UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2014
OR
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o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 0-30739
INSMED INCORPORATED
(Exact name of registrant as specified in its charter)
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Virginia |
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54-1972729 |
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. employer identification no.) |
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10 Finderne Avenue, Building 10 |
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Bridgewater, New Jersey |
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08807 |
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(Address of principal executive offices) |
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(Zip Code) |
(908) 977-9900
(Registrant’s telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting Company (See the definitions of “large accelerated filer,” “accelerated filer,” and “small reporting Company” in Rule 12b-2 of the Exchange Act).
Large accelerated filer o Accelerated filer x Non-accelerated filer o Small Reporting Company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of October 31, 2014, there were 49,664,996 shares of the registrant’s common stock, $0.01 par value, outstanding.
INSMED INCORPORATED
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2014
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Consolidated Balance Sheets as of September 30, 2014 (unaudited) and December 31, 2013 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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In this Form 10-Q, we use the words “Insmed Incorporated” to refer to Insmed Incorporated, a Virginia corporation, and we use the words “Company,” “Insmed,” “Insmed Incorporated,” “we,” “us” and “our” to refer to Insmed Incorporated and its consolidated subsidiaries. IPLEX is a registered trademark of Insmed Incorporated. ARIKAYCE and INSMED are trademarks of Insmed Incorporated. This Form 10-Q also contains trademarks of third parties. Each trademark of another company appearing in this Form 10-Q is the property of its owner.
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
INSMED INCORPORATED
(in thousands, except par value and share data)
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As of |
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As of |
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September 30, 2014 |
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December 31, 2013 |
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(unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
167,311 |
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$ |
113,894 |
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Prepaid expenses and other current assets |
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3,532 |
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2,269 |
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Total current assets |
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170,843 |
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116,163 |
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In-process research and development |
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58,200 |
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58,200 |
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Fixed assets, net |
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5,982 |
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1,812 |
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Other assets |
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418 |
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323 |
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Total assets |
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$ |
235,443 |
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$ |
176,498 |
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Liabilities and shareholders’ equity |
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Current liabilities: |
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Accounts payable |
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$ |
8,867 |
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$ |
5,929 |
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Accrued expenses |
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3,547 |
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3,905 |
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Accrued compensation |
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3,032 |
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2,839 |
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Accrued lease expense, current |
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317 |
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307 |
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Deferred rent |
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321 |
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129 |
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Capital lease obligations, current |
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16 |
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64 |
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Current portion of long term debt |
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5,178 |
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3,283 |
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Total current liabilities |
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21,278 |
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16,456 |
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Accrued lease expense, long-term |
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185 |
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380 |
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Debt, long-term |
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14,713 |
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16,338 |
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Total liabilities |
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36,176 |
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33,174 |
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Shareholders’ equity: |
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Common stock, $0.01 par value; 500,000,000 authorized shares, 49,605,544 and 39,137,679 issued and outstanding shares at September 30, 2014 and December 31, 2013, respectively |
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496 |
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391 |
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Additional paid-in capital |
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651,904 |
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534,554 |
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Accumulated deficit |
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(453,133 |
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(391,621 |
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Total shareholders’ equity |
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199,267 |
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143,324 |
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Total liabilities and shareholders’ equity |
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$ |
235,443 |
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$ |
176,498 |
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See accompanying notes to consolidated financial statements
INSMED INCORPORATED
Consolidated Statements of Comprehensive Loss (Unaudited)
(in thousands, except per share data)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2014 |
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2013 |
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2014 |
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2013 |
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Other revenue |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
11,500 |
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Operating expenses: |
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Research and development |
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15,200 |
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12,095 |
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41,493 |
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34,654 |
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General and administrative |
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8,204 |
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4,747 |
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22,806 |
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16,267 |
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Total operating expenses |
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23,404 |
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16,842 |
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64,299 |
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50,921 |
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Operating loss |
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(23,404 |
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(16,842 |
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(64,299 |
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(39,421 |
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Investment income |
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12 |
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40 |
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41 |
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141 |
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Interest expense |
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(594 |
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(525 |
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(1,795 |
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(1,802 |
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Other (expense) / income, net |
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(4 |
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— |
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152 |
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2 |
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Loss before income taxes |
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(23,990 |
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(17,327 |
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(65,901 |
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(41,080 |
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Benefit from income taxes |
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— |
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— |
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(4,389 |
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(1,221 |
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Net loss and comprehensive loss |
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$ |
(23,990 |
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$ |
(17,327 |
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$ |
(61,512 |
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$ |
(39,859 |
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Basic and diluted net loss per share |
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$ |
(0.54 |
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$ |
(0.46 |
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$ |
(1.50 |
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$ |
(1.19 |
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Weighted average basic and diluted common shares outstanding |
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44,082 |
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37,389 |
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40,882 |
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33,577 |
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See accompanying notes to consolidated financial statements
INSMED INCORPORATED
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
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Nine months ended September 30, |
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2014 |
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2013 |
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Operating activities |
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Net loss |
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$ |
(61,512 |
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$ |
(39,859 |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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697 |
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475 |
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Stock based compensation expense |
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8,592 |
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6,410 |
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Gain on sale of asset, net |
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— |
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(2 |
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Amortization of debt discount and debt issuance costs |
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283 |
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256 |
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Accrual of the end of term charge on the debt |
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86 |
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126 |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other assets |
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(1,358 |
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(1,078 |
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Accounts payable |
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2,546 |
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(2,399 |
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Accrued expenses and deferred rent |
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(825 |
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3,908 |
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Accrued lease expenses |
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(185 |
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(190 |
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Accrued compensation |
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192 |
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(254 |
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Net cash used in operating activities |
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(51,484 |
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(32,607 |
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Investing activities |
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Purchases of fixed assets |
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(3,814 |
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(713 |
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Proceeds from sale of asset |
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— |
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2 |
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Maturity of certificate of deposit |
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— |
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2,153 |
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Net cash (used in) / provided by investing activities |
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(3,814 |
) |
1,442 |
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Financing activities |
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Payments on capital lease obligations |
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(48 |
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(80 |
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Proceeds from exercise of stock options |
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847 |
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1,471 |
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Net proceeds from issuances of common stock |
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108,016 |
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67,017 |
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Payment of debt issuance costs |
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(100 |
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— |
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Net cash provided by financing activities |
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108,715 |
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68,408 |
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Increase in cash and cash equivalents |
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53,417 |
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37,243 |
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Cash and cash equivalents at beginning of period |
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113,894 |
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90,782 |
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Cash and cash equivalents at end of period |
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$ |
167,311 |
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$ |
128,025 |
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Supplemental disclosures of cash flow information: |
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Cash paid for interest |
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$ |
1,403 |
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$ |
1,416 |
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Cash received for taxes |
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$ |
4,389 |
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$ |
1,221 |
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Supplemental disclosures of non-cash investing and financing activities: |
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Value of warrant exercised by converting the warrant into shares of common stock (“net issuance method”) |
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$ |
— |
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$ |
790 |
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See accompanying notes to consolidated financial statements
INSMED INCORPORATED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. The Company and Basis of Presentation
Insmed is a biopharmaceutical company currently focused on developing and commercializing inhaled therapies for patients battling serious lung diseases that are often life threatening. The Company’s lead product candidate, ARIKAYCETM, or liposomal amikacin for inhalation, is an inhaled antibiotic treatment that delivers a proven and potent anti-infective directly to the site of serious lung infections.
The Company was incorporated in the Commonwealth of Virginia on November 29, 1999. On December 1, 2010, the Company completed a business combination with Transave, Inc. (Transave), a privately held, New Jersey-based pharmaceutical company focused on the development of differentiated and innovative inhaled pharmaceuticals for the treatment of serious lung infections (the “Merger”). The Company’s continuing operations are based on the technology and products historically developed by Transave. The Company’s principal executive offices are located in Bridgewater, New Jersey.
The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and disclosures required by accounting principles generally accepted in the United States for complete consolidated financial statements have been condensed or are not included herein. The interim statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2013.
The results of operations of any interim period are not necessarily indicative of the results of operations for the full year. The unaudited interim condensed consolidated financial information presented herein reflects all normal adjustments that are, in the opinion of management, necessary for a fair statement of the financial position, results of operations and cash flows for the periods presented. The Company is responsible for the unaudited interim consolidated financial statements included in this report.
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Transave, LLC, Insmed Pharmaceuticals, Incorporated, Insmed Limited, and Celtrix Pharmaceuticals, Incorporated. All intercompany transactions and balances have been eliminated in consolidation.
Subsequent Events - The Company has evaluated all events and transactions since September 30, 2014 through the date of this report.
2. Summary of Significant Accounting Policies
The following are interim updates to certain of the policies described in “Note 2” to the Company’s audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013:
Fair Value Measurements - The Company categorizes its financial assets and liabilities measured and reported at fair value in the financial statements on a recurring basis based upon the level of judgments associated with the inputs used to measure their fair value. Hierarchical levels, which are directly related to the amount of subjectivity associated with the inputs used to determine the fair value of financial assets and liabilities, are as follows:
· Level 1 — Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
· Level 2 — Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the assets or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
· Level 3 — Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
Each major category of financial assets and liabilities measured at fair value on a recurring basis are categorized in the tables below based upon the lowest level of significant input to the valuations. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Financial instruments in Level 1 generally include US treasuries and mutual funds listed in active markets.
The following table presents assets and liabilities measured at fair value as of September 30, 2014 and December 31, 2013 (in thousands):
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Fair Value Measurements at Reporting Date Using |
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Quoted Prices in |
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Quoted Prices in |
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Active Markets for |
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Inactive Markets for |
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Significant |
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Identical Assets |
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Identical Assets |
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Unobservable Inputs |
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Total |
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(Level 1) |
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(Level 2) |
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(Level 3) |
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As of September 30, 2014: |
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Assets: |
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Cash and cash equivalents |
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$ |
167,311 |
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$ |
167,311 |
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$ |
— |
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$ |
— |
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$ |
167,311 |
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$ |
167,311 |
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$ |
— |
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$ |
— |
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As of December 31, 2013: |
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Assets: |
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Cash and cash equivalents |
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$ |
113,894 |
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$ |
113,894 |
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$ |
— |
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$ |
— |
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$ |
113,894 |
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$ |
113,894 |
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$ |
— |
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$ |
— |
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The Company’s cash and cash equivalents permit daily redemption and the fair values of these investments are based upon the quoted prices in active markets provided by the holding financial institutions. Cash equivalents consist of liquid investments with a maturity of three months or less from the date of purchase.
The Company recognizes transfers between levels within the fair value hierarchy, if any, at the end of each quarter. There were no transfers in or out of Level 1, Level 2 or Level 3 during the three and nine months ended September 30, 2014 and 2013, respectively.
As of September 30, 2014 and December 31, 2013, the Company held no securities that were in an unrealized gain or loss position. The Company reviews the status of each security quarterly to determine whether an other-than-temporary impairment has occurred. In making its determination, the Company considers a number of factors, including: (1) the significance of the decline, (2) whether the securities were rated below investment grade, (3) how long the securities have been in an unrealized loss position, and (4) the Company’s ability and intent to retain the investment for a sufficient period of time for it to recover.
Revenue Recognition — Other revenue during the nine months ended September 30, 2013 solely consists of an $11.5 million payment the Company received from Premacure (now Shire plc) in exchange for the Company’s right to receive future royalties under its license agreement with Premacure. The Company recorded this as Other revenue during the three months ended June 30, 2013, since all four revenue recognition criteria were met at that time and the Company had no continuing performance obligations related to the payment received. Also see Note 11 of the Company’s audited consolidated financial statements on Form 10-K for the year ended December 31, 2013 for more information.
Net Loss Per Common Share - Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of common shares and other dilutive securities outstanding during the period. Potentially dilutive securities from stock options, restricted stock units and warrants to purchase common stock would be antidilutive as the Company incurred a net loss. Potentially dilutive common shares resulting from the assumed exercise of outstanding stock options and warrants are determined based on the treasury stock method.
The following table sets forth the reconciliation of the weighted average number of shares used to compute basic and diluted net loss per share for the three and nine months ended September 30, 2014 and 2013:
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2014 |
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2013 |
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2014 |
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2013 |
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(In thousands, except per share amounts) |
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Numerator: |
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Net loss |
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$ |
(23,990 |
) |
$ |
(17,327 |
) |
$ |
(61,512 |
) |
$ |
(39,859 |
) |
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Denominator: |
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Weighted average common shares used in calculation of basic net loss per share: |
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44,082 |
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37,389 |
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40,882 |
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33,577 |
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Effect of dilutive securities: |
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Common stock options |
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— |
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— |
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— |
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— |
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Restricted stock and restricted stock units |
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— |
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— |
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— |
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— |
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|
Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2014 |
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2013 |
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2014 |
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2013 |
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(In thousands, except per share amounts) |
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Common stock warrant |
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— |
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— |
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— |
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— |
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Weighted average common shares outstanding used in calculation of diluted net loss per share |
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44,082 |
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37,389 |
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40,882 |
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33,577 |
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Net loss per share: |
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| ||||
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Basic and Diluted |
|
$ |
(0.54 |
) |
$ |
(0.46 |
) |
$ |
(1.50 |
) |
$ |
(1.19 |
) |
The following potentially dilutive securities have been excluded from the computations of diluted weighted-average common shares outstanding as of September 30, 2014 and 2013 as their effect would have been anti-dilutive (in thousands):
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|
2014 |
|
2013 |
|
Stock options to purchase common stock |
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4,674 |
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3,439 |
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Restricted stock and restricted stock units |
|
21 |
|
106 |
3. Identifiable Intangible Assets
The Company believes there are no indicators of impairment relating to its in-process research and development intangible assets as of September 30, 2014.
4. Accrued Expenses
Accrued expenses consist of the following:
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As of September 30, |
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As of December 31, |
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|
2014 |
|
2013 |
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(in thousands) |
| ||||
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Accrued clinical trial expenses |
|
$ |
2,057 |
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$ |
2,484 |
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|
Accrued technical operation expenses |
|
319 |
|
1,220 |
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|
Accrued professional fees |
|
1,017 |
|
24 |
| ||
|
Accrued interest payable |
|
154 |
|
159 |
| ||
|
Other accrued expenses |
|
— |
|
18 |
| ||
|
|
|
$ |
3,547 |
|
$ |
3,905 |
|
5. Debt
On June 29, 2012, the Company and its domestic subsidiaries, as co-borrowers, entered into a Loan and Security Agreement with Hercules Technology Growth Capital, Inc. (“Hercules”) that allowed the Company to borrow up $20.0 million in $10.0 million increments (“Loan Agreement”). The Company borrowed the first and second $10.0 million increments by signing two Secured Promissory Notes (“Note A” and “Note B” and collectively, the “Notes”) on June 29, 2012 and December 27, 2012, respectively. Notes A and B bear interest at 9.25%. Note A was originally scheduled to be repaid over a 42-month period with the first twelve monthly payments representing interest only followed by thirty monthly equal payments of principal and interest. Note B was originally scheduled to be repaid over a 36-month period with the first six monthly payments representing interest only followed by thirty monthly equal payments of principal and interest. The Loan Agreement provided that in certain circumstances the Company could delay the first principal payment by five months. In July 2013, subsequent to the completion of certain ARIKAYCE-related development milestones, the Company elected to extend the interest only period under the Notes from July 31, 2013 to December 31, 2013 and delay the first monthly principal repayments for Notes A and B from August 1, 2013 to January 1, 2014. On November 25, 2013, the Company and Hercules entered into an amendment (the “Amendment”) of the Loan Agreement. The Amendment initially extended the interest-only period through June 30, 2014 and called for the first monthly principal payment on July 1, 2014. The Amendment also allowed the Company to further extend the interest-only period through December 31, 2014 and delay the first payment of principal until January 1, 2015, so long as the Company paid a $100,000 fee and obtained positive data from its phase 2 clinical trial of ARIKAYCE in patients who have lung infections caused by nontuberculous mycobacteria (NTM). In June 2014, the Company paid the $100,000 fee and exercised its option to extend the interest-only period and delay the first payment of principal to January 1, 2015. The election and amendment did not change the maturity date for Notes A and B, which is January 1, 2016.
In connection with the Loan Agreement, the Company granted the lender a first position lien on all of the Company’s assets, excluding intellectual property. Prepayment of the loans made pursuant to the Loan Agreement is subject to penalty and the Company is required to pay an “end of term” charge of $390,000, which is being charged to interest expense (and accreted to the debt) using the effective interest method over the life of the Loan Agreement. Debt issuance fees paid to the lender were recorded as a discount on the debt and are being amortized to interest expense using the effective interest method over the life of the Loan Agreement. Debt issuance fees paid to third parties were capitalized and are being amortized to interest expense using the effective interest method over the life of the Loan Agreement.
The Loan Agreement also contains representations and warranties by the Company and the lender and indemnification provisions in favor of the lender and customary covenants (including limitations on other indebtedness, liens, acquisitions, investments and dividends, but no financial covenants), and events of default (including payment defaults, breaches of covenants following any applicable cure period, a material impairment in the perfection or priority of the lender’s security interest or in the collateral, and events relating to bankruptcy or insolvency). Upon the occurrence of an event of default, a default interest rate of an additional 5% may be applied to the outstanding loan balances, and the lender may terminate its lending commitment, declare all outstanding obligations immediately due and payable, and take such other actions as set forth in the Loan Agreement. In addition, pursuant to the Loan Agreement, the lender has the right to participate, in an amount of up to $1.0 million, in certain future private equity financing(s) by the Company.
In conjunction with entering into the Loan Agreement, the Company granted a warrant to the lender to purchase shares of the Company’s common stock. Since the warrant was granted in conjunction with entering into the Loan Agreement, the relative fair value of the warrant was recorded as equity and debt discount. The debt discount is being amortized to interest expense over the term of the related debt using the effective interest method.
The following table presents the components of the Company’s debt balance as of September 30, 2014 (in thousands):
|
Debt: |
|
|
| |
|
Notes payable |
|
$ |
20,000 |
|
|
Accretion of end of term charge |
|
290 |
| |
|
Issuance fees paid to lender |
|
(202 |
) | |
|
Discount from warrant |
|
(197 |
) | |
|
Current portion of long-term debt |
|
(5,178 |
) | |
|
Long-term debt |
|
$ |
14,713 |
|
As of September 30, 2014, future principal repayments of the two Notes for the period October 1, 2014 to December 31, 2014 and in each of the years ending December 31, 2015 and 2016 were as follows (in thousands):
|
Year Ending in December 31: |
|
|
| |
|
2014 |
|
$ |
— |
|
|
2015 |
|
7,430 |
| |
|
2016 |
|
12,570 |
| |
|
|
|
$ |
20,000 |
|
The estimated fair value of the debt (categorized as a Level 2 liability for fair value measurement purposes) is determined using current market factors and the ability of the Company to obtain debt at comparable terms to those that are currently in place. The Company believes the estimated fair value at September 30, 2014 approximates the carrying amount.
6. Stockholders’ Equity
Common Stock — As of September 30, 2014, the Company had 500,000,000 shares of common stock authorized with a par value of $0.01 and 49,605,544 shares of common stock issued and outstanding. In addition, as of September 30, 2014, the Company had reserved 4,674,146 shares of common stock for issuance upon the exercise of outstanding common stock options and 20,960 for issuance upon the vesting of restricted stock units.
On August 18, 2014, the Company completed an underwritten public offering of 10,235,000 shares of the Company’s common stock, which included the underwriter’s exercise in full of its over-allotment option of 1,335,000 shares, at a price to the public of $11.25 per share. The Company’s net proceeds from the sale of the shares, after deducting the underwriter’s discount and offering expenses of $7.1 million, were $108.0 million.
On July 22, 2013, the Company completed an underwritten public offering of 6,900,000 shares of the Company’s common stock, which included the underwriter’s exercise in full of its over-allotment option of 900,000 shares, at a price to the public of $10.40 per share. The Company’s net proceeds from the sale of the shares, after deducting the underwriter’s discount and offering expenses of $4.7 million, were $67.0 million.
Warrant - In conjunction with entering into the Loan Agreement (See Note 5 — Debt), the Company granted a warrant to the lender to purchase 329,932 shares of the Company’s common stock at an exercise price of $2.94 per share. The fair value of the warrant of $0.8 million was calculated using the Black-Scholes warrant-pricing methodology at the date of issuance and was recorded as equity and as a discount to the debt and is being amortized to interest expense over the term of the related debt using the effective interest method. On April 30, 2013, the lender exercised the warrant in full via the “net issuance” method specified in the warrant agreement. In accordance with such provisions, the Company issued and delivered 223,431 shares of common shares to the lender on May 1, 2013. As a result of the exercise, the warrant is no longer outstanding and there are no additional shares issuable under this instrument.
7. Stock-Based Compensation
The Company currently has one equity compensation plan, the 2013 Incentive Plan, which was approved by shareholders at the Company’s Annual Meeting of Shareholders on May 23, 2013 (the “2013 Incentive Plan”). The 2013 Incentive Plan is administered by the Compensation Committee and the Board of Directors of the Company. Under the terms of the 2013 Incentive Plan, the Company is authorized to grant a variety of incentive awards based on its common stock, including stock options (both incentive stock options and non-qualified stock options), performance options/shares and other stock awards, as well as the payment of incentive bonuses to all employees and non-employee directors. As of September 30, 2014, 363,378 shares of the Company’s common stock were reserved for future grants (or issuances) of restricted stock, restricted stock units, stock options, and stock warrants under the 2013 Incentive Plan. The 2013 Incentive Plan will terminate on April 16, 2023 unless it is extended or terminated earlier pursuant to its terms.
During the first quarter of 2013, the Company completed a review of equity compensation awards granted under its previous equity compensation plan and determined that it had inadvertently exceeded the annual per-person sub-limits involving certain awards previously made to certain of its current and past officers and directors (the “excess awards”). The aggregate amount of common stock represented by these excess awards, which consisted of Restricted Stock Units (“RSUs”) and stock options, was approximately 1.4 million shares. These awards were deemed to be granted outside of the plan and as such the Company applied liability accounting to these awards. On May 23, 2013 (the date of the Company’s 2013 Annual Meeting of Stockholders), the Company’s shareholders approved the grants associated with the excess awards, which as of that date, allowed the excess awards to be deemed granted under the previous equity compensation plan. As a result, the excess awards were remeasured at fair value on May 23, 2013 and the liability was reclassified to additional paid-in capital. The unrecognized fair value calculated for the excess awards as of May 23, 2013 is recognized as compensation expense ratably over the remaining requisite service period for each award.
Stock Options - The Company calculates the fair value of stock options granted using the Black-Scholes valuation model.
The following table summarizes the Company’s grant date fair value and assumptions used in determining the fair value of stock options granted under its’ equity compensation plans:
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
| ||||
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Volatility |
|
84.1%-85.4% |
|
87.7%-90.3% |
|
83.1%-85.5% |
|
87.7%-96.0% |
|
|
Risk-free interest rate |
|
1.62%-1.83% |
|
1.39%-1.65% |
|
1.46%-1.83% |
|
0.65%-1.65% |
|
|
Dividend yield |
|
0.0% |
|
0.0% |
|
0.0% |
|
0.0% |
|
|
Expected option term (in years) |
|
6.25 |
|
6.25 |
|
6.25 |
|
6.25 |
|
|
Weighted-average fair value of stock options granted |
|
$10.10 |
|
$8.91 |
|
$11.74 |
|
$7.53 |
|
For all periods presented, the volatility factor was based on the Company’s historical volatility since the closing of the Company’s merger with Transave on December 1, 2010. The expected life was determined using the simplified method as described in ASC Topic 718, “Accounting for Stock Compensation”, which is the midpoint between the vesting date and the end of the contractual term. The risk-free interest rate is based on the US Treasury yield in effect at the date of grant. Forfeitures are based on actual percentage of option forfeitures since the closing of the Company’s merger with Transave on December 1, 2010, and this is the basis for future forfeiture expectations.
From time to time, the Company grants performance-condition options to certain of the Company’s employees. Vesting of these options is subject to the Company achieving certain performance criteria established at the date of grant and the individuals fulfilling a service condition (continued employment). As of September 30, 2014 the Company had performance options totaling 496,667 shares outstanding. During the three months ended September 30, 2014, 150,000 options were forfeited due to performance criteria not being met.
The following table summarizes the Company’s aggregate stock option activity for the nine months ended September 30, 2014:
|
|
|
Number of |
|
Weighted |
|
Weighted |
|
Aggregate |
| ||
|
Options outstanding at December 31, 2013 |
|
3,632,996 |
|
$ |
7.94 |
|
|
|
|
| |
|
Granted |
|
1,592,850 |
|
$ |
16.11 |
|
|
|
|
| |
|
Exercised |
|
(153,943 |
) |
$ |
5.51 |
|
|
|
|
| |
|
Forfeited or expired |
|
(397,755 |
) |
$ |
9.78 |
|
|
|
|
| |
|
Options outstanding at September 30, 2014 |
|
4,674,148 |
|
$ |
10.65 |
|
8.63 |
|
$ |
16,774 |
|
|
Vested and expected to vest at September 30, 2014 |
|
4,413,329 |
|
$ |
10.53 |
|
8.61 |
|
$ |
16,228 |
|
|
Exercisable at September 30, 2014 |
|
968,202 |
|
$ |
5.87 |
|
7.61 |
|
$ |
6,992 |
|
The total intrinsic value of stock options exercised during the three months ended September 30, 2014 and 2013 was $0.8 million and $1.4 million and during the nine months ended September 30, 2014 and 2013 was $1.5 million and $2.5 million, respectively.
As of September 30, 2014, there was $30.8 million of unrecognized compensation expense related to unvested stock options which is expected to be recognized over a weighted average period of 2.6 years. Included above in unrecognized compensation expense was $3.3 million related to outstanding performance-based options. The following table summarizes the range of exercise prices and the number of stock options outstanding and exercisable:
|
Outstanding as of September 30, 2014 |
|
Exercisable as of September 30, 2014 |
| ||||||||||
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining |
|
Weighted |
|
|
|
|
|
|
Range of Exercise |
|
Number of |
|
Contractual |
|
Average |
|
Number of |
|
Weighted Average |
| ||
|
Prices |
|
Options |
|
Term (in years) |
|
Exercise Price |
|
Options |
|
Exercise Price |
| ||
|
3.03 |
|
3.29 |
|
219,062 |
|
7.18 |
|
3.04 |
|
115,618 |
|
3.04 |
|
|
3.40 |
|
3.40 |
|
708,314 |
|
7.95 |
|
3.40 |
|
354,158 |
|
3.40 |
|
|
3.60 |
|
6.90 |
|
767,820 |
|
8.18 |
|
6.20 |
|
230,374 |
|
5.77 |
|
|
6.96 |
|
11.32 |
|
496,325 |
|
7.79 |
|
9.32 |
|
163,363 |
|
8.82 |
|
|
11.46 |
|
11.81 |
|
15,000 |
|
9.53 |
|
11.69 |
|
1,250 |
|
11.46 |
|
|
12.44 |
|
12.44 |
|
516,327 |
|
8.63 |
|
12.44 |
|
76,459 |
|
12.44 |
|
|
12.58 |
|
12.58 |
|
595,300 |
|
9.67 |
|
12.58 |
|
— |
|
— |
|
|
12.66 |
|
14.64 |
|
479,000 |
|
9.25 |
|
13.87 |
|
12,980 |
|
13.26 |
|
|
14.65 |
|
19.21 |
|
467,450 |
|
9.40 |
|
17.53 |
|
14,000 |
|
15.63 |
|
|
19.40 |
|
21.54 |
|
409,550 |
|
9.29 |
|
20.49 |
|
— |
|
— |
|
Restricted Stock and Restricted Stock Units — The Company may grant Restricted Stock (“RS”) and RSUs to eligible employees, including its executives, and non-employee directors. Each RS and RSU represents a right to receive one share of the Company’s common stock upon the completion of a specific period of continued service or achievement of a certain milestone. RS and RSU awards granted are generally valued at the market price of the Company’s common stock on the date of grant. RSUs granted in excess of certain plan sub-limits were considered to be granted outside the previous equity compensation plan and were classified as a liability and remeasured at fair value at the end of each reporting period and changes in fair value are included in compensation expense in the Consolidated Statements of Comprehensive Loss (see additional disclosures related to certain RSUs granted outside the previous equity compensation plan at the end of this note). The Company recognizes noncash compensation expense for the fair values of these RS and RSUs on a straight-line basis over the requisite service period of these awards.
The following table summarizes the Company’s RSU award activity during the nine months ended September 30, 2014:
|
|
|
|
|
Weighted |
| |
|
|
|
Number of |
|
Average |
| |
|
|
|
RSUs |
|
Grant Price |
| |
|
Outstanding at December 31, 2013 |
|
92,641 |
|
$ |
6.27 |
|
|
Granted |
|
20,258 |
|
19.53 |
| |
|
Released |
|
(91,939 |
) |
6.21 |
| |
|
Outstanding at September 30, 2014 |
|
20,960 |
|
$ |
19.35 |
|
|
Expected to vest |
|
20,960 |
|
$ |
19.35 |
|
Awards Granted outside of the previous equity compensation plan — As described above, during the first quarter of 2013, the Company completed a review of equity compensation awards granted under its previous equity compensation plan and determined that it had inadvertently exceeded the annual per-person sub-limits involving certain awards previously made to certain of its current and past officers and directors. The aggregate amount of common stock represented by these excess awards, which consisted of RSUs and stock options, was approximately 1.4 million shares. These awards were deemed to be granted outside of the plan and as such the Company applied liability accounting to these awards. On May 23, 2013 (the date of the Company’s 2013 Annual Meeting of Stockholders), the Company’s shareholders approved the grants associated with the excess awards, which as of that date, allowed the excess awards to be deemed granted under the previous equity compensation plan. As a result, the excess awards were remeasured at fair value on May 23, 2013 and the liability was reclassified to additional paid-in capital. The unrecognized fair value calculated for the excess awards as of May 23, 2013 is recognized as compensation expense ratably over the remaining requisite service period for each award.
The following table summarizes the aggregate stock-based compensation recorded in the Consolidated Statements of Comprehensive Loss related to stock options and RSUs during the three and nine months ended September 30, 2014 and 2013:
|
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
| ||||||||
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
| ||||
|
|
|
(in millions) |
|
(in millions) |
| ||||||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Research and development expenses |
|
$ |
1.4 |
|
$ |
0.4 |
|
$ |
3.6 |
|
$ |
1.6 |
|
|
General and administrative expenses |
|
1.8 |
|
1.0 |
|
5.0 |
|
4.8 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Total |
|
$ |
3.2 |
|
$ |
1.4 |
|
$ |
8.6 |
|
$ |
6.4 |
|
8. Income Taxes
The benefit for income taxes was $4.4 million and $1.2 million for the nine months ended September 30, 2014 and 2013, respectively. The benefit for income taxes recorded for the nine months ended September 30, 2014 and 2013 solely reflect the reversal of a valuation allowance previously recorded against the Company’s New Jersey State net operating losses (“NOL”) that resulted from the Company’s sale of a portion of its New Jersey State NOLs under the State of New Jersey’s Technology Business Tax Certificate Transfer Program (the “Program”) for cash of $4.4 million and $1.2 million, respectively and net of commissions. The Program allows qualified technology and biotechnology businesses in New Jersey to sell unused amounts of NOLs and defined research and development tax credits for cash.
The Company is subject to US federal and state income taxes. The Company has never been audited and the statute of limitations for tax audit is generally open for the years 2010 and later. The Company has incurred net operating losses since inception, except in 2009. Such loss carryforwards would be subject to audit in any tax year in which those losses are utilized, notwithstanding the year of origin. The Company’s policy is to recognize interest accrued related to unrecognized tax benefits and penalties in income tax expense. The Company has recorded no such expense. As of September 30, 2014 and December 31, 2013, the Company has recorded no reserves for unrecognized income tax benefits, nor has it recorded any accrued interest or penalties related to uncertain tax positions. The Company does not anticipate any material changes in the amount of unrecognized tax positions over the next twelve months. Due to the Company’s history of operating losses, the Company recorded a full valuation allowance on its net deferred tax assets as it is more likely than not that such tax benefits will not be realized.
At December 31, 2013, the Company had federal net operating loss carryforwards for income tax purposes of approximately $398.7 million available to offset future taxable income, if any. The NOL carryovers and general business tax credits expire in various years beginning in 2018.
Utilization of the Company’s NOL and general business tax credit carryforwards generated in prior years through December 2010 (the “December 2010 and prior NOLs”) are likely subject to substantial limitations under Section 382 of the Internal Revenue Code (“Section 382”) due to ownership changes that occurred at various points during those periods. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period. Since the Company’s formation, it has raised capital through the issuance of common stock on several occasions which, combined with the purchasing shareholders’ subsequent disposition of those shares, likely resulted in multiple changes in ownership, as defined by Section 382 since the Company’s formation in 1999. The substantial limitations on the use of the December 2010 and prior NOLs are likely to result in expiration of a substantial portion of these NOL or general business tax credit carryforwards before utilization which would substantially reduce the Company’s gross deferred tax assets. The Company is currently in the process of completing a Section 382 analysis regarding the limitation of its NOL and general business tax credit carryforwards and intends to disclose the results of this analysis when it is completed.
9. Collaboration Agreements
Therapure Biopharma Inc. — In February 2014, the Company entered into a Contract Manufacturing Agreement (the “Agreement”) with Therapure Biopharma Inc. (“Therapure”) for the manufacture of the Company’s product ARIKAYCE. Pursuant to the Agreement, the Company and Therapure are collaborating to construct a production area for the manufacture of ARIKAYCE in Therapure’s existing manufacturing facility in Mississauga, Ontario, Canada. Therapure will manufacture ARIKAYCE for the Company on a non-exclusive basis. The Agreement has an initial term of five years from the first date on which Therapure delivers ARIKAYCE to Insmed after Insmed obtains permits related to the manufacture of ARIKAYCE, and will renew automatically for successive periods of two years each, unless terminated by either party by providing the required two years’ prior written notice to the other party. Notwithstanding the foregoing, the parties have rights and obligations under the Agreement prior to the commencement of the initial term. The Agreement allows for termination by either party upon the occurrence of certain events, including (i) the material breach by the other party of any provision of the Agreement or the quality agreement expected to be entered into between the parties, or (ii) the default or bankruptcy of the other party. In addition, the Company may terminate the Agreement for any reason upon no fewer than one hundred eighty days’ advance notice. Costs incurred under this agreement will be recorded as a component of research and development expense until such time as the Company receives US Food and Drug Administration approval for ARIKAYCE.
PARI Pharma GmbH — In July 2014, the Company entered into a Commercialization Agreement (the “PARI Agreement”) with PARI Pharma GmbH (“PARI”) for the manufacture and supply of eFlow nebulizer systems and related accessories (the “Device”) as optimized for use with the Company’s proprietary liposomal amikacin for inhalation. The PARI Agreement has an initial term of fifteen years from the first commercial sale of the Device (the “Initial Term”). The term of the PARI Agreement may be extended by the Company for an additional five years by providing written notice to PARI at the least one year prior to the expiration of the Initial Term. Notwithstanding the foregoing, the parties have certain rights and obligations under the PARI Agreement prior to the commencement of the Initial Term. The PARI Agreement allows for termination by either party upon the occurrence of certain events, including (i) the material breach by the other party of any provision of the PARI Agreement, (ii) the default or bankruptcy of the other party, or (iii) upon termination by the Company of the License Agreement between the parties.
10. Commitments and Contingencies
Commitments
The Company has two operating leases for office and laboratory space located in Monmouth Junction, New Jersey through December 31, 2014. Future minimum rental payments under these two leases as of September 30, 2014 total approximately $0.2 million. The Company also has an operating lease for office and laboratory space located in Bridgewater, New Jersey that terminates in November 2019. Future minimum rental payments under this lease as of September 30, 2014 total approximately $3.6 million. The Company also leases office space in Richmond, Virginia, where the Company’s corporate headquarters were once located, through October 2016. Future minimum rental payments under this lease as of September 30, 2014 total approximately $1.0 million.
Rent expense charged to operations was $0.4 million and $0.2 million for the three months ended September 30, 2014 and 2013 and $1.0 million and $0.8 million for the nine months ended September 30, 2014 and 2013, respectively. Future minimum rental payments required under the Company’s operating leases for the period from October 1, 2014 to December 31, 2014 and for each of the next five years are as follows (in thousands):
Year Ending in December 31:
|
2014 (remaining) |
|
$ |
360 |
|
|
2015 |
|
1,106 |
| |
|
2016 |
|
1,144 |
| |
|
2017 |
|
741 |
| |
|
2018 |
|
762 |
| |
|
2019 |
|
718 |
| |
|
|
|
$ |
4,831 |
|
Legal Proceedings
Pilkiewicz v. Transave LLC
On March 28, 2011, Frank G. Pilkiewicz and other former stockholders of Transave (collectively, the “Petitioners”) filed an appraisal action against the Company’s subsidiary Transave, LLC in the Delaware Court of Chancery captioned Frank G. Pilkiewicz, et al. v. Transave, LLC, C.A. No. 6319-CS. On December 13, 2011, following the mailing of the revised notice of appraisal rights in accordance with the settlement terms of Mackinson et al. v. Insmed, an Amended Petition for Appraisal of Stock was filed by the Petitioners.
The Petitioners sought appraisal under Delaware law of their total combined common stock holdings representing total dissenting shares of approximately 7.77 million shares of Transave common stock (the “Transave Stock”). The Petitioners were challenging the value of the consideration that they would have been entitled to receive for their Transave Stock under the terms of the Company’s merger with Transave.
Under the terms of the Merger Agreement, certain of the former stockholders of Transave (the “Transave Stockholders”) were obligated to indemnify the Company for certain liabilities in connection with the appraisal action. The Company notified the Transave Stockholders in May 2012 that the Company was seeking indemnification in accordance with the Merger Agreement and that it would continue to retain the aggregate amount of the holdback shares totaling 1,765,271 shares, as security for any indemnification payments due under the Merger Agreement. Discovery was completed and a trial was scheduled. Prior to commencement of the trial, in May 2014, the parties entered into a settlement, dismissal and release agreement. The Company was indemnified in full for the settlement and related costs incurred in defending the appraisal action.
From time to time, the Company is a party to various other lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. While the outcomes of these matters are uncertain, management does not expect that the ultimate costs to resolve these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.
11. Retirement Plan
The Company has a 401(k) defined contribution plan for the benefit for all employees and permits voluntary contributions by employees subject to IRS-imposed limitations. There were no employer contributions in the three and nine months ended September 30, 2014 and 2013.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Note Regarding Forward Looking Statements
This Quarterly Report on Form 10-Q contains forward looking statements. “Forward-looking statements,” as that term is defined in the Private Securities Litigation Reform Act of 1995, are statements that are not historical facts and involve a number of risks and uncertainties. Words herein such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “intends,” “potential,” “continues,” and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) identify forward-looking statements.
Forward-looking statements include, but are not limited to: failure or delay of European Medicines Agency, Health Canada, United States Food and Drug Administration and other regulatory reviews and approvals; competitive developments affecting the Company’s product candidates; delays in product development or clinical trials or other studies; patent disputes and other intellectual property developments relating to the Company’s product candidates; unexpected regulatory actions, delays or requests; the failure of clinical trials or other studies or results of clinical trials or other studies that do not meet expectations; the fact that subsequent analyses of clinical trial or study data may lead to different (including less favorable) interpretations of trial or study results or may identify important implications of a trial or study that are not reflected in Company’s prior disclosures, and the fact that trial or study results or subsequent analyses may be subject to differing interpretations by regulatory agencies; the inability to successfully develop the Company’s product candidates or receive necessary regulatory approvals; inability to make product candidates commercially successful; changes in anticipated expenses; changes in the Company’s financing requirements or ability raise additional capital; our ability to complete development of, receive regulatory approval for, and successfully commercialize ARIKAYCE; our estimates of expenses and future revenues and profitability; our plans to develop and market new products and the timing of these development programs; our estimates of the size of the potential markets for our product candidates; our selection and licensing of product candidates; our ability to attract third parties with acceptable development, regulatory and commercialization expertise; the benefits to be derived from corporate license agreements and other third party efforts, including those relating to the development and commercialization of our product candidates; the degree of protection afforded to us by our intellectual portfolio; the safety and efficacy of our product candidates; sources of revenues and anticipated revenues, including contributions from license agreements and other third party efforts for the development and commercialization of products; our ability to create an effective direct sales and marketing infrastructure for products we elect to market and sell directly; the rate and degree of market acceptance of our product candidates; the timing and amount of reimbursement for our product candidates; the success of other competing therapies that may become available; and the availability of adequate supply and manufacturing capacity and quality for our product candidates.
Forward-looking statements are based upon our current expectations and beliefs, and involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance and achievements and the timing of certain events to differ materially from the results, performance, achievements or timing discussed, projected, anticipated or indicated in any forward-looking statements. Such factors include, among others, the factors discussed in Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013 filed with the Securities and Exchange Commission (“SEC”) on March 6, 2014. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the Securities and Exchange Commission, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.
The following discussion should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the consolidated financial statements and related notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2013.
OVERVIEW
Insmed is a biopharmaceutical company currently focused on developing and commercializing inhaled therapies for patients battling serious lung diseases that are often life threatening. Our lead product candidate, ARIKAYCE, or liposomal amikacin for inhalation (LAI), is an inhaled antibiotic treatment that delivers a proven and potent anti-infective directly to the site of serious lung infections.
In March 2014, we reported top-line clinical results from the double-blind portion of our phase 2 clinical trial in the United States (US) and Canada of ARIKAYCE in patients who have lung infections caused by nontuberculous mycobacteria (NTM). The randomized, double-blind, placebo-controlled phase 2 clinical trial compared ARIKAYCE (590 mg delivered once daily), added to
standard of care treatment, versus standard of care treatment plus placebo, in 90 adult patients with treatment resistant NTM lung disease. Eligibility for the study required patients to have been on the American Thoracic Society/Infectious Disease Society of America guideline therapy for at least six months prior to screening and to continue to have persistently positive mycobacterial cultures. The primary efficacy endpoint of the study was a semi-quantitative measurement of the change in mycobacterial density on a seven-point scale from baseline (day one) to the end of the randomized portion of the trial (day 84). ARIKAYCE did not meet the pre-specified level for statistical significance although there was a positive trend (p=0.148) in favor of ARIKAYCE. However, ARIKAYCE did achieve statistical significance with regard to the clinically relevant key secondary endpoint of culture conversion, with 11 out of 44 patients treated with ARIKAYCE (added to standard of care treatment) demonstrating clearance of the infecting mycobacterial organism (culture negative) by day 84 of the study as compared to 3 out of 45 patients treated with placebo (added to standard of care treatment) (p=0.01).
In May 2014, additional data from the phase 2 trial were presented at the American Thoracic Society meeting. At the conclusion of the 84-day double blind phase of the trial, 78 of the 80 patients agreed to receive once-daily ARIKAYCE plus standard of care treatment for an additional 84 days. Data from 68 of these patients who completed the visits during the additional open label phase were available for inclusion in the poster. These results collected from the open label phase show that 21 of these patients were culture negative for NTM at Day 168. This data reflects 10 patients who were culture negative at Day 84 as well as 5 additional patients from the ARIKAYCE arm and 6 additional patients who were on placebo, switching to ARIKAYCE during the open-label phase.
In June 2014, the US Food and Drug Administration (FDA) granted ARIKAYCE Breakthrough Therapy Designation for the treatment of adult patients with NTM lung disease who are treatment refractory. This designation is based on findings from our U.S. phase 2 clinical trial of ARIKAYCE to treat NTM lung infections. ARIKAYCE has already received Orphan Drug, Qualified Infectious Disease Product (QIDP) and Fast Track designations from the FDA for the treatment of NTM lung infections and has also received Orphan Drug Designation from the European Medicines Agency (EMA).
In August 2014 we announced that, following discussions with European regulatory authorities, we intend to file a Marketing Authorization Application (MAA) with the EMA by the end of 2014 for ARIKAYCE for the treatment of NTM lung infections as well as Pseudomonas aeruginosa (Pseudomonas) lung infections in cystic fibrosis (CF) patients.
In addition, based on discussions with the FDA, we are proceeding with a phase 3 study which will be designed to confirm the positive culture conversion results seen in our phase 2 clinical trial. This confirmatory study will primarily investigate ARIKAYCE for use in non-CF patients with mycobacterium avium complex (MAC) NTM lung infections who have failed prior standard of care treatment. This subgroup of the phase 2 trial’s patients responded particularly well to the treatment. We believe this approach will enable the confirmation of the previous study results to provide a path to filing and approval for an indication in patients with NTM that have failed prior treatment. Following discussions with the FDA, the trial will focus on culture conversion as the primary measure of efficacy with additional goals of demonstrating sustainability and safety. We expect to initiate the global trial in early 2015 and to complete enrollment within one year. We anticipate having preliminary top-line clinical results from the confirmatory phase 3 study in mid-2016, if positive, that would enable a Subpart H filing and potential accelerated approval. We expect to conduct the trial at over eighty sites in the United States, Europe, Australia and Canada. In addition, the trial is expected to enroll approximately 150 patients in each arm for a total of approximately 300 patients.
The CF and NTM target indications address orphan patient populations. Our strategy includes plans to continue to develop ARIKAYCE in the NTM patient population and for additional indications beyond Pseudomonas in CF and NTM. We also plan to develop, acquire, in-license or co-promote other products that address orphan or rare diseases in the fields of pulmonology and infectious disease. Our current primary development focus is to obtain regulatory approval for ARIKAYCE in these two initial indications and to prepare for commercialization in the US, Europe, Canada and Japan. We anticipate that if approved, ARIKAYCE would be the first once-a-day inhaled antibiotic treatment option available for the CF indication and the NTM indication. The following table summarizes the current status of ARIKAYCE development.
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Product |
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Status |
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Next Expected Milestones |
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ARIKAYCE Non-tuberculous mycobacteria (NTM) lung infections |
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· We reported top-line clinical results from our phase 2 clinical trial which stated that ARIKAYCE did not meet the pre-specified level for statistical significance with respect to the primary endpoint, but did achieve statistical significance with regard to the clinically relevant key secondary endpoint of culture conversion. · Results collected from the open label phase show that 21 of these patients were culture negative for NTM at Day 168. · Granted Orphan Drug designation in Europe and the US. · Granted QIDP designation, which includes Priority Review, by the FDA. · Granted Fast Track designation by the FDA which permits a rolling submission of an NDA. · Granted Breakthrough Therapy designation in the US. |
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· We intend to file a MAA with the EMA by the end of 2014 and in Canada during the first half of 2015 for the treatment of NTM lung infections, as well as for Pseudomonas lung infections in CF patients. · We are proceeding with a phase 3 study which will be designed to confirm the positive culture conversion results seen in our phase 2 clinical trial. This confirmatory study will primarily investigate ARIKAYCE for use in the non-CF, treatment failure population with MAC NTM lung infections. · If approved, we expect ARIKAYCE would be the first approved inhaled antibiotic treatment in the US, Canada and Europe for NTM lung infections. · We are developing plans to commercialize ARIKAYCE, if approved, in certain countries in Europe, in the US, and Canada, and eventually Japan and certain other countries. |
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ARIKAYCE Pseudomonas aeruginosa lung infections in CF patients |
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· Reported top-line results from our phase 3 clinical trial conducted in Europe and Canada, in which once-daily ARIKAYCE achieved its primary endpoint of non-inferiority when compared to twice-daily tobramycin inhaled solution. · Conducting a two-year, open-label safety study in patients who completed the phase 3 clinical trial. We expect to complete this study in mid-2015. · Reported top-line results from the patients who completed the first year of the two-year open label extension study. · Granted orphan drug designation in Europe and the US. |
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· We intend to file a MAA with the EMA by the end of 2014 and in Canada during the first half of 2015. · We are developing plans to commercialize ARIKAYCE, if approved, in certain countries in Europe and Canada where we expect it would be the only once-a-day treatment for Pseudomonas lung infections in CF patients. · We will initiate new studies in pediatric patients, however we currently do not plan to initiate any further studies in adult CF patients with Pseudomonas lung infections. |
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ARIKAYCE Pseudomonas aeruginosa and other susceptible organisms causing lung infections in non-CF bronchiectasis patients |
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· Completed phase 2 study in the US. · Granted orphan drug designation in the US. |
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· We currently do not intend to initiate further clinical studies with respect to a non-CF bronchiectasis indication. |
Amikacin sulfate is an FDA-approved antibiotic with proven efficacy in the treatment of a broad range of gram-negative infections, including Pseudomonas and NTM. ARIKAYCE is in the aminoglycoside class of antibiotics. We believe there currently is no drug approved in the US, Canada or Europe for treatment of NTM lung infections, and as a result all current drug treatments for NTM are used off-label. If approved for NTM patients, we believe ARIKAYCE would be the first and only approved inhaled antibiotic for the treatment of NTM lung infections. If approved for CF patients with Pseudomonas lung infections, we believe ARIKAYCE would be the first inhaled antibiotic to be approved for once-daily administration in this indication. ARIKAYCE has been granted orphan drug designations in the following indications:
· US: NTM lung infections, Pseudomonas lung infections in CF patients, and lung infections in non-CF bronchiectasis patients; and
· European Union (EU): NTM lung infections and Pseudomonas lung infections in CF patients.
Corporate History
We were incorporated in the Commonwealth of Virginia on November 29, 1999. On December 1, 2010, we completed a business combination with Transave, Inc. (Transave), a privately held, New Jersey-based pharmaceutical company focused on the development of differentiated and innovative inhaled pharmaceuticals for the site-specific treatment of serious lung infections.
Our Strategy
Our strategy is to focus on the development and commercialization of innovative inhaled therapies for patients with serious lung diseases in orphan indications. While we believe that ARIKAYCE has the potential to treat many different diseases, our attention is initially focused on regulatory approval and commercialization preparation for our two initial indications: (1) NTM lung infections and (2) Pseudomonas lung infections in CF patients. Our current priorities are as follows:
· Continue generating additional clinical data from studies showing the effects of ARIKAYCE to treat NTM lung infections and Pseudomonas lung infections in CF patients;
· Actively pursue new drug filings to secure approval for ARIKAYCE to treat NTM lung infections in the US, Europe, Canada, Japan and certain other countries;
· Actively pursue new drug filings to secure approval for ARIKAYCE to treat Pseudomonas lung infections in CF patients in Europe and Canada;
· Expand our product supply chain in support of clinical development and if approved, commercialization;
· Prepare for commercial launch in the NTM indication in the US, Europe, Canada and eventually Japan and certain other countries;
· Prepare for commercial launch in Pseudomonas lung infections in CF patients indication in Europe and Canada;
· Attempt to develop, acquire, in-license or co-promote promising late stage or commercial products that we believe are complementary to ARIKAYCE and our core competencies; and
· Continue to develop novel formulations of existing therapies, where such reformulation could materially improve the treatment paradigm for the underlying disease or to enable pursuit of a new indication.
In support of these priorities, we completed our registrational phase 3 clinical study of ARIKAYCE in CF patients with Pseudomonas lung infections in Europe and Canada. We plan to submit regulatory marketing applications for the CF and NTM indications in Europe by the end of 2014 and in Canada in the first half of 2015. In the first half of 2014, we completed our US and Canadian phase 2 clinical study of ARIKAYCE for the treatment of NTM lung infections in treatment refractory patients. Following recent discussions with the FDA, we plan to initiate a global phase 3 clinical trial of ARIKAYCE in NTM which will be a confirmatory study for patients with NTM lung infections that failed prior standard of care treatment. We plan to scale up manufacturing, we are identifying second source suppliers, and we plan to implement supply and quality agreements in preparation for commercialization of ARIKAYCE. In February 2014, we entered into a contract manufacturing agreement with Therapure Biopharma Inc. (Therapure) for the manufacture of ARIKAYCE at the larger scales necessary to support commercialization. In July 2014, we entered into a commercialization agreement with PARI Pharma GmbH (PARI), the manufacturer of our drug delivery nebulizer, to address our commercial supply needs. We have commenced the build-out of our commercial infrastructure in preparation for potential commercial launches in Europe, Canada and the US. We will continue to evaluate opportunities for additional products through various business development channels.
Product Candidates
Our lead product candidate, ARIKAYCE, or LAI, is a once-a-day inhaled antibiotic treatment engineered to deliver an anti-infective directly to the site of serious lung infections. There are two key components of ARIKAYCE: the liposomal formulation of the drug and the nebulizer device through which ARIKAYCE is inhaled via the mouth and into the lung. The nebulizer technology is owned by PARI, but we have exclusive access to this technology, which is specifically developed for the delivery of our liposomal encapsulation of amikacin, through our licensing agreement with PARI. Our proprietary liposomal technology and the nebulizer are designed specifically for delivery of pharmaceuticals to the lung and provides for potential improvements to existing treatments. We believe that ARIKAYCE has potential usage for at least two orphan patient populations with high unmet need: patients who have NTM lung infections and CF patients who have Pseudomonas lung infections. We estimate the combined global market potential for these two orphan indications to be approximately $1 billion.
ARIKAYCE has the potential to be differentiated from amikacin and certain marketed drugs for the treatment of chronic lung infections if it can be demonstrated to provide improved efficacy, safety and patient convenience. We believe ARIKAYCE’s ability to deliver high, sustained levels of amikacin directly to the lung and to the specific site of the underlying infection could distinguish it from other alternatives. We are also investigating ARIKAYCE’s potential for durability of effect, benefiting patients when off treatment or for an extended period of treatment. In addition, the inhalation delivery of ARIKAYCE may reduce the potential for adverse events such as ototoxicity (hearing loss, ringing in the ears and/or loss of balance) and nephrotoxicity (toxicity to the kidneys), as compared with intravenous (IV) administration of amikacin. If approved we expect that ARIKAYCE will be administered once-daily via inhalation using the eFlow® Nebulizer System, which has been optimized specifically for ARIKAYCE by PARI. We believe that this nebulizer system will reduce treatment time or dosing frequency, as compared with the currently marketed inhaled antibiotics, which require dosing two to three times daily with treatment times ranging from approximately 10 to 40 minutes per day. By easing the patients’ treatment burden we believe that ARIKAYCE can potentially improve patient compliance, which we believe may in turn lead to a reduction in the development of antibiotic resistance and, ultimately, lead to clinical benefit.
