INSMED Inc 10-K for FY2021

INSMED Inc (INSM)

10-K 2022-02-17 For: 2021-12-31

Added on April 09, 2026

About this 10-K

INSMED Inc filed this 10-K on February 17, 2022, covering the fiscal year ended December 31, 2021 (FY2021).

Headline figures

Fiscal year ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $188.46M; up 14.6% from $164.41M a year earlier
Net loss: $434.65M; compared with a net loss of $294.09M a year earlier
Diluted EPS: -$3.88; compared with -$3.01 a year earlier

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(Mark One)
☒						ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
OR
☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to


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

700 US Highway 202/206 Bridgewater, New Jersey 08807 (Address of principal executive offices)						(908) 977-9900 (Registrant's telephone number including area code)


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


			PAGE
REPORT:	FORM 10-K
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS			4
PART I			6
	ITEM 1	BUSINESS	6
	ITEM 1A	RISK FACTORS	32
	ITEM 1B	UNRESOLVED STAFF COMMENTS	56
	ITEM 2	PROPERTIES	57
	ITEM 3	LEGAL PROCEEDINGS	57
	ITEM 4	MINE SAFETY DISCLOSURES	57
PART II			58
	ITEM 5	MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	58
	ITEM 6	[RESERVED]	60
	ITEM 7	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	61
	ITEM 7A	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	70
	ITEM 8	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	70
	ITEM 9	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	71
	ITEM 9A	CONTROLS AND PROCEDURES	71
	ITEM 9B	OTHER INFORMATION	71
PART III			72
	ITEM 10	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	72
	ITEM 11	EXECUTIVE COMPENSATION	72
	ITEM 12	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	72
	ITEM 13	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE	72
	ITEM 14	PRINCIPAL ACCOUNTANT FEES AND SERVICES	72
PART IV			73
	ITEM 15	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	73
	ITEM 16	FORM 10-K SUMMARY	77
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			80
CONSOLIDATED FINANCIAL STATEMENTS			83


Potential Market	Estimated Number of Patients with Diagnosed NTM Lung Disease	Estimated Number of Patients Treated for MAC Lung Disease	Estimated Number of MAC lung disease Patients Refractory to Treatment
United States	95,000-115,000	48,000-55,000	12,000-17,000
European 5	14,000	4,400	1,400
Japan	125,000-145,000	60,000-70,000	15,000-18,000


	For the Year Ended December 31,				Increase (decrease)
	2021		2020		$		%
US	$	159,510	$	157,520	$	1,990	1.3%
Japan	16,006		—		16,006		NA
Europe and rest of world	12,945		6,893		6,052		87.8%
Total product revenues, net	$	188,461	$	164,413	$	24,048	14.6%


	For the Years Ended December 31,				Increase (decrease)
	2021		2020		$		%
External Expenses
Clinical development and research	$	107,096	$	45,709	$	61,387	134.3%
Milestone payment to AstraZeneca	—		12,500		(12,500)		(100.0)%
Manufacturing	29,503		16,912		12,591		74.5%
Regulatory, quality assurance, and medical affairs	17,734		15,557		2,177		14.0%
Subtotal—external expenses	$	154,333	$	90,678	$	63,655	70.2%
Internal Expenses
Compensation and benefit related expenses	$	82,909	$	63,507	$	19,402	30.6%
Stock-based compensation	17,814		11,789		6,025		51.1%
Other internal operating expenses	17,688		15,183		2,505		16.5%
Subtotal—internal expenses	$	118,411	$	90,479	$	27,932	30.9%
Total R&D expenses	$	272,744	$	181,157	$	91,587	50.6%


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

3.2						Amended and Restated Bylaws of Insmed Incorporated (incorporated by reference from Exhibit 3.1 to Insmed Incorporated's Current Report on Form 8-K filed on March 30, 2020).

4.1						Specimen stock certificate representing common stock, $0.01 par value per share, of the Registrant (incorporated by reference from Exhibit 4.2 to Insmed Incorporated's Registration Statement on Form S-4/A (Registration No. 333-30098) filed on March 24, 2000).

4.2						Indenture, dated as of January 26, 2018, by and between the Company and Wells Fargo Bank, National Association (incorporated by reference from Exhibit 4.1 to Insmed Incorporated’s Current Report on Form 8-K filed on January 26, 2018).

4.3						First Supplemental Indenture, dated as of January 26, 2018, by and between the Company and Wells Fargo Bank, National Association (incorporated by reference from Exhibit 4.2 to Insmed Incorporated’s Current Report on Form 8-K filed on January 26, 2018).

4.4						Second Supplemental Indenture, dated as of May 13, 2021, by and between the Company and Wells Fargo Bank, National Association (incorporated by reference from Exhibit 4.2 to Insmed Incorporated’s Current Report on Form 8-K filed on May 13, 2021).

