recognize interest and penalties as a component of the income tax provision in the consolidated statements of comprehensive loss.

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

The following table sets forth the reconciliation of the weighted average number of shares used to compute basic and diluted net loss per share for the years ended December 31, 2023, 2022 and 2021.

Years Ended December 31,

(in thousands, except per share amounts)

Numerator:

Denominator:

Effect of dilutive securities:

Common stock options — — —

RS and RSUs — — —

PSUs — — —

Convertible debt securities — — —

Net loss per share:

The following potentially dilutive securities have been excluded from the computations of diluted weighted average common shares outstanding as of December 31, 2023, 2022 and 2021 as their effect would have been anti-dilutive (in thousands).

As of December 31,

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Segment Information—The Company currently operates in one business segment, which is the development and commercialization of therapies for patients with rare diseases. The Company has a single management team that reports to the Chief Executive Officer, the chief operating decision maker, who comprehensively manages the entire business. The Company does not operate separate lines of business with respect to its products or product candidates. Accordingly, the Company has one reportable segment.

Recently Adopted Accounting Pronouncements—In August 2020, the Financial Accounting Standards Board (FASB) issued ASU 2020-06, Debt — Accounting for Convertible Instruments, to reduce the complexity associated with applying GAAP to certain financial instruments with characteristics of liabilities and equity. For convertible instruments, the number of accounting models for convertible debt instruments is reduced, which results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Only convertible instruments that meet the definition of a derivative or are issued with substantial premiums will continue to be subject to the separation models. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021. A modified retrospective and a fully retrospective transition method are both permitted. The Company transitioned using the modified retrospective method. The impact of adopting ASU 2020-06 on January 1, 2022 resulted in an opening balance sheet adjustment increasing debt by approximately $221.9 million and issuance costs classified to debt by approximately $6.1 million, decreasing the deferred tax liability by $1.4 million, as well as an increase to retained earnings of approximately $50.2 million, with an offsetting reduction to additional paid-in-capital of $264.6 million, net of tax.

Recent Accounting Pronouncements (Not Yet Adopted)—In December 2023, the FASB issued ASU 2023-09 Income Taxes—Improvements to Income Tax Disclosures, in order to enhance the transparency and decision usefulness of income tax disclosures. ASU 2023-09 requires greater disaggregation of income tax disclosures related to the income tax rate reconciliation and income taxes paid. ASU 2023-09 will be effective for fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of adoption of ASU 2023-09 on its consolidated financial statements.

3. Fair Value Measurements

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

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

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

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

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

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

Fair Value

Carrying Value Level 1 Level 2 Level 3

Assets

Cash and cash equivalents $ 482.4 $ 482.4 $ — $ —

Marketable securities $ 298.1 $ 298.1 $ — $ —

Collateral for interest rate swap $ 6.0 $ 6.0 $ — $ —

Liabilities

Interest rate swap $ 1.2 $ — $ 1.2 $ —

Deferred consideration $ 5.7 $ — $ 5.7 $ —

Contingent consideration $ 84.6 $ — $ — $ 84.6

Fair Value

Carrying Value Level 1 Level 2 Level 3

Assets

Cash and cash equivalents $ 1,074.0 $ 1,074.0 $ — $ —

Marketable securities $ 74.2 $ 74.2 $ — $ —

Collateral for interest rate swap $ 5.0 $ 5.0 $ — $ —

Liabilities

Interest rate swap $ 1.5 $ — $ 1.5 $ —

Deferred consideration $ 7.4 $ — $ 7.4 $ —

Contingent consideration $ 58.1 $ — $ — $ 58.1

During the year ended December 31, 2023, the Company purchased $588.7 million of marketable securities consisting of US Treasury Notes.

As of December 31, 2023, the Company held $298.1 million of available-for-sale securities, including an unrealized gain of $0.7 million recorded in accumulated other comprehensive (loss) income.As of December 31, 2022, the Company held $74.2 million of available-for-sale securities, net of an unrealized loss of $0.5 million that were in an unrealized gain or loss position.

During the year ended December 31, 2022, the Company entered into an interest rate swap in connection with the Company's Term Loan. The Company entered into the interest rate swap to hedge its variable interest rate in an exchange for a fixed interest rate. The collateral for interest rate swap and the interest rate swap are recorded in other assets and accounts payable and accrued liabilities, respectively, in the consolidated balance sheet as of December 31, 2023 and 2022. The collateral for interest rate swap is cash, a Level 1 asset. The interest rate swap is a Level 2 liability as it uses observable inputs other than quoted market prices in an active market.

There were no transfers in or out of Level 1, Level 2 or Level 3 during the years ended December 31, 2023 and 2022.

The Company reviews the status of each security quarterly to determine whether an other-than-temporary impairment has occurred. In making its determination, the Company considers a number of factors, including: (1) the significance of the decline; (2) whether the security was rated below investment grade; (3) failure of the issuer to make scheduled interest or principal payments; and (4) the Company's ability and intent to retain the investment for a sufficient period of time for it to recover. The Company has determined that there were no other-than-temporary impairments during the year ended December 31, 2023.

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Deferred Consideration

The deferred consideration arose from the Business Acquisition in August 2021 (see Note 18). The Company is obligated to issue to Motus equityholders an aggregate of 184,433 shares of the Company’s common stock on each of the first, second and third anniversaries of the closing date, subject to certain reductions. During August 2022 and August 2023, the Company fulfilled the payments due on the first and second anniversary of the closing date by issuing 171,427 and 177,203 shares of the Company's common stock, respectively, after certain reductions. A valuation of the deferred consideration is performed quarterly, based on the Company's current stock price, with gains and losses included within change in fair value of deferred and contingent consideration liabilities in the consolidated statements of comprehensive loss. As the deferred consideration is settled in shares, there is no discount rate applied in the fair value calculation.

The deferred consideration has been classified as a Level 2 recurring liability as its valuation utilizes an input, the Insmed share price, which is a directly observable input at the measurement date and for the duration of the liabilities' anticipated lives. Deferred consideration expected to be settled within twelve months or less is classified as a current liability and are included in accrued liabilities. As of December 31, 2023, the fair value of deferred consideration included in accrued liabilities was $5.7 million. Deferred consideration expected to be settled in more than twelve months are classified as a non-current liability and are included in other long-term liabilities.

The following observable input was used in the valuation of the deferred consideration as of December 31, 2023 and 2022:

Fair Value as of December 31, 2023(in millions) Observable Input Input Value

Deferred consideration $5.7 Insmed share price on December 31, 2023 $30.99

Fair Value as of December 31, 2022(in millions) Observable Input Input Value

Deferred consideration $7.4 Insmed share price on December 31, 2022 $19.98

Contingent Consideration Liabilities

The contingent consideration liabilities arose from the Business Acquisition in August 2021 (see Note 18). The contingent consideration liabilities consist of developmental and regulatory milestones, a priority review voucher milestone and net sales milestones. Upon the achievement of certain development and regulatory milestone events, the Company is obligated to issue to Motus equityholders up to 5,348,572 shares in the aggregate and AlgaeneX equityholders up to 368,867 shares in the aggregate. The fair value of the development and regulatory milestones are estimated utilizing a probability-adjusted approach. At December 31, 2023, the weighted average probability of success was42%. The development and regulatory milestones will be settled in shares of the Company's common stock. As such, there is no discount rate applied in the fair value calculation.

If the Company were to receive a priority review voucher, the Company is obligated to pay to the Motus equityholders a portion of the value of the priority review voucher, subject to certain reductions. The potential payout will be either 50% of the after-tax net proceeds received by the Company from a sale of the priority review voucher or 50% of the average of the sales prices for the last three publicly disclosed priority review voucher sales, less certain adjustments. The fair value of the priority review voucher milestone is estimated utilizing a probability-adjusted discounted cash flow approach. This obligation will be settled in cash.

The contingent consideration liabilities for net sales milestones were valued using an option pricing model with Monte Carlo simulation. As of December 31, 2023, the fair value of these net sales milestones were deemed immaterial to the overall fair value of the contingent consideration.

The contingent consideration liabilities have been classified as a Level 3 recurring liability as its valuation requires substantial judgment and estimation of factors that are not currently observable in the market. If different assumptions were used for the inputs to the valuation approach, the estimated fair value could be significantly different than the fair value the Company determined. Contingent consideration liabilities expected to be settled within twelve months are classified as a current

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liability withing accounts payable and accrued liabilities in the consolidated balance sheet. Contingent consideration liabilities expected to be settled in more than twelve months are classified as a non-current liability in the consolidated balance sheet. A valuation of the contingent consideration liabilities is performed quarterly with gains and losses included within change in fair value of contingent consideration liabilities in the consolidated statements of comprehensive loss.

The following significant unobservable inputs were used in the valuation of the contingent consideration liabilities as of December 31, 2023 and 2022 (in millions):

Discount rate 10.0%

Discount rate 8.5%

A rollforward of the Company's valuations deferred and contingent consideration liabilities for the years ended December 31, 2023 and 2022 follows (in thousands):

Additions — —

Additions — —

The change in fair value of deferred and contingent consideration liabilities are due to changes in factors such as the probability of achieving milestones, our stock price, or certain other estimated assumptions.

Convertible Notes

The estimated fair value of the liability component of the Company's 0.75% convertible senior notes due 2028 (the 2028 Convertible Notes) (categorized as a Level 2 liability for fair value measurement purposes) as of December 31, 2023 was $665.5 million, determined using current market factors and the ability of the Company to obtain debt on comparable terms to the 2028 Convertible Notes. The $565.0 million carrying value of the 2028 Convertible Notes as of December 31, 2023 excludes the $10.0 million of unamortized issuance costs.

The estimated fair value of the liability component of the Company's 1.75% convertible senior notes due 2025 (the 2025 Convertible Notes) (categorized as a Level 2 liability for fair value measurement purposes) as of December 31, 2023 was $240.2 million, determined using current market factors and the ability of the Company to obtain debt on comparable terms to

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the 2025 Convertible Notes. The $223.9 million carrying value of the 2025 Convertible Notes as of December 31, 2023 excludes the $1.1 million of unamortized issuance costs.

Synthetic Royalty Financing Agreement

In October 2022, the Company entered into the Royalty Financing Agreement with OrbiMed. Under the Royalty Financing Agreement, OrbiMed paid the Company $150 million in exchange for the right to receive, on a quarterly basis, royalties in an amount equal to 4% of ARIKAYCE global net sales prior to September 1, 2025 and 4.5% of ARIKAYCE global net sales on or after September 1, 2025, as well as 0.75% of brensocatib global net sales, if approved. In the event that OrbiMed has not received aggregate Revenue Interest Payments of at least $150 million on or prior to March 31, 2028, the Company must make a one-time payment to OrbiMed for the difference between the $150 million and the aggregated Revenue Interest Payments that have been paid. In addition, the royalty rate for ARIKAYCE will be increased beginning March 31, 2028 to the rate which would have resulted in aggregate Revenue Interest Payments as of March 31, 2028 equaling $150 million. The total Revenue Interest Payments payable by us to OrbiMed are capped at 1.8x of the purchase price or up to a maximum of 1.9x of the purchase price under certain conditions. Net proceeds from the Royalty Financing Agreement, after deducting the lenders fees and deal expenses of $3.6 million, were $146.4 million.

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

4. Product Revenues, Net

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

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

The following table presents a geographic summary of the Company's product revenues, net for the years ended December 31, 2023 and 2022 (in thousands).

For the Year Ended December 31,

During the fourth quarter of 2022, the Company agreed with French authorities on the final reimbursement price related to the temporary authorization for use (Autorisation Temporaire d'Utilisation or ATU) program in France. This final pricing resulted in a change in estimate that reduced revenue by approximately $5.8 million in the fourth quarter of 2022, which

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related to periods prior to 2022. The accrued France ATU reimbursement payable is recorded within accounts payable and accrued liabilities in the consolidated balance sheets (see Note 8).

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

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

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

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

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

The following table provides a summary rollforward of the Company's sales allowances and related accruals for the years ended December 31, 2023 and 2022, which have been deducted in arriving at product revenues, net (in thousands).

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Allowances for prior period sales — (118) (118)

The Company also recognizes revenue related to various EAPs in Europe. EAPs are intended to make products available on a named patient basis before they are commercially available in accordance with local regulations. The allowance for prior period sales of customer credits, fees and discounts in the year ended December 31, 2022is related to the change in estimate for the final France ATU pricing.

5. Inventory

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

As of December 31,

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

6. Intangibles, Net and Goodwill

Intangibles, Net

Finite-lived Intangible Assets

As of December 31, 2023, the Company's finite-lived intangible assets consisted of acquired ARIKAYCE R&D and the milestones paid to PARI for the license to use Lamira for the delivery of ARIKAYCE to patients as a result of the FDA and EC approvals of ARIKAYCE in September 2018 and October 2020, respectively. The Company began amortizing its acquired ARIKAYCE R&D and PARI milestones intangible assets in October 2018, over ARIKAYCE's initial regulatory exclusivity period of 12 years. Amortization of these assets during each of the next five years is estimated to be approximately $5.1 million per year.

Indefinite-lived Intangible Assets

As of December 31, 2023, the Company's indefinite-lived intangible assets consisted of acquired IPR&D from the Business Acquisition (see Note 18). Indefinite-lived intangible assets are not amortized.

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A rollforward of the Company's intangible assets for the years ended December 31, 2023 and 2022 follows (in thousands):

Intangible Asset January 1, Additions Amortization December 31,

Intangible Asset January 1, Additions Amortization December 31,

Goodwill

The Company's goodwill balance of $136.1 million as of December 31, 2023 and 2022 resulted from the August 2021 Business Acquisition (see Note 18).

7. Fixed Assets, Net

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

EstimatedUseful Life (years) As of December 31,

Depreciation expense was $5.5 million, $5.3 million and $9.1 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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8. Accounts Payable and Accrued Liabilities

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

As of December 31,

Accounts payable and other accrued operating expenses $ 65,393 $ 50,461

Accrued technical operation expenses 9,187 3,345

Accrued compensation and employee related costs 48,933 32,040

Accrued royalty and milestones payable 5,674 4,710

Revenue Interest Payments payable 3,347 2,149

Accrued sales allowances and related costs 10,937 6,974

Accrued France ATU reimbursement payable 14,685 12,943