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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.03pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.04pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.11pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adversely+8
unable+6
adverse+5
failure+4
failing+4
Positive rising
exclusivity+11
successfully+5
profitability+3
gain+3
favored+3
Risk Factors (Item 1A)
25,429 words
ITEM 1A. RISK FACTORS
Our business is subject to substantial risks and uncertainties. Any of the risks and uncertainties described below, either alone or taken together, could materially and adversely affect our business, financial condition, results of operations, prospects for growth, and the value of an investment in our common stock. In addition, these risks and uncertainties could cause actual results to differ materially from those expressed or implied by forward-looking statements contained in this Annual Report on Form 10-K (please read the Cautionary Note Regarding Forward-Looking Statements appearing at the beginning of this Annual Report on Form 10-K).
Risk Factor Summary
An investment in our securities is subject to various risks, the most significant of which are summarized below.
• Our prospects are highly dependent on the success of our approved products, ARIKAYCE and BRINSUPRI. If we are unable to successfully market, commercialize and maintain approval for ARIKAYCE and BRINSUPRI, our business, financial condition, results of operations and prospects and the value of our common stock may be materially adversely affected.
• We may not be to obtain regulatory approval for ARIKAYCE in front-line NTM lung disease, for ARIKAYCE or BRINSUPRI in additional markets or for our product candidates. Any such to obtain regulatory approvals may materially affect us.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
suspension+1
exacerbations+1
Positive rising
achievement+4
enable+2
advancing+1
achieved+1
MD&A (Item 7)
7,714 words
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion also should be read in conjunction with our consolidated financial statements and the notes thereto contained elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth under the section entitled Risk Factors, Cautionary Note Regarding Forward-Looking Statements and elsewhere herein, our actual results may differ materially from those anticipated in these forward-looking statements.
EXECUTIVE OVERVIEW
We are a people-first global biopharmaceutical company striving to deliver first- and best-in-class therapies to transform the lives of patients facing serious diseases. Our commercial portfolio and clinical pipeline are organized around three therapeutic areas: Respiratory, Immunology & Inflammation, and Neuro & Other Rare.
Our two commercial products, ARIKAYCE and BRINSUPRI, are both part of the Respiratory therapeutic area. ARIKAYCE is approved in the US as ARIKAYCE (amikacin liposome inhalation suspension), in Europe as ARIKAYCE Liposomal 590 mg Nebuliser Dispersion and in Japan as ARIKAYCE inhalation 590 mg (amikacin sulfate inhalation drug product). ARIKAYCE was approved in the US in September 2018, in the EU in October 2020 and in Japan in March 2021.
BRINSUPRI (brensocatib 25 mg and 10 mg tablets), an oral, once-daily treatment for NCFB in patients 12 years of age and older, was approved in the US in August 2025. In November 2025, the EC approved BRINSUPRI (brensocatib 25 mg tablets) for the treatment of NCFB in patients 12 years of age and older with two or more exacerbations in the prior 12 months.
Our Respiratory therapeutic area also includes the clinical-stage programs TPIP and INS1148. TPIP is an inhaled dry powder formulation of the treprostinil prodrug treprostinil palmitil that may offer a differentiated product profile for PH-ILD, PAH, PPF, and IPF. INS1148 is a monoclonal antibody targeting SCF248.
The clinical-stage program in our Inflammation & Immunology therapeutic area is brensocatib, a small molecule, oral, reversible inhibitor of DPP1, for the treatment of patients with HS.
The clinical-stage programs in our Neuro & Other Rare therapeutic area are INS1201, an intrathecally delivered gene therapy for patients with DMD, and INS1202, an intrathecally delivered gene therapy for patients with ALS.
Our pre-clinical research programs encompass a wide range of technologies and modalities, including gene therapy, AI-driven protein engineering, protein manufacturing, RNA end-joining, and synthetic rescue.
Refer to Part I, Item 1. "Business" for a detailed discussion of our ongoing commercial and clinical programs.
Prior to 2019, we had not generated significant revenue, and through December 31, 2025, we had an accumulated deficit of $5.6 billion. We have financed our operations primarily through the public offerings of our equity securities, debt financings and revenue interest financings. Although it is difficult to predict our future funding requirements, based upon our current operating plan, we anticipate that our cash and cash equivalents and marketable securities as of December 31, 2025 will enable us to fund our operations for at least the next 12 months.
Our ability to reduce our operating loss and begin to generate positive cash flow from operations depends on the continued success in commercializing our marketed products and achievingpositive results from the ARIKAYCE confirmatory clinical trial program in order to obtain full approval of ARIKAYCE in the US and potentially reach more patients. Our continued success also depends on obtaining regulatory approval for brensocatib in an additional indication, bringing additional clinical stage products, such as TPIP, INS1148, INS1201, and INS1202, to market and advancing our pre-clinical research programs. We expect to continue to incur substantial expenses related to our research and development activities as we continue the ARIKAYCE confirmatory clinical program, conduct studies to explore the potential of brensocatib in HS, conduct trials of TPIP in PH-ILD, PAH, PPF, and IPF, and fund development of our pre-clinical research programs. We also expect to continue to incur significant costs related to the commercialization of our marketed products. Our financial results may fluctuate from quarter to quarter and will depend on, among other factors, the net sales of our marketed products; the scope and of our research and development efforts; and the timing of certain expenses. We cannot predict whether or when new products or new indications for marketed products will receive regulatory approval or, if any such approval is received, whether we will be to commercialize such products and whether or when we may become .
KEY COMPONENTS OF OUR RESULTS OF OPERATIONS
Product Revenues, Net
Product revenues, net, consist of net sales of ARIKAYCE and BRINSUPRI. We recognize revenue for product received by our customers net of allowances for customer credits, including prompt pay discounts, service fees, estimated rebates, including government rebates, such as Medicaid rebates and Medicare Part D reimbursements in the US, and chargebacks.
Cost of Product Revenues (Excluding Amortization of Intangible Assets)
Cost of product revenues (excluding amortization of intangible assets) consist primarily of direct and indirect costs related to the manufacturing of ARIKAYCE and BRINSUPRI sold, including third-party manufacturing costs, packaging services, freight, and allocation of overhead costs, in addition to royalty expenses.