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).

4.7						Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934 (incorporated by reference from Exhibit 4.5 of Insmed Incorporated’s Annual Report on Form 10-K filed on February 25, 2021).

10.1**						Insmed Incorporated Amended and Restated 2000 Stock Incentive Plan (incorporated by reference from Exhibit 10.3 to Insmed Incorporated's Quarterly Report on Form 10-Q filed on May 8, 2013).

10.2**						Insmed Incorporated 2013 Incentive Plan (incorporated by reference from Exhibit 99.1 to Insmed Incorporated's Registration Statement on Form S-8 filed on May 24, 2013).


10.2.1**						Form of Award Agreement for Incentive Stock Options pursuant to the Insmed Incorporated 2013 Incentive Plan (incorporated by reference from Exhibit 10.5 to Insmed Incorporated's Annual Report on Form 10-K filed on March 6, 2014).

10.2.2**						Form of Award Agreement for Non-Qualified Stock Options pursuant to the Insmed Incorporated 2013 Incentive Plan (incorporated by reference from Exhibit 10.6 to Insmed Incorporated's Annual Report on Form 10-K filed on March 6, 2014).

10.3**						Insmed Incorporated 2015 Incentive Plan (incorporated by reference from Exhibit 99.1 to Insmed Incorporated's Registration Statement on Form S-8 filed on May 28, 2015).

10.3.1**						Form of Award Agreement for Non-Qualified Stock Options pursuant to the Insmed Incorporated 2015 Incentive Plan (incorporated by reference from Exhibit 10.2 to Insmed Incorporated’s Quarterly Report on Form 10-Q filed May 3, 2017).

10.4**						Insmed Incorporated 2017 Incentive Plan (incorporated by reference from Exhibit 10.3 to Insmed Incorporated’s Quarterly Report on Form 10-Q filed August 3, 2017).

10.4.1 **						Form of Award Agreements for Restricted Stock Units pursuant to the Insmed Incorporated 2017 Incentive Plan (incorporated by reference from Exhibit 10.4 to Insmed Incorporated’s Quarterly Report on Form 10-Q filed August 3, 2017).

10.4.2**						Amendment to Form of Award Agreement for Restricted Stock Units pursuant to the Insmed Incorporated 2017 Incentive Plan (filed herewith).

10.4.3 **						Form of Award Agreement for Non-Qualified Stock Options pursuant to the Insmed Incorporated 2017 Incentive Plan (incorporated by reference from Exhibit 10.5 to Insmed Incorporated’s Quarterly Report on Form 10-Q filed August 3, 2017).

10.5**						Insmed Incorporated 2019 Incentive Plan (incorporated by reference from Exhibit 10.1 to Insmed Incorporated’s Quarterly Report on Form 10-Q filed August 1, 2019).

10.5.1**						Amendment No. 1 to the Insmed Incorporated 2019 Incentive Plan (incorporated by reference from Appendix A to Insmed Incorporated’s Proxy Statement on Schedule 14A filed March 31, 2020).

10.5.2**						Form of Award Agreement for Restricted Stock Units pursuant to the Insmed Incorporated 2019 Incentive Plan (incorporated by reference from Exhibit 10.2 of Insmed Incorporated’s Quarterly Report on Form 10-Q filed on October 28, 2021).

10.5.3**						Amendment to Form of Award Agreement for Restricted Stock Units pursuant to the Insmed Incorporated 2019 Incentive Plan (incorporated by reference from Exhibit 10.3 of Insmed Incorporated’s Quarterly Report on Form 10-Q filed on October 28, 2021).

10.5.4**						Form of Award Agreement for Restricted Stock Units to non-US employees pursuant to the Insmed Incorporated 2019 Incentive Plan (filed herewith).

10.5.5**						Form of Award Agreement for Non-Qualified Stock Options pursuant to the Insmed Incorporated 2019 Incentive Plan (incorporated by reference from Exhibit 10.5.3 of Insmed Incorporated’s Annual Report on Form 10-K filed on February 25, 2021).

10.5.6 **						Form of Award Agreement for Non-Qualified Stock Options issued to non-US employees pursuant to the Insmed Incorporated 2019 Incentive Plan (incorporated by reference from Exhibit 10.1 of Insmed Incorporated’s Quarterly Report on Form 10-Q filed on October 28, 2021).

10.5.7 **						Form of Award Agreement for Restricted Stock Units issued to directors pursuant to the Insmed Incorporated 2019 Incentive Plan (incorporated by reference from Exhibit 10.5.4 of Insmed Incorporated’s Annual Report on Form 10-K filed on February 25, 2021).

10.5.8**						Form of Award Agreement for Performance-Based Restricted Stock Units pursuant to the Insmed Incorporated 2019 Incentive Plan (filed herewith).

10.5.9**						Form of Award Agreement for Performance-Based Restricted Stock Units to non-US employees pursuant to the Insmed Incorporated 2019 Incentive Plan (filed herewith).


10.6**						Omnibus Amendment to Insmed Incorporated Incentive Plans, dated December 10, 2020 (incorporated by reference from Exhibit 10.6 of Insmed Incorporated’s Annual Report on Form 10-K filed on February 25, 2021).

10.7 **						Amendment No. 2 to Insmed Incorporated 2019 Incentive Plan (incorporated by reference from Appendix A to Insmed Incorporated’s Proxy Statement on Schedule 14A filed April 1, 2021).

10.8 **						Insmed Incorporated Senior Executive Bonus Plan (incorporated by reference from Exhibit 10.2 to Insmed Incorporated's Quarterly Report on Form 10-Q filed on November 5, 2013).

10.9 **						Form of Non-Qualified Stock Option Inducement Award Agreement (incorporated by reference from Exhibit 10.6 to Insmed Incorporated’s Quarterly Report on Form 10-Q filed August 3, 2017).

10.1 0 **						Form of Indemnification Agreement entered into with each of the Company's directors and officers (incorporated by reference from Exhibit 10.1 to Insmed Incorporated's Current Report on Form 8-K filed on January 16, 2014).

10.1 1 **						Employment Agreement, effective as of September 10, 2012, between Insmed Incorporated and William Lewis (incorporated by reference from Exhibit 10.1 to Insmed Incorporated's Current Report on Form 8-K filed on September 11, 2012).

10.1 1 .1**						Amendment to Employment Agreement, effective as of July 31, 2019, between Insmed Incorporated and William Lewis (incorporated by reference from Exhibit 10.5 to Insmed Incorporated’s Quarterly Report on Form 10-Q filed on August 1, 2019).

10.1 2 **						Consulting Agreement, effective as of July 8, 2021, between Christine Pellizzari and Insmed Incorporated (incorporated by reference from Exhibit 10.2 to Insmed Incorporated’s Quarterly Report on Form 10-Q filed on August 5, 2021).

10.1 3 **						Employment Agreement, effective as of January 2, 2013, between Insmed Incorporated and S. Nicole Schaeffer (incorporated by reference from Exhibit 10.2 to Insmed Incorporated's Quarterly Report on Form 10-Q filed on May 7, 2015).

10.1 3 .1**						Amendment to Employment Agreement, effective as of September 26, 2016, between Insmed Incorporated and S. Nicole Schaeffer (incorporated by reference from Exhibit 10.32 to Insmed Incorporated’s Annual Report on Form 10-K filed February 23, 2017).

10.1 3 .2**						Second Amendment to Employment Agreement, effective as of July 31, 2019, between Insmed Incorporated and S. Nicole Schaeffer (incorporated by reference from Exhibit 10.1 to Insmed Incorporated’s Quarterly Report on Form 10-Q filed April 30, 2020).

10.1 4 **						Employment Agreement, effective as of September 27, 2016, between Insmed Incorporated and Roger Adsett (incorporated by reference from Exhibit 10.2 to Insmed Incorporated's Quarterly Report on Form 10-Q filed November 3, 2016).

10.1 4 .1**						Amendment to Employment Agreement, effective as of July 31, 2019, between Insmed Incorporated and Roger Adsett (incorporated by reference from Exhibit 10.6 to Insmed Incorporated’s Quarterly Report on Form 10-Q filed August 1, 2019).

10.1 4 .2**						Second Amendment to Employment Agreement, effective as of July 23, 2021, between Insmed Incorporated and Roger Adsett (incorporated by reference from Exhibit 10.3 to Insmed Incorporated’s Quarterly Report on Form 10-Q filed August 5, 2021).

10.1 5 **						Employment Agreement, effective as of January 28, 2020, between Insmed Incorporated and Sara Bonstein (incorporated by reference from Exhibit 10.13 to Insmed Incorporated's Annual Report on Form 10-K filed February 25, 2020).

10.1 6 **						Employment Agreement, effective as of March 17, 2014, between Insmed Incorporated and John Goll (incorporated by reference from Exhibit 10.14 to Insmed Incorporated's Annual Report on Form 10-K filed February 25, 2020).

10.1 7 **						Employment Agreement, effective as of December 16, 2019, by and between Insmed Incorporated and Martina Flammer, M.D. (incorporated by reference from Exhibit 10.1 of Insmed Incorporated’s Quarterly Report on Form 10-Q filed May 6, 2021).


10.1 7 .1**						Amendment to Employment Agreement, effective as of July 23, 2021, between Insmed Incorporated and Martina Flammer, M.D. (incorporated by reference from Exhibit 10.4 of Insmed Incorporated’s Quarterly Report on Form 10-Q filed August 5, 2021).

10.1 8 **						Employment Agreement, effective as of July 8, 2021, by and between Insmed Incorporated and Michael Smith (incorporated by reference from Exhibit 10.1 of Insmed Incorporated’s Quarterly Report on Form 10-Q filed August 5, 2021).

10.1 9 *						License Agreement, dated April 25, 2008, between Transave, Inc. and PARI Pharma GmbH, and Amendments No. 1-4 thereto (incorporated by reference from Exhibit 10.1 to Insmed Incorporated's Quarterly Report on Form 10-Q filed on October 29, 2020).

10.1 9 .1 *						Amendment No. 5 to License Agreement between Insmed Incorporated and PARI Pharma GmbH, effective as of October 5, 2015 (incorporated by reference from Exhibit 10.14.1 to Insmed Incorporated's Annual Report on Form 10-K filed on February 25, 2016).

10.1 9 .2*						Amendment No. 6 to License Agreement between Insmed Incorporated and PARI Pharma GmbH, effective as of October 9, 2015 (incorporated by reference from Exhibit 10.14.2 to Insmed Incorporated's Annual Report on Form 10-K filed on February 25, 2016).

10.1 9 .3*						Amendment No. 7 to License Agreement between Insmed Incorporated and PARI Pharma GmbH, effective as of July 21, 2017 (incorporated by reference from Exhibit 10.1 to Insmed Incorporated’s Quarterly Report on Form 10-Q filed on November 2, 2017).

10.1 9 .4*						Amendment No. 8 to License Agreement between Insmed Incorporated and PARI Pharma GmbH, effective as of December 19, 2018 (incorporated by reference from Exhibit 10.15.4 to Insmed Incorporated’s Annual Report on Form 10-K filed on February 22, 2019).

10.20 *						Contract Manufacturing Agreement, dated February 7, 2014, between Insmed Incorporated and Resilience Biotechnologies Inc. (successor to Therapure Biopharma Inc.) (incorporated by reference from Exhibit 10.2.1 to Insmed Incorporated's Quarterly Report on Form 10-Q filed on October 29, 2020).

10.20 .1*						Amending Agreement, dated March 13, 2014, between Insmed Incorporated and Resilience Biotechnologies Inc. (successor to Therapure Biopharma Inc.) (incorporated by reference from Exhibit 10.2.2 to Insmed Incorporated's Quarterly Report on Form 10-Q filed on October 29, 2020).

10.2 1 *						Commercialization Agreement dated July 8, 2014 between Insmed Incorporated and PARI Pharma GmbH (incorporated by reference from Exhibit 10.1 to Insmed Incorporated's Quarterly Report on Form 10-Q filed on November 6, 2014).

10.2 1 .1*						Amendment No. 1 to Commercialization Agreement between Insmed Incorporated and PARI Pharma GmbH, effective as of July 21, 2017 (incorporated by reference from Exhibit 10.2 to Insmed Incorporated’s Quarterly Report on Form 10-Q filed on November 2, 2017).

10.2 2 *						Manufacturing and Supply Agreement between Insmed Incorporated and Patheon UK Limited, dated as of October 20, 2017 (incorporated by reference from Exhibit 10.39 to Insmed Incorporated's Annual Report on Form 10-K filed February 23, 2018).

10.2 3 *						Technology Transfer Agreement between Insmed Incorporated and Patheon UK Limited, dated as of October 20, 2017 (incorporated by reference from Exhibit 10.40 to Insmed Incorporated's Annual Report on Form 10-K filed February 23, 2018).

10.23.1*						Amendment to the Technology Transfer Agreement and to the Manufacturing and Supply Agreement, by and between Insmed Incorporated and Patheon UK Limited, dated as of March 11, 2021 (incorporated by reference from Exhibit 10.3 to Insmed Incorporated’s Quarterly Report on Form 10-Q filed May 6, 2021).

10.2 4 *						License Agreement, dated October 4, 2016, between Insmed Incorporated and AstraZeneca AB (incorporated by reference from Exhibit 10.29 to Insmed Incorporated’s Annual Report on Form 10-K filed February 23, 2017).

10.25						Lease Agreement, effective as of July 1, 2016, by and between Insmed Incorporated and CIP II/AR Bridgewater Holdings, LLC (incorporated by reference from Exhibit 10.1 to Insmed Incorporated's Quarterly Report on Form 10-Q filed August 4, 2016).


10.25.1		First Amendment to Lease Agreement, dated October 1, 2016, between CIP II/AR Bridgewater Holdings LLC and Insmed Incorporated (incorporated by reference from Exhibit 10.2 to Insmed Incorporated’s Quarterly Report on Form 10-Q filed May 7, 2019).

10.25.2		Second Amendment to Lease Agreement, dated October 1, 2016, between CIP II/AR Bridgewater Holdings LLC and Insmed Incorporated (incorporated by reference from Exhibit 10.3 to Insmed Incorporated’s Quarterly Report on Form 10-Q filed May 7, 2019).

10.26		Lease Agreement, dated September 11, 2018, by and between Insmed Incorporated and Exeter 700 Route 202/206, LLC (incorporated by reference from Exhibit 10.1 to Insmed Incorporated’s Current Report on Form 8-K filed on September 17, 2018).

10.27		Sales Agreement, dated as of February 25, 2021, by and between Insmed Incorporated and SVB Leerink LLC (incorporated by reference from Exhibit 10.1 to Insmed Incorporated’s Current Report on Form 8-K filed on February 25, 2021).

21.1		Subsidiaries of Insmed Incorporated (filed herewith).

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

31.1		Certification of William H. Lewis, Chair and Chief Executive Officer (Principal Executive Officer) of Insmed Incorporated, pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2003 (filed herewith).

31.2		Certification of Sara Bonstein, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) of Insmed Incorporated, pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2003 (filed herewith).

32.1		Certification of William H. Lewis, Chair and Chief Executive Officer (Principal Executive Officer) of Insmed Incorporated, pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2003 (filed herewith).

32.2		Certification of Sara Bonstein, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) of Insmed Incorporated, pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2003 (filed herewith).

101		The following materials from Insmed Incorporated’s Annual Report on Form 10-K for the year ended December 31, 2021 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of December 31, 2021 and 2020, (ii) Consolidated Statements of Comprehensive Loss for the years ended December 31, 2021, 2020 and 2019, (iii) Consolidated Statements of Shareholders' Equity for the years ended December 31, 2021, 2020 and 2019, (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020, and 2019, and (v) Notes to the Consolidated Financial Statements, and (vi) Cover Page.

104		The cover page from the Annual Report on Form 10-K for the year ended December 31, 2021, formatted in iXBRL and contained in Exhibit 101.

*	Certain portions of this exhibit have been redacted.

**	Management contract or compensatory plan or arrangement.


			INSMED INCORPORATED a Virginia corporation (Registrant)
			By:			/s/ WILLIAM H. LEWIS
						William H. Lewis Chair and Chief Executive Officer (Principal Executive Officer)


Signature						Title

/s/ WILLIAM H. LEWIS						Chair and Chief Executive Officer (Principal Executive Officer)
William H. Lewis

/s/ SARA BONSTEIN						Chief Financial Officer (Principal Financial and Accounting Officer)
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/ STEINAR J. ENGELSEN, M.D.						Director
Steinar J. Engelsen, M.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.


			Variable consideration in contracts with customers
Description of the Matter			As discussed in Note 2 of the consolidated financial statements, the transaction price for product sales is typically adjusted for variable consideration, which includes rebates paid to government agencies, specifically Medicaid. The Company estimates these reserves based upon a range of possible outcomes that are probability-weighted for the estimated payor mix. Auditing the Company's estimate of variable consideration for amounts to be paid to government agencies was complex and judgmental due to uncertainty about the ultimate third-party payor at the time of shipment to the specialty pharmacies and the amounts of rebates to be paid to those government agencies. The transaction price is sensitive to assumptions used in the rebate calculations.
How We Addressed the Matter in Our Audit			We identified, evaluated and tested controls over management’s review of the calculated reductions to gross product prices related to government agencies including management’s review of the significant assumptions and the data utilized in its calculations. To test the revenue adjustments related to government agencies our audit procedures included, among others, using internal specialists to assist with recalculating government rebates. We also tested the underlying data and inputs used by the Company in its determination of the estimated payor mix. We compared the inputs used by management to historical trends, evaluated the change in the estimated rebates amounts recorded throughout the year and assessed the historical accuracy of management’s estimates against actual results.


	For the Year Ended December 31,						Increase (decrease)
	2021			2020			$		%
Cost of product revenues (excluding amortization of intangibles)	$	44,152		$	39,872		$	4,280	10.7%
Cost of product revenues, as % of revenues	23.4		%	24.3		%


	As of December 31,
		2021		2020
Assets
Current assets:
Cash and cash equivalents		$	716,782	$	532,756
Accounts receivable		24,351		16,562
Inventory		67,009		49,592
Prepaid expenses and other current assets		28,898		23,982
Total current assets		837,040		622,892

Marketable securities		50,043		—
Fixed assets, net		52,955		53,953
Finance lease right-of-use assets		9,256		10,334
Operating lease right-of-use assets		33,305		32,946
Intangibles, net		73,809		49,261
Goodwill		136,110		—
Other assets		50,990		26,769
Total assets		$	1,243,508	$	796,155

Liabilities and shareholders' equity
Current liabilities:
Accounts payable		$	35,784	$	42,853
Accrued liabilities		60,665		37,807
Accrued compensation		28,581		25,591
Finance lease liabilities		609		1,081
Operating lease liabilities		9,527		11,475


Total current liabilities		135,166		118,807

Debt, long-term		566,588		356,318
Contingent consideration		75,668		—
Finance lease liabilities, long-term		14,103		14,713
Operating lease liabilities, long-term		21,441		21,255
Other long-term liabilities		20,074		9,178
Total liabilities		833,040		520,271

Shareholders' equity:
Common stock, $0.01 par value; 500,000,000 authorized shares, 118,738,266 and 102,763,060 issued and outstanding shares at December 31, 2021 and December 31, 2020, respectively		1,187		1,028


	Years Ended December 31,
	2021		2020		2019
Product revenues, net	$	188,461	$	164,413	$	136,467

Operating expenses:
Cost of product revenues (excluding amortization of intangible assets)	44,152		39,872		24,212
Research and development	272,744		181,157		131,711
Selling, general and administrative	234,273		203,613		210,796
Amortization of intangible assets	5,052		5,003		4,993
Change in fair value of deferred and contingent consideration liabilities	7,334		—		—
Total operating expenses	563,555		429,645		371,712

Operating loss	(375,094)		(265,232)		(235,245)

Investment income	174		1,703		9,921
Interest expense	(40,473)		(29,564)		(27,705)
Loss on extinguishment of debt	(17,689)		—		—
Other (expense) income, net	(3,330)		405		(531)
Loss before income taxes	(436,412)		(292,688)		(253,560)

(Benefit) provision for income taxes	(1,758)		1,402		777

Net loss	$	(434,654)	$	(294,090)	$	(254,337)

Basic and diluted net loss per share	$	(3.88)	$	(3.01)	$	(3.01)

Weighted average basic and diluted common shares outstanding	112,111		97,605		84,560

Net loss	$	(434,654)	$	(294,090)	$	(254,337)

Other comprehensive income (loss):
Foreign currency translation and other gains (losses)	775		203		(1)
Total comprehensive loss	$	(433,879)	$	(293,887)	$	(254,338)


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total
	Shares	Amount
Balance at December 31, 2018	77,308	$	773	$	1,489,664	$	(1,282,162)	$	(9)	$	208,266
Comprehensive loss:
Net loss						(254,337)				(254,337)
Other comprehensive loss								(1)		(1)
Exercise of stock options and ESPP shares issuance	1,632	16		19,684						19,700
Equity component of convertible debt	10,658	107		260,967						261,074
Issuance of common stock for vesting of RSUs	84	1								1
Stock compensation expense				26,971						26,971
Balance at December 31, 2019	89,682	$	897	$	1,797,286	$	(1,536,499)	$	(10)	$	261,674
Comprehensive loss:
Net loss						(294,090)				(294,090)
Other comprehensive income								203		203
Exercise of stock options and ESPP shares issuance	1,795	18		26,054						26,072
Net proceeds from issuance of common stock	11,155	112		245,754						245,866
Issuance of common stock for vesting of RSUs	131	1								1
Stock compensation expense				36,158						36,158
Balance at December 31, 2020	102,763	$	1,028	$	2,105,252	$	(1,830,589)	$	193	$	275,884
Comprehensive loss:
Net loss						(434,654)				(434,654)
Other comprehensive income								775		775
Exercise of stock options and ESPP shares issuance	1,359	13		22,022						22,035
Net proceeds from issuance of common stock	11,500	115		269,771						269,886
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
Issuance of common stock for business acquisition	2,899	29		71,978						72,007
Stock compensation expense				46,021						46,021
Balance at December 31, 2021	118,738	$	1,187	$	2,673,556	$	(2,265,243)	$	968	$	410,468


			Valuation of intangible assets acquired in a business combination
Description of the Matter			As discussed in Note 2 and 15 of the consolidated financial statements, the Company acquired all of the equity interests of Motus and AlgaeneX, each a privately held, preclinical stage company. In connection with the acquisition the Company recognized $29.6 million of in-process research and development intangible assets. Auditing the Company's accounting for its acquisition was especially complex due to the significant estimation and judgment required by management in determining the fair value of in-process research and development intangible assets acquired. The significant estimation was primarily due to the judgmental nature of the inputs to the valuation models used to measure the fair value of the in-process research and development intangible assets. The Company used the multi-period excess earnings method of the income approach to measure the fair value of the in-process research and development intangible assets acquired. The significant assumptions used to estimate the fair value of the in-process research and development intangible assets acquired included the estimated probability of regulatory success rates, expected pricing, relevant market size and share and discount rate. Given the preclinical nature of the assets acquired, these significant assumptions are forward-looking and could be affected by future economic and market conditions.
How We Addressed the Matter in Our Audit			We identified, evaluated and tested controls over management’s review related to the Company’s accounting for acquisitions. Our testing of controls included controls over the valuation of the intangible assets acquired including the valuation model used and the underlying assumptions used to develop such estimates, and controls over the completeness and accuracy of the data used to develop the estimates. To test the estimated fair value of the intangible assets, we performed audit procedures that included, among others, evaluating the Company's use of the income approach (the multi-period excess earnings method), testing the significant assumptions used in the model, including the discount rate, estimated probability of regulatory success rates, expected pricing, relevant market size and share, and assessing the completeness and accuracy of the underlying data. We compared the significant assumptions to current industry, and market data, to the assumptions used to value similar assets in other acquisitions and to other guideline companies within the same industry. We involved our valuation professionals to assist with our evaluation of the methodology used by the Company and significant assumptions included in the fair value estimates.


	As of December 31, 2021
			Fair Value
	Carrying Value		Level 1		Level 2		Level 3
Cash and cash equivalents	$	716.8	$	716.8	$	—	$	—
Marketable securities	$	50.0	$	50.0	$	—	$	—
Deferred consideration	$	14.9	$	—	$	14.9	$	—
Contingent consideration liabilities	$	75.7	$	—	$	—	$	75.7

	As of December 31, 2020
			Fair Value
	Carrying Value		Level 1		Level 2		Level 3
Cash and cash equivalents	$	532.8	$	532.8	$	—	$	—


	Fair Value as of December 31, 2021 (in millions)	Observable Input	Input Value
Deferred consideration	$14.9	Insmed share price on December 31, 2021	$27.24


	2021
	January 1,		Additions	Change in Fair Value	Adjustments	December 31,
Deferred consideration	$	—	13,700	1,372	(141)	$	14,931
Contingent consideration	$	—	69,706	5,962	—	$	75,668


	Percentage of Total Gross Product Revenue
	2021	2020
Customer A	27%	27	%
Customer B	24%	28	%
Customer C	24%	23	%


	Customer Credits, Fees and Discounts		Rebates, Chargebacks and Co-pay Assistance		Total
Balance as of December 31, 2020	$	453	$	4,518	$	4,971
Allowances for current period sales	6,788		21,347		28,135
Allowances for prior period sales	—		(476)		(476)
Payments and credits	(4,119)		(20,113)		(24,232)
Balance as of December 31, 2021	$	3,122	$	5,276	$	8,398

Balance as of December 31, 2019	$	464	$	5,171	$	5,635
Allowances for current period sales	3,731		18,244		21,975
Allowances for prior period sales	—		(288)		(288)
Payments and credits	(3,742)		(18,609)		(22,351)
Balance as of December 31, 2020	$	453	$	4,518	$	4,971



	2021
Intangible Asset	January 1,		Additions		Amortization		December 31,
Acquired ARIKAYCE R&D	$	47,289	$	—	$	(4,850)	$	42,439
Acquired IPR&D	—		29,600		—		29,600
PARI milestones	1,972		—		(202)		1,770
	$	49,261	$	29,600	$	(5,052)	$	73,809

	2020
Intangible Asset	January 1,		Additions		Amortization		December 31,
Acquired ARIKAYCE R&D	$	52,139	$	—	$	(4,850)	$	47,289
PARI milestone	1,543		582		(153)		1,972
	$	53,682	$	582	$	(5,003)	$	49,261


	Estimated Useful Life (years)	As of December 31,
Asset Description		2021		2020
Lab equipment	7	$	11,862	$	10,352
Furniture and fixtures	7	5,799		5,917
Computer hardware and software	3 - 5	7,264		7,267
Office equipment	7	89		88
Manufacturing equipment	7	1,145		1,567
Leasehold improvements	lease term	36,073		35,289
Construction in progress (CIP)	—	27,784		21,823
		90,016		82,303
Less accumulated depreciation		(37,061)		(28,350)
		$	52,955	$	53,953


	As of December 31, 2021					As of December 31, 2020


Finance lease cost:
Amortization of right-of-use assets	$	1,078				$	1,078
Interest on lease liabilities	1,300					1,301
Total finance lease cost			$	2,378				$	2,379
Operating lease cost			12,125					8,664
Variable lease cost			7,043					9,950
Total lease cost			$	21,546				$	20,993

Other information:
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for finance leases			$	1,300				$	1,301
Operating cash flows for operating leases			$	14,598				$	8,813
Financing cash flows for finance leases			$	1,081				$	936
Right-of-use assets obtained in exchange for new finance lease liabilities			$	—				$	—
Right-of-use assets obtained in exchange for new operating lease liabilities			$	12,948				$	1,205
Weighted average remaining lease term - finance leases			8.6 years					9.6 years
Weighted average remaining lease term - operating leases			3.8 years					4.4 years
Weighted average discount rate - finance leases			8.6		%			8.6		%
Weighted average discount rate - operating leases			7.0		%			7.4		%


Year Ending December 31,	Finance Lease		Operating Leases
2022	$	1,819	$	11,315
2023	1,670		7,927
2024	2,556		7,270
2025	2,615		7,182
2026	2,673		1,218
Thereafter	10,059		311
Total	21,392		35,223
Less: present value discount	6,680		4,255
Present value of lease liabilities	$	14,712	$	30,968
Balance Sheet Classification at December 31, 2021:
Current lease liabilities	$	609	$	9,527
Long-term lease liabilities	14,103		21,441
Total lease liabilities	$	14,712	$	30,968


Year Ending December 31:
2022	$	—
2023	—
2024	—
2025	225,000
2026	—
2027 and thereafter	575,000
	$	800,000


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years	Aggregate Intrinsic Value (in '000)
Options outstanding at December 31, 2018	9,381,730	$	16.30
Granted	3,434,270	$	15.02
Exercised	(1,413,341)	$	11.87
Forfeited and expired	(909,713)	$	19.02
Options outstanding at December 31, 2019	10,492,946	$	16.24
Exercisable at December 31, 2019	5,719,818	$	15.38
Granted	3,990,740	$	24.12
Exercised	(1,678,604)	$	14.04
Forfeited and expired	(541,680)	$	23.98
Options outstanding at December 31, 2020	12,263,402	$	18.84
Exercisable at December 31, 2020	6,028,261	$	16.15
Granted	4,039,360	$	30.18
Exercised	(1,235,186)	$	15.50
Forfeited and expired	(978,616)	$	24.35
Options outstanding at December 31, 2021	14,088,960	$	22.00	6.91	$	90,317
Exercisable at December 31, 2021	7,292,851	$	17.97	5.34	$	70,204


	Number of RSUs	Weighted Average Grant Price
Outstanding at December 31, 2018	227,826	$	29.14
Granted	407,655	$	27.89
Released	(92,145)	$	28.05
Forfeited	(42,514)	$	29.11
Outstanding at December 31, 2019	500,822	$	28.32
Granted	559,054	$	23.85
Released	(161,774)	$	28.90
Forfeited	(53,711)	$	25.43
Outstanding at December 31, 2020	844,391	$	25.43
Granted	607,578	$	29.40
Released	(291,823)	$	25.93
Forfeited	(140,432)	$	27.73
Outstanding at December 31, 2021	1,019,714	$	27.33


	2021		2020
Balance as of January 1,	$	5,633	$	4,836
Additions related to prior period tax positions	112		—
Reductions related to prior period tax positions	—		(32)
Additions related to current period tax positions	1,637		829

Balance as of December 31,	$	7,382	$	5,633


	Fair Value of Consideration
Cash consideration	$	10,500
Fair value of Insmed common stock issued	71,570
Estimated fair value of contingent consideration liabilities	69,706
Estimated fair value of deferred consideration	13,700
	$	165,476


	Purchase Price Allocation
Cash and cash equivalents	$	3,580
Intangible assets - IPR&D	29,600
Fixed assets	228
Other assets	17
Liabilities assumed	(558)
Deferred tax liability	(3,501)
Fair value of net assets acquired	29,366
Goodwill	136,110
	$	165,476


Type of Grant	Grant Date	Number of Shares	Vesting Provisions
Restricted Stock Units
Restricted Stock Units


TSR Ranking of Company Compared To Peer Group			Payout Modifier
<25th percentile			0.00
≥ 25th percentile to < 50th percentile			0.50
≥ 50th percentile to < 75th percentile			1.00
≥ 75th percentile to < 90th percentile			2.00
≥ 90th percentile			2.50


Name			Jurisdiction of Incorporation
Celtrix Pharmaceuticals, Inc.			Delaware
Insmed Limited			England and Wales
Insmed Holdings Limited			Ireland
Insmed Ireland Limited			Ireland
Insmed Netherlands B.V.			The Netherlands
Insmed Germany GmbH			Germany
Insmed France SAS			France
Insmed Godo Kaisha			Japan
Insmed Switzerland GmbH			Switzerland
Insmed Italy S.R.L.			Italy


/s/ Sara Bonstein
Sara Bonstein
Chief Financial Officer
(Principal Financial and Accounting Officer)