We believe that ARIKAYCE may provide: (i) improved efficacy resulting from sustained deposition of drug in the lung and improved ability to reach the site of infection (for CF Pseudomonas infections, this means penetration of biofilm and facilitated drug release by factors that are secreted by the bacteria, and for NTM, this means enhanced uptake into macrophages, where NTM often grows); (ii) decreased adverse events and improved tolerability as compared with amikacin delivered intravenously, and (iii) reduced dosing frequency or treatment time as compared to existing products. In the future we may conduct head-to-head comparative studies that would be necessary to make comparative statements against other products.
ARIKAYCE for Patients with NTM Lung Infections
Overview of NTM Lung Infections
Nontuberculous mycobacteria, or NTM, are organisms common in soil and water that have been associated with lung disease in select patient groups. NTM have characteristics that are similar to tuberculosis, or TB, but NTM are not believed to be contagious. Many people have NTM in their bodies, but NTM do not normally lead to an infection, perhaps because the body’s immune system successfully overcomes the threat of infection. It is not completely understood why certain individuals are susceptible to NTM infections. However, the patients who become infected by NTM often are immune-compromised, due to comorbidities such as HIV or rheumatoid arthritis, or have structural damage in their lungs, due to smoking, chronic obstructive pulmonary disease or CF, at the time of the infection.
NTM are organisms that invade and multiply chiefly within macrophages. They are characteristically resistant to most antibiotics. NTM lung infections are chronic, debilitating and progressive and often require lengthy, repeat hospitalizations. Signs and symptoms of NTM pulmonary disease are variable and nonspecific. They include chronic cough, sputum production and fatigue. Less commonly, malaise, dyspnea, fever, hemoptysis, and weight loss also can occur, usually with advanced NTM disease. Evaluation is often complicated by the symptoms caused by co-existing lung diseases. According to a study published in the American Journal of Respiratory and Critical Care Medicine, these conditions include chronic obstructive airway disease associated with smoking, bronchiectasis, previous mycobacterial diseases, CF and pneumoconiosis (Olivier et al. 2003).
Current Treatment Options and Limitations
We believe there currently is no drug approved in the US, Europe or Canada for treatment of NTM lung infections, and as a result all current drug treatments for NTM are used off-label. Patients are often treated with the same antibiotics that are used to treat TB. Such treatments usually consist of lengthy multi-drug antibiotic regimens, which are often poorly tolerated and not very effective, especially in patients with severe disease and patients who have failed prior treatments. NTM patients average 7.6 antibiotic courses per year (SDI Healthcare Database, July 2009). Treatment guidelines published in 2007 in the American Journal of Respiratory and Critical Care Medicine reported that few clinical trials were under way to identify treatment recommendations, and no new antibiotics had been studied for the treatment of NTM lung infections in multi-center, randomized clinical trials since the late 1990s.
Although approved for other indications, amikacin sulfate is not approved by the FDA for NTM lung infections. In practice, however, it is often recommended by physicians as part of the standard treatment regimen for some NTM patients. It is delivered most commonly by intravenous administration and, far less often, by inhalation. Because the drug is delivered for months at a time, resulting in high systemic (blood) levels of the drug, there can be considerable toxicity, including ototoxicity and nephrotoxicity, associated with intravenous treatment. There are very few prior studies to support what doses should be administered to effectively treat NTM patients even with these existing medications and they are often titrated on a patient by patient basis.
Market
The prevalence of human disease attributable to NTM has increased over the past two decades. In 2012, in collaboration with the NIH, we funded a study performed by Clarity Pharma Research that showed there were an estimated 50,000 cases of pulmonary disease attributable to NTM in the US in 2011 and that such cases were estimated to be growing at a rate of 10% per year. NTM is four to five times more prevalent than TB in the US (Incidence of TB from Center for Disease Control and Prevention Morbidity and Mortality Weekly Report, March 2012). In a decade-long study, researchers found that the diagnosis of NTM in the US is increasing at approximately 8% per year and that those NTM patients over the age of 65 are 40% more likely to die than those who do not have the disease (Adjemian et al, Prevalence of Pulmonary Nontuberculous Mycobacterial Disease among Medicare Beneficiaries, USA, 1997-2007, American Journal of Respiratory and Critical Care Medicine, April 2012).
In 2013, we engaged Clarity Pharma Research to perform a similar chart audit study of NTM in Europe and Japan. Based on results of this study, researchers estimated that there are approximately 20,000 cases of pulmonary disease attributable to NTM within the European nations of France, Germany, the United Kingdom, Italy and Spain combined and approximately 30,000 in the 28 countries comprising the EU. In addition, there are nearly 32,000 cases in Japan. Although population-based data on the epidemiology of NTM infections in Europe are limited, consistent with US prevalence trends, recent published studies concur that prevalence in Europe is increasing and, according to a study published in the Japanese journal Kekkaku in 2011, Japan has one of the world’s highest NTM disease rates.
Although there are many species of NTM that have been reported to cause lung infections, ARIKAYCE is intended to treat two of the most common, Mycobacterium Avium Complex (MAC) and Mycobacterium abscessus (M. abscessus). MAC accounts for the vast majority of NTM lung infections with prevalence rates from 72% to more than 85% in the US. The reported prevalence rates for M. abscessus range from 3% to 11% in the US. The diagnosed prevalence of NTM species causing lung infections varies geographically with MAC rates of 25% to 55% reported in Europe. MAC is also the most common NTM pathogen in Japan.
ARIKAYCE for NTM Lung Infections: Potential Advantages and Distinguishing Features
If approved we believe ARIKAYCE would be the first and only approved treatment in the US, Canada and Europe for patients battling NTM lung infections.
Liposomal Design and Formulation
We believe that ARIKAYCE may be effective in treating patients with NTM lung infections due to the apparent ability of the ARIKAYCE liposomes to be taken up inside lung macrophages that harbor NTM. Macrophages are immune cells whose primary function includes removing foreign particles and bacteria from the lungs. NTM are taken up by and multiply inside these macrophages. Many antibiotics cannot efficiently gain access to the macrophage interior. ARIKAYCE liposomes, however, are designed to be internalized by lung macrophages and thereby deliver high levels of drug inside the macrophages where the NTM bacteria are located.
Route of Administration
We believe ARIKAYCE has the potential to offer a safety profile different from that of intravenous delivery of amikacin. For example, unlike the intravenous administration of amikacin, ARIKAYCE would deliver the drug more directly to the site of disease. We anticipate this will result in less exposure of non-disease sites to amikacin. We believe this may reduce the potential for the occurrence of any drug-related systemic toxicity, such as nephrotoxicity, which is especially important with diseases like NTM that require long-term drug administration.
Anticipated Dosage Regimen
We believe ARIKAYCE, if approved, could improve patient convenience by providing once-a-day dosing. According to SDI Healthcare Database NTM patients average 7.6 antibiotic courses and 10.2 hospital days per year. We anticipate that ARIKAYCE will be administered once daily outside of the hospital for a period of 84 days for this indication. We believe that an effective inhaled treatment that improves the outcomes for an NTM patient would represent a significant benefit in the patient’s quality of life.
Current Clinical Program
In March 2014, we reported top-line clinical results from the double-blind portion of our phase 2 clinical trial in the US and Canada of ARIKAYCE in patients who have lung infections caused by NTM. The randomized, double-blind, placebo-controlled phase 2 clinical trial compared ARIKAYCE (590 mg delivered once daily), added to standard of care treatment, versus standard of care treatment plus placebo, in 90 adult patients with treatment resistant NTM lung disease. Eligibility for the study required patients
to have been on the American Thoracic Society/Infectious Disease Society of America guideline therapy for at least six months prior to screening and to continue to have persistently positive mycobacterial cultures. The primary efficacy endpoint of the study was a semi-quantitative measurement of the change in mycobacterial density on a seven-point scale from baseline (day one) to the end of the randomized portion of the trial (day 84). ARIKAYCE did not meet the pre-specified level for statistical significance although there was a positive trend in favor of ARIKAYCE. However, ARIKAYCE did achieve statistical significance with regard to the clinically relevant key secondary endpoint of culture conversion, with 11 out of 44 patients treated with ARIKAYCE (added to standard of care treatment) demonstrating negative cultures by day 84 of the study as compared to 3 out of 45 patients treated with placebo (added to standard of care treatment).
In May 2014, additional data from the phase 2 trial were presented at the American Thoracic Society meeting. At the conclusion of the 84-day double blind phase of the trial, 78 of the 80 patients agreed to receive once-daily ARIKAYCE plus standard of care treatment for an additional 84 days. Data from 68 of these patients who completed the visits during the additional open label phase were available for inclusion in the poster. These results collected from the open label phase show that 21 of these patients were culture negative for NTM at Day 168. This data reflects 10 patients who were culture negative at Day 84 as well as 5 additional patients from the ARIKAYCE arm and 6 additional patients who were on placebo, switching to ARIKAYCE during the open-label phase.
In June 2014, the FDA granted ARIKAYCE, Breakthrough Therapy Designation for the treatment of adult patients with NTM lung disease who are treatment refractory. This designation is based on findings from our U.S. phase 2 clinical trial of ARIKAYCE to treat NTM lung infections. ARIKAYCE has already received Orphan Drug, Qualified Infectious Disease Product (QIDP) and Fast Track designations from the FDA for the treatment of NTM lung infections and recently received Orphan Drug Designation from the EMA.
In August 2014 we announced that, following discussions with European regulatory authorities, we intend to file a MAA with the EMA by the end of 2014 for ARIKAYCE for the treatment of NTM lung infections as well as for Pseudomonas lung infections in CF patients.
In addition, based on discussions with the FDA, we are proceeding with a phase 3 study which will be designed to confirm the positive culture conversion results seen in our phase 2 clinical trial. This confirmatory study will primarily investigate ARIKAYCE for use in non-CF patients with mycobacterium avium complex (MAC) NTM lung infections who have failed prior standard of care treatment. This subgroup of the phase 2 trial’s patients responded particularly well to the treatment. We believe this approach will enable the confirmation of the previous study results to provide a path to filing and approval for an indication in patients with NTM that have failed prior treatment. Following discussions with the FDA, the trial will focus on culture conversion as the primary measure of efficacy with additional goals of demonstrating sustainability and safety. We expect to initiate the global trial in early 2015 and to complete enrollment within one year. We anticipate having preliminary top-line clinical results from the confirmatory phase 3 study in mid-2016, if positive, that would enable a Subpart H filing and potential accelerated approval. We expect to conduct the trial at over eighty sites in the United States, Europe, Australia and Canada. In addition, the trial is expected to enroll approximately 150 patients in each arm for a total of approximately 300 patients.
Additionally, we have initiated a scintigraphy sub-study to examine drug deposition and distribution of ARIKAYCE in the lung.
Development History
Nonclinical evaluations of ARIKAYCE in relation to NTM infections indicate: (1) high concentrations of drug are deposited in the lung, and high levels are sustained for prolonged periods, with low serum concentrations, and (2) ARIKAYCE has in vitro activity that is superior to amikacin solution against different strains of NTM.
Data obtained from in vitro testing of ARIKAYCE with respect to four different strains of MAC and M. abscessus indicate dose response with ARIKAYCE and superior activity to free amikacin. We believe that the safety and efficacy data obtained from the phase 3, phase 2 and open label studies of ARIKAYCE in CF and non-CF patients with chronic lung disease and pulmonary infections and the non-clinical data collected to date serve as the basis for further development of ARIKAYCE in patients with NTM lung infections.
We submitted an IND to launch a phase 3 study of ARIKAYCE in CF and non-CF patients for the treatment of NTM lung infections in treatment refractory patients. In August 2011, prior to starting the NTM study, we announced that the FDA placed a clinical hold on our phase 3 trial. The clinical hold for the NTM study was lifted in January 2012. The FDA based its clinical hold decision on an initial review of the results of a long-term rat inhalation carcinogenicity study with ARIKAYCE. When rats were given ARIKAYCE daily by inhalation for two years, 2 of the 120 rats receiving the highest dose developed lung tumors. These rats received ARIKAYCE doses that were within two-fold of those in clinical studies (normalized on a body surface area basis or a lung
weight basis). ARIKAYCE was not associated with changes that may lead to tumors in shorter-term studies in animals. Additionally, ARIKAYCE was not shown to be genotoxic in our standard series of tests. The relevance of the observed rat tumors to the use of ARIKAYCE in humans is not known. The FDA requested we conduct a phase 2 clinical trial, instead of our previously agreed upon phase 3 clinical trial in adult NTM patients, to provide proof-of-concept efficacy and safety data for ARIKAYCE in NTM patients. Despite the change in status from phase 3 to phase 2, the study design and target enrollment did not change. In connection with the FDA’s decision to lift the clinical hold for all disease indications, we agreed to conduct a dog inhalation toxicity study of ARIKAYCE. In 2013, we concluded the dog inhalation toxicity study. In summary, the final report from the study stated that the lung macrophage response in dogs was similar to that seen in our previous 3 month dosing dog study, and there was no evidence of neoplasia, squamous metaplasia or proliferative changes.
Strategy for Commercialization
We currently plan to retain marketing rights for ARIKAYCE for the NTM indication. Given the current lack of approved treatments for NTM lung infections, we believe we will immediately have a strong market position if ARIKAYCE is approved for commercialization in the NTM indication. We believe ARIKAYCE will require a limited commercial infrastructure because of the small focused nature of the potential physician prescribing population for NTM patients. We have commenced preparations for the potential commercialization of ARIKAYCE and we have filled several positions to support our future sales and marketing efforts. We may also seek to out-license ARIKAYCE in certain countries in Europe, as well as outside of Europe, Canada and the US.
ARIKAYCE for CF Patients with Pseudomonas Lung Infections
Overview of CF and Pseudomonas Lung Infections
CF is an inherited chronic disease that is often diagnosed before the age of two. CF occurs primarily in individuals of central and western European origin. CF affects roughly 70,000 children and adults worldwide, including 30,000 children and adults in the US (Cystic Fibrosis Foundation Patient Registry, 2011) and 35,000 patients in Europe (Hoiby, BMC Medicine, 2011, 9:32). There is no cure for CF.
Despite extensive treatment with multiple antibiotics, improved nutrition, and other treatments, life expectancy of a CF patient is only 38-40 years (Cystic Fibrosis Foundation Patient Registry, 2012). Median predicted age of survival is calculated using life table analysis (as calculated by actuaries) given the ages of the patients in the registry and the distribution of deaths. Using this calculation, half of the people in the patient registry are expected to live beyond the median predicted survival age, and half are expected to live less than the median predicted survival age.
Among other issues, CF causes thick, sticky mucus to develop in and clog the lungs. This creates an ideal environment for various pathogens, such as Pseudomonas, to colonize and lead to chronic infection of the lung, inflammation and progressive loss of lung function. In fact, chronic bronchial infections with Pseudomonas are a major cause of morbidity and mortality among patients with CF. Once a CF patient acquires a Pseudomonas infection, it is difficult to eradicate. The current, best available treatment is chronic administration of antibiotics to suppress the bacteria, reduce inflammation and preserve lung function for as long as possible. The rate of infection with Pseudomonas in CF patients increases with age. It is estimated that 80% of adult CF patients have chronic infection due to Pseudomonas (CFF Patient Registry, 2012). A study reported in the Journal of Cystic Fibrosis (Liou, 2010) found that deterioration in lung function of CF patients is the main cause of death and that, despite best efforts, lung function declines by 1% to 3% annually.
Current Treatment Options and Limitations
CF therapy significantly impacts patients’ quality of life. Patients generally receive extensive antibiotic treatments, which can be delivered via the oral, intravenous and inhaled routes. Some CF patients spend up to three hours per day taking medications and other treatments, including inhaled antibiotics, and often face the burden of taking in excess of 20 pills per day. All currently approved inhalation treatments for Pseudomonas lung infections require two- to three-times a day dosing.
Antibiotics delivered via inhalation are part of the standard treatment for CF patients with Pseudomonas lung infections and are generally thought to be a way to deliver more active drug directly to the site of infection compared with other routes of administration. The most used treatment in the US for the management of chronic Pseudomonas infection in subjects with CF is suppressive therapy with tobramycin. One example is twice daily Tobi inhaled solution, which is approved by the FDA for CF patients ages six years and above with a FEV1 (forced expiratory volume in 1 second) of 25%-75%, has been sold in the US since January 1998. A 1999 study reported that Tobi, 300 mg, administered twice a day for cycles of 28 days followed by 28-days-off treatment was shown to reduce Pseudomonas colony counts, increase FEV1 percent predicted, reduce hospitalizations and decrease additional antibiotic use (Ramsey et al., 1999, New England Journal of Medicine). High levels of tobramycin can be attained in the
lung with relatively low systemic exposure with inhaled drug compared to intravenous tobramycin. However, patients using Tobi must be dosed twice a day for approximately 15 to 20 minutes of inhalation session per dose for a total of approximately 30 to 40 minutes per day. Recent data show that the effect of Tobi on pulmonary function in CF patients has lessened since its introduction into the marketplace more than a decade ago (Konstan et al., Journal of Cystic Fibrosis, January 2011, and Assael et al., 34th European Cystic Fibrosis Society Conference, Poster 86, June 2011). In addition, according to information presented at a FDA advisory panel, resistance to Tobi has increased 85% in the ten-year period from 1999 to 2009 (FDA advisory panel US-FDA-AIDAC for Tobi-Podhaler, September 2012).
Market
We estimate that the global market for the treatment of Pseudomonas lung infections in CF patients is approximately $500 million. We believe this market is being driven by physicians’ desire to maintain the lung function of CF patients, which continues to decline in many patients despite extensive treatment with current therapies including currently approved inhaled antibiotics. We believe that the following additional factors may lead to further market growth:
· Better patient adherence to physician prescribed regimens resulting from more convenient (less frequent and less time consuming) treatments;
· Physicians initiating treatment with inhaled antibiotics earlier for patients with Pseudomonas in their lungs;
· CF patients living longer;
· Physicians moving to a different antibiotic every other month as opposed to giving patients off-treatment holidays on alternate months; and
· The standard of care in the rest of the world continuing to advance closer to that in the EU and the US.
ARIKAYCE for CF Patients with Pseudomonas Lung Infections: Potential Advantages and Distinguishing Features
Patient Compliance Considerations
We believe ARIKAYCE may facilitate better patient compliance with prescribed treatment regimens; patient compliance with or “adherence” to prescribed treatment is generally expected to impact the effectiveness of treatment. If a product can improve adherence, it may be able to differentiate itself from other marketed drugs. In the case of treatment and management of chronic Pseudomonas lung infections in CF patients, currently the most used treatment in the US is suppressive therapy with 300 mg twice daily of Tobi inhaled solution and tobramycin inhaled powder. Tobi is administered twice daily for 28 days followed by a 28-day-off period. This cycle of “on and off” treatment is repeated in a chronic pattern. We anticipate that ARIKAYCE would be administered once daily for 28 days followed by a 28-day off-drug period. We believe that any inhaled treatment that reduces the treatment burden on a CF patient could represent a significant improvement in the patient’s quality of life and result in improved compliance, as well as reduce the development of antibiotic resistance.
Liposomal Design and Formulation
We believe ARIKAYCE has the potential to deliver high levels of amikacin directly to the site of bacteria in the lung for a sustained period of time, which we expect would differentiate it from other marketed drugs for the treatment of chronic Pseudomonas lung infections in CF patients. Current inhaled antibiotics are commonly used as standard treatments for CF patients with Pseudomonas lung infections and generally are thought to be a way to deliver more drug directly to the site of infection as compared with other methods of delivery. However, CF patients seldom clear the Pseudomonas permanently from their lungs, in part because of the thick sticky mucus these patients produce in their lungs, and often become chronically infected despite existing antibiotic treatments. All existing aminoglycoside antibiotics, including tobramycin and amikacin, are positively charged and tend to bind to the negative surfaces of mucus and the biofilm. In contrast, we have designed ARIKAYCE to be a neutrally charged liposome, which has been shown in laboratory studies, to penetrate both CF mucus and a Pseudomonas biofilm. This means that ARIKAYCE may reach the site of the Pseudomonas infection in CF patients’ lungs more efficiently than the other currently available aminoglycoside antibiotics, including currently available inhaled antibiotics.
In addition, ARIKAYCE has demonstrated a prolonged half-life in animals’ lungs. We believe this effect is due to our proprietary liposomal technology. One important measure of the effectiveness of antibiotics is the maintenance of anti-bacterial drug levels in the lung above the minimum inhibitory concentration. We anticipate that ARIKAYCE will be maintained in the human lung in a manner similar to what was demonstrated in animal studies.
We believe ARIKAYCE may be further differentiated from other marketed drugs for the treatment of chronic Pseudomonas lung infections in CF patients due to improved lung function during both on-treatment and off-treatment cycles. Typically an inhaled antibiotic is given to CF patients with chronic Pseudomonas lung infections for 28 days followed by a 28-day off-treatment cycle,
which is often repeated chronically or for the rest of a patient’s life. In February 2014, we reported interim data from our two-year open label extension study which showed a mean increase in relative change in FEV1 which was sustained during both on-treatment and off-treatment months. In addition, during phase 2 studies ARIKAYCE demonstrated statistically significant and clinically meaningful improvement in pulmonary function throughout the 28-day treatment period, and such improvement was sustained during the 28-days off treatment period.
We have also reported data showing durability of effect for longer off-treatment periods. In an open-label phase 2 extension trial (TR02-105), CF patients using ARIKAYCE demonstrated sustained efficacy in lung function improvement during a 28-day treatment period and 56-day off-treatment period across multiple cycles of therapy as compared to baseline. In this clinical study, ARIKAYCE produced an improvement in lung function that was sustained over six cycles totaling approximately 17 months. During the off-treatment periods for this study, approximately 50% to 70% of the benefit achieved during the on-treatment periods was sustained at the end of the off-treatment periods. To our knowledge, no other inhaled antibiotic has shown sustained improvement in lung function at the end of a 56-day off-treatment period.
Route of Administration
We believe ARIKAYCE has the potential to offer a safety profile different from that of intravenous delivery of aminoglycosides. Pseudomonas is susceptible to several broad spectrum antibiotics, notably aminoglycosides. Some examples of aminoglycoside antibiotics include tobramycin and amikacin. Studies found that aminoglycosides are an important class of antibiotics for the treatment of Pseudomonas lung infections in CF patients because of their broad antimicrobial activity and concentration dependent bactericidal activity (Lacy et al., 1998; Lortholary et al., 1995; Zembower et al., 1998). Intravenous antibiotics were originally used for treatment of chronic infections associated with CF and are still used for pulmonary exacerbations. Studies report that ototoxicity and nephrotoxicity are common adverse events associated with the use of intravenous aminoglycosides and these effects are related to plasma drug levels (Mingeot-Leclercq and Tulkens, 1999).
There are two main obstacles to effective and safe treatment of CF:
· Drug Resistance. High-level multi-drug resistance complicates eradication of such strains from the bronchial secretions of CF patients. Pseudomonas lung infections are commonly treated using aminoglycoside antimicrobial agents, such as amikacin and tobramycin. However, due to drug resistance, significantly higher concentrations of these drugs above the minimum inhibitory concentration are required at the site of infection. The intravenous dosage levels required to achieve such exposures can be nephrotoxic and ototoxic.
· Limited Penetration. There is limited penetration into and through the sputum/biofilm matrix by aminoglycoside antibiotics. The antibiotics are positively charged and the biofilm is negatively charged. As a result, the antibiotics bind to the biofilm and the availability of the drug at the location of the microorganism is suboptimal. We believe that our proprietary liposomal technology will result in localized targeting of drugs, leading to increased availability of the drug at the location of the microorganism, while significantly reducing drug exposure at non-disease sites throughout the body and reducing the occurrence of systemic drug-related toxicity.
Current Clinical Program
We completed a registrational phase 3 clinical trial of ARIKAYCE for CF patients with Pseudomonas lung infections in Europe and Canada during the second quarter of 2013. The phase 3 trial was a randomized, open label, multi-center study designed to assess the comparative safety and efficacy of once-daily ARIKAYCE administered for approximately 13 minutes via the eFlow Nebulizer System and twice-daily Tobi (tobramycin inhalation solution) administered for approximately 15 minutes per treatment via the PARI LC Plus Nebulizer System for a daily total of approximately 30 minutes per day in CF patients with Pseudomonas. A total of 302 adult and pediatric CF patients with chronic Pseudomonas were randomized to receive 28-days of ARIKAYCE treatment or Tobi delivered twice-daily via the PARI LC Plus® Nebulizer System over a 24-week treatment period. The primary endpoint of the study was relative change in forced expiratory volume in one second (“FEV1”) measured after three treatment cycles, with each cycle consisting of 28 days “on” treatment and 28 days “off” treatment. The study was designed to demonstrate non-inferiority to Tobi at a 5% non-inferiority margin with 80% power agreed upon by us and the EMA. Secondary endpoints measured were relative changes in FEV1 at other time points, time to and number of pulmonary exacerbations, time to antibiotic rescue treatment, change in density of Pseudomonas in sputum, respiratory hospitalizations and changes in Patient Reported Outcomes assessing Quality of Life. Top-line results from this study indicated:
· ARIKAYCE achieved its primary endpoint of non-inferiority to Tobi for relative change in FEV1 from baseline to the end of the study;
· Overall, secondary endpoints, as summarized above, showed comparability of once-daily ARIKAYCE compared with twice-daily Tobi; and
· The safety profile of ARIKAYCE was comparable to Tobi during all three treatment cycles, with adverse events consistent with those seen in similar studies and expected in a population of CF patients receiving inhaled antibiotics. There was no difference between arms in the reporting of serious adverse events and there were no unexpected adverse events.
We are conducting a two-year, open label safety study in patients that also completed our registrational phase 3 clinical study of ARIKAYCE for CF patients with Pseudomonas lung infections in Europe and Canada. Approximately 75% of the eligible patients that completed our registrational phase 3 clinical study consented to participate in the safety study. The patients in this study will receive ARIKAYCE for up to an additional two year period, using the same cycles of a 28 day on-treatment period and a 28 day off-treatment period. In February 2014, we reported interim data from our two-year open label extension study which showed a mean increase in relative change in FEV1 which was sustained during both on-treatment and off-treatment months. We expect to use this interim data from this study as part of our regulatory filings with the EMA, which we expect to submit by the end of 2014 and Health Canada, which we expect to submit in the first half of 2015. We expect to complete this study in mid-2015.
ARIKAYCE has been granted orphan drug status in the US and Europe for the treatment of Pseudomonas lung infections in CF patients.
Development History
Nonclinical evaluations of ARIKAYCE in relation to Pseudomonas lung infections indicate:
· High concentrations of drug are deposited in the lung, and high levels are maintained for prolonged periods, with low serum concentrations;
· ARIKAYCE penetrates CF sputum and Pseudomonas biofilm;
· ARIKAYCE exhibits antipseudomonal activity in in vitro and in vivo models, including against resistant isolates; and
· Virulence factors secreted by Pseudomonas facilitate the release of amikacin from ARIKAYCE.
Our predecessor liposomal amikacin formulations for inhalation were evaluated in a series of phase 1 clinical studies involving healthy volunteers and CF patients with Pseudomonas lung infections. The current formulation of ARIKAYCE was evaluated in phase 2 clinical studies in CF patients with Pseudomonas lung infections. We completed two randomized, placebo-controlled phase 2 studies with ARIKAYCE in 105 CF patients with chronic Pseudomonas lung infections in Europe and the US. In these studies, patients in the ARIKAYCE 560 mg cohort demonstrated statistically significant and clinically meaningful improvement in lung function throughout the 28-day on-treatment period compared with placebo. In addition, the improvement in lung function that was achieved at the end of the 28-day on-treatment period was sustained during the 28-day off-treatment period and was statistically significantly better than placebo.
In a separate follow-on open-label, multi-cycle clinical trial conducted in Europe, ARIKAYCE was given at a dose of 560 mg once daily via an eFlow Nebulizer System for six cycles which consisted of a 28-day on-treatment and 56-day off-treatment period, which is double the standard 28-day off-treatment period. In this clinical study, ARIKAYCE produced a statistically significant improvement in lung function that was sustained over the six cycles (approximately 17 months). In addition, approximately 50% to 70% of the benefit achieved during the 28-day on-treatment periods was sustained at the end of the 56-day off-treatment periods. In other words, ARIKAYCE demonstrated sustained efficacy in lung function improvement during the treatment and off-treatment periods across multiple cycles of therapy. To our knowledge, no other inhaled antibiotic has shown sustained improvement in lung function at the end of a 56-day off-treatment period. In addition, ARIKAYCE was well tolerated with overall adverse events reported as consistent with those expected in a population of CF patients receiving other inhaled medicines.
In August 2011, we announced that the FDA placed a clinical hold on our phase 3 trial for ARIKAYCE in CF patients with Pseudomonas lung infections, which was lifted in May 2012. A clinical hold is an order issued by the FDA to the sponsor to delay a proposed clinical trial or suspend an ongoing clinical trial. The FDA based its clinical hold decision on an initial review of the results of a long-term rat inhalation carcinogenicity study with ARIKAYCE. When rats were given ARIKAYCE daily by inhalation for two years, 2 of the 120 rats receiving the highest dose developed lung tumors. These rats received ARIKAYCE doses that were within two-fold of those in clinical studies (normalized on a body surface area basis or a lung weight basis). ARIKAYCE was not associated with changes that may lead to tumors in shorter-term studies in animals. Additionally, ARIKAYCE was not shown to be genotoxic in our standard series of tests. The relevance of the observed rat tumors to the use of ARIKAYCE in humans is not known.
In connection with the FDA’s decision to lift the clinical hold for the CF Pseudomonas aeruginosa lung infection indication, we agreed to conduct a 9 month dog inhalation toxicity study of ARIKAYCE. In 2013, we concluded the 9 month dog inhalation toxicity study. In summary, the final report from the study stated that the lung macrophage response in dogs was similar to that seen in our previous 3 month dosing dog study, and there was no evidence of neoplasia, squamous metaplasia or proliferative changes.
We currently do not plan to initiate any further studies in Pseudomonas lung infections.
Strategy for Commercialization
We currently plan to retain marketing rights for ARIKAYCE for CF patients with Pseudomonas lung infections. We believe ARIKAYCE will require a limited commercial infrastructure because of the small focused nature of the potential physician prescribing population for CF patients. We may seek to out-license ARIKAYCE in certain countries in Europe, as well as outside of Europe, Canada and the US.
ARIKAYCE for Non-CF Bronchiectasis Patients with Pseudomonas Lung Infections
Overview of Non-CF Bronchiectasis and Pseudomonas Lung Infections
We believe ARIKAYCE has the potential to be used to treat non-CF bronchiectasis characterized by Pseudomonas lung infections. However, we are currently concentrating our development efforts on the treatment of Pseudomonas lung infections in CF patients and patients with NTM lung infections.
Non-CF bronchiectasis is a serious pulmonary condition characterized by localized, irreversible enlargement of the bronchial tubes. Accumulation of mucus in the bronchi leads to frequent infections, which causes inflammation and further reduces lung function. Patients evolve to a chronic inflammation-infection cycle. Disease burden has primarily been linked to productive cough and high levels of sputum production.
Market
It is estimated that there are more than 250,000 non-CF bronchiectasis patients in the US (SDI Innovations in Healthcare Analytics, 2008), of which approximately 30% of non-CF bronchiectasis patients are infected with Pseudomonas (Wilson, C.B., et al., Eur Respir, 1997, 10(8):1754-1760); Nicotra, M.B., et al., Chest, 1995 108(4):955-961). Currently there are no approved antibiotics for this indication. When bronchiectasis patients become infected with Pseudomonas, they tend to have more frequent exacerbations and hospitalizations and are more frequent users of antibiotics.
Development Program
In May 2009 we completed our randomized, placebo controlled US phase 2 study (TR02-107) of ARIKAYCE in the treatment of chronic Pseudomonas infection in non-CF patients with bronchiectasis. In the study, 64 study subjects were randomized (1:1:1) to receive ARIKAYCE 280 mg, ARIKAYCE 560 mg or a placebo on a daily basis during a 28-day on-treatment period. The subjects completed follow-up assessments at the end of a 28-day off-treatment period. This study provided initial evidence of safety, tolerability and clinically meaningful improvement in pulmonary function throughout the on-treatment period in the treatment of chronic Pseudomonas infection in non-CF patients with bronchiectasis.
In the study both ARIKAYCE 280 mg and ARIKAYCE 560 mg were well tolerated. The adverse events experienced by patients during the study were consistent with underlying chronic lung disease in bronchiectasis patients. There was no evidence of renal toxicity or ototoxicity. Patients in the 560-mg cohort had a slightly higher frequency of dry cough post administration than patients in the 280 mg cohort. Cough was of short duration and self-limiting. One patient discontinued treatment due to dysphonia (hoarseness or difficulty speaking) and cough.
There was a statistically significant reduction in Pseudomonas density observed in the 560 mg ARIKAYCE cohort relative to the placebo cohort. Patients receiving ARIKAYCE experienced fewer pulmonary exacerbations at a rate of 4.7%, as compared to 10.5% in those receiving placebo. No patients in the ARIKAYCE cohorts required anti-Pseudomonas rescue treatment, whereas 15% of patients in the placebo cohort required treatment. Hospitalization from any cause occurred at a 5.3% rate for patients in the placebo cohort, as compared to a 2.3% rate for patients in the ARIKAYCE cohort. Patients receiving ARIKAYCE achieved improvements in patient respiratory symptoms and quality of life assessments compared with patients receiving placebo.
Although we believe there is an opportunity to develop ARIKAYCE for non-CF bronchiectasis, we currently do not intend to initiate further clinical studies with respect to a non-CF bronchiectasis indication.
ARIKAYCE has been granted orphan drug status in the US for the treatment of bronchiectasis in patients with Pseudomonas aeruginosa and other susceptible microbial pathogens.
Optimized eFlow Nebulizer System
If approved for commercialization, we expect that ARIKAYCE will be administered once daily via inhalation using an eFlow Nebulizer System optimized specifically for ARIKAYCE by PARI, a third-party vendor.
The optimized eFlow Nebulizer System is a medical device that uses PARI’s patented eFlow technology to enable highly efficient delivery of inhaled medication, also called aerosolization, including liposomal formulations via a vibrating, perforated membrane that includes thousands of specially designed laser-drilled holes, which aids the delivery of ARIKAYCE to the lung. We believe the optimized eFlow Nebulizer System is state of the art and highly efficient. The eFlow Nebulizer System delivers a very high density of active drug, in a precisely defined and controlled droplet size, with a high proportion of respirable droplets delivered in a relatively short period of time. In addition, the eFlow Nebulizer System has a quiet mode of operation, is small in size, light weight and provides for optional battery-powered operation. We believe that using the eFlow Nebulizer System to deliver ARIKAYCE will reduce treatment time and ease the patient’s treatment burden and thereby potentially improve patient compliance. We believe that improved compliance with the prescribed treatment regimen may lead to a reduction in the development of antibiotic resistance by increasing the exposure of the infection to the minimum inhibitory concentration of antibiotic and therefore may ultimately lead to clinical benefit.
MANUFACTURING OF ARIKAYCE
The ARIKAYCE used in our clinical studies is manufactured for us by Ajinomoto Althea, Inc. (Althea), a third-party contract manufacturing organization in the US. We are working with Althea to develop commercial production capabilities for ARIKAYCE. Our agreement with Althea was amended in September 2014 to extend the term until December 31, 2014, subject to an earlier termination upon the provision of 180 days’ notice by either party, or in the event of an uncured material breach, certain bankruptcy or liquidation events, or upon the occurrence of certain other specified termination events. We are negotiating with Althea to extend the manufacture of ARIKAYCE at Althea beyond 2014. There can be no assurance that we will enter into an agreement to extend the manufacture or that we will enter into an agreement on terms favorable to us.
In February 2014, we entered into a contract manufacturing agreement with Therapure for the manufacture of ARIKAYCE at the larger scales necessary to support commercialization. Pursuant to the agreement, the Company and Therapure are collaborating to construct a production area for the manufacture of ARIKAYCE in Therapure’s existing manufacturing facility in Mississauga, Ontario, Canada. Therapure will manufacture ARIKAYCE for us on a non-exclusive basis. The agreement has an initial term of five years from the first date on which Therapure delivers ARIKAYCE to us after we obtain permits related to the manufacture of ARIKAYCE.
We are also exploring the possibility of establishing our own manufacturing facilities in order to support clinical studies and commercial supply of ARIKAYCE.
All sites of manufacture of ARIKAYCE use the technology developed and optimized by us. We and all our manufacturing partners must comply with applicable regulations relating to the current good manufacturing practices (cGMP) regulations of regulatory agencies. The cGMP regulations include requirements relating to the organization of personnel, buildings and facilities, equipment, control of components and drug product containers and closures, production and process controls, packaging and labeling controls, holding and distribution, laboratory controls, records and reports, and returned or salvaged products. We believe that all facilities will meet cGMP requirements for the sterile manufacturing of finished ARIKAYCE product.
The eFlow nebulizer system is manufactured by PARI under the names PARI Pharma GmbH in Europe and PARI Respiratory Equipment, Inc., in the US. PARI manufactures eFlow nebulizer systems utilizing technology licensed, developed and optimized within its company and produces several commercially available eFlow technology based products for use in Europe, North America and other countries. PARI maintains facilities and equipment necessary to support manufacture of eFlow nebulizers for use with ARIKAYCE. PARI must comply with applicable governmental regulations relating to medical device production in each country of manufacture. We will continue to work with PARI to address our manufacturing needs for our clinical program. In July 2014, we entered into a commercialization agreement with PARI, the manufacturer of our drug delivery nebulizer, to address our commercial supply needs.
We seek to maintain the quality of our suppliers through quality agreements and our vendor audit program.
INS-1009 Inhaled Treprostinil for Pulmonary Arterial Hypertension
Disease
Pulmonary Arterial Hypertension, or PAH, is a chronic, life-threatening disorder characterized by abnormally high blood pressure in the arteries between the heart and lungs of an affected individual. PAH is one form of pulmonary hypertension. Pulmonary arteries carry blood from the heart to the lungs, where it picks up oxygen to be delivered throughout the body. In PAH, the pulmonary arteries constrict abnormally. This forces the heart to pump harder to maintain adequate blood flow which causes blood pressure within the lungs to rise. Common early symptoms include shortness of breath, fatigue, weakness, chest pain, and fainting, particularly during physical activity. PAH worsens over time and is life-threatening because the pressure in a patient’s pulmonary arteries rises to dangerously high levels, putting a strain on the heart leading to heart failure. The cause of some cases of PAH is unknown.
Market and Current Treatment Options
There is no cure for PAH. PAH is estimated to have a prevalence of between 15 and 50 cases per 1 million adults and is considered an orphan disease.
Several medications are approved by FDA to treat symptoms:
· Treatment recommendations for early stage PAH include: diuretics, oxygen, anticoagulant, and digoxin therapy, as well as exercise.
· Advanced therapy includes treatment with endothelin receptor antagonists, phosphodiesterase 5 inhibitors and prostanoids.
The long term outcomes of medically treated patients remain uncertain, and transplantation remains an option for patients who fail on drug therapy. Prostanoid formulations used to treat PAH include oral treprostinil, intravenous epoprostenol (prostacyclin), intravenous treprostinil (a prostacyclin analog), subcutaneous treprostinil, inhaled treprostinil, and inhaled iloprost. All prostanoid compounds have the limitation of a short half-life in the body, including treprostinil.
For subcutaneous or intravenous administered treprostinil, continuous infusion is required and patients often experience injection site pain and increased risk of infection. Oral and inhaled forms of treprostinil require multiple dosing sessions per day with high and low cycling in blood levels. The initial high levels of drug may cause tolerability issues (cough, laryngeal irritation, emesis, hypotension and headache) and at the subsequent low levels of drug there may be reduced therapeutic benefit, especially in the overnight hours.
Current Program
INS-1009. We believe that we can apply our proven design and development expertise to advance a new inhaled treatment that will address the current limitations of inhaled prostanoid therapies in PAH. We believe that a sustained-release inhaled prostanoid formulation may prolong duration of effect and may provide greater consistency in pulmonary arterial pressure reduction over time. Current inhaled prostanoid therapies must be dosed four to nine times per day. Reducing dose frequency would therefore ease patient burden and may positively impact compliance. With a formulation where active prostanoid is released over time, we believe the potential for side effects due to initially high drug levels is reduced. For example, there may be reduced change in heart rate, blood pressure, and the severity and/or frequency of cough, as compared to treatment with current inhaled prostanoid therapies.
We are conducting early-stage preclinical work and if results from these studies support our product concept we may continue the program into development with the goal of submitting an IND in the second half of 2015.
Strategy for Commercialization
We are constructing our development and commercialization plan for INS-1009. We will evaluate independent development, co-development and out-licensing alternatives, as well as similar commercialization approaches.
IPLEX
In addition, we have another proprietary compound, IPLEX®, which is IGF-1, with its natural binding protein, IGFBP-3. IPLEX is no longer a development priority for us. We no longer have protein development capability or the in-house capability to manufacture IPLEX. Previously, under the proprietary IPLEX protein platform, we maintained an expanded access program for amyotrophic lateral sclerosis (also known as ALS or Lou Gehrig’s disease) until drug supplies were exhausted at the end of 2011. It is our intention to seek licensing partners for the IPLEX development programs. In 2012, we out-licensed the IPLEX technology to Premacure Holdings AB and Premacure AB of Sweden (collectively, Premacure) for retinopathy of prematurity indication. In March 2013, we amended the Premacure License Agreement to provide Premacure with the option to pay us $11.5 million and assume
any of our royalty obligations to other parties in exchange for a fully paid license. In March 2013, Shire plc announced that they acquired Premacure. In April 2013 Shire exercised this option and paid us $11.5 million, and as a result we are not entitled to future royalties from Shire.
KEY COMPONENTS OF OUR STATEMENT OF OPERATIONS
Revenues
We currently do not recognize any revenue from product sales or other sources.
Research and Development Expenses
Research and development expenses consist primarily of salaries, benefits and other related costs, including stock-based compensation, for personnel serving in our research and development functions, and other internal operating expenses, the cost of manufacturing our drug candidate for clinical study, the cost of conducting clinical studies, and the cost of conducting preclinical and research activities. Our expenses related to manufacturing our drug candidate for clinical study are primarily related to activities at contract manufacturing organizations that manufacture ARIKAYCE for our use. Our expenses related to clinical trials are primarily related to activities at contract research organizations that conduct and manage clinical trials on our behalf. These contracts set forth the scope of work to be completed at a fixed fee or amount per patient enrolled. Payments under these contracts primarily depend mainly on performance criteria such as the successful enrollment of patients or the completion of clinical trial milestones as well as time-based fees. Expenses are accrued based on contracted amounts applied to the level of patient enrollment and to activity according to the clinical trial protocol. Nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities are deferred and capitalized. Such amounts are then recognized as an expense as the related goods are delivered or the services are performed, or when the goods or services are no longer expected to be provided.
Since 2011, we have focused our development activities principally on our proprietary, advanced liposomal technology designed specifically for inhalation lung delivery. In 2014, we completed our phase 2 clinical trial in the US and Canada of ARIKAYCE in patients who have lung infections caused by NTM. In 2013, we completed a phase 3 trial in Europe and Canada in which we evaluated ARIKAYCE in CF patients with Pseudomonas lung infections. We are currently conducting a clinical trial, specifically the completion of the open-label portion of a phase 2 trial in the US in which we are evaluating ARIKAYCE for NTM infections. Since our business combination with Transave, the majority of our research and development expenses have been for our ARIKAYCE program. Our development efforts in 2014 principally relate to the development of ARIKAYCE in the NTM and CF indications.
Our clinical trials with ARIKAYCE are subject to numerous risks and uncertainties that are outside of our control, including the possibility that necessary regulatory approvals may not be obtained. In addition, the duration and the cost of clinical trials may vary significantly from trial to trial over the life of a project as a result of differences in the study protocol for each trial as well as differences arising during the clinical trial, including, among others, the following:
· The number of patients that ultimately participate in the trial;
· The duration of patient follow-up that is determined to be appropriate in view of results;
· The number of clinical sites included in the trials;
· The length of time required to enroll suitable patient subjects; and
· The efficacy and safety profile of the product candidate.
Our clinical trials may be subject to delays, particularly if we are unable to produce clinical trial material in sufficient quantities and of sufficient quality to meet the schedule for our clinical trials. Moreover, all of our product candidates must overcome significant regulatory, technological, manufacturing and marketing challenges before they can be successfully commercialized. Any significant delays that occur or additional expenses that we incur may have a material adverse effect on our financial position and may require us to raise additional capital sooner or in larger amounts than is presently expected. In addition, as a result of the risks and uncertainties related to the development and approval of our product candidates and the additional uncertainties related to our ability to market and sell these products once approved for commercial sale, we are unable to provide a meaningful prediction regarding when, if at all, we will generate positive cash inflow from these projects.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, benefits and other related costs, including stock-based compensation, for personnel serving in our executive, finance and accounting, legal, pre-commercial, corporate development, information technology, program management and human resource functions. General and administrative expenses also include
professional fees for legal, including patent-related expenses, consulting, insurance, board of director fees, tax and accounting services. We expect that our general and administrative expenses will increase in order to support increased levels of development activities and commencement of commercialization activities for our product candidates.
Debt Issuance Costs
Debt issuance costs are amortized to interest expense using the effective interest rate method over the term of the debt. Our balance sheet reflects debt net of debt issuance costs paid to the lender and reflects debt issuance costs paid to other third parties as other assets.
Investment Income and Interest Expense
Investment income consists of interest and dividend income earned on our cash, cash equivalents and short-term investments, along with realized gains (losses) on the sale of investments. Interest expense consists primarily of interest costs related to our debt and capital lease obligations.
RESULTS OF OPERATIONS
Comparison of the Three Months Ended September 30, 2014 and 2013
Net Loss
Net loss for the three months ended September 30, 2014 was $24.0 million, or ($0.54) per common share — basic and diluted, compared with a net loss of $17.3 million, or ($0.46) per common share — basic and diluted for the three months ended September 30, 2013. The $6.7 million increase in our net loss in the third quarter of 2014 as compared to the same period in 2013 was primarily due to an increase in expenses including:
· a $3.5 million increase in our general and administrative expenses that primarily resulted from an increase in personnel costs due to an increase in headcount, including non-cash stock compensation expense and an increase in pre-commercial activities; and
· a $3.1 million increase in our research and development expenses that primarily resulted from an increase in internal expenses, specifically compensation and personnel related expenses, including non-cash stock compensation expense, as well as an increase in manufacturing expenses as a result of the build-out of a production and quality control area at Therapure’s facility. These increases were offset, in part, by a decrease in external clinical development expenses which was primarily related to the fact that our phase 3 pivotal study in CF patients was completed in 2013.
Research and Development Expenses
Research and development expenses for the three months ended September 30, 2014 and 2013 comprised the following:
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|
|
September 30, |
|
Increase (Decrease) |
| |||||||
|
|
|
2014 |
|
2013 |
|
$ |
|
% |
| |||
|
External Expenses |
|
|
|
|
|
|
|
|
| |||
|
Clinical development |
|
$ |
3,226 |
|
$ |
4,731 |
|
$ |
(1,505 |
) |
-31.8 |
% |
|
Manufacturing |
|
4,707 |
|
3,291 |
|
1,416 |
|
43.0 |
% | |||
|
Regulatory and quality assurance |
|
1,245 |
|
550 |
|
695 |
|
126.3 |
% | |||
|
Subtotal - external expenses |
|
$ |
9,177 |
|
$ |
8,572 |
|
$ |
605 |
|
7.1 |
% |
|
|
|
|
|
|
|
|
|
|
| |||
|
Internal Expenses |
|
|
|
|
|
|
|
|
| |||
|
Compensation and related expenses |
|
$ |
4,687 |
|
$ |
2,482 |
|
$ |
2,205 |
|
88.8 |
% |
|
Other internal operating expenses |
|
1,336 |
|
1,041 |
|
295 |
|
28.3 |
% | |||
|
Subtotal - internal expenses |
|
$ |
6,023 |
|
$ |
3,523 |
|
$ |
2,500 |
|
71.0 |
% |
|
|
|
|
|
|
|
|
|
|
| |||
|
Total |
|
$ |
15,200 |
|
$ |
12,095 |
|
$ |
3,105 |
|
25.7 |
% |
Research and development expenses increased to $15.2 million during the three months ended September 30, 2014 from $12.1 million in the same period in 2013. The $3.1 million increase was primarily due to a $2.5 million increase in internal expenses, including a $2.2 million increase in compensation and related expenses, which included additional expenses related to the transition and consulting agreement with our former chief medical officer. In addition, there was a $1.4 million increase in manufacturing expenses primarily as a result of the build-out of a production area at Therapure’s facility. These increases were offset, in part, by a decrease of $1.5 million in external clinical development expenses which was primarily related to the fact that our phase 3 pivotal study in CF patients was completed in 2013.
General and Administrative Expenses
General and administrative expenses increased to $8.2 million during the three months ended September 30, 2014 from $4.7 million in the same period in 2013. The $3.5 million increase was primarily due to a $1.4 million increase in personnel costs due to an increase in headcount, including stock-based compensation and a $0.8 million increase in pre-commercial expenses.
Investment Income and Interest Expense
Investment income was nominal in both three month periods. Interest expense was $0.6 million and $0.5 million during the three months ended September 30, 2014 and 2013, respectively, and represents interest expense under our Loan Agreement.
Comparison of the Nine Months Ended September 30, 2014 and 2013
Net Loss
Net loss for the nine months ended September 30, 2014 was $61.5 million, or ($1.50) per common share — basic and diluted, compared with a net loss of $39.9 million, or ($1.19) per common share — basic and diluted for the nine months ended September 30, 2013. The $21.6 million increase in our net loss in the nine months ended September 30, 2014 as compared to 2013 was primarily due to $11.5 million in Other revenue received during the three months ended June 30, 2013 related to a one-time payment for the sale of the Company’s right to receive future royalties under its license agreement with Premacure (now Shire plc). An increase in expenses also contributed to the increase in net loss for the period and included:
· a $6.8 million increase in our research and development expenses that primarily resulted from an increase in internal expenses, specifically compensation and personnel related expenses, including non-cash stock compensation expense. In addition, there was an increase in manufacturing expenses as a result of the build-out of a production area at Therapure’s facility and an increase as a result of the completion of certain process improvement projects at our third party manufacturing partner and the manufacture of ARIKAYCE for clinical supply. These increases were offset, in part, by a decrease in external clinical expenses which was primarily related to the fact that our phase 3 pivotal study in CF patients was completed in 2013; and
· a $6.5 million increase in our general and administrative expenses primarily resulted from an increase in pre-commercial expenses and an increase in certain administrative expenses primarily related to our new headquarters and laboratory facilities in Bridgewater, New Jersey.
Partially offsetting these expenses was a $3.2 million increase in the benefit from income taxes resulting from the sale of a portion of our New Jersey State NOLs under the State of New Jersey’s Technology Business Tax Certificate Transfer Program for cash of $4.4 million and $1.2 million in 2014 and 2013, respectively, and net of commissions.
Other Revenue
Other revenue during the nine months ended September 30, 2013 solely consists of a one-time $11.5 million payment we received from Premacure (now Shire plc) in exchange for the Company’s right to receive future royalties under its license agreement with Premacure (see Note 11. License and Collaboration Agreements to the consolidated financial statements on Form 10-K for the year ended December 31, 2013 for additional information regarding our agreement with Premacure). We recorded this as Other revenue during the three months ended June 30, 2013, since all revenue recognition criteria were met and we had no continuing performance obligations related to the payment received.
Research and Development Expenses
Research and development expenses for the nine months ended September 30, 2014 and 2013 comprised the following:
|
|
|
Nine Months Ended |
|
|
|
|
| |||||
|
|
|
September 30, |
|
Increase (Decrease) |
| |||||||
|
|
|
2014 |
|
2013 |
|
$ |
|
% |
| |||
|
External Expenses |
|
|
|
|
|
|
|
|
| |||
|
Clinical development |
|
$ |
8,705 |
|
$ |
16,685 |
|
$ |
(7,980 |
) |
-47.8 |
% |
|
Manufacturing |
|
12,255 |
|
6,447 |
|
5,808 |
|
90.1 |
% | |||
|
Regulatory and quality assurance |
|
3,763 |
|
1,357 |
|
2,406 |
|
177.3 |
% | |||
|
Subtotal - external expenses |
|
$ |
24,723 |
|
$ |
24,489 |
|
$ |
244 |
|
1.0 |
% |
|
|
|
|
|
|
|
|
|
|
| |||
|
Internal Expenses |
|
|
|
|
|
|
|
|
| |||
|
Compensation and related expenses |
|
$ |
13,131 |
|
$ |
7,124 |
|
$ |
6,007 |
|
84.3 |
% |
|
Other internal operating expenses |
|
3,639 |
|
3,041 |
|
598 |
|
19.7 |
% | |||
|
Subtotal - internal expenses |
|
$ |
16,770 |
|
$ |
10,165 |
|
$ |
6,605 |
|
65.0 |
% |
|
|
|
|
|
|
|
|
|
|
| |||
|
Total |
|
$ |
41,493 |
|
$ |
34,654 |
|
$ |
6,839 |
|
19.7 |
% |
Research and development expenses increased to $41.5 million during the nine months ended September 30, 2014 from $34.7 million in the same period in 2013. The $6.8 million increase was primarily due to a $6.6 million increase in internal expenses, specifically a $6.0 million increase in compensation and related expenses, which included an increase of $2.0 million in stock compensation expenses and additional expenses related to the transition and consulting agreement with our former chief medical officer. In addition, there was a $5.8 million increase in manufacturing expenses as a result of the build-out of a production area at Therapure’s facility and an increase in manufacturing expenses as a result of the completion of certain process improvement projects at our third party manufacturing partner and the manufacture of ARIKAYCE for clinical supply. These increases were offset, in part, by a decrease of $8.0 million in external clinical expenses which was primarily related to the fact that our phase 3 pivotal study in CF patients was completed in 2013.
General and Administrative Expenses
General and administrative expenses increased to $22.8 million during the nine months ended September 30, 2014 from $16.3 million in the same period in 2013. The $6.5 million increase was primarily due to a $3.5 million increase in pre-commercial expenses and a $1.3 million increase in certain administrative expenses primarily related to our new headquarters and laboratory facilities in Bridgewater, New Jersey.
Investment Income and Interest Expense
Investment income decreased to $0.0 million during the nine months ended September 30, 2014 from $0.1 million in the same period in 2013. Interest expense was $1.8 million during the nine months ended September 30, 2014 and 2013 and represents interest expense under our Loan Agreement.
Benefit from Income Taxes
The benefit for income taxes was $4.4 million and $1.2 million for the nine months ended September 30, 2014 and 2013, respectively. The benefit for income taxes recorded for the nine months ended September 30, 2014 and 2013 solely reflect the reversal of a valuation allowance previously recorded against our New Jersey State net operating losses (NOLs) that resulted from the sale of a portion of our New Jersey State NOLs under the State of New Jersey’s Technology Business Tax Certificate Transfer Program (the “Program”) for cash of $4.4 million and $1.2 million, respectively and net of commissions. The Program allows qualified technology and biotechnology businesses in New Jersey to sell unused amounts of NOLs and defined research and development tax credits for cash.
LIQUIDITY AND CAPITAL RESOURCES
Overview
There is considerable time and cost associated with developing a potential drug or pharmaceutical product to the point of regulatory approval and commercialization. Historically, we have funded our operations through public and private placements of equity securities, through debt financing, from the proceeds from the sale of our follow-on biologics platform to Merck in 2009, from revenues related to sales of product and secondary revenue streams from our IPLEX expanded access program in Europe, which was discontinued in 2011 and revenue related to a one-time payment received in exchange for our right to receive royalties under our
license agreement with Premacure (now Shire plc) in 2013. We expect to continue to incur losses because we plan to fund research and development activities and commercial launch activities, and we do not expect material revenues for at least the next few years.
We may opportunistically raise additional capital during the next twelve months and may do so through equity or debt financing(s), strategic transactions or otherwise. Such additional funding may be necessary to continue to develop our potential product candidates, to pursue the license or purchase of other technologies, to commercialize our product candidates or to purchase other products. We cannot assure you that adequate capital will be available on favorable terms, or at all, when needed. If we are unable to obtain sufficient additional funds when required, we may be forced to delay, restrict or eliminate all or a portion of our research or development programs, dispose of assets or technology or cease operations. During 2014 we plan to continue to fund further clinical development of ARIKAYCE, increase our investment in third-party manufacturing capacity, support efforts to obtain regulatory approvals and prepare for commercialization. We estimate that our cash requirements to fund operations during the fourth quarter of 2014 will be in the range of $22 million to $26 million, which includes expenses of approximately $4 million for third party manufacturing capacity. In addition, in the fourth quarter of 2014 we expect to invest approximately $2 million in capital expenditures and pay current liabilities of approximately $1.0 million related to the build out of our new headquarters and laboratory facilities in Bridgewater, New Jersey. We relocated the majority our operations to the Bridgewater facility in June 2014 and the lease for our Monmouth Junction operating facility expires in December 2014.
On August 18, 2014, we completed an underwritten public offering of 10,235,000 shares of the Company’s common stock, which included the underwriter’s exercise in full of its over-allotment option of 1,335,000 shares, at a price to the public of $11.25 per share. Our net proceeds from the sale of the shares, after deducting the underwriter’s discount and offering expenses of $7.1 million, were $108.0 million.
Cash Flows
As of September 30, 2014, we had total cash and cash equivalents $167.3 million, as compared with $113.9 million as of December 31, 2013. Our working capital was $149.6 million as of September 30, 2014.
Net cash used in operating activities was $51.5 million and $32.6 million for the nine months ended September 30, 2014 and 2013, respectively. Excluding the (i) $11.5 million one-time payment from Premacure in the nine months ended September 30, 2013 and (ii) proceeds from the sale of a portion of our New Jersey State NOLs under the State of New Jersey’s Technology Business Tax Certificate Transfer Program of $4.4 million and $1.2 million in 2014 and 2013, respectively, net cash used in operating activities for the nine month periods in 2014 and 2013 would have been $55.9 million and $45.3 million, respectively. The net cash used in operating activities during the nine months ended September 30, 2014 and 2013 was primarily for the clinical development of ARIKAYCE.
Net cash (used in) / provided by investing activities was $(3.8) million and $1.4 million for the nine months ended September 30, 2014 and 2013, respectively. The net cash used in investing activities in 2014 included $(3.3) million for the build out of our new headquarters in Bridgewater, New Jersey and other fixed asset purchases of $(0.5) million for computers and lab equipment. The net cash provided by investing activities in 2013 included $2.1 million of proceeds from the maturity of a certificate of deposit offset, in part, by $(0.7) million of fixed asset purchases for lab and computer equipment.
Net cash provided by financing activities was $108.7 million and $68.4 million for the nine months ended September 30, 2014 and 2013, respectively. Net cash provided by financing activities in both periods were primarily proceeds from issuances of common stock of $108.0 million in 2014 and $67.0 million in 2013.
Contractual Obligations
On June 29, 2012, we and our domestic subsidiaries, as co-borrowers, entered into a Loan and Security Agreement with Hercules Technology Growth Capital, Inc. (Hercules) that allowed us to borrow up to $20.0 million in $10.0 million increments (Loan Agreement). We borrowed the first and second $10.0 million increments by signing two Secured Promissory Notes (Note A and Note B and collectively, the Notes) on June 29, 2012 and December 27, 2012, respectively. Notes A and B bear interest at 9.25%. Note A was originally scheduled to be repaid over a 42-month period with the first twelve monthly payments representing interest only followed by thirty monthly equal payments of principal and interest. Note B was originally scheduled to be repaid over a 36-month period with the first six monthly payments representing interest only followed by thirty monthly equal payments of principal and interest. The Loan Agreement provided that in certain circumstances we could delay the first principal payment by five months. In July 2013, subsequent to the completion of certain ARIKAYCE-related development milestones, we elected to extend the interest only period under the Notes from July 31, 2013 to December 31, 2013 and delay the first monthly principal repayments for the Notes from August 1, 2013 to January 1, 2014. On November 25, 2013, the Company and Hercules entered into an amendment (the Amendment) to the Loan Agreement. The Amendment initially extended the interest-only period through June 30, 2014 and called for the first monthly principal payment on July 1, 2014. The Amendment also allowed us to further extend the interest-only period through December 31, 2014 and delay the first payment of principal until January 1, 2015, so long as we paid a $100,000 fee and obtained positive data from our phase 2 clinical trial of ARIKAYCE in patients who have lung infections caused by NTM. In June 2014, we
paid the $100,000 fee and exercised our option to extend the interest-only period and delay the first payment of principal to January 1, 2015. The election and amendment did not change the maturity date for Notes A and B, which is January 1, 2016. In connection with the Loan Agreement, we granted the lender a first position lien on all of our assets, excluding intellectual property. Prepayment of the loans made pursuant to the Loan Agreement is subject to penalty and we are required to pay an “end of term” charge of $390,000.
We have two operating leases for office and laboratory space located in Monmouth Junction, New Jersey that expire on December 31, 2014. Future minimum rental payments under these two leases total approximately $0.2 million. We also have an operating lease for office and laboratory space located in Bridgewater, NJ that expires in November 2019. Future minimum rental payments under this lease total approximately $3.6 million. We continue to lease office space in Richmond, Virginia where our corporate headquarters was once located. Future minimum rental payments under this lease total approximately $1.0 million.
As of September 30, 2014, future payments under the two promissory notes, the capital leases and minimum future payments under non-cancellable operating leases are as follows:
|
|
|
|
|
As of September 30, 2014 |
| |||||||||||
|
|
|
|
|
Payments Due By Period |
| |||||||||||
|
|
|
|
|
Less than |
|
|
|
|
|
After |
| |||||
|
|
|
Total |
|
1 year |
|
1-3 Years |
|
4-5 Years |
|
5 Years |
| |||||
|
|
|
(In thousands) |
| |||||||||||||
|
Debt obligations: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Debt maturities |
|
$ |
20,000 |
|
$ |
5,506 |
|
$ |
14,494 |
|
$ |
— |
|
$ |
— |
|
|
Contractual interest |
|
2,129 |
|
1,705 |
|
424 |
|
— |
|
— |
| |||||
|
Capital lease obligations: |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Debt maturities |
|
16 |
|
16 |
|
— |
|
— |
|
— |
| |||||
|
Contractual interest |
|
— |
|
— |
|
— |
|
— |
|
— |
| |||||
|
Operating leases |
|
4,831 |
|
1,162 |
|
2,001 |
|
1,536 |
|
132 |
| |||||
|
Purchase obligations |
|
— |
|
— |
|
— |
|
— |
|
— |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Total contractual obligations |
|
$ |
26,976 |
|
$ |
8,389 |
|
$ |
16,919 |
|
$ |
1,536 |
|
$ |
132 |
|
This table does not include (i) any milestone payments which may become payable to third parties under our license and collaboration agreements as the timing and likelihood of such payments are not known, (ii) any royalty payments to third parties as the amounts of such payments, timing and/or the likelihood of such payments are not known, (iii) contracts that are entered into in the ordinary course of business which are not material in the aggregate in any period presented above, or (iv) any payments related to the agreements mentioned below.
We currently have a licensing agreement with PARI for use of the optimized eFlow Nebulizer System for delivery of ARIKAYCE in treating patients with CF, bronchiectasis and NTM infections. We have rights to several US and foreign issued patents, and patent applications involving improvements to the optimized eFlow Nebulizer System. Under the licensing agreement, PARI is entitled to receive payments either in cash, qualified stock or a combination of both, at PARI’s discretion, based on achievement of certain milestone events including phase 3 trial initiation (which occurred in 2012), first acceptance of MAA submission (or equivalent) in the US of ARIKAYCE and the device, first receipt of marketing approval in the US for ARIKAYCE and the device, and first receipt of marketing approval in a major EU country for ARIKAYCE and the device. In addition, PARI is entitled to receive royalty payments on commercial sales of ARIKAYCE pursuant to the licensing agreement. In July 2014, we entered into a commercialization agreement with PARI, the manufacturer of our drug delivery nebulizer, to address our commercial supply needs.
In 2004 and 2009, we entered into research funding agreements with Cystic Fibrosis Foundation Therapeutics, Inc. (CFFT) whereby we received $1.7 million and $2.2 million for each respective agreement in research funding for the development of ARIKAYCE. If ARIKAYCE becomes an approved product for CF patients in the US, we will owe a payment to CFFT of up to $13.4 million that is payable over a three-year period after approval as a commercialized drug in the US. Furthermore, if certain sales milestones are met within 5 years of the drug commercialization approval in the US, we would owe an additional $3.9 million in additional payments. Since there is significant development risk associated with ARIKAYCE, we have not accrued these obligations.
In 2009 and 2012, we entered into a cooperative research and development agreement (CRADA) with the National Institute of Allergy and Infectious Diseases (NIAID) to design and conduct our phase 2 study of ARIKAYCE in patients with NTM. NIAID has also agreed to provide biostatistical advisory input in connection with the phase 2 NTM study. If we decide not to continue with the commercialization of ARIKAYCE in NTM, NIAID will have the right to complete the clinical trial. Further NIAID may elect to pursue its rights to obtain license rights to certain inventions made under the CRADA.
In February 2014, we entered into a contract manufacturing agreement with Therapure for the manufacture of ARIKAYCE at the larger scales necessary to support commercialization. Pursuant to the agreement, the Company and Therapure are collaborating to construct a production area for the manufacture of ARIKAYCE in Therapure’s existing manufacturing facility in Mississauga, Ontario, Canada. We expect to pay Therapure approximately $12 million for the build out of the construction area and related manufacturing costs, of which approximately $6 million has been paid as of September 30, 2014. Therapure will manufacture ARIKAYCE for us on a non-exclusive basis. The agreement has an initial term of five years from the first date on which Therapure delivers ARIKAYCE to us after we obtain permits related to the manufacture of ARIKAYCE.
Future Funding Requirements
We may raise capital within the next twelve months to fund our operations, to develop and commercialize ARIKAYCE and to develop, acquire, in-license or co-promote other products that address orphan or rare diseases in the fields of pulmonology or infectious disease. Our future capital requirements may be substantial and will depend on many factors, including:
· The decisions of the FDA and EMA with respect to our applications for marketing approval of ARIKAYCE in the US and Europe; the costs of activities related to the regulatory approval process; and the timing of approvals, if received;
· The timing and cost of our anticipated clinical trials of ARIKAYCE for the treatment of patients with CF or for the treatment of patients with NTM lung infections;
· The cost of putting in place the sales and marketing capabilities necessary to be prepared for a potential commercial launch of ARIKAYCE, if approved;
· The cost of filing, prosecuting and enforcing patent claims;
· The costs of our manufacturing-related activities;
· The costs associated with commercializing ARIKAYCE if we receive marketing approval; and
· Subject to receipt of marketing approval, the levels, timing and collection of revenue received from sales of approved products, if any, in the future.
Our business strategy may require us to, or we may otherwise determine to, raise capital at any time through equity or debt financing(s), strategic transactions or otherwise. Such additional funding may be necessary to continue to develop our potential product candidates, to pursue the license or purchase of complementary technologies, to commercialize our product candidates or to purchase other products. If we are unable to obtain additional financing, we may be required to reduce the scope of our planned product development and commercialization or our plans to establish a sales and marketing force, any of which could harm our business, financial condition and results of operations. The source, timing and availability of any future financing will depend principally upon equity and debt market conditions, interest rates and, more specifically, our continued progress in our regulatory, development and commercial activities. We cannot assure you that such capital funding will be available on favorable terms or at all. If we are unable to obtain sufficient additional funds when required, we may be forced to delay, restrict or eliminate all or a portion of our research or development programs, dispose of assets or technology or cease operations.
To date, we have not generated any revenue from ARIKAYCE. We do not know when or if we will generate any revenue. We do not expect to generate significant revenue unless or until we obtain marketing approval of, and commercialize, ARIKAYCE.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, other than operating leases, that have or are reasonably likely to have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. We do not have any interest in special purpose entities, structured finance entities or other variable interest entities.
CRITICAL ACCOUNTING POLICIES
Preparation of financial statements in accordance with generally accepted accounting principles in the US requires us to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenues and expenses and the disclosures of contingent assets and liabilities. We use our historical experience and other relevant factors when developing our estimates and assumptions. We continually evaluate these estimates and assumptions. The amounts of assets and liabilities reported in our consolidated balance sheets and the amounts of revenue reported in our consolidated statements of comprehensive loss are effected by estimates and assumptions, which are used for, but not limited to, the accounting for research and development, revenue recognition, beneficial conversion charge, stock-based compensation, identifiable intangible assets and goodwill, and accrued expenses. The accounting policies discussed below are considered critical to an understanding of our consolidated financial statements because their
application places the most significant demands on our judgment. Actual results could differ from our estimates. There have been no material changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2013. For the required interim updates of our accounting policies see Note 2 to our Consolidated Financial Statements — “Summary of Significant Accounting Policies” in this Quarterly Report on Form 10-Q.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of September 30, 2014, our cash and cash equivalents were in cash accounts or were invested in money market funds. Such accounts or investments are not insured by the federal government.
As of September 30, 2014, we had $20.0 million of fixed rate borrowings in the form of two secured promissory notes that bear interest at 9.25% outstanding under a Loan and Security Agreement we entered into in June 2012. A hypothetical 10% change in interest rates occurring on September 30, 2014 would not have had a material effect on the fair value of our debt as of that date, nor would it have had a material effect on our future earnings or cash flows.
The majority of our business is conducted in US dollars. However, we do conduct certain transactions in other currencies, including Euros or British Pounds. Historically, fluctuations in foreign currency exchange rates have not materially affected our results of operation and during the three and nine months ended September 30, 2014 and 2013, our results of operation were not materially affected by fluctuations in foreign currency exchange rates.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2014. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures that are designed to provide reasonable assurance that information required to be disclosed by us in the periodic reports that we file or submit with the SEC is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation as of September 30, 2014, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended September 30, 2014 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
From time to time, we are a party to various other lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. Management does not expect that the ultimate costs to resolve these matters will materially adversely affect our business, financial position, or results of operations.
See Note 10 to the consolidated financial statements for the three months ended September 30, 2014 included in this Quarterly Report on Form 10-Q, and Note 12 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013 for a description of our significant legal proceedings, which are incorporated by reference herein.
Except for the historical information in this report on Form 10-Q, the matters contained in this report include forward-looking statements that involve risks and uncertainties. Our operating results and financial condition have varied in the past and may in the future vary significantly depending on a number of factors. These factors, among others, could cause actual results to differ materially
from those contained in forward-looking statements made in this report and presented elsewhere by management from time to time. Such factors may have a material adverse effect upon our business, results of operations and financial condition.
You should consider carefully the risk factors, together with all of the other information included in our Annual Report on Form 10-K for the year ended December 31, 2013. Each of these risk factors could adversely affect our business, results of operations and financial condition, as well as adversely affect the value of an investment in our common stock. There have been no material changes to our risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2013, except for the following update:
Risks Related to Development and Commercialization of our Product Candidates
Our near term prospects are highly dependent on the success of our most advanced product candidate, ARIKAYCE. If we are unable to successfully complete the development of, obtain regulatory approval for, and successfully commercialize ARIKAYCE, our business and the value of our common stock may be materially adversely affected.
We are investing substantially all of our efforts and financial resources in the development of ARIKAYCE, our most advanced product candidate. Our ability to generate product revenue from ARIKAYCE, which may not occur for at least the next year or two, if ever, will depend heavily on the successful completion of development of, receipt of regulatory approval for, and commercialization of, ARIKAYCE.
Positive results from preclinical studies of a drug candidate may not be predictive of similar results in human clinical trials, and promising results from earlier clinical trials of a drug candidate may not be replicated in later clinical trials. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials even after achieving promising results in earlier stages of development. Accordingly, the results of the completed clinical trials for ARIKAYCE may not be predictive of the results we may obtain in future or ongoing clinical trials. On March 26, 2014, we reported top-line clinical results from a phase 2 clinical trial in the US and Canada of ARIKAYCE in patients who have lung infections caused by NTM. ARIKAYCE did not meet the pre-specified level for statistical significance with respect to the primary endpoint although there was a positive trend (p=0.148) in favor of ARIKAYCE.
We intend to file a MAA with the EMA by the end of 2014 for ARIKAYCE for the treatment of NTM lung infections as well as for Pseudomonas lung infections in CF patients.
In addition we are proceeding with a phase 3 study which will be designed to confirm the positive culture conversion seen in our phase 2 clinical trial. This confirmatory study will primarily investigate ARIKAYCE for use in non-CF patients with MAC NTM lung infections who have failed prior standard of care treatment.
We do not expect ARIKAYCE or any other drug candidates we may develop to be commercially available for at least a year, if at all.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no unregistered sales of the Company’s equity securities during the quarter ended September 30, 2014.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
None.
A list of exhibits filed herewith is included on the Exhibit Index, which immediately precedes such exhibits and is incorporated herein by reference.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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INSMED INCORPORATED |
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Date: November 6, 2014 |
By |
/s/ Andrew T. Drechsler |
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Andrew T. Drechsler |
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Chief Financial Officer |
10.1* Commercialization Agreement dated July 8, 2014 between Insmed Incorporated and PARI Pharma GmbH.
31.1 Certification of William H. Lewis, Chief Executive Officer of Insmed Incorporated, pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
31.2 Certification of Andrew T. Drechsler, Chief Financial Officer of Insmed Incorporated, pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
32.1 Certification of William H. Lewis, Chief Executive Officer of Insmed Incorporated, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
32.2 Certification of Andrew T. Drechsler, Chief Financial Officer of Insmed Incorporated, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
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101.INS |
XBRL Instance Document |
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101.SCH |
XBRL Taxonomy Extension Schema Document |
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101.CAL |
XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
XBRL Taxonomy Extension Presentation Linkbase Document |
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* Confidential treatment has been requested for certain portions of this exhibit. The confidential portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission. |
Exhibit 10.1
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
COMMERCIALIZATION AGREEMENT
This COMMERCIALIZATION AGREEMENT (“Agreement”), dated as of July 8, 2014 (“Effective Date”), is made between PARI PHARMA GMBH, a German corporation, with a principal place of business at Moosstrasse 3, D-82319 Starnberg, Germany (“PARI”), and INSMED INCORPORATED, a Delaware corporation, with a place of business at 10 Finderne Avenue, Building 10, Suite F, Bridgewater, NJ 08807-3365 (“INSMED”). PARI and INSMED are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”
RECITALS
WHEREAS, PARI is in the business of developing, manufacturing and commercializing, among other things, drug inhalation devices and optimized formulations used in the treatment of respiratory tract disorders.
WHEREAS, INSMED is in the business of developing and commercializing drugs for various diseases and conditions, including without limitation the treatment of respiratory tract disorders and infectious diseases.
WHEREAS, PARI and INSMED are parties to a certain license agreement effective as of 25 April 25, 2008, as amended by Amendment No. 1 the 24th day of June 2009, Assignment and Amendment No. 2 the 22nd day of December 2010, Amendment No. 3 the 6th day of March 2012, and Amendment No. 4 the 21st day of May 2012 (collectively the “License Agreement”).
WHEREAS, pursuant to Section 8.9 of the License Agreement, the Parties desire to enter into this Agreement for PARI to manufacture and supply the Device (as defined below) and Device Accessories (as defined below) for use with the INSMED Product (as defined below).
NOW, THEREFORE, in consideration of the premises and direct and indirect benefits to the Parties hereto and other consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 “Affiliate” of a Party means any person or entity that directly or indirectly owns or controls, is owned or controlled by or is under common control with such Party, in each case, only for so long as such control exists. As used in this definition only, “control” of an entity means beneficial ownership, directly or indirectly, of fifty percent (50%) or more of the outstanding voting shares or securities or the ability otherwise to elect or appoint a majority of the board of directors or other managing authority of such entity.
1.2 “Applicable Laws and Standards” means (a) all applicable laws, ordinances, rules, orders, directives and regulations of any and all supra-national, federal, state, provincial and local authorities and agencies, including without limitation all laws and regulations of such territories applicable to the maintenance of the manufacturing equipment and facilities and the
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
manufacturing, transportation, storage, use, handling and disposal of medical devices, components and of any hazardous materials, (b) applicable regulations and guidelines of the FDA and other Regulatory Authorities and the ICH guidelines; (c) as applicable to the particular activities performed, Good Manufacturing Practices, Good Laboratory Practices and Good Clinical Practices promulgated by the FDA and other Regulatory Authorities or the ICH; and (d) all applicable industry and trade standards, including the applicable standards of the International Organization for Standardization (ISO).
1.3 “Business Day” means a day other than a Saturday or Sunday on which banking institutions in Berlin, Germany and New York, United States of America, are open for business
1.4 “Confidential Information” of a Party, means the confidential or proprietary scientific, regulatory, clinical, technical or business information, materials and technologies disclosed or learned under this Agreement, whether in written, oral, electronic, photographic, magnetic or other form. For clarity, the Intellectual Property owned by a Party shall be deemed the Confidential Information of such Party. Confidential Information shall exclude any information to the extent that the receiving Party can demonstrate it:
(a) is known by the receiving Party without restriction at the time of receipt and not through a prior disclosure by the disclosing Party;
(b) is at the time of disclosure or thereafter becomes published or otherwise part of the public domain through no breach of this Agreement by the receiving Party;
(c) is subsequently disclosed to the receiving Party without restriction by a third party having the right to make such a disclosure; or
(d) is developed by the receiving Party independent of and without access to Confidential Information received by it from the disclosing Party hereunder.
1.5 “Control” means, with respect to an item of information or intellectual property rights, possession by such Party of the power and authority, whether arising by ownership, license, or other authorization, to disclose such item as required by this Agreement, and/or to grant and authorize licenses or sublicenses under such items that are within the scope granted to the other Party under this Agreement.
1.6 “Cure Period” means the *** (***) Business Day period following the date of issuance of a Notice of Failure Event.
1.7 “Current Good Manufacturing Practices,” or “cGMP” means all good manufacturing practices as promulgated by the Regulatory Authority of the country where the Device is being sold, in the form of laws or regulations or guidance documents, for the manufacturing of medical devices, including 21 CFR § 820 — Quality System Regulation.
1.8 “cGMP Manufacturing” means all processes and activities typically engaged in by a person or entity in the pharmaceutical or medical device industry for the cGMP manufacture
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
of a product or component thereof, including procuring raw materials, manufacturing, quality control and assurance testing, cGMP record keeping, packaging and labeling.
1.9 “Data” means all data, data sets, test data, pre-clinical and clinical trial data, technical and non-technical data, price data (but excluding cost information and/or data), marketing data, sales data, analyses, reports, regulatory filings and approvals and the information therein or associated therewith (including drug master files and device master files, supporting data, regulatory correspondence and meeting minutes) and rights to reference the same. Each Party’s Data shall be deemed its Confidential Information.
1.10 “Device” means the eFlow® nebulizer system intended to be branded as the ***™ Nebulizer System that has been optimized for the INSMED Product as more specifically described in Exhibit A and any Territory-Specific Appendix. For clarity, the Parties agree that the Device will not include the ***™ functionality, i.e. a *** *** which *** of the *** to the ***.
1.11 “Device Accessories” means those types of accessories sold by PARI as of the Effective Date or during the Term for use with Devices, which are not specific to the drug substance being delivered by such Devices, including e.g. power adapters, carrying cases, face masks, and any replacement parts associated with the foregoing. For the avoidance of doubt, Device Accessories do not include an ***.
1.12 “Device Specifications” means the characteristics, processing, labeling, and packaging requirements and standards for the Device and Device Accessories, as set forth in the applicable Territory Specific Appendix.
1.13 “Durable Components” means the ***, the AC power supply and the *** of each Device.
1.14 “***” shall have the meaning set forth in Exhibit I.
1.15 “eFlow” means the nebulizer proprietary to PARI or its Affiliates that is based on *** technology and includes the *** and ***.
1.16 “EU” means the members states of the European Union, as it may be constituted from time to time.
1.17 “FDA” means the United States Food and Drug Administration, or any successor thereto having the administrative authority to regulate the marketing of medical devices and drugs in the United States.
1.18 “First Commercial Sale” means the first commercial sale of the INSMED Product subject to royalties under Article 6 of the License Agreement, by or under authority of INSMED, its Affiliates and/or their Sublicensees (as such term is defined in the License Agreement) in a country in the INSMED Territory, after Marketing Approval in such country has been obtained.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
1.19 “Forecast” shall have the meaning set forth in Section 6.2.
1.20 “Initial Purchase Order” shall have the meaning set forth in Section 6.3.
1.21 “INSMED Field” means (a) the pulmonary administration of INSMED Product for the treatment or prophylaxis in cystic fibrosis (CF), bronchiectasis and/or Non-tuberculosis Mycobacteria infections, and (b) any Secondary Indication (as defined in the License Agreement) that is added to the Transave Field (as defined in the License Agreement) in accordance with the provisions of Section 2.6 of the License Agreement.
1.22 “INSMED Product” means INSMED’s proprietary amikacin antibiotic based on INSMED’s proprietary sustained release liposomal technology that is formulated for delivery via pulmonary administration exclusively for use with the Device in the INSMED Field.
1.23 “INSMED Territory” means the entire world.
1.24 “Intellectual Property” means (a) any of the following, whether existing now or in the future anywhere in the world: patents, inventor’s certificates, registrations and applications therefor, including any provisionals, additions, divisionals, continuations, substitutions, continuations-in-part, together with re-examinations, reissues, renewals or extensions thereof and all foreign counterparts of any of the foregoing (collectively, “Patent Rights”), and (b) all Data, ideas, pharmaceutical, chemical and biological materials, products and compositions, tests, assays, techniques, methods, procedures, and other information relating to any of the foregoing, drawings, plans, designs, diagrams, sketches, specifications or other documents containing such information or materials, and business processes, price information, marketing information, sales information, marketing plans and market research (collectively, “Know-How”). It is understood, however, that Know-How does not include information that falls within exceptions of the definition of “Confidential Information” set forth in Section 11.1 of the License Agreement. Intellectual Property includes all enforcement rights.
1.25 “Joint Steering Committee” shall have the meaning set forth in Section 2.1(a).
1.26 “MAA” means a fully completed marketing authorization application, including a New Drug Application, (filed with the FDA, if in the United States or to the counterpart of the FDA if outside the United States), including all supporting documentation and Data required for such application to be accepted for substantive review, filed with a Regulatory Authority to seek Marketing Approval for a particular indication in a particular country. It is understood that MAA does not include applications for pricing or reimbursement approval.
1.27 “Manufacture” means all activities related to the production, manufacture, processing, finishing, packaging, labelling, shipping and holding of the PARI Products, including process development, process qualification and validation, scale-up, pre-clinical, clinical and commercial manufacture of the PARI Products, process improvements and optimization, product characterization, quality assurance, quality control and release.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
1.28 “Marketing Approval” means all approvals, registrations or authorizations of any governmental entity that are necessary for the sale of products in a regulatory jurisdiction excluding reimbursement approvals.
1.29 “Nebulizer Handset” means the eFlow® nebulizer handset intended to be branded as the *** Nebulizer Handset that has been optimized for the INSMED Product as set forth in more detail in Exhibit A.
1.30 “New Drug Application” means a New Drug Application filed pursuant to the requirements of the FDA, or the equivalent application or filing in a country other than the United States.
1.31 “PARI Competitor” shall have the meaning set forth in Exhibit B.
1.32 “PARI Intellectual Property” shall mean PARI Patents and PARI Know-How.
1.33 “PARI Know-How” shall mean all Know-How Controlled by PARI or Affiliates as of the Effective Date or at any time during the Term that relates to any of the PARI Product(s) or any component thereof and/or the Manufacture or use of the PARI Products or any component thereof.
1.34 “PARI Patents” shall mean the patents and patent applications set forth on Exhibit C, which include all patents and patent applications owned and Controlled by PARI or its Affiliates as of the Effective Date or at any time during the Term, which claim or relate to any of the PARI Product(s) or any component thereof and/or the Manufacture or use of the PARI Products or any component thereof; and any divisionals, continuations, substitutions, continuations-in-part, extensions, renewals or reissues of any of the foregoing. Upon request by INSMED, PARI shall provide update(s), if any, to the list of patents and patent applications set forth on Exhibit C.
1.35 “PARI Products” means, collectively, Devices, ***, Nebulizer Handsets and Device Accessories.
1.36 “Prices” shall have the meaning set forth in Section 4.1.
1.37 “Quality Agreements” shall have the meaning set forth in Section 6.1.
1.38 “Recall” means a recall, withdrawal, or field correction of any product for any reason, or a dissemination of information regarding such product due to a change in the labeling of such product.
1.39 “Regulatory Approval” means approval by the applicable Regulatory Authority of (x) the manufacture, use, importation, packaging, labeling, marketing, pricing and sale of the PARI Product or (y) a MAA, as applicable.
1.40 “Regulatory Authority” means any regional, state, national (e.g., the FDA), international, supra-national (e.g., the European Commission, the Council of the European
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Union, or the EMA), or other governmental entity involved in regulation of or the granting of Marketing Approval for the INSMED Product or PARI Products, as applicable, or the development, manufacture, use or commercialization thereof with jurisdiction over either Party.
1.41 “Regulatory Requirements” means all applicable requirements of the Regulatory Authorities relating to the sale, manufacture and supply of any PARI Product or the INSMED Product, as applicable.
1.42 “ROW” means all the countries in the INSMED Territory excluding the United States and Canada.
1.43 “Term” shall have the meaning set forth in Section 12.1.
1.44 “Territory-Specific Appendix” means each sub-appendix attached to this Agreement under Appendix A summarizing the applicable Device Specifications and the specific commercial terms for the Manufacture and supply of PARI Products in one or more particular country(ies) in the INSMED Territory. From time to time, the Parties may agree to add the INSMED Territory-Specific Appendices, or modify the INSMED Territory-Specific Appendices applicable to one or more particular country(ies) to this Agreement. Such Territory-Specific Appendices may contain provisions, terms and conditions that are exceptions to or different from this Agreement to address country specific conditions, provided, both Parties have agreed thereto in writing.
1.45 “Third Party” means any person or entity that is not PARI, INSMED or any Affiliate of either PARI or INSMED.
1.46 “Third Party License Agreement” means that agreement entered into between the *** (“***”) and PARI dated ***, as amended.
1.47 “United States” means the United States of America and all of its territories and possessions.
ARTICLE II
GOVERNANCE; JOINT STEERING COMMITTEE
2.1 Joint Steering Committee.
(a) Membership. The Parties hereby agree to utilize the JSC (as defined in the License Agreement and established pursuant to Section 2.3.1 of the License Agreement), to perform the additional responsibilities set forth below. As set forth in the License Agreement, the JSC shall consist of three (3) representatives from each Party. The representatives of the JSC as of the Effective Date are set forth on Exhibit D attached hereto. Each Party shall designate one (1) of its representatives as the co-chairperson of the JSC. Each Party may replace its appointed JSC representatives or co-chairperson at any time upon reasonable written notice to the other Party.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(b) Responsibilities. The responsibilities of the JSC under this Agreement shall be:
(i) to discuss INSMED’s worldwide strategy for the commercialization of the INSMED Product;
(ii) to discuss the strategy for the sublicensing and commercialization of the PARI Products with INSMED’s strategy set forth in subsection (i) above;
(iii) to facilitate the exchange of information between the Parties with respect to the activities hereunder;
(iv) to establish procedures for the efficient sharing of information necessary for the supply of the PARI Products;
(v) to share and discuss PARI’s performance under this Agreement, including without limitation the quality of the PARI Products supplied hereunder;
(vi) to share, discuss and coordinate between the Parties to ensure that the overall market demand of PARI Products for use with INSMED Product is met;
(vii) to create subcommittees as the JSC may find necessary or desirable from time to time to coordinate specific activities within the scope of the JSC’s responsibilities;
(viii) to review, discuss and decide the process for establishing a call center for support and processing complaints regarding the INSMED Product and PARI Products in the EU;
(ix) to review, discuss and implement appropriate policies regarding social media related to the Parties activities contemplated by this Agreement;
(x) to oversee the activities of subcommittees created under this Agreement; and
(xi) to perform such other functions as appropriate to further the purposes of this Agreement as allocated to it in writing by the Parties.
(c) Guiding Principles. The JSC shall perform its responsibilities based on the principles of good faith, diligence, prudence and good scientific and business judgment. The JSC shall have only the powers assigned expressly to it under this Article 2 and elsewhere in this Agreement, and the JSC shall not have any power to amend, modify or waive compliance under this Agreement. The Parties acknowledge and agree that if there is any inconsistency between the JSC’s role and responsibilities under the License Agreement and the role and responsibilities of the JSC under this Agreement, in each case with respect to the manufacture and supply of PARI Products, this Agreement shall control. In addition, the scope of the JSC’s role and
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
responsibilities under this Agreement or the License Agreement shall not in any way limit a Party’s rights under this Agreement, including any decisions allocated to it hereunder.
(d) JSC Meetings. JSC meetings shall be held as often as the Parties mutually agree are necessary but at least twice every year (alternating each in-person meeting between a location selected by PARI and a location selected by INSMED), or on another schedule agreed to by the Parties. In person meetings may be waived and conference calls substituted as agreed to by the JSC. With the consent of the representatives of each Party serving on the JSC, other representatives of each Party may attend meetings as non-voting observers (provided such non-voting observers have confidentiality obligations to such Party that are at least as stringent as those set forth in this Agreement). Meetings of the JSC shall be effective only if at least one (1) representative of each Party is present or participating. Each Party shall be responsible for all of its own expenses of participating in the JSC meetings. The JSC will be chaired by a representative of INSMED. The role of the chairperson shall be to convene and preside at meetings of the JSC, but the chairperson shall have no additional powers or rights beyond those held by the other Committee representatives. Within *** (***) Business Days following each JSC meeting, the chairperson shall prepare and deliver to the members of the JSC the minutes of such meeting for review and approval by both Parties. The minutes shall reflect, without limitation, all material decisions made at such meetings. Such minutes will be deemed approved unless one or more members of the JSC object to the accuracy of such minutes within *** (***) Business Days of receipt thereof.
(e) Void Decisions. Notwithstanding anything to the contrary in this Agreement, no decision by either Party would be effective if such decision requires the other Party to breach any obligation or agreement with a Third Party, or to perform any activities that are different or greater in scope than those provided for specifically under this Agreement.
2.2 Subcommittees.
(a) Membership. The JSC may establish subcommittees to coordinate specific activities within the scope of the JSC’s responsibilities. Each such subcommittee shall consist of two (2) representatives from each Party. Each Party may replace its appointed subcommittee representatives at any time upon reasonable written notice to the other Party. Each Party shall designate one (1) of its representatives as the co-chairpersons of each subcommittee. The Parties will agree on the responsibilities of a subcommittee before it will be established.
(b) No Decision Making. No subcommittee shall have the authority to make any decisions on behalf of the Parties.
(c) Subcommittee Meetings. Other representatives of each Party may attend meetings as nonvoting observers (provided such nonvoting observers have confidentiality obligations to such Party that are at least as stringent as those set forth in this Agreement). Meetings of the subcommittees shall be effective only if at least one (1) representative of each Party is present or participating. Each Party shall be responsible for all of its own expenses of participating in the subcommittee meetings. Within *** (***) Business Days following each
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
subcommittee meeting, INSMED shall prepare and deliver to the members of the subcommittee the minutes of such meeting for review and approval by both Parties.
ARTICLE III
COMMERCIALIZATION
3.1 Overview. PARI shall be responsible for Manufacturing and supplying PARI Products to INSMED, its Affiliates and permitted Sublicensees (as such term is defined in the License Agreement) in the INSMED Territory in compliance with the terms of this Agreement, including all Applicable Laws and Standards, and for training the appropriate key INSMED commercial team members who train general INSMED commercial team members. Unless expressly provided otherwise and agreed to by the Parties in the Territory-Specific Appendix, INSMED shall have the sole right to, in its sole discretion, promote, advertise, and distribute INSMED Products, provided that INSMED shall do so in compliance with all Applicable Laws and Standards. The Parties shall cooperate in good faith to fulfill their respective obligations under this Agreement. Notwithstanding the foregoing, PARI must approve all PARI Products related sections of promotional and/or advertising materials generated for the INSMED Products prior to any use or dissemination of such materials; provided that such approval shall not be unreasonably withheld or delayed, and PARI’s failure to respond to a request for approval within *** (***) Business Days will be deemed approval. PARI shall not use or disseminate any promotional and/or advertising materials for the Device, except that PARI shall be permitted to do so as to Device Accessories and the *** (as a stand alone item), or, to the extent not exclusively related to the INSMED Products, any other PARI Products without INSMED’s prior written approval; provided that such approval shall not be unreasonably withheld or delayed, and INSMED’s failure to respond to a request for approval within *** (***) Business Days will be deemed approval. PARI agrees to comply with the following INSMED policies and instructions to the extent applicable: (i) tracking expenditures in sufficient detail, and providing such information in a timely manner and a form and format required by INSMED so as to enable INSMED to comply with Applicable Laws, including any state or federal “sunshine” reporting requirements applicable to the INSMED Product; (ii) any policies regarding social media (which might include, for example, disabling “comment” features) implemented by the JSC; (iii) refrain from editing any promotional content (for the avoidance of doubt promotional content shall not include any labelling or packaging of PARI Products) relating to the INSMED Product other than as may be specifically requested by INSMED and approved through INSMED’s promotional review process; and (iv) submission of any proposed promotional content or scripts relating to the INSMED Product sufficiently in advance of proposed use to permit INSMED time to approve/reject/modify such data.
3.2 Commercialization of PARI Products. PARI shall sell the PARI Products to INSMED or any Third Party designated by INSMED (other than a PARI Competitor) as its representative in accordance with the terms of this Agreement to be further distributed to end users for use with the INSMED Product.
3.3 Territory-Specific Appendixes. Promptly after INSMED submits a MAA for an INSMED Product in a particular country(ies), but in any event no later than *** (***) days prior
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
to the earliest anticipated approval date by the appropriate Regulatory Authority in a particular country(ies), the Parties shall agree on a Territory-Specific Appendix setting forth the commercial terms governing such country(ies), which shall contain the applicable Price for each territory in the ROW (other than EU), the T-S Branding Strategy and any other material terms and conditions that are specifically necessary to commence commercial sales of the PARI Products and INSMED Product in such country(ies). Such Territory-Specific Appendixes shall then be attached to this Agreement and incorporated in this Agreement. Thereafter, the Parties may modify or supplement such Territory-Specific Appendixes from time to time by written agreement; provided, that PARI shall not withhold consent to any modification or supplement to a Territory-Specific Appendix to the extent such modification or supplement is required by the appropriate Regulatory Authority in the applicable country. If the Parties are unable to agree on the terms of any Territory-Specific Appendix (including any T-S Branding Strategy included therein) within *** (***) days after either Party begins negotiations for such Territory-Specific Appendix, then the provisions of Section 13.8 of this Agreement shall apply.
3.4 Branding Generally. Subject to applicable Regulatory Requirements, the packaging, labeling and promotional materials for both the PARI Products and the INSMED Products will be consistent with a branding strategy to be agreed upon by the Parties and included as part of each Territory-Specific Appendix (the “T-S Branding Strategy(ies)”). Unless the Parties agree otherwise under the applicable T-S Branding Strategy, each T-S Branding Strategy shall contain the following elements:
(a) PARI Product Branding. PARI shall be responsible for, and shall work together with INSMED in good faith in selecting trademarks for use on or in connection with any PARI Product that is aligned with PARI’s branding strategy for eFlow products. PARI will label the packaging for the Device and the packaging for the Nebulizer Handset of the Device. As determined by PARI (and reasonably acceptable to INSMED), packaging for the Device will include the PARI word mark and/or logo and/or the PARI Pharma logo, the eFlow® technology word mark and logo, a dedicated, unique brand name for the Device, and the Drug Reference (as defined below). The Nebulizer Handset component of the Device will include the dedicated, unique brand name for the Device and the Drug Reference. The aerosol head component of the Device will include only the dedicated, unique brand name for the Device. Each of the above Device components will have a distinct item number, and all such item numbers will be identified on the packaging for the Device and the packaging for the Nebulizer Handset. For purposes of this Section 3.4, unless specified otherwise by Regulatory Authorities, the “Drug Reference” means either (i) the generic drug name associated with the INSMED Product, and/or (ii) INSMED’s trademark for such INSMED Product, depending upon the status of INSMED’s branding for the INSMED Product at the time of commercialization by the Parties as contemplated herein. Notwithstanding the foregoing, the Parties shall discuss the precise forms of co-branding to accompany the Device and Nebulizer Handset and the INSMED Products, including support or other promotional materials therefor, to promote the use of the Device and Nebulizer Handset exclusively with the INSMED Product and use of the INSMED Product in the INSMED Field exclusively with the Device and Nebulizer Handset. INSMED shall not modify PARI’s labeling in any way (including by over-labeling). Except as expressly set forth in this Agreement (including, but not limited to Section 3.1), INSMED shall not use any videos,
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
photographs or graphic depictions of the PARI Products without PARI’s prior written approval; provided that such approval shall not be unreasonably withheld or delayed, and PARI’s failure to respond to a request for approval within *** (***) Business Days will be deemed approval.
(b) INSMED Product Branding/PARI Product Recognition. INSMED shall be responsible for, and shall have sole discretion, in selecting trademarks for the use on or in connection with any INSMED Product and determining the packaging, labeling and branding of any INSMED Product; provided, however, that, where it determines are appropriate, INSMED shall provide recognition of the PARI Product approved by the applicable Regulatory Authority for use with the INSMED Product. In addition, subject to Regulatory Requirements, INSMED agrees to include in the product labeling for the INSMED Product the precise Device brand name and the Device item number(s) approved to administer the INSMED Product. Except as expressly set forth in this Agreement, PARI shall not use any videos, photographs or graphic depictions of the INSMED Products without INSMED’s prior written approval; provided that such approval shall not be unreasonably withheld or delayed, and INSMED’s failure to respond to a request for approval within *** (***) Business Days will be deemed approval.
(c) PARI Supply Restriction. PARI shall not supply any Devices or any other product that is branded for use with any INSMED Product to any Third Party for use with any product other than an INSMED Product.
3.5 Product Support. PARI shall, at its own expense, and in accordance with Applicable Law and Standards establish and maintain product support capabilities for PARI Products consistent with the terms to be set forth in any Territory-Specific Appendix, including without limitation a call center or call centers and hotlines for patient support and warranty claims for PARI Products to all patients using PARI Products in the United States and Germany with toll-free access in the United States. Unless the Territory-Specific Appendix for the United States expressly states otherwise, INSMED will establish a call center for support in the United States and there will be a warm transfer of telephone calls received by the INSMED call center to PARI of all problems and complaints regarding the PARI Products. The process for establishing a call center for support and processing complaints regarding the INSMED Product and PARI Products in the EU will be reviewed, discussed and decided by the JSC. PARI shall establish such patient support capabilities for PARI Products prior to the first commercial sale of any INSMED Product in the United States and Germany, pursuant to the specific requirements in the applicable Territory-Specific Appendix and in compliance with any requirements set forth in the Safety Data Exchange Agreement. For all other countries PARI will establish an English speaking service support to communicate with local distributors which will be available during normal business hours in Germany. Each Territory-Specific Appendix may set forth any additional product support capabilities for PARI Products and for INSMED Products.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
ARTICLE IV
PAYMENTS
4.1 Pricing.
(a) Prices. PARI shall Manufacture and sell the PARI Products at the prices (the “Prices”) set forth in Exhibit I. Each Party acknowledges that the Prices were determined pursuant to an arms-length transaction.
(b) Distributors. Notwithstanding anything to the contrary in this Agreement or the License Agreement, the Parties acknowledge that PARI has established a network of distributors. If requested by INSMED, INSMED and PARI will discuss in good faith the possibility of utilizing that existing network on terms to be mutually agreed and as set forth in this Agreement; provided that the foregoing shall not limit INSMED’s right or ability to utilize distributors of its own choice.
(c) ***. Notwithstanding anything to the contrary in this Agreement, during the Term, PARI agrees to sell the Device to INSMED in any country at the *** at which any *** is sold by *** or its ***, as applicable, to a Third Party in the respective ***, taking into account *** for the Device in transactions with ***, and in each case based on *** and ***. For purposes of the foregoing, “***” means any *** with a *** and *** used for the same ***, or, if no *** is used for the same ***, for *** *** and *** and with a *** (based on ***) and *** (as described in more detail in Exhibit A).
4.2 Invoicing. Except as otherwise set forth in Article VI of this Agreement, PARI shall invoice INSMED when PARI *** the PARI Products pursuant to the Initial Purchase Order or the Purchase Orders. Subject to the terms and conditions of this Agreement, INSMED shall pay all undisputed invoices for the PARI Products delivered and accepted in accordance with Section 7.4 within *** (***) calendar days after the acceptance of shipment and receipt of the invoice.
4.3 Payment.
(a) Currency. All references to “Dollars” or “$” means the legal currency of the United States. All references to “Euros” or “€” means the legal currency of the Eurozone. In the event any PARI Product is ordered for delivery outside the United States or Canada, the currency for payment shall be Euros. With respect to the Prices for the United States and Canada set forth in Section 4.1 above, if the exchange rate of Euros to Dollars, based on the conversion rate reported by Reuters, Ltd. for the last Business Day immediately preceding the applicable invoice date (the “Invoice Date Exchange Rate”), is higher or lower than the mean exchange rate of the *** prior to the Effective Date (the “Effective Date Exchange Rate”), as set forth on Exhibit E, by ***% or more, then the Price shall be adjusted as follows:
(i) if the exchange rate has increased by more than ***%:
the Price shall be equal to the sum of (X) the Price set forth in Section 4.1(a)(i), (ii) or (iii), as applicable, plus (Y) the product of (A) the Price set forth in Section 4.1(a)(i), (ii) or (iii), as applicable, multiplied by (B) the amount equal to (x) the quotient of (a) the Invoice Date Exchange Rate divided by (b) the Effective Date Exchange Rate, minus (y) ***. By means of example, if the Effective Date Exchange
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Rate is ***, the Price is $*** and the Invoice Date Exchange Rate is ***, then the new Price will be computed as follows: $*** + ($*** x ((***/***) — ***))) = $***.
(ii) if the exchange rate has decreased by more than ***%:
the Price shall be an amount equal to the difference between (X) the Price set forth in Section 4.1(a)(i), (ii) or (iii), as applicable, and (Y) the product of (A) the Price set forth in Section 4.1(a)(i), (ii) or (iii), as applicable, multiplied by (B) the amount equal to (x) *** minus (y) the amount equal to the quotient of (a) the Invoice Date Exchange Rate divided by (b) the Effective Date Exchange Rate. By means of example, if the Effective Date Exchange Rate is ***, the Price is $*** and the Invoice Date Exchange Rate is ***, then the new Price will be computed as follows: $*** - ($*** x (*** - (***/***))) = $***.
(b) Payment Type. All payments pursuant to this Agreement for the PARI Products shall be paid to the address listed on the applicable invoice.
(c) Withholding of Taxes. INSMED may withhold from payments due to PARI amounts for payment of any withholding tax that is required by law to be paid to any taxing authority with respect to such payments. INSMED shall provide to PARI all necessary documents and correspondence and written evidence to demonstrate the payment of such tax, and shall also provide to PARI any other cooperation or assistance on a reasonable basis as may be necessary to enable PARI to claim exemption from such withholding taxes and to receive a full refund of such withholding tax or claim a tax credit.
(d) Late Payments. Any payments or portions thereof due hereunder which are not paid when due (unless disputed by INSMED in good faith) shall bear interest equal to the prime rate as reported by the Chase Manhattan Bank, New York, New York, on the date such payment is due, plus an additional *** percent (***%) per year calculated on the number of days such payment is delinquent or the maximum amount allowed by Applicable Laws and Standards, whichever is lower. This Section 4.3(d) shall not limit other remedies available to PARI.
4.4 Royalties. INSMED shall pay PARI royalties pursuant to Article 6 of the License Agreement in accordance with the terms of the License Agreement, as amended pursuant to Section 12.1 of this Agreement.
ARTICLE V
REGULATORY
5.1 Regulatory Assistance.
(a) The Parties shall cooperate in good faith to obtain any Regulatory Approvals for the use of PARI Products with INSMED Products; provided, however, that as to ROW PARI shall be provided with sufficient lead time and prior to requesting any such cooperation from PARI, INSMED shall be committed to use commercially reasonable efforts to launch the INSMED Products in the applicable country(ies). PARI shall provide regulatory and
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
technical information relating to the Manufacture and supply of PARI Products and/or components thereof as reasonably requested by INSMED to the extent required by a Regulatory Authority or that the Parties mutually agree will be helpful for a filing with a Regulatory Authority. Alternatively, if PARI determines it is reasonably necessary to protect PARI Know-How related to eFlow or the Manufacture of PARI Products and if permitted by the applicable Regulatory Authority, PARI shall notify INSMED and make such information available to Regulatory Authorities directly (e.g. via a master file for devices or equivalent documents). INSMED shall provide regulatory and technical information and Data relating to the INSMED Products as reasonably requested by PARI to the extent required by a Regulatory Authority or that the Parties mutually agree will be helpful for a filing with a Regulatory Authority or in order for PARI to create its technical file of the CE documentation or similar documents. PARI shall cooperate with any inspection of its facilities (including facilities of its Affiliates) by any Regulatory Authority relating to the PARI Products. INSMED shall cooperate with any inspection of its facilities (including facilities of its Affiliates) by any Regulatory Authority relating to the INSMED Products. Each Party shall notify the other Party, as soon as reasonably practicable but in any event within *** (***) Business Days via telephone, followed by a notice in writing in the event any action is taken or threatened by a Regulatory Authority relating to the PARI Products and the INSMED Products, as applicable.
(b) It is currently anticipated by the Parties that, with respect to the United States, the Device regulatory path shall not include a separate 510(k) submission to CDRH for clearance of the Device. Instead, the Parties currently anticipate proceeding with a single marketing application for the combination product (Device and INSMED Product) in the form of a New Drug Application for the INSMED Product, which single marketing application will contain a Device module similar in format and content to a 510(k) application.
5.2 Reimbursement Assistance. The Parties shall cooperate in good faith to obtain any reimbursement approval for the use of the Device with the INSMED Product (subject to the provisio set forth in the first sentence of Section 5.1(a) above). Each Party shall provide to the other reasonable and accurate regulatory and technical information relating to the PARI Products and/or components thereof or the INSMED Products and/or components thereof, as applicable, as reasonably requested by a payor source (without compromising confidentiality and in compliance with all applicable laws).
5.3 Safety Data Exchange Agreement. Within *** (***) days after submission to a Regulatory Authority for Marketing Approval in any given country of the INSMED Product, the Parties shall enter, with respect to such country, into a safety data exchange agreement governing the safety data exchange, adverse event reporting, patient support and management of patient compliance relating to the Device, Device Accessories and INSMED Product (each a “Safety Data Exchange Agreement”).
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
5.4 Recall.
(a) PARI Product.
(i) Each Party shall promptly notify the other Party in writing (which notice shall be provided within *** (***) hours) if any Regulatory Authority or other governmental agency having jurisdiction requests or orders it to conduct a Recall of any PARI Product, or with respect to PARI, if PARI determines to undertake a Recall of any PARI Product voluntarily. Prior to the beginning of any such Recall, the Parties agree to discuss the Recall process if practicable. Promptly after being notified of such Recall, but in no event later than may be required to permit such Party conducting such Recall to meet applicable Regulatory Requirements, the other Party shall provide the Party conducting such Recall with reasonable assistance in connection with such Recall as requested by the Party conducting such Recall.
(ii) If PARI is required or determines to effect any such Recall of the PARI Product, then PARI shall solely manage such Recall and be responsible for (i) the cost of notifying end users; (ii) costs associated with the collection and shipment from end users of the PARI Product(s) subject to such Recall; and (iii) costs of replacing such PARI Product(s), including the cost of shipping the replacement PARI Product(s) to the affected end users.
(iii) In the event that the INSMED Product is Recalled and such Recall does not result from a PARI Product or from PARI’s breach of its obligations hereunder or the gross negligence or willful misconduct of PARI or any of its Affiliates in its or their performance under this Agreement or the Quality Agreement and as a consequence the FDA or other Regulatory Authority also requires the Device be retrieved or recalled for any reason, then INSMED will bear the costs (x) of notifying end users; (y) costs associated with the collection and shipment from end users of the PARI Product(s) subject to such Recall; and (z) costs of replacing such PARI Product(s), including the cost of shipping the replacement PARI Product(s) to the affected end users.
(b) INSMED Product. INSMED shall promptly notify PARI in writing if any Regulatory Authority or other governmental agency having jurisdiction requests or orders it to conduct a Recall of any INSMED Product, or if it determines to undertake a Recall of any INSMED Product voluntarily. Prior to the beginning of any such Recall, the Parties agree to discuss the Recall process if practicable. INSMED shall solely manage such Recall and be responsible for (i) the cost of notifying end users; (ii) costs associated with the collection and shipment from end users of the INSMED Product subject to such Recall; and (iii) costs of replacing such INSMED Product, including the cost of shipping the replacement INSMED Product(s) to the affected end users. Notwithstanding anything to the contrary in this Section 5.4(b), to the extent INSMED is required to effect any Recall of an INSMED Product and such Recall results from a PARI Product or from PARI’s breach of its obligations hereunder or the gross negligence or willful misconduct of PARI or any of its Affiliates in its or their performance under this Agreement or the Quality Agreement, PARI shall, to the extent resulting from the PARI Product or from PARI’s or its Affiliates’ (as applicable) breach of its obligations hereunder, or gross negligence or willful misconduct in its or their performance under this Agreement or the Quality Agreement, bear the expense of repackaging any INSMED Product that is still in INSMED’s or its Affiliates’ or their distributor’s possession or control and replacing the PARI Products packaged with such INSMED Products.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
5.5 Deficiency Audits. INSMED shall have the right at its own cost to inspect and audit, or cause to be inspected and audited, the facilities, books and records of PARI which directly relate to (i) a Regulatory Authority-identified deficiency, provided that such deficiency is related to information or materials that PARI provided to INSMED; and/or (ii) a material breach in PARI’s performance under this Agreement (each a “Deficiency”). INSMED shall have the right at its own cost to inspect or audit, or caused to be inspected or audited, any document, process, system, procedure, product or material that has resulted in a Deficiency (a “Deficiency Audit”).
ARTICLE VI
MANUFACTURE AND SUPPLY OF PARI PRODUCTS
6.1 Manufacture of PARI Products. PARI shall Manufacture all PARI Product(s) in accordance with this Agreement, the Quality Agreements, the applicable Device Specifications and Applicable Laws and Standards. Within *** days from the Effective Date, the Parties will enter into two substantially equivalent agreements (one to cover the US/Canada and the other for the ROW) governing the change control processes, cGMP, quality system regulations, other standards and procedures for manufacturing and supplying the Device and the Device Accessories as required by Applicable Laws and Standards and Regulatory Requirements customary for similar agreements (“Quality Agreements”). Upon their execution, the Quality Agreements will be attached as Exhibit F. Any modification(s) to the Device Specifications that could: (i) affect the Regulatory Approval of the Device or Device Accessories, as applicable, or (ii) have a material adverse effect on the development of the PARI Products and the manufacture thereof, including the quality, reliability, robustness or user interface of the Device or which would otherwise have an adverse effect on the INSMED Product when used with the Device or Device Accessories, as applicable, shall be subject to the Parties’ written agreement prior to their implementation provided, however, that if INSMED has not responded to PARI in writing within *** (***) Business Days of receipt of PARI’s notice regarding such modifications, then INSMED shall be deemed to have approved such modifications. PARI shall promptly inform the JSC of any other PARI Product modification(s) that could give rise to questions on the part of end-users or others involved in Device distribution.
6.2 Forecasts. Subject to Section 6.3 with respect to the Initial Forecast, after submission to a Regulatory Authority for Marketing Approval of the INSMED Product in any given country but no less than *** (***) months prior to the anticipated First Commercial Sale in such country and thereafter on a quarterly basis during the Term, at least *** (***) days before the end of each calendar quarter, INSMED shall provide PARI with its good faith, reasonable written projections (broken down by Devices, *** and Nebulizer Handsets) of the anticipated total market requirements of PARI Products for each country in the INSMED Territory (“Forecast”), on a *** basis during the *** (***)-*** period immediately following the calendar quarter in which such projection is issued. The forecasted quantities of PARI Products set forth in each Forecast are non-binding, good faith estimates provided solely to assist PARI in its production planning. All Forecasts shall be deemed INSMED Confidential Information. PARI shall use commercially reasonable efforts to commence scale-up activities to transition from clinical supply to commercial supply based on INSMED’s Forecasts which shall be reasonably explained by INSMED to PARI.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
6.3 Initial Purchase Orders for PARI Products. No later than *** (***) days prior to the earliest anticipated approval date by the Regulatory Authority of a MAA in any given country of the INSMED Product, INSMED shall provide PARI with a PARI Product purchase order for a quantity of PARI Products by item number (each an “Initial Purchase Order”). PARI shall produce sub-components for Devices and Nebulizer Handsets as specified in the Initial Purchase Order. Such sub-components shall not be labeled with a trademark or according to the branding strategy until INSMED and PARI will have mutually agreed and confirmed in writing the labeling of the Devices and Nebulizer Handsets. The shipment date of the Devices and Nebulizer Handsets covered by such Initial Purchase Order shall allow PARI a lead time of *** (***) days from the date of written agreement on the labeling of the Device and Nebulizer Handset for completing the finished components. Notwithstanding the above, if requested in writing by INSMED as an amendment to the Initial Purchase Order, PARI shall complete production and ship *** as requested in the amendment of the PARI Products ordered in the Initial Purchase Order within *** (***) days of the receipt of such amendment. The amendment shall include the requested labeling of the Device including the Nebulizer Handset, packaging, and instruction for use. The remaining balance of the Initial Purchase Order shall be shipped within *** (***) days from the date of written confirmation by INSMED on the labeling of the Device and Nebulizer Handset. For the avoidance of doubt, if INSMED requests the production and shipment of *** of the PARI Products ordered in the Initial Purchase Order before the date of written agreement on the labeling of the Device and Nebulizer Handset, INSMED shall pay for such portion of the Initial Purchase Order as set forth below regardless of whether the labeling of the Device and Nebulizer Handset changes for any reason. Notwithstanding the foregoing, if PARI needs to change the labeling upon request by INSMED or any relevant Regulatory Authority, then INSMED shall promptly reimburse PARI for the additional cost incurred by PARI and any resulting delay in shipment shall not be deemed a breach of this Agreement and such late shipment shall not be included to determine a Failure Event. PARI shall store such PARI Products until such time as PARI delivers such PARI Products on the dates and to the locations to be provided by INSMED, to the extent allowed by applicable law, in written instructions to PARI prior to the First Commercial Sale in the U.S. or in the European Union, as applicable. Notwithstanding Section 4.2 above, PARI shall provide INSMED with an invoice for the PARI Products manufactured by PARI pursuant to such Initial Purchase Order upon receipt and confirmation of the Initial Purchase Order, and INSMED shall pay the invoice submitted by PARI for the Initial Purchase Order within *** (***) calendar days after the date of invoice.
6.4 Subsequent Purchase Orders.
(a) PARI shall supply PARI Products to INSMED in accordance with the terms and conditions of this Agreement, and in accordance with the purchase orders submitted to PARI by INSMED (the “Purchase Orders”). Each Purchase Order shall include item numbers and quantity, delivery location(s), contact information and shipment date(s). PARI shall ship the quantity of PARI Products specified in each Purchase Order no less than *** (***) days after the date and confirmation of such Purchase Order by PARI, unless otherwise agreed to by PARI and INSMED; provided, however, that no such Purchase Order shall have a shipment date prior to the *** day following the date of receipt by PARI of the Initial Purchase Order. PARI shall
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
accept all Purchase Orders for quantities of PARI Products that are set forth in the most recent Forecast for the applicable time period, and PARI shall use commercially reasonable efforts to accept and fill Purchase Orders placed by INSMED that are *** of the forecasted quantities for such time period. PARI shall notify INSMED within *** (***) Business Days if it cannot meet the requested shipment date for the ***; provided, however that failure by PARI to fulfill such *** shall not be deemed a breach under this Agreement.
(b) PARI’s sale of PARI Products hereunder shall be subject to the terms and conditions of this Agreement and not to any terms and conditions stated on any Purchase Order, PARI’s written acceptance of a Purchase Order or other document not effectively amending this Agreement, except insofar as such Purchase Order or other document establishes the quantity, delivery date, specific shipping requirements and destination of shipment of PARI Products ordered. Any additional, inconsistent or different terms and conditions contained in such other documents are hereby expressly rejected.
(c) Rush orders for PARI Products requesting a delivery date sooner than *** (***) days after the date of such Purchase Order (other than the Initial Purchase Order) may incur additional charges. Such additional charges shall be equal to the actual cost incurred by PARI (over and above non-rush order costs) due to such rush order.
6.5 Continuity of Supply. The Parties recognize that continuity in the manufacture and supply of the PARI Products is critical for patient care and for the commercial success of the PARI Products and the INSMED Product(s). The Parties have agreed on the following terms and conditions in this Section 6.5 to minimize the risk of discontinuity in such manufacture and/or supply.
(a) Contingency Plan. On or about *** days prior to the earliest anticipated First Commercial Sale of the INSMED Product, PARI will provide to INSMED its draft contingency plan for ensuring the continuity of manufacture and supply of PARI Products in the event of a Supply Interruption or other Failure Event (each as defined in Section 6.5(c)) (the “Contingency Plan”). INSMED shall have the opportunity to review and comment on such draft Contingency Plan and the Parties shall finalize such Contingency Plan by mutual written agreement (not to be unreasonably withheld). As part of such Contingency Plan, the Parties may discuss in the future the possibility for PARI to use commercially reasonable efforts to negotiate in good faith and implement a reasonably acceptable *** for the PARI Products, which may include a *** for such PARI Products by PARI or its Affiliates, and any such discussions shall also include the *** of *** and *** related to the implementation of such a ***.
(b) Safety Stock. For the purpose of guarding against unexpected changes in market demand or unforeseen manufacturing failures, delays and shortfalls, PARI agrees to maintain, at its own cost and expense, safety stock of the Devices, *** and Nebulizer Handsets (the “Safety Stock”), equal to *** (***) months supply as set forth in the most current Forecast. PARI shall have the Safety Stock in place beginning *** days after the first Marketing Approval of the INSMED Product. PARI shall have the right to freshen the Safety Stock from time to time by rotating such Safety Stock provided that the minimum quantity of Safety Stock is not reduced
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
through such process. In addition, an additional *** (***) months of safety stock may be maintained by INSMED at its expense.
(c) Back-up Manufacturer.
(i) Notice of Supply Interruption. In the event of any interruption of PARI’s ability to supply Devices in accordance with this Agreement for any reason, (a “Supply Interruption”), PARI shall promptly notify INSMED. Upon the occurrence of any Supply Interruption, the Parties will meet immediately and discuss in good faith all appropriate actions to remedy and cure the Supply Interruption. PARI will use *** to cure the Supply Interruption as soon as possible. Upon the occurrence of a Supply Interruption, PARI shall be permitted to use the Safety Stock to cure such Supply Interruption. Promptly following the event of a Supply Interruption, PARI shall prepare a plan to address any deficiencies or cause(s) of such interruption, provide a draft of the plan to INSMED (including a plan for filling up the Safety Stock if PARI used the Safety Stock to cure the Supply Interruption or an otherwise potentially incomplete Purchase Order) for review and agreement, and will implement all reasonable comments from INSMED as soon as possible.
(ii) Failure Event. The Parties acknowledge the possibility that one or more of the following events (each, a “Failure Event”) may occur:
(1) PARI undergoes a voluntary or involuntary dissolution;
(2) PARI ceases to conduct business in the normal course, becomes insolvent, files for bankruptcy, is subject to a bankruptcy proceeding or otherwise becomes bankrupt, makes a general assignment for the benefit of creditors, admits in writing its inability to pay its debts as they are due, permits the appointment of a receiver for its business or assets, avails itself of or becomes subject to any proceeding under any statute of any governing authority relating to insolvency or the protection of rights of creditors; or
(3) PARI’s failure to supply at least *** percent (***%) of all quantities of Devices, Nebulizer Handsets and *** (which, for purposes of calculating a Failure Event under this subsection (3), shall be calculated ***) set forth in all accumulated Purchase Orders (but only to the extent each such Purchase Order is within the applicable forecasted amount) in any *** (***) consecutive ***; provided that in order for a shortage in supply to qualify under this subsection (3), the delivery date in the applicable Purchase Order corresponding to such supply shortage must be at least *** (***) days from the delivery date in any other Purchase Order for which a shortage in supply occurred and is being applied towards a Failure Event under this subsection (3); and provided further that PARI shall be permitted to use Safety Stock to avoid an incomplete Purchase
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Order, in which case such Purchase Order shall be deemed complete and not be counted towards the occurrence of a Failure Event.
(iii) Notification of Failure Event. PARI shall promptly notify INSMED in writing upon the occurrence of any Failure Event set forth in subsection (1) or (2) in clause (ii) above. INSMED may notify PARI in writing upon the occurrence of an event set forth in subsection (3) of clause (ii) above (each such notice provided pursuant to this Section 6.4(c)(iii), a “Notice of Failure Event”).
(iv) Cure. If a Failure Event set forth in Section 6.5(c)(ii)(3) occurs, PARI shall provide INSMED a written proposal which includes: (1) a statement of the exact amount of Safety Stock and other PARI Products available pro rata to INSMED, as applicable, remaining in PARI’s inventory; (2) the current and expected (based on the Forecast) shipments for PARI Products; and (3) PARI’s plans for remedying such Failure Event within the Cure Period. Such remedies may include, but are not limited to, PARI’s implementation of the Contingency Plan, establishment of a new manufacturing line at an alternate PARI facility or PARI establishing an agreement with a Third Party to begin manufacturing. INSMED will have *** (***) days to review and give good faith consideration to PARI’s written proposal and, provide comments to PARI’s proposal for cure.
(v) Alternative Supplier. If a Failure Event set forth in Section 6.5(c)(ii)(1) or Section 6.5(c)(ii)(2) occurs or if PARI fails to cure any Failure Event set forth in Section 6.5(c)(ii)(3) within the Cure Period, then INSMED shall have the right to obtain PARI Products from an alternate supplier of its choice other than a PARI Competitor (an “Alternative Supplier”) and the further provisions of this Section 6.5(c)(v) shall apply.
(1) PARI shall grant INSMED a limited, non-exclusive right and license, with the right to grant sublicenses of INSMED’s rights under the PARI Intellectual Property (in accordance with the terms and conditions of this Agreement and the License Agreement, excluding the payment terms for PARI Products under this Agreement), to make or have made the PARI Products solely for use with the INSMED Product(s) in the INSMED Field in the INSMED Territory (the “Back-Up License”). The Back-Up License shall survive any termination of this Agreement by INSMED solely pursuant to Section 12.2(c) or 12.2(d) of this Agreement.
(2) In the event INSMED requests that PARI initiate the transfer of its Data to an Alternative Supplier to support the Manufacture of PARI Products in accordance herewith, such Alternative Supplier shall first enter into a reasonable non-disclosure/confidentiality rights agreement with PARI to protect PARI’s Data, Confidential Information and PARI Intellectual Property associated with such transfer and such transfer shall be in accordance with the terms and conditions of this Agreement and the License Agreement.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(3) Upon written notice from INSMED, PARI shall promptly initiate and complete the transfer of the Data set forth below to support the Manufacture of PARI Products pursuant to the Back-Up License at PARI’s sole cost and expense to INSMED or INSMED’s Alternative Supplier in accordance herewith, and provide related reasonable technical assistance (including the availability of personnel) reasonably useful or necessary for such Manufacture, including the right to review all records related to such Manufacture upon reasonable advance written notice in accordance with Article X of this Agreement:
(a) the complete Manufacture standard operating procedures (“SOPs”), including a complete description of all PARI Intellectual Property, to the extent related to the Manufacture of PARI Products;
(b) all technical reports and materials related to the Manufacture process activities for the PARI Products, including all reports, documentation and other materials generated, to the extent not previously delivered to INSMED (if any), which at the time of such transfer are relevant to and would be required or useful to Manufacture the PARI Products as set forth herein using the processes as performed by PARI at such time;
(c) all regulatory filings relating to the Manufacture of the PARI Products, including the materials comprising the PARI Products; and
(d) all necessary Chemistry, Manufacturing and Controls (“CMC”) section documentation relating to the Manufacture of the PARI Products and required for regulatory filings.
(vi) Notwithstanding anything set forth in this Agreement or the License Agreement, in acknowledgment of PARI’s reasonable concern over the protection of PARI Intellectual Property, INSMED shall not (directly or indirectly) undertake, or cause to be undertaken by the Alternative Supplier, the proprietary aspects of Manufacture of the PARI Products (including without limitation the Device’s or Nebulizer Handset’s aerosol heads) in the countries listed on Exhibit G hereto, except to the extent such country currently listed no longer is listed on the TRIPS Priority Watch list.
(vii) If PARI regains the ability to manufacture and supply PARI Products and INSMED reasonably determines in good faith that PARI does have the ability to manufacture and supply PARI Products, then INSMED will use its *** to transition back to PARI the Manufacture of the PARI Products within a reasonable timeframe determined by INSMED in good faith after consultation with PARI, such
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
timeframe not to exceed *** (***) days, provided that such maximum timeframe shall be reasonably extended to the extent necessary to comply with any necessary regulatory requirements or for INSMED to perform any ongoing clinical development activities.
(viii) For clarity, INSMED shall remain responsible for its royalty obligations in accordance with the terms of the License Agreement, as amended pursuant to Section 12.1 of this Agreement. Notwithstanding anything to the contrary contained herein, the Back-Up License and related rights set forth in this Section 6.5(c) shall terminate concurrently with any termination of the License Agreement by PARI under Section 15.2 of the License Agreement.
(ix) If INSMED and/or its Alternative Supplier (directly or indirectly) modifies or improves any PARI Intellectual Property, all such improvements and modifications, and all Intellectual Property rights thereto, are and will be exclusively owned by PARI (and included within the scope of the Back-Up License) and INSMED does hereby and will promptly (and shall secure and cause its Alternative Supplier to promptly) transfer and assign any and all such rights in such improvements and modifications to PARI without further consideration at INSMED’s sole cost and expense.
6.6 Relationship to the License Agreement. The provisions of this Agreement shall replace and supersede Section 8.9 and Exhibit 8.9 of the License Agreement in their entirety.
ARTICLE VII
DELIVERY
7.1 Delivery. PARI shall deliver to INSMED all PARI Products in conformance with each applicable Purchase Order. PARI recognizes that time is of the essence under this Agreement. PARI shall report to INSMED the occurrence of any event within or beyond its control which is likely to affect delivery under this Agreement. All PARI Product so delivered shall be accompanied by the following documentation, as applicable: (a) the serial numbers of the delivered Devices or aerosol heads; (b) any documentation required under this Agreement or the Quality Agreements, and (c) any documentation that PARI customarily includes in shipments of such Device and/or Device Accessories.
7.2 Shipping; Risk of Loss. All shipments for PARI Products will be made (x) *** in *** (INCOTERMS 2010) by a common carrier selected by PARI; and (y) in case of the United States and Canada, *** in *** (INCOTERMS 2010) by a common carrier selected by INSMED, such selection to be reasonably acceptable to PARI acting in good faith.
7.3 Testing. PARI shall test the orders of PARI Product to be supplied to INSMED in accordance with the terms and conditions set forth in the Quality Agreements.
7.4 Acceptance. INSMED shall have a period of *** (***) Business Days from the date of receipt of any shipment of the PARI Products to test for quality and visually inspect each
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
shipment for shortage in quantity or visible damages. INSMED shall have the right to reject all or a portion of a shipment for any visible damage, or request for the shipment of additional units to the extent there is a shortage in quantity. If INSMED rejects a shipment, it shall notify PARI in writing within such *** (***) Business Days, indicating the order number, date of delivery and the nature of the Device defect. Upon PARI’s receipt of a rejection from INSMED and PARI’s acceptance in good faith of such a rejection, PARI shall, at the option of INSMED, replace the Device and/or Device Accessory or replace the defective part or component, in each case at PARI’s sole expense. Time shall be of the essence in PARI’s replacement of such defective part or component. In the event INSMED does not so notify PARI of visible damage, a shortage of PARI Products or a quality issue within *** (***) Business Days after its receipt of any shipment thereof, INSMED shall be deemed to have accepted such shipment and shall be obligated to make payment therefor as provided in this Agreement. Thereafter, INSMED may return any PARI Product only pursuant to Section 8.3 below.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
8.1 Mutual Representations and Warranties. Each Party hereby represents and warrants to the other Party as follows:
(a) Due Authorization. Such Party has taken all necessary action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder.
(b) Enforcement of Obligations. This Agreement has been duly executed and delivered on behalf of such Party, and constitutes a legal, valid, binding obligation, enforceable against such Party in accordance with its terms.
(c) No Conflict. The execution and delivery of this Agreement and the performance of such Party’s obligations hereunder do not conflict with, or constitute a default or require any consent under, any contractual obligation of such Party.
(d) Each Party represents and warrants and covenants that all relationships or arrangement between such Party and any federal, state or local government (or an agency thereof)) or any elected or appointed public official shall comply with all Applicable Laws and Standards, including without limitation lobbying restrictions, conflicts of interest requirements, and the Foreign Corrupt Practices Act.
8.2 Representations and Warranties of PARI. PARI represents, warrants, and covenants to INSMED as follows:
(a) PARI is not debarred pursuant to the Federal Food, Drug and Cosmetic Act, excluded from a federal health care program, or debarred from federal contracting, and PARI shall not use any employee or consultant, in the United States, who has ever been so debarred or excluded or is, to PARI’s knowledge (after reasonable inquiry), the subject of such debarment or exclusion proceedings, or who has been convicted of or pled nolo contendere to
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
any felony, or to any federal or state legal violation (including misdemeanors) relating to prescription drug or device products or fraud, or convicted of any other crime for which an entity or person could be so debarred or excluded (including by the FDA under 21 U.S.C. § 335a (or subject to a similar sanction of any other Regulatory Authority in the United States)). PARI agrees that, if, during the Term, all or part of the above statement ceases to be accurate, PARI shall immediately notify INSMED of such circumstance, and at INSMED’s option, acting reasonably, this Agreement shall terminate automatically as of the first date of such noncompliance);
(b) PARI has not and shall not enter into any agreement or arrangement with any other entity that could reasonably be expected to prevent, in any material respect, or in any other negative way materially interfere with, PARI’s ability to perform its obligations pursuant to this Agreement, or that would prevent INSMED from exercising its rights under this Agreement or the License Agreement;
(c) PARI is a ISO-certified manufacturer following ISO 13485, and PARI agrees to inform INSMED immediately regarding any change in this status;
(d) PARI agrees to inform INSMED immediately regarding any change in its registration or status with the FDA or any other Regulatory Authority;
(e) PARI owns or otherwise Controls all necessary rights to make, use, import, export, offer for sale and sell and commercialize all Devices, *** and Nebulizer Handsets as contemplated under this Agreement; and
(f) PARI has not received any written notice that any Regulatory Authority has commenced, or threatened to initiate, any action to withdraw approval, place marketing or sale restrictions, or request the recall of the PARI Products, or commenced, or threatened to initiate, any action to enjoin or place restrictions on the production, sale, or marketing of the PARI Products.
8.3 Device Warranties. PARI represents, warrants and guarantees that each unit of PARI Products supplied by PARI under this Agreement:
(a) as of the time of first use, complies with the terms of this Agreement and the applicable Device Specifications set forth in the applicable Territory-Specific Appendix;
(b) has been manufactured in compliance with Applicable Laws and Standards;
(c) has been manufactured in compliance with the terms and conditions of the Quality Agreements;
(d) with respect to the Durable Components of each Device, will have no material defect in workmanship for a period of at least *** (***) months from the date of receipt by an end user;
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(e) with respect to each Nebulizer Handset and Device Accessory, will have no material defect in workmanship when the Nebulizer Handset and Device Accessory is used by such end user for the first time, provided such Nebulizer Handset and Device Accessory has been properly used and maintained in accordance with any product user manual or the “Instructions for Use” for the applicable Nebulizer Handset and Device Accessory;
(f) is, upon shipment to INSMED, free and clear of all security interests, liens and other encumbrances of any kind or character;
(g) to the knowledge of PARI, is not a product, the manufacture, use or sale of which infringes any patent rights or other intellectual property rights of any Third Party in the INSMED Field and subject to the license and cross-license agreements mentioned in Exhibit C.
The foregoing warranties shall survive any inspection, delivery, acceptance, or payment by INSMED, any subsequent sublicense or distribution to third parties by INSMED, its Affiliates or its authorized agents, and shall be enforceable by INSMED as well as its successors and permitted assigns for itself or the benefit of any third party Sublicensee or distributor of the INSMED Product.
8.4 Warranty Replacement.
(a) Warranty to End Users. The period and requirement of the warranty set forth under Section 8.3(c) shall be included with the Device.
(b) PARI’s Responsibilities. PARI shall be solely responsible, at its cost, for any warranty claim that it accepts which alleges that any PARI Product does not conform with any of the warranties described under Sections 8.3, by replacing the non-conforming units. INSMED shall not be obligated to bear any costs, including transportation costs, in connection with the replacement of such non-conforming units unless otherwise defined in the Territory-Specific Appendix. The Parties shall establish appropriate timelines and procedures for responding to warranty calls in the different countries within the INSMED Territory. PARI shall have the right to inspect defective Devices and/or Device Accessories to determine the validity of warranty claims under this Section 8.4 or to comply with applicable Regulatory Requirements.
8.5 Warranty Limitations or Disclaimers. THE WARRANTIES, LIMITATIONS AND DISCLAIMERS DESCRIBED IN THIS ARTICLE 8 ARE EXCLUSIVE AND SUPERSEDE ANY OTHER WARRANTY LIMITATIONS AND DISCLAIMERS GIVEN BY PARI OR INSMED, WHETHER WRITTEN OR ORAL. EXCEPT FOR THE EXPRESS WARRANTIES IN SECTION 8.3, PARI MAKES NO WARRANTIES OF ANY KIND WITH RESPECT TO ANY PARI PRODUCT, WHETHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OF FITNESS FOR A PARTICULAR PURPOSE, FOR ANY IMPLIED WARRANTIES ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING, OR USAGE OF TRADE. INSMED AND ITS DESIGNEES SHALL NOT MAKE ANY REPRESENTATION OR WARRANTY ON BEHALF OF PARI THAT EXCEEDS THE EXPRESS WARRANTIES IN SECTION 8.3.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
8.6 Compliance with Laws. Each Party certifies that it shall not violate any Applicable Law, including but not limited to, the federal anti-kickback statute, set forth at 42 U.S.C. sec. 1320a-7b(b), the Public Contracts Anti-Kickback Act, 41 U.S.C. sec 50 et seq., any state anti-kickback law, the Health Insurance Portability and Accountability Act (“HIPAA”), set forth at 42 U.S.C. sec. 1320d-2, and the Foreign Corrupt Practices Act, set forth at 15 U.S.C. sec. 78dd-1, et seq. Each Party certifies that it shall cooperate with the other Party as required to comply with Applicable Laws, including providing assistance with any disclosures required by Applicable Laws
ARTICLE IX
INTELLECTUAL PROPERTY
9.1 Trademark.
(a) License and Authorization.
(i) Subject to the terms and conditions set forth in this Agreement, PARI hereby grants to INSMED and its designees, a non-exclusive, non-transferable right and license to use PARI’s trademark(s) set forth on Exhibit H attached hereto, in the INSMED Territory in connection with (w) the PARI Products, (x) the INSMED Products offered by INSMED and its designees, and (y) any advertising or promotional materials associated therewith, in the manner mutually agreed to by the Parties pursuant to Section 3.4 of this Agreement, and (z) packaging and prescribing information. The license set forth herein shall immediately terminate with respect to (w), (x), and (y), upon expiration or sooner termination of this Agreement and with respect to (z), upon expiration or sooner termination of the License Agreement.
(ii) Subject to the terms and conditions set forth in this Agreement, INSMED hereby grants to PARI a non-exclusive, non-transferable right and license to use INSMED’s trademark(s) set forth on Exhibit H attached hereto, in the INSMED Territory in connection with (x) the PARI Products and (y) any advertising or promotional materials associated therewith, in the manner mutually agreed to by the Parties pursuant to Section 3.4 of this Agreement, and (z) packaging and prescribing information. The license set forth herein shall immediately terminate with respect to (x), and (y), upon expiration or sooner termination of this Agreement and with respect to (z), upon expiration or sooner termination of the License Agreement.
(b) Notices. Each of PARI and INSMED agree to use commercially reasonable efforts to mark all materials, including packaging, advertising and promotional materials, that incorporate the trademarks of the other Party hereto that are licensed above in Section 9.1(a) with the symbol ™ or ®, as applicable, and the following attribution notice: “[Insert applicable trademark from Exhibit H] is a trademark of [insert applicable Party that owns the relevant trademark]”. In addition, each Party shall comply with any additional requirements established by the other Party with respect to the use of its trademarks.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(c) Ownership. Each Party represents and warrants that it owns all right, title and interest in and to its trademarks set forth in Exhibit H. Neither Party shall challenge, cause others to challenge or assist in any challenge to the validity of the other Party’s trademarks, any registrations thereof or the ownership thereof. Each of INSMED and PARI shall be solely responsible for taking such actions as it deems appropriate to obtain trademark, service mark or copyright registration for its trademarks. All uses of or references to each Party’s trademarks shall inure to the benefit thereof, and all rights with respect to such Party trademarks not specifically granted in this Agreement shall be and are hereby reserved to such Party.
(d) Infringement. If either Party learns of any activity by a Third Party which might constitute an infringement of the other Party’s rights in any of its trademarks, or if any Third Party asserts that a Party’s use of the other Party’s trademarks constitutes unauthorized use or infringement, such Party shall so notify the other Party. The notifying Party shall make all reasonable efforts to assist the other Party, at the other Party’s expense and request, with any litigation concerning such trademarks, including providing such evidence and/or expert assistance as the notifying Party may have within its control.
(e) Quality Control. Each Party hereto acknowledges and agrees that the other Party shall be entitled to monitor the use of its respective trademarks pursuant to this Agreement. If a Party determines that any of its trademarks is not being used properly, it shall so notify the other Party in writing or through the Joint Steering Committee and such other Party shall take steps to: (i) reassure the notifying Party that the trademark usage is proper or (ii) comply with any changes necessary to address the notifying Party’s concerns.
ARTICLE X
CONFIDENTIALITY
10.1 Confidentiality and Non-Use Obligations. Article 11 of the License Agreement is hereby incorporated herein by reference and shall govern all Confidential Information exchanged between the Parties under this Agreement.
10.2 Injunctive Relief. The Parties expressly acknowledge and agree that any breach or threatened breach of Article 9 or Article 10 may cause immediate and irreparable harm which may not be adequately compensated by damages. Each Party therefore agrees that in the event of such breach or threatened breach and in addition to any remedies available at law, the non-breaching Party shall have the right to secure equitable and injunctive relief, without bond, in connection with such a breach or threatened breach.
ARTICLE XI
INDEMNIFICATION
11.1 Indemnification of INSMED. PARI shall at all times be responsible for, and shall defend, indemnify and hold INSMED, its Affiliates, and their respective directors, officers, employees, agents and representatives (collectively, “INSMED Indemnitees”), harmless from and against any and all losses, expenses, recoveries and damages, including reasonable legal expenses, costs and attorneys’ fees (collectively “Losses”), arising out of Third
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Party claims, lawsuits, judgments, or proceedings of any kind or nature (collectively, “Claims”) to the extent arising from: (i) any product liability claim or lawsuit directly arising from the authorized use, design, manufacture or function of a Devices, *** and/or Nebulizer Handsets; (ii) any claim of infringement of any patent rights, trade secrets rights or other intellectual property rights of a Third Party arising from the authorized use, design or function of a Devices, *** and/or Nebulizer Handsets or manufacture by PARI thereof; (iii) PARI’s failure to manufacture the PARI Products in accordance with the applicable Device Specifications, Applicable Laws and Standards or the terms of the Quality Agreement; (iv) PARI’s material breach of any representation or warranty or covenant given in this Agreement by PARI; or (v) any negligent conduct or willful misconduct by PARI in performance under this Agreement; except, in each case to the extent that any Claim arises out of or results from any negligent conduct or willful misconduct by INSMED or INSMED’s material breach of any representation or warranty or covenant given in this Agreement by INSMED. INSMED, at its expense, may participate in the defense of any such claim or lawsuit. The Parties acknowledge and agree that INSMED’s indemnifications rights and PARI’s indemnification obligations under this Section 11.1 shall control over Section 13.1 of the License Agreement with respect to any Claims arising from activities performed under this Agreement and nothing in this Section 11.1 shall permit a duplicative recovery by INSMED or its Affiliates for any Losses for which indemnity is obtained hereunder and the indemnification obligations of PARI under Section 13.1 of the License Agreement.
11.2 Indemnification of PARI. INSMED shall at all times be responsible for, and shall defend, indemnify and hold PARI, its Affiliates, and their respective directors, officers, employees, agents and representatives (collectively, “PARI Indemnitees”), harmless from and against any and all Losses arising out of Third Party Claims to the extent arising from: (i) any product liability claim or lawsuit directly arising from the INSMED Product; (ii) any claim of infringement of any patent rights, trade secrets rights or other intellectual property rights of a Third Party arising from the INSMED Product or the manufacture thereof; (iii) INSMED’s material breach of any representation, warranty or covenant given in this Agreement by INSMED; and (iv) any negligent conduct or willful misconduct by INSMED in performance under this Agreement; except, in each case to the extent that any Claim arises out of or results from any negligent conduct or willful misconduct by PARI or PARI’s material breach of any representation or warranty or covenant given in this Agreement by PARI. PARI, at its expense, may participate in the defense of any such claim or lawsuit. The Parties acknowledge and agree that PARI’s indemnifications rights and INSMED’s indemnification obligations under this Section 11.2 shall control over Section 13.2 of the License Agreement with respect to any Claims arising from activities performed under this Agreement and nothing in this Section 11.2 shall permit a duplicative recovery by PARI or its Affiliates for any Losses for which indemnity is obtained hereunder and the indemnification obligations of INSMED under Section 13.2 of the License Agreement.
11.3 Indemnification Procedures. In the event of any claim that may be subject to indemnification under this Article 11, the indemnified Party shall (a) promptly notify the indemnifying Party of such claim; (b) at indemnifying Party expense, reasonably cooperate with the indemnifying Party in the defense of such claim; and (c) not settle any such claim without the
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
indemnifying Party’s written consent, which shall not be unreasonably withheld, conditioned or delayed. The indemnifying Party shall keep the indemnified Party informed at all times as to the status of its efforts. The indemnifying Party shall not settle any such claim without the prior written consent of the indemnified Party, which shall not be unreasonably withheld, conditioned or delayed, unless (x) such settlement includes an unconditional release of the indemnified Party from all liability arising out of such claim, (y) does not contain any admission or statement suggesting any wrongdoing or liability on behalf of the indemnified Party and (z) does not contain any equitable order, judgment or term that in any manner affects, restrains or interferes with the business of the indemnified Party. The indemnified Party may participate in proceedings relating to any indemnified claim with counsel of its own choosing at its own expense.
11.4 Insurance. During the Term and for a reasonable period of time thereafter, each Party or its Affiliates shall maintain appropriate product liability insurance with respect to any clinical trials, Manufacture, development, sales, marketing, distribution and promotion activities performed by such Party hereunder. Each Party shall furnish the other Party, upon the other Party’s request, with a certificate of insurance evidencing coverage under the foregoing policies of insurance, along with any amendments and revisions thereto. PARI shall be (i) named as an additional insured on any such policies maintained hereunder by INSMED, and (ii) also added by endorsement on such policies. With respect to the United States, INSMED shall be (i) named as an additional insured on any such policy maintained hereunder by PARI’s Affiliate, PRE Holding, Inc., and (ii) also added by endorsement on such policies of PRE Holding, Inc.
11.5 Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY UNDER ANY CIRCUMSTANCES OR ANY LEGAL OR EQUITABLE THEORY, WHETHER IN CONTRACT, STRICT LIABILITY OR OTHERWISE, FOR ANY INDIRECT, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES OR DAMAGES FOR LOST PROFITS ARISING OUT OF OR RELATED TO THIS AGREEMENT, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OR ANY LIMITED REMEDY. THE LIMITATION OF THIS SECTION 11.5 SHALL NOT APPLY, HOWEVER, TO A PARTY’S INDEMNIFICATION OBLIGATIONS FOR THIRD PARTY CLAIMS PURSUANT TO SECTION 11.1 OF THIS AGREEMENT, OR TO A PARTY’S MATERIAL BREACH OF ITS OBLIGATIONS UNDER ARTICLE 10.
ARTICLE XII
TERM
12.1 Term. This Agreement shall become effective upon the Effective Date and unless earlier terminated pursuant to Section 12.2 below shall remain in full force and effect until fifteen (15) years from First Commercial Sale, (the “Initial Term”); provided that INSMED may extend the Term of the Agreement for an additional five (5) years by providing written notice thereof to PARI at least one (1) year prior to the expiration of the Initial Term (the “Renewal Term” and the Initial Term plus any Renewal Term, collectively the “Term”). The Parties acknowledge and agree that if INSMED elects to extend the Term of the Agreement for the Renewal Term, then INSMED shall be responsible for paying PARI royalties on Net Sales of the
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Drug Product (as such terms are defined in the License Agreement) in accordance with Article 6 of the License Agreement until expiration of the Renewal Term (unless terminated earlier pursuant to Section 12.2 below). In addition, notwithstanding anything to the contrary in the License Agreement or this Agreement, (x) the Royalty Term (as defined in the License Agreement) shall automatically be extended for the entire duration of the Term of this Agreement, and (y) the provisions of Article 6 of the License Agreement shall survive the termination or expiration of the License Agreement if this Agreement remains in effect after the expiration or termination of the License Agreement.
12.2 Termination.
(a) For Convenience. This Agreement may be terminated by INSMED at any time upon prior written notice to PARI if INSMED terminates the License Agreement in accordance with the provisions of Section 15.3 of the License Agreement; provided, that INSMED shall provide PARI with written notice of its intent to terminate this Agreement if PARI does not cure its default under the License Agreement concurrent with the written notice of default provided to PARI pursuant to Section 15.3 of the License Agreement.
(b) By Mutual Agreement. This Agreement may be terminated at any time upon the mutual written agreement of the Parties.
(c) For Insolvency. This Agreement may be terminated by either Party in the event the other Party files an application for commencement of bankruptcy, civil rehabilitation, corporate reorganization, corporate liquidation or special liquidation procedures, or any mailing of order or notice of attachment or provisional attachment on any assets of such other Party, or any other insolvency.
(d) For Cause. If a Party is in material breach of this Agreement, then the non-breaching Party may deliver notice of such material breach to the other Party. For all material breaches other than a failure to make a payment set forth in this Agreement, the breaching Party shall have *** (***) days to cure such material breach from the receipt of the notice or to dispute. With respect to any failure to make a payment set forth in this Agreement, the breaching Party shall have *** (***) days from the receipt of the notice to dispute or cure such non-payment. If the Party receiving notice of material breach or failure to make a payment fails to cure, or fails to dispute, that material breach or failure to make a payment within the applicable period set forth above, then the non-breaching Party may terminate this Agreement immediately on written notice of termination.
12.3 No Waiver. The termination or expiration of this Agreement, as the case may be, shall not act as a waiver of any breach of this Agreement and shall not act as a release of either Party from any liability or obligation incurred under this Agreement through the date of such termination or expiration, including payments due PARI pursuant to this Agreement.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
12.4 Consequences of Expiration and Termination.
(a) Supply Following Expiration. At INSMED’s request, prior to the expiration of this Agreement under Section 12.1 above, the parties shall meet and discuss in good faith a new agreement, containing commercially reasonable, arms-length terms, pursuant to which PARI and its Affiliates may make, have made, import and export PARI Products to INSMED following the expiration of this Agreement.
(b) Reimbursement of Safety Stock. If INSMED terminates this Agreement pursuant to Section 12.2(a), then INSMED shall reimburse PARI no later than *** (***) Business Days after the effective date of termination of this Agreement for all reasonable costs related to the remaining Safety Stock, other PARI Products manufactured and raw material / unfinished goods specific for the Device by PARI pursuant to Purchase Orders submitted by INSMED in accordance with this Agreement that, in each case, cannot be reallocated or reused by PARI through PARI’s use of commercially reasonable efforts to do so. Any PARI Products that INSMED reimburses PARI for pursuant to this Section 12.4(b) shall be promptly delivered to INSMED in accordance with the provisions of Section 7.2.
(c) Rights in Bankruptcy. All rights and licenses granted under this Agreement are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the United States Bankruptcy Code, licenses of a right to “intellectual property” as defined under Section 101(60) of the United States Bankruptcy Code. Each Party, as a licensee of such rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the United States Bankruptcy Code in the event of the commencement of a bankruptcy proceeding by or against the licensor Party under the United States Bankruptcy Code, including without limitation the right to treat this Agreement or any agreement supplementary to this Agreement as terminated or to retain its rights under this Agreement or any agreement supplementary to this Agreement. In the event that the licensee Party elects to retain its rights under this Agreement or any agreement supplementary to this Agreement, the licensor Party shall provide to the licensee Party, within *** (***) calendar days after written notice by the licensee Party to the licensor Party in accordance with Section 13.1 of this Agreement, all intellectual property and all embodiments of such intellectual property within the possession or Control of the licensor Party.
(d) Survival. Sections 4.2, 4.3, 6.5(c)(v), 8.2, 8.3, 8.4, and 12.4, and Articles 1, 10, 11 (with respect to any Claim that is attributable to any cause that occurs under this Agreement prior to its expiration or termination, as applicable) and 13 of this Agreement shall survive expiration or termination of this Agreement for any reason.
ARTICLE XIII
MISCELLANEOUS
13.1 Notices. All notices and other communications given hereunder shall be in writing and shall be deemed to have been delivered and received (a) when personally delivered, (b) on the *** (***) Business Day after which sent by registered or certified mail, postage prepaid, return receipt requested, (c) on the date on which transmitted by facsimile or other electronic means generating a receipt evidencing a successful transmission (provided that, on that same date, a copy of such notice is sent by registered or certified mail, postage prepaid, return receipt requested), or (d) on the *** (***) Business Day after the Business Day on which
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
deposited with a regulated public carrier (e.g., Federal Express) for overnight delivery (receipt verified), freight prepaid, addressed to the Party for whom intended at the mailing address or facsimile number set forth below, or such other mailing address or facsimile number, notice of which is given in a manner permitted by this Section 13.1:
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If to PARI to: |
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PARI Pharma GmbH |
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Moosstrasse 3 |
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D-82319 Starnberg, Germany |
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Attention: *** |
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Title: President |
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Telefax No.: *** |
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with a copy to: |
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McGuireWoods LLP |
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One James Center |
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901 East Cary Street |
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Richmond, Virginia 23219 |
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Attention: *** |
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Telefax No.: *** |
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If to INSMED to: |
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Insmed Incorporated |
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10 Finderne Avenue, Building 10 |
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Bridgewater, NJ 08807-3365 |
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Attention: Chief Commercial Officer |
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Telefax No.: *** |
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with a copy to: |
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Insmed Incorporated |
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10 Finderne Avenue, Building 10 |
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Bridgewater, NJ 08807-3365 |
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Attention: General Counsel |
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Telefax No.: *** |
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Any Party may by such notice change the address to which notice or other communications to it are to be delivered or mailed.
13.2 Force Majeure. No failure or omission by either Party in the performance of any obligation under this Agreement shall be deemed a breach of this Agreement or create any liability if the same shall arise from any cause or causes beyond the control of such Party including, but not limited to, the following which, for the purposes of this Agreement, shall be
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
regarded as beyond the control of the Party in question: (a) any act or omission of any government; (b) any future rule, regulation or order issued by any governmental authority or by any officer, department, agency, or instrumentality thereof which makes such performance impossible or commercially unreasonable; or (c) any Act of God, fire, storm, flood, earthquake, accident, war, terrorism, rebellion, insurrection, riot, invasion, strike, and lockout.
13.3 Relationship of the Parties. In making and performing this Agreement, the Parties are acting, and intend to be treated, as independent entities and nothing contained in this Agreement shall be construed or implied to create an agency, partnership, joint venture, or employer and employee relationship between or among any of the Parties. Except as otherwise provided herein, no Party may make any representation, warranty or commitment, whether express or implied, on behalf of or incur any charges or expenses for or in the name of any other Party. No Party shall be liable for the act of any other party unless such act is expressly authorized in writing by such Party.
13.4 Choice of Language. This Agreement, originally written in the English language, shall be governed by the English language. In the event any dispute arises with respect to this Agreement, the meanings of all terms and provisions of this Agreement shall be interpreted in their original English form. The governing language of all correspondence related to reporting, negotiation, disputes, arbitration and notice requirements shall be the English language. The Parties shall bear their own expenses for having text or other communications translated into the English language.
13.5 Waivers and Amendments. This Agreement may be amended or modified, and the terms and conditions hereof may be waived, only by a written instrument signed by the Parties hereto or, in the case of a waiver, by the Party waiving compliance. No delay on the part of any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any Party of any right, power or privilege hereunder, nor any total or partial exercise of any other right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. The rights and remedies herein provided are cumulative and are not exclusive of other rights or remedies which any Party may otherwise have.
13.6 Assignment. This Agreement shall not be assignable by either Party without the prior written consent of the other Party, which consent shall not be unreasonably withheld, delayed or conditioned, except that without consent either Party may assign or transfer the rights and obligations of this Agreement to any Affiliate or to any successor in interest in connection with any merger, consolidation, or sale of all or substantially all of the assets to which this Agreement relates; provided, however, that (a) such assignment or transfer by INSMED to a PARI Competitor shall require the prior written consent of PARI; and (b) in the event of any such assignment or transfer by INSMED to *** or any of its subsidiaries (“***”), (i) notwithstanding the provisions of Section 6.5(c)(v), in the event *** is entitled to obtain supply of PARI Products from an Alternative Supplier in accordance with Section 6.5(c)(v), PARI shall grant the Back-Up License in accordance therewith (including in accordance with the terms and conditions of this Agreement and the License Agreement) and perform the technology transfer of the Data for Manufacture in accordance with 6.5(c)(v) to a Third Party reasonably acceptable to
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
*** and shall not be obligated to grant such Back-Up License or provide such Data directly to ***. This Agreement shall inure to the benefit of and be binding upon the Parties hereto and their respective successors and permitted assigns. Any assignment in contravention of the foregoing shall be null and void. The Parties acknowledge and agree that, notwithstanding anything to the contrary in the License Agreement, INSMED may also assign the License Agreement to *** if this Agreement is assigned to *** in any instance permitted under this Section 13.6.
13.7 Choice of Law. This Agreement is construed in accordance with, and its performance is governed by, the laws of State of New York, excluding its or any other jurisdiction’s choice of law principles. In the event of any conflict between US and foreign laws, regulations and rules, US laws, regulations and rules shall govern. The UN Convention on contracts for the International Sale of Goods shall not apply to this Agreement. Any dispute arising hereunder shall be brought exclusively in the state or federal courts located in the State of New York in the division of Manhattan. The Parties hereby consent to the exclusive jurisdiction and venue of such courts and waive any objections to the jurisdiction and venue thereof.
13.8 Disputes. PARI and INSMED shall endeavor to resolve any claim or controversy arising out of the threatened breach, breach, enforcement, interpretation, termination or validity of this Agreement informally by good faith negotiation between the senior executives, officers or management of PARI and INSMED. Either Party may give the other Party written notice of any claim or controversy not resolved in the normal course of business (the “Disputing Party Notice”). Within *** (***) calendar days after the delivery of the Disputing Party Notice, the receiving Party shall submit to the other Patty a written response (the “Response”). The Disputing Party Notice and Response shall include a statement of each Party’s position and a summary of the arguments supporting that position. Within *** (***) days after the Disputing Party Notice, such designated senior executives, officers or management of PARI and INSMED shall meet at a mutually acceptable time and place and thereafter as often as they reasonably deem necessary to attempt to resolve the claim or controversy. All negotiations pursuant to this Section 13.8 are confidential and without prejudice and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence. Any claim or controversy unresolved after application of this Section 13.8 shall be subject to Section 13.7 of this Agreement.
13.9 Entire Agreement. This Agreement and the License Agreement contain the entire understanding of the Parties hereto with respect to the subject matter contained herein and supersede and cancel all prior agreements, negotiations, correspondence, undertakings and communications among the Parties, oral or written, with respect to such subject matter. The License Agreement shall remain in full force and effect except for those provisions that are inconsistent with the terms and conditions under this Agreement, in which event the terms and conditions under this Agreement shall control.
13.10 Severability. Both Parties hereby expressly state that it is the intention of neither Party to violate any law. If any of the provisions of this Agreement are held to be void or unenforceable, then such void or unenforceable provisions shall be replaced by valid and
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
enforceable provisions which will achieve as far as possible the economic business intentions of the Parties.
13.11 Section Headings. The section headings contained in this Agreement are for the purpose of convenience and are not intended to define or limit the contents of such sections.
13.12 Further Assurances. Upon the reasonable request of either Party, the other Party shall execute any additional certificates or other documents that may be reasonably necessary to fully implement this Agreement.
13.13 Counterparts. This Agreement may be signed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be executed in one or more counterparts, each of which shall be an original, but taken together constituting one and the same instrument. Execution of a facsimile copy or in Adobe™ Portable Document Format (PDF) sent by electronic mail shall have the same force and effect as execution of an original, and a facsimile or PDF signature shall be deemed an original and valid signature.
[SIGNATURES APPEAR ON THE NEXT PAGE]
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
IN WITNESS WHEREOF, each Party hereto has executed or caused this Agreement to be executed on its behalf as of the Effective Date.
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PARI PHARMA GMBH | ||
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By: |
/s/ Dr. Martin Knoch | |
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Name: |
Dr. Martin Knoch |
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Title: |
President |
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INSMED INCORPORATED | ||
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By: |
/s/ William H. Lewis | |
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Name: |
William H. Lewis |
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Title: |
CEO & President |
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT A
Device
The “Device” comprises of the following components:
· ***
· ***
· ***
· ***
· ***
· ***
· ***
· ***
Specifications of the Device:
· *** ( ***): *** to ***
· *** (***): ***
· ***: *** (***)
For clarity, Device does not mean: the ***, the ***, the *** or the ***.
Nebulizer Handset
The “Nebulizer Handset” comprises of the following components:
· ***
· ***
· ***
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT B
PARI Competitors
***
***
***
***
***
***
***
***
***
***
In the event of a merger, consolidation, sale of all or substantially all of the assets or business or other change of control involving the above entities (the “Original Competitors”), such Original Competitor listed above shall be replaced with the successor thereof that is continuing to engage in the business of developing and/or commercializing nebulizers. However, if the merger or acquisition partner had separate lines of business, divisions or operations prior to such change of control, whether or not relating to nebulizers, the merger or acquisition partner shall be deemed a PARI Competitor only to the extent it is continuing the business of the Original Competitor, and not with respect to any such separate lines of business, divisions or operations.
In addition, PARI Competitors shall include any subsidiary that is formed by the Original Competitors, but shall not include any subsidiaries acquired by the Original Competitors if such subsidiaries had separate lines of business, divisions or operations prior to such acquisition, whether or not relating to nebulizers. However, PARI Competitors shall include such subsidiaries to the extent such subsidiaries continue the lines of business, divisions or operations of the Original Competitors relating to nebulizers.
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT C
Patents
PARI Patents and Patent Applications
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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Additional Patents and Patent Applications from Insmed (with PARI Know How):
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Patents licensed from *** (***):
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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Patents licensed from ***:
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***
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Patents licensed from *** (non-exclusive):
***
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Application |
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Publication number |
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Patent number |
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Issue date |
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***
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT D
Initial Representatives of the JSC
Joint Steering Committee
PARI: *** and ***
INSMED: *** and ***
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT E
Effective Date Exchange Rate
*** EUR = *** USD
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT F
Quality Agreements
[To be agreed to by the Parties in writing and attached hereto after the Effective Date as set forth in Section 6.1.]
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT G
TRIPS Priority Watch List
***
***
***
***
***
***
***
***
***
***
***
***
***
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT H
Trademarks
PARI Marks:
1. ***
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
INSMED Marks:
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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN ASTERISK ***, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT I
Price
1. Price
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Prices for *** |
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Prices for |
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Prices for *** |
| ||||
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for each unit of *** |
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**** |
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for each unit of *** |
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***** |
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***** |
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for each unit of *** (“***”) |
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$ |
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**** |
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Euro |
**** |
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****** |
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* Price includes ***** ***
******.
2. ***
A. ***
B. ***
EXHIBIT 31.1
Section 302 Certification
I, William H. Lewis, Chief Executive Officer of Insmed Incorporated, certify that:
(1) I have reviewed this Quarterly Report on Form 10-Q of Insmed Incorporated;
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: November 6, 2014 |
|
|
|
/s/ William H. Lewis |
|
|
William H. Lewis |
|
|
Chief Executive Officer |
|
|
(Principal Executive Officer) |
EXHIBIT 31.2
Section 302 Certification
I, Andrew T. Drechsler, Chief Financial Officer of Insmed Incorporated, certify that:
(1) I have reviewed this Quarterly Report on Form 10-Q of Insmed Incorporated;
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: November 6, 2014 |
|
|
|
/s/ Andrew T. Drechsler |
|
|
Andrew T. Drechsler |
|
|
Chief Financial Officer |
|
|
(Principal Financial and Accounting Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2003
Solely for the purposes of complying with 18 U.S.C. § 1350, I, William Lewis, Chief Executive Officer of Insmed Incorporated (the “Company”), hereby certify, based on my knowledge, that:
(1) the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2014 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
|
|
/s/ William H. Lewis |
|
|
William H. Lewis |
|
|
Chief Executive Officer |
|
|
(Principal Executive Officer) |
|
November 6, 2014
This certification accompanies the Quarterly Report on Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Insmed Incorporated under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing. A signed original of this statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2003
Solely for the purposes of complying with 18 U.S.C. § 1350, I, Andrew T. Drechsler, Chief Financial Officer of Insmed Incorporated (the “Company”), hereby certify, based on my knowledge, that:
(1) the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2014 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
|
|
/s/ Andrew T. Drechsler |
|
|
Andrew T. Drechsler |
|
|
Chief Financial Officer |
|
|
(Principal Financial and Accounting Officer) |
|
November 6, 2014
This certification accompanies the Quarterly Report on Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Insmed Incorporated under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing. A signed original of this statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
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