Research and Development (R&D) Expenses
R&D expenses consist of salaries, benefits and other related costs, including stock-based compensation, for personnel serving in our research and development functions. R&D expenses also include other internal operating expenses, the cost of manufacturing product candidates, including the medical devices for drug delivery, for clinical study, the cost of conducting clinical studies, and the cost of conducting pre-clinical and research activities. In addition, R&D expenses include payments to third parties for the license rights to products in development (prior to marketing approval), and may include the cost of asset acquisitions. Our R&D expenses related to manufacturing our product candidates and medical devices for clinical study are primarily related to activities at CMOs that manufacture our product candidates and early-stage research activities. Our R&D expenses related to clinical trials are primarily related to activities at contract research organizations (CROs) that conduct and manage clinical trials on our behalf. These contracts with CROs set forth the scope of work to be completed at a fixed fee or billed at a per-unit cost, and increase proportionally to the volume of services rendered. Payments under these contracts with CROs primarily depend on performance criteria such as the successful enrollment of patients or the completion of clinical trial milestones as well as time-based fees. Expenses are accrued based on contracted amounts applied to the level of patient enrollment and to activity according to the clinical trial protocol. Deposits for goods or services that will be used or rendered for future research and development activities are deferred and capitalized. Such amounts are then recognized as an expense as the related goods are delivered or the services are performed.
Selling, General and Administrative (SG&A) Expenses
SG&A expenses consist of salaries, benefits and other related costs, including stock-based compensation, for our non-employee directors and personnel serving in our executive, finance and accounting, legal and compliance, commercial and pre-commercial, corporate development, field sales, information technology and human resource functions. SG&A expenses also include professional fees for legal services, consulting services, including commercial activities, insurance, board of director fees, tax and accounting services.
Amortization of Intangible Assets
Upon commercialization of each of ARIKAYCE and BRINSUPRI, the related intangible assets began to be amortized over their estimated useful lives. The fair values assigned to our intangible assets are based on estimates and assumptions we believe are reasonable based on available facts and circumstances. Unanticipated events or circumstances may occur that require us to review the assets for impairment.
Change in Fair Value of Deferred and Contingent Consideration Liabilities
In connection with the Business Acquisition, we recorded deferred and contingent consideration liabilities related to potential future milestone payments. Adjustments to the fair value are due to changes in the probability of achieving milestones, our stock price, or certain other estimated assumptions. The change in fair value of deferred and contingent consideration liabilities is calculated quarterly with gains and losses recorded in the consolidated statements of comprehensive loss. Our deferred consideration liabilities were fully settled in the third quarter of 2024. As of December 31, 2025 and 2024, only contingent consideration liabilities exist.
Investment Income and Interest Expense
Investment income consists of interest and dividend income earned on our cash and cash equivalents and marketable securities. Interest expense consists primarily of contractual interest costs, Royalty Financing Agreement non-cash interest expense and the amortization of debt issuance costs related to our debt. Debt issuance costs are amortized to interest expense using the effective interest rate method over the term of the debt. Our consolidated balance sheets reflect debt, net of the debt issuance costs paid to the lender, and other third-party costs.
Change in Fair Value of Interest Rate Swap
We record derivative and hedge transactions in accordance with generally accepted accounting principles in the US (GAAP). In the fourth quarter of 2022, we entered into an interest rate swap contract (the Swap Contract) with a notional value of $350.0 million to economically hedge our variable rate-based term debt for three years, effectively changing the variable rate under the term debt to a fixed interest rate. Our interest rate swap was not designated as a hedging instrument for accounting purposes. We settled and terminated the Swap Contract in October 2024. All changes in the fair value of the Swap Contract were reported as change in fair value of interest rate swap in the consolidated statements of comprehensive loss.
RESULTS OF OPERATIONS
Comparison of the Years Ended December 31, 2025 and 2024
Product Revenues, Net
Product revenues, net, consist of net sales of ARIKAYCE and BRINSUPRI. The following table summarizes revenue by product and geography for the years ended December 31, 2025 and 2024 (in thousands):
Years Ended December 31,
Increase (decrease)
ARIKAYCE
International
Total
BRINSUPRI
Total
Total
International
Total product revenues, net
Product revenues, net for the year ended December 31, 2025 were $606.4 million as compared to $363.7 million for the year ended December 31, 2024, an increase of $242.7 million, or 66.7%. This increase was a result of $172.7 million of US commercial sales of BRINSUPRI following FDA approval in August 2025 and a 19.3% growth in sales of ARIKAYCE, driven primarily by a 40.9% growth in international sales.
Cost of Product Revenues (Excluding Amortization of Intangibles)
Cost of product revenues (excluding amortization of intangibles) for the years ended December 31, 2025 and 2024 were comprised of the following (in thousands):
Years Ended December 31,
Increase (decrease)
Cost of product revenues (excluding amortization of intangibles)
Cost of product revenues, as % of revenues
Cost of product revenues (excluding amortization of intangibles) were $122.9 million for the year ended December 31, 2025 as compared to $85.7 million for the year ended December 31, 2024, an increase of $37.2 million, or 43.4%. This increase was primarily attributable to the increase in total product revenues discussed above. Cost of product revenues as a percentage of revenues decreased in the current period due to sales of BRINSUPRI, which has lower manufacturing costs than ARIKAYCE.
All product costs for BRINSUPRI incurred prior to FDA approval on August 12, 2025 were expensed as R&D expenses. We expect our cost of product revenues (excluding amortization of intangible assets) to benefit during 2026 and beyond, as we sell through inventory that was expensed prior to FDA approval of BRINSUPRI.
R&D Expenses
R&D expenses for the years ended December 31, 2025 and 2024 were comprised of the following (in thousands):
Years Ended December 31,
Increase (decrease)
External Expenses
Clinical development and research
Manufacturing
Regulatory, quality assurance, and medical affairs
AstraZeneca milestone
INS1148 asset acquisition
Subtotal—external expenses
Internal Expenses
Compensation and benefit-related expenses
Stock-based compensation
Other internal operating expenses
Subtotal—internal expenses
Total R&D expenses
R&D expenses were $771.1 million for the year ended December 31, 2025 as compared to $598.4 million for the year ended December 31, 2024, an increase of $172.7 million, or 28.9%. This increase was primarily due to the $76.7 million increase in compensation and benefit-related expenses and stock-based compensation costs due to an increase in headcount, a $45.5 million increase in manufacturing expense, and the $40.0 million up-front cash consideration in connection with the acquisition of INS1148, partially offset by the $12.5 million AstraZeneca milestone upon our release of an official public statement that we intended to file an NDA for brensocatib in 2024.
External R&D expenses by product for the years ended December 31, 2025 and 2024 were comprised of the following (in thousands):
Years Ended December 31,
Increase (decrease)
ARIKAYCE external R&D expenses
Brensocatib external R&D expenses
TPIP external R&D expenses
INS1148 asset acquisition
AstraZeneca milestone
Other external R&D expenses
Total external R&D expenses
We expect R&D expenses to increase in 2026 relative to 2025 primarily d ue to our clinical trial activities and related spend, including our TPIP and brensocatib clinical trials, and other research efforts for our product candid ates. INS1201 and INS1202 are included within other external R&D expenses.
SG&A Expenses
SG&A expenses for the years ended December 31, 2025 and 2024 were comprised of the following (in thousands):
Years Ended December 31,
Increase (decrease)
Compensation and benefit-related expenses
Stock-based compensation
Professional fees and other external expenses
Facility related and other internal expenses
Total SG&A expenses
SG&A expenses were $701.2 million during the year ended December 31, 2025 as compared to $461.1 million for the year ended December 31, 2024, an increase of $240.1 million, or 52.1%. This increase was primarily due to a $113.5 million
increase in compensation and benefit-related expenses and stock-based compensation costs due to an increase in headcount, and a $107.6 million increase in professional fees and other external expenses, both driven by commercial and commercial readiness activities for BRINSUPRI . We expect SG&A expenses to continue to increase in 2026 relative to 2025 due, in part, to commercial activities for BRINSUPRI.
Amortization of Intangible Assets
Amortization of intangible assets for the years ended December 31, 2025 and 2024 was $6.0 million and $5.1 million, respectively. This increase was due to amortization of the AstraZeneca milestones achieved upon FDA and EC approvals of BRINSUPRI in August 2025 and November 2025, respectively.
Change in Fair Value of Deferred and Contingent Consideration Liabilities
The change in fair value of deferred and contingent consideration liabilities for the year ended December 31, 2025 was $252.0 million and was primarily due to the increase in our share price. The change is related to the fair value of the potential future consideration to be paid to former equityholders of certain businesses we have acquired.
Investment Income
Investment income was $60.7 million for the year ended December 31, 2025 as compared to $53.3 million for the year ended December 31, 2024. The increase was primarily due to an increase in our average cash and cash equivalents and marketable securities balances in 2025 relative to 2024.
Interest Expense
Interest expense was $83.8 million for the year ended December 31, 2025 as compared to $84.9 million for the year ended December 31, 2024. This decrease was primarily due to a reduction in interest expense related to the redemptions of the outstanding 0.75% Convertible Senior Notes due 2028 (the 2028 Convertible Notes) in the second quarter of 2025 and the outstanding 1.75% Convertible Senior Notes due 2025 (the 2025 Convertible Notes) in the third quarter of 2024, partially offset by the interest income related to the Swap Contract in 2024. See Note 10 - Debt and Note 11 - Royalty Financing Agreement in this Annual Report on Form 10-K for further details.
Change in Fair Value of Interest Rate Swap
Prior to settlement and termination of the Swap Contract in October 2024, the change in fair value of interest rate swap was due to changes in interest rates during 2024 relative to the interest rate of the Swap Contract .
Provision for Income Taxes
The income tax provision was $5.0 million for the year ended December 31, 2025 as compared to $3.7 million for the year ended December 31, 2024. The income tax provision for the years ended December 31, 2025 and 2024 reflects the income tax expense recorded as a result of taxable income in certain of our subsidiaries in Europe and Japan, as well as a liability for certain state income taxes.
Comparison of the Years Ended December 31, 2024 and 2023
Please refer to the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 for a comparative discussion of our fiscal years ended December 31, 2024 and December 31, 2023.
LIQUIDITY AND CAPITAL RESOURCES
Overview
There is considerable time and cost associated with developing potential pharmaceutical products to the point of regulatory approval and commercialization. We commenced commercial shipments of ARIKAYCE in October 2018 and BRINSUPRI in August 2025. We expect to continue to incur consolidated operating losses, including losses at our US and certain international entities, as we plan to fund R&D for ARIKAYCE, TPIP, brensocatib, INS1148, INS1201, INS1202, and our other pipeline programs, continue commercialization and regulatory activities for ARIKAYCE and BRINSUPRI, and engage in other general and administrative activities.
In June 2025, we completed an underwritten offering of 8,984,375 shares of our common stock at a public offering price of $96.00 per share. 1,171,875 of the shares of common stock were issued pursuant to the exercise in full of the underwriters' option to purchase additional shares. Our net proceeds from the sale of the shares, after deducting the underwriting discounts and offering expenses of $39.2 million, were $823.3 million.
In May 2024, we completed an underwritten offering of 14,514,562 shares of our common stock at a public offering price of $51.50 per share. 1,893,203 of the shares of common stock were issued pursuant to the exercise in full of the
underwriters' option to purchase additional shares. Our net proceeds from the sale of the shares, after deducting underwriting discounts and offering expenses of $34.3 million, were $713.2 million.
In October 2022, we entered into a $350.0 million Tranche A Term Loan with Pharmakon that would have matured on October 19, 2027. The Tranche A Term Loan originally bore interest at a rate based upon the Secured Overnight Financing Rate (SOFR), subject to a SOFR floor of 2.5%, in addition to a margin of 7.75% per annum. Net proceeds from the Tranche A Term Loan, after deducting the lenders fees and deal expenses of $15.1 million, were $334.9 million. In October 2024, we entered into the A&R Loan Agreement, as amended July 10, 2025, with BioPharma Credit PLC, BPCR Limited Partnership and BioPharma Credit Investments V (Master) LP, which are funds managed by Pharmakon, and the guarantors party to such agreement. The A&R Loan Agreement, among other items, provides an additional $150.0 million senior secured Tranche B Term Loan. The A&R Loan Agreement extends the maturity of the Term Loans to September 30, 2029, subject to acceleration to February 1, 2028 on the occurrence of certain prespecified events, and amends the interest rate on the Term Loans to a fixed rate of 9.6% per annum. As consideration for the provision of the Tranche B Term Loan, we agreed to pay Pharmakon a fee equal to 2.0% of the Tranche B Term Loan at the closing date of the Tranche B Term Loan and an additional exit fee of 2.0% of the amount of each prepayment or repayment of the Term Loans. The Term Loans will be repaid in eight equal quarterly payments starting on January 3, 2028. Net proceeds from the Tranche B Term Loan, after deducting the lenders fees and administrative expenses of $3.7 million, were $146.3 million.
In October 2022, we entered into the Royalty Financing Agreement with OrbiMed, whereby OrbiMed paid us $150.0 million in exchange for the right to receive, on a quarterly basis, royalties in an amount equal to 4.0% of ARIKAYCE global net sales prior to September 1, 2025 and 4.5% of ARIKAYCE global net sales on or after September 1, 2025, as well as 0.75% of brensocatib global net sales, which includes BRINSUPRI. In the event that OrbiMed has not received aggregate Revenue Interest Payments equal to or greater than $150.0 million on or prior to March 31, 2028, the royalty rate for ARIKAYCE will be increased for all subsequent fiscal quarters to a rate which, if applied retroactively, would have resulted in aggregate Revenue Interest Payments to OrbiMed for all fiscal quarters ended on or prior to March 31, 2028 equal to $150.0 million. In addition, we must make a one-time payment to OrbiMed in an amount that, when added to the aggregate amount of Revenue Interest Payments received by OrbiMed as of March 31, 2028, would equal $150.0 million. The total Revenue Interest Payments payable by us to OrbiMed are capped at 1.8x of the purchase price or up to a maximum of 1.9x of the purchase price under certain conditions. Net proceeds from the Royalty Financing Agreement, after deducting the lenders fees and deal expenses of $3.6 million, were $146.4 million. The Royalty Financing Agreement was amended in October 2024 to, among other things, amend certain restrictions on the Company’s ability to incur indebtedness.
In the first quarter of 2021, we entered into a sales agreement with SVB Leerink LLC (now known as Leerink Partners LLC) (Leerink Partners), to sell shares of our common stock, with aggregate gross sales proceeds of up to $250.0 million, from time to time, through an “at the market” equity offering program (the ATM program), under which Leerink Partners acted as sales agent. During the year ended December 31, 2023, we issued and sold an aggregate of 6,503,041 shares of common stock through the ATM program at a weighted-average public offering price of $24.12 per share and received net proceeds of $152.2 million. In the first quarter of 2024, we entered into a new sales agreement (the new sales agreement) with Leerink Partners to sell shares of our common stock, with aggregate gross sales proceeds of up to $500.0 million, from time to time, through a new "at the market" equity offering program (the new ATM program), under which Leerink Partners acted as sales agent. In connection with entering into the new ATM program, we terminated the ATM program. During the year ended December 31, 2024, we issued and sold an aggregate of 5,022,295 shares of common stock through the new ATM program at a weighted-average public offering price of $75.64 per share and received net proceeds of $371.3 million. On November 18, 2024, we terminated the new sales agreement.
Based on our current operating plan we anticipate that our cash and cash equivalents and marketable securities as of December 31, 2025 will enable us to fund our operations. While we believe we currently have sufficient funds to meet our financial needs for at least the next 12 months, w e may raise additional capital to fund future development of our product candidates, and to develop, acquire, in-license or co-promote other products or product candidates, including those that address serious diseases with significant unmet need. Our cash requirements for the next 12 months will be impacted by a number of factors, the most significant of which we expect to be expenses related to our commercialization efforts for ARIKAYCE and BRINSUPRI and development costs for our clinical-stage assets, and, to a lesser extent, our pre-clinical research programs.
Cash Flows
We had cash and cash equivalents of $510.4 million as of December 31, 2025 as compared with $555.0 million as of December 31, 2024. In addition, as of December 31, 2025, we had marketable securities of $919.6 million as compared to $878.8 million as of December 31, 2024. Our working capital was $1.3 billion as of December 31, 2025 and 2024.
Net cash used in operating activities was $935.0 million and $683.9 million for the years ended December 31, 2025 and 2024, respectively, which was primarily driven by commercial, clinical, and manufacturing activities related to ARIKAYCE, commercial and commercial readiness activities for BRINSUPRI, as well as other SG&A expenses, clinical trial expenses related to brensocatib and TPIP, and the $40.0 million acquisition of INS1148. The increase in cash used in operating activities for the year ended December 31, 2025 as compared to 2024 was primarily due to the increase in net loss, excluding the adjustments to reconcile net loss to net cash used in operating activities.
Net cash used in investing activities was $64.6 million and $583.2 million for the years ended December 31, 2025 and 2024, respectively. During the year ended December 31, 2025, net cash used in investing activities consisted primarily of purchases of property and equipment. During the year ended December 31, 2024, net cash used in investing activities consisted primarily of purchases of marketable securities, partially offset by maturities of marketable securities.
Net cash provided by financing activities was $954.1 million and $1,341.0 million for the years ended December 31, 2025 and 2024, respectively. During the years ended December 31, 2025 and 2024, net cash provided by financing activities consisted primarily of proceeds from the issuance of common stock in our underwritten public equity offerings and proceeds from the exercise of stock options and the Employee Stock Purchase Plan (ESPP). During the year ended December 31, 2024, net cash provided by financing activities also included $150.0 million in proceeds from the Tranche B Term Loan.
Contractual Obligations
In December 2025, we acquired the global rights to O pSCF (renamed INS1148) from Opsidio. The Opsidio shareholders may become entitled to receive contingent payments up to an aggregate of $382 million in cash upon the achievement of certain development, regulatory and sales milestones, as well as earnout payments based upon a low to mid single-digit percentage of net sales of certain products, both subject to the terms and conditions of the agreement. See Note 15 - Licenses and Other Agreements in this Annual Report on Form 10-K for further details.
In June 2023, we acquired all of the issued and outstanding share capital of Adrestia, a privately held, pre-clinical stage company. Adrestia's former shareholders may also become entitled to receive contingent payments up to an aggregate of $326.5 million in cash upon the achievement of certain development, regulatory and commercial milestone events, as well as royalty payments based upon a low single-digit percentage of net sales of certain products, both subject to the terms and conditions of the agreement. See Note 15 - Licenses and Other Agreements in this Annual Report on Form 10-K for further details.
In January 2023, we acquired Vertuis, a privately held, pre-clinical stage company. The Company is obligated to pay the Vertuis equityholders up to an aggregate of $23.0 million in cash upon the achievement of certain development and regulatory milestone events, and up to an aggregate of $63.8 million in cash upon the achievement of certain net sales-based milestone events, in each case, subject to certain reductions. See Note 15 - Licenses and Other Agreements in this Annual Report on Form 10-K for further details.
In October 2022, we entered into financings resulting in aggregate gross proceeds of $500.0 million, comprised of the $350.0 million Tranche A Term Loan with funds managed by Pharmakon and the $150.0 million Royalty Financing Agreement with OrbiMed, which was subsequently amended in October 2024. Under the Royalty Financing Agreement, OrbiMed will be entitled to receive royalties of 4.0% on ARIKAYCE global net sales until September 1, 2025, and royalties of 4.5% on ARIKAYCE global net sales on or after September 1, 2025, as well as royalties of 0.75% on brensocatib global net sales, which includes BRINSUPRI. The total royalty payable to OrbiMed is capped at 1.8x of the $150.0 million purchase price or up to a maximum of 1.9x of the $150.0 million purchase price under certain conditions. See Note 10 - Debt and Note 11 - Royalty Financing Agreement in this Annual Report on Form 10-K for further details.
In October 2024, we entered into the A&R Loan Agreement, as amended July 10, 2025, with BioPharma Credit PLC, BPCR Limited Partnership and BioPharma Credit Investments V (Master) LP, which are funds managed by Pharmakon, and the guarantors party to such agreement. The A&R Loan Agreement amends and restates the Loan Agreement, dated as of October 19, 2022, pursuant to which the Tranche A Term Loan was provided. The A&R Loan Agreement, among other items, provides the Tranche B Term Loan. The A&R Loan Agreement extends the maturity of the Term Loans to September 30, 2029, subject to acceleration to February 1, 2028 on the occurrence of certain prespecified events, and amends the interest rate on the Term Loans to a fixed rate of 9.6% per annum. See Note 10 - Debt in this Annual Report on Form 10-K for further details.
In January 2024, we entered into certain agreements with Patheon Inc., a wholly-owned subsidiary of Thermo Fisher, related to the manufacture and supply of commercial brensocatib products, including BRINSUPRI, for our commercial needs and brensocatib for our clinical needs by Patheon Inc. Under these agreements, we are required to deliver to Patheon Inc. the active pharmaceutical ingredients needed to manufacture BRINSUPRI and brensocatib. In addition, in September 2024, we entered into a commercial manufacturing and supply agreement with Esteve for the manufacture and supply of BRINSUPRI's and brensocatib's active pharmaceutical ingredient.
In April 2020, we entered into a master services agreement with PPD pursuant to which we retained PPD to perform clinical development services in connection with certain of our clinical research programs. The master services agreement has an initial term of five years. In March 2025, we amended the agreement to extend the term three years. Either party may terminate (i) any project addendum under the master services agreement for any reason and without cause upon 30 days’ written notice, (ii) any project addendum in the event of the other party’s breach of the master services agreement or such project addendum upon 30 days’ written notice, provided that such breach is not cured within such 30-day period, (iii) the master services agreement or any project addendum immediately upon the occurrence of an insolvency event with respect to the other party or (iv) any project addendum upon 30 days’ written notice if (a) the continuation of the services under such project addendum would pose material ethical or safety risks to study participants, (b) any approval from a regulatory authority necessary to perform the applicable study is revoked, suspended or expires without renewal or (c) in the reasonable opinion of such party, continuation of the services provided under such project addendum would be in of applicable law. We have entered into project addenda with PPD to perform clinical development services over several years for, but not limited to, our PALM-ILD and PAH studies and other trials involving brensocatib and TPIP. The anticipated future cost of these project addenda is $295.7 million.
In September 2018, we entered into an agreement (the Lease) with Bridgewater Biotech Center LLC (assumed from Exeter 700 Route 202/206, LLC) to lease 117,022 square feet of office space located in Bridgewater, New Jersey for our corporate headquarters. Subject to certain conditions, we had the one-time option to expand the leased premises by up to 50,000 rentable square feet, exercisable prior to the fifth anniversary of the Commencement Date, which was October 1, 2019. We did not exercise this one-time option. The initial Lease term runs 130 months from the Commencement Date and we have the option to extend that term for up to three additional five-year periods. In addition, we are responsible for operating expenses and taxes pursuant to the Lease. Future minimum payments under the Lease during the initial Lease term are approximately $12.7 million. The Lease contains customary default provisions, including those relating to payment defaults, performance defaults and events of bankruptcy.
In October 2017, we entered into certain agreements with Patheon related to the increase of our long-term production capacity for ARIKAYCE. The agreements provide for Patheon to manufacture and supply ARIKAYCE for our anticipated commercial needs. Under these agreements, we are required to deliver to Patheon the required raw materials, including active pharmaceutical ingredients, and certain fixed assets needed to manufacture ARIKAYCE. Patheon's supply obligations will commence once certain technology transfer and construction services are completed. Our manufacturing and supply agreement with Patheon will remain in effect for a fixed initial term, after which it will continue for successive renewal terms unless either we or Patheon have given written notice of termination. The technology transfer agreement will expire when the parties agree that the technology transfer services have been completed. The agreements may also be terminated under certain other circumstances, including by either party due to a material uncured breach of the other party or the other party’s insolvency. These early termination clauses may reduce the amounts due to the relevant parties. The aggregate investment to increase our long-term production capacity, including under the Patheon agreements and related agreements or purchase orders with third parties for raw materials and fixed assets, is estimated to be app roximately $127.7 million.
In October 2016, we entered into the AZ License Agreement, pursuant to which AstraZeneca granted us exclusive global rights for the purpose of developing and commercializing AZD7986 (which we renamed brensocatib). Following FDA approval, brensocatib was commercially designated as BRINSUPRI. In consideration of the licenses and other rights granted by AstraZeneca, we made an upfront payment of $30.0 million, which was included as research and development expense in the fourth quarter of 2016. In December 2020, we incurred a $12.5 million milestone payment obligation upon first dosing in a Phase 3 clinical trial of brensocatib. In May 2024, u pon our release of an official public statement that we intended to file an NDA, we incurred an additional $12.5 million milestone payment obligation. Upon regulatory approval by the FDA of an NDA, we paid AstraZeneca an additional $30.0 million. In November 2025, a $15.0 million milestone commitment became payable to AstraZeneca upon EC approval of BRINSUPRI. Subsequent to this milestone, we are also obligated to make an additional $15.0 million contingent payment upon the achievement of a regulatory filing milestone. If we elect to develop brensocatib for a second indication, we will be obligated to make an additional series of contingent milestone payments totaling up to $42.5 million, the first of which occurs at the initiation of a Phase 3 trial in the additional indication. We are not obligated to make payments for additional indications. In addition, we have agreed to pay AstraZeneca tiered royalties ranging from high single-digit to mid-teens on net sales of any approved product based on brensocatib and one additional payment of $35.0 million upon the first of $1.0 billion in annual net sales. The AZ License Agreement provides AstraZeneca with
the option to negotiate a future agreement with us for commercialization of brensocatib in chronic obstructive pulmonary disease or asthma.
We have a licensing agreement with PARI for the use of optimized Lamira for delivery of ARIKAYCE in treating patients with NTM lung infections, CF and bronchiectasis. Under the licensing agreement, we have rights under several US and foreign issued patents, and patent applications involving improvements to optimized Lamira, to exploit the system with ARIKAYCE for the treatment of such indications, but we cannot manufacture the nebulizers except as permitted under our Commercialization Agreement with PARI, as described below. Lamira has been approved for use in the US (in combination with ARIKAYCE), the EU and Japan. Under the licensing agreement, we made an upfront license fee and milestone payments to PARI. Upon the FDA acceptance of our NDA and the subsequent FDA and EMA approvals of ARIKAYCE, we made additional milestone payments of €1.0 million, €1.5 million, and €0.5 million, respectively, to PARI. In October 2017, we exercised an option to buy-down the royalties payable to PARI, which was included within selling, general and administrative expenses in the fourth quarter of 2017. PARI is entitled to receive royalty payments in the mid-single digits on the annual global net sales of ARIKAYCE, pursuant to the licensing agreement, subject to certain specified annual minimum royalties.
In July 2014, we entered into a Commercialization Agreement with PARI for the manufacture and supply of Lamira, which is an e-Flow ® nebulizer modified and optimized for use with ARIKAYCE. Under the Commercialization Agreement, PARI manufactures Lamira except in the case of certain defined supply failures, when the Company will have the right to make Lamira and have it made by third parties (but not certain third parties deemed under the Commercialization Agreement to compete with PARI). The Commercialization Agreement has an initial term of 15 years that began in October 2018. The term of the Commercialization Agreement may be extended by us for an additional five years by providing written notice to PARI at least one year prior to the expiration of the Initial Term.
In February 2014, we entered into a contract manufacturing agreement with Therapure Biopharma Inc., which has been assumed by Resilience, for the manufacture of ARIKAYCE, on a non-exclusive basis, at a 200 kg scale. Pursuant to the agreement, we collaborated with Resilience to construct a production area for the manufacture of ARIKAYCE in Resilience's existing manufacturing facility in Canada. The agreement has an initial term of five years, which began in October 2018, and renews automatically for successive periods of two years each, unless terminated by either party by providing the required two years' prior written notice to the other party. Under the agreement, we are obligated to pay certain minimum amounts for the batches of ARIKAYCE produced each calendar year.
Future Funding Requirements
Based on our current operating plan we anticipate that our cash and cash equivalents and marketable securities as of December 31, 2025 will enable us to fund our operations. We may raise additional capital to fund development of our future product candidates, and to develop, acquire, in-license or co-promote other products or product candidates, including those that address serious diseases with significant unmet need. We expect that our future capital requirements may be substantial and will depend on many factors, including:
• The timing, outcome, and cost of our ongoing and anticipated clinical trials for our product candidates;
• The cost of supporting the sales and marketing efforts necessary to support the continued commercial efforts of our marketed products;
• The cost of discovering or in-licensing additional product candidates;
• The costs of activities related to the regulatory approval process and the timing of approvals, if received;
• The timing and costs of supporting the commercial launch activities of BRINSUPRI in additional markets, if any;
• The cost of eventually supporting the commercial launches of TPIP and our other product candidates, if approved;
• The cost of filing, prosecuting, defending, and enforcing patent claims;
• The costs of our manufacturing-related activities;
• The cost of hiring more personnel to support our ongoing development and commercialization efforts; and
• The levels, timing and collection of revenue earned from sales of our marketed products and other products approved in the future, if any.
We have raised $2.2 billion in net proceeds from securities offerings and other financing transactions since January 1, 2023. We believe we currently have sufficient funds to meet our financial needs for at least the next 12 months. However, our business strategy may require us to raise additional capital at any time through equity or debt financing(s), strategic transactions or otherwise.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. We do not have any interest in special purpose entities, structured finance entities or other variable interest entities.
CRITICAL ACCOUNTING ESTIMATES
Preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenues and expenses and the disclosures of contingent assets and liabilities. We use our historical experience and other relevant factors when developing our estimates and assumptions and we regularly evaluate these estimates and assumptions. The amounts of assets and liabilities reported in our consolidated balance sheets and the amounts reported in our consolidated statements of comprehensive loss are affected by estimates and assumptions, which are used for, but not limited to, the accounting for revenue recognition and indefinite-lived intangible assets. The accounting estimates discussed below involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. Actual results could differ materially from our estimates. See Note 2 - Summary of Significant Accounting Policies in this Annual Report on Form 10-K for our required disclosures on accounting policies and estimates.
Revenue Recognition
In accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers, we recognize revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration we expect to receive in exchange for the goods or services provided. To determine revenue recognition for arrangements within the scope of ASC 606, we perform the following five steps: (1) identify the contracts with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when or as the entity satisfies a performance obligation. At contract inception, we assess the goods or services promised within each contract and determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when or as the performance obligation is satisfied. For all contracts that fall into the scope of ASC 606, we have identified one performance obligation: the sale of marketed products to our customers. We have not incurred or capitalized any incremental costs associated with obtaining contracts with customers.
Product revenues, net, consist of global net sales of ARIKAYCE and US net sales of BRINSUPRI. Our customers in the US include specialty pharmacies and a specialty distributor. P roduct revenues are recognized once we perform and satisfy all five steps of the revenue recognition criteria mentioned above.
Revenue is recorded at net selling price (transaction price), which includes estimates of variable consideration for which reserves are established for (a) customer credits, such as invoice discounts for prompt pay, (b) estimated government rebates, such as Medicaid and Medicare Part D reimbursements, and estimated managed care rebates, (c) estimated chargebacks, and (d) estimated costs of co-payment assistance. These reserves are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (prompt pay discounts and chargebacks), prepaid expenses (co-payment assistance), or as a current liability (rebates). Where appropriate, these estimates take into consideration a range of possible outcomes which are probability-weighted for relevant factors such as our historical experience, current contractual and statutory requirements, and forecasted customer buying and payment patterns. Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the applicable contract. The amount of variable consideration included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from estimates, we adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.
Rebates : We contract with certain government agencies and managed care organizations, or collectively, third-party payors, so that our marketed products will be eligible for purchase by, or partial or full reimbursement from, such third-party payors. We estimate the rebates we will provide to third-party payors and deduct these estimated amounts from total gross product revenues at the time the revenues are recognized. These reserves are recorded in the same period in which the revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability. The current liability is included in accounts payable and accrued liabilities on the consolidated balance sheets. We estimate the rebates that will be provided to third-party payors based upon (i) our contracts with these third-party payors, (ii) the government mandated discounts applicable to government-funded programs, (iii) a range of possible outcomes that are probability-weighted for the estimated payor mix, and (iv) information obtained from our specialty pharmacies.
If any, or all, of our actual experience vary from the estimates above, we may need to adjust prior period accruals, affecting revenue in the period of adjustment.
• The commercial success of ARIKAYCE and BRINSUPRI depend on market acceptance by physicians, patients, third-party payors and others in the healthcare community, and the commercial success of our product candidates, if approved, will similarly depend on market acceptance.
• We obtained regulatory approval of ARIKAYCE in the US through an accelerated approval process, and full approval will be contingent on successful and timely completion of a confirmatory post-marketing clinical trial. Failure to obtain full approval or otherwise meet our post-marketing requirements and commitments may have a material adverse effect on our business, prospects, and the value of our common stock.
• We are subject to substantial, ongoing regulatory requirements, including with respect to advertising and promotion, and failure to comply with these requirements may lead to enforcement action or otherwise materially harm our business.
• If we are unable to obtain or maintain adequate reimbursement from government or third-party payors for ARIKAYCE, BRINSUPRI or our product candidates, if approved, or if we are unable to obtain or maintain acceptable prices for ARIKAYCE, BRINSUPRI, or, if approved, our product candidates, our prospects for generating revenue and achievingprofitability may be materially adversely affected.
• ARIKAYCE, BRINSUPRI, or any of our product candidates may develop unexpected safety or efficacy concerns, which may have a material adverse effect on us.
• If our estimates of the size of the potential markets for ARIKAYCE, BRINSUPRI, or our product candidates prove inaccurate, our ability to generate revenue may be materially adversely affected.
• Pharmaceutical research and development is very costly and highly uncertain, and we may not succeed in developing product candidates in the future.
• Interim, topline and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available, may be interpreted differently if additional data are disclosed, and are subject to audit and verification procedures that may result in material changes in the final data.
• As ARIKAYCE is a drug/device combination product, we cannot sell ARIKAYCE without Lamira. Any failure to secure or maintain regulatory approval in each market for Lamira as a delivery system for ARIKAYCE may limit our ability to successfully commercialize ARIKAYCE. Additionally, we plan to submit an NDA for TPIP as a drug/device combination product or as a stand-alone marketing application, as dictated by local regulations. Failure to obtain or maintain regulatory approval or clearance of any of our devices or drug-device combination products may materially harm our business.
• If our clinical studies do not produce positive results or our clinical trials are delayed, or if serious side effects are identified during drug development, we may experience delays, incur additional costs and ultimately be unable to obtain regulatory approval for and successfully commercialize our product candidates in the US, Europe, Japan or other markets.
• We may not be able to enroll enough patients to conduct and complete our clinical trials or retain a sufficient number of patients in our clinical trials to generate the data necessary for regulatory approval of our product candidates or to gain the approval of the use of ARIKAYCE in the broader population of patients with MAC lung disease.
• If another party obtains orphan drug exclusivity for a product that is considered the same or essentially the same as a product we are developing for a particular indication, we may be precluded from or delayed in commercializing the product in that indication.
• Our clinical and pre-clinical research activities include the research and development of novel gene therapy product candidates. It will be difficult to predict the time and cost of development and of subsequently obtaining regulatory
approval for any such gene therapy product candidates, or how long it will take to commercialize any gene therapy product candidates.
• If we are unable to form and sustain relationships with third-party service providers that are critical to our business, or if any third-party arrangements that we may enter into are unsuccessful, our ability to develop and commercialize our products may be materially adversely affected.
• We may not have, or may be unable to obtain, sufficient quantities of ARIKAYCE, Lamira, BRINSUPRI, or our product candidates to meet our required supply for commercialization or clinical studies, which may materially harm our business.
• Adverse consequences to our business may result if we or our manufacturing partners fail to comply with applicable regulations or maintain required approvals.
• We are dependent on retaining and attracting key personnel, the loss of whose services may materially adversely affect our business, financial condition, results of operations and prospects, and the value of our common stock.
• We expect to continue to expand our development, regulatory and sales and marketing capabilities, and as a result, may encounter difficulties in managing our growth, which may disrupt our operations.
• Any acquisitions we have made or may make in the future, or collaborative relationships we have entered into or may in the future enter into, may not be clinically or commercially successful, and may require financing or a significant amount of cash, which could adversely affect our business.
• We may be subject to product liability claims, and we have only limited product liability insurance.
• Our business and operations, including our drug development and commercialization programs, may be materially disrupted and/or subject to reputational harm in the event of system failures, security breaches, cyber-attacks, deficiencies in cybersecurity, violations of data protection laws or data loss or damage by us or third parties.
• We are subject to laws and regulations that govern how we can collect, process, store and transfer personal data and sensitive data, and violations may result in meaningful penalties, enforcement, and/or reputational harm and have a significant impact on our operations.
• Our inability to access, upgrade or expand our technology systems or difficulties in updating our existing technology or developing or implementing new technology may have a material adverse effect on our business or results of operations.
• We are subject to a number of risks associated with our international activities and operations and may not be successful in any efforts to further expand internationally.
• We operate in a highly competitive and changing environment, and if we are unable to adapt to our environment, we may be unable to compete successfully.
• We have a limited number of significant customers and losing any of them may have an adverse effect on our financial condition and results of operations.
• Deterioration in general economic conditions in the US, Europe, Japan and globally, including the effect of prolonged periods of inflation on our suppliers, third-party service providers and potential partners, may harm our business and results of operations.
• The emergence of a pandemic, and efforts to reduce its spread, may negatively impact our business and operations.
• Our current and potential future use of AI and machine learning may not be successful and presents new risks and challenges to our business.
• If we are unable to adequately protect our intellectual property rights, the value of ARIKAYCE, BRINSUPRI, and our product candidates may be materially diminished.
• If we fail to comply with obligations in our third-party agreements, our business may be adversely affected, including by the loss of license rights that are important to our business.
• Healthcare legislation or other government action may materially adversely affect our business, financial condition, results of operations and prospects and the value of our common stock.
• We are subject to anti-corruption laws and trade control laws, as well as other laws governing our operations. If we fail to comply with these laws, we may be subject to negative publicity, civil or criminalpenalties, other remedial measures, and legal expenses, which may adversely affect our business, financial condition, results of operations and prospects and the value of our common stock.
• We have a history of operating losses, expect to incur operating losses in the near term, and may never achieve or maintain profitability.
• We may need to raise additional funds to continue our operations, and any failure to obtain capital when needed on acceptable terms, or at all, may force us to delay, reduce or eliminate our development programs, commercialization efforts, or other operations.
• We have outstanding indebtedness in the form of a term loan and a royalty financing arrangement and may incur additional indebtedness in the future, which may adversely affect our financial position, prevent us from implementing our strategy, and, in certain cases, dilute the ownership interest of our existing shareholders.
• We may be unable to use certain of our net operating losses and other tax assets.
• Goodwill impairment charges in the future may have a material adverse effect on our business, results of operations and financial condition.
• Our shareholders may experience dilution of their ownership interests because of the future issuance of additional shares of our common stock.
• Certain provisions of Virginia law, our articles of incorporation and amended and restated bylaws and arrangements between us and our employees may hamper a third party’s acquisition of us or discourage a third party from attempting to acquire control of us.
Risks Related to the Commercialization and Continued Approval of ARIKAYCE and BRINSUPRI, and the Potential Approval and Commercialization of our Product Candidates
Our prospects are highly dependent on the success of our approved products, ARIKAYCE and BRINSUPRI. If we are unable to successfully market, commercialize and maintain approval for ARIKAYCE and BRINSUPRI, our business, financial condition, results of operations and prospects and the value of our common stock may be materially adversely affected.
Our long-term viability and growth depend on the successful commercialization of ARIKAYCE and BRINSUPRI. ARIKAYCE was approved in the US for the treatment of MAC lung disease as part of a combination antibacterial drug regimen for adult patients with limited or no alternative treatment options in a refractory setting, as defined by patients who do not achievenegative sputum cultures after a minimum of six consecutive months of a multidrug background regimen therapy. Subsequently, ARIKAYCE was approved in Europe for the treatment of NTM lung infections caused by MAC in adults with limited treatment options who do not have CF, and in Japan for the treatment of patients with NTM lung disease caused by MAC who did not sufficiently respond to prior treatments with a multidrug regimen. We refer to NTM lung disease caused by MAC as MAC lung disease. BRINSUPRI was approved in the US in August 2025 as an oral, once-daily treatment for NCFB in adults and children 12 years and older, and in the EU in November 2025 for NCFB in adults and children 12 years or older with two or more exacerbations in the prior 12 months. We have invested and continue to invest significant efforts and financial resources in the commercialization of ARIKAYCE and BRINSUPRI. Our ability to continue to generate revenue from ARIKAYCE will depend heavily on successfully commercializing and obtaining full regulatory approval for ARIKAYCE from the FDA by conducting an appropriate confirmatory post-marketing study. Our ability to generate revenue from BRINSUPRI will depend heavily on successfully commercializing BRINSUPRI in the US and the EU as well as obtaining additional regulatory approvals outside of the US and the EU.
In order to continue to commercialize ARIKAYCE and BRINSUPRI, we must continue to establish and maintain marketing, market access, sales and distribution capabilities on our own or make arrangements with third parties for its marketing, sale and distribution. We are commercializing ARIKAYCE in the US, Europe and Japan and BRINSUPRI in the US using our sales force, and we intend to use our sales force in any additional markets in which we commercialize BRINSUPRI, but we may not continue to be successful in these efforts. The establishment, development and maintenance of our own sales force is and will continue to be expensive and time-consuming. As a result, we may seek one or more partners to handle some or all of the sales and marketing of ARIKAYCE and/or BRINSUPRI in certain markets following approval by the relevant regulatory authority in those markets. In that case, we will be reliant on third parties to successfully commercialize ARIKAYCE and/or BRINSUPRI and will have less control over commercialization efforts than if we handled commercialization with our own sales force. However, we may not be able to enter into arrangements with third parties to sell ARIKAYCE and/or BRINSUPRI on favorable terms or at all. In the event that either our own marketing, market access, sales force or third-party marketing, and sales organizations are not effective, our ability to generate revenue would be adversely affected.
We may not be able to obtain regulatory approval for ARIKAYCE in front-line NTM lung disease, for ARIKAYCE or BRINSUPRI in additional markets or for our product candidates. Any such failure to obtain regulatory approvals may materially adversely affect us.
We are required to obtain various regulatory approvals prior to studying our products in humans and then again before we market and distribute our products, and the failure to obtain such approvals will prevent us from commercializing our products, which would materially adversely affect our business, financial condition, results of operations and prospects and the value of our common stock. While we have obtained accelerated approval for ARIKAYCE in the US, approval for ARIKAYCE in Europe and Japan and approval for BRINSUPRI in the US and the EU, seeking any future regulatory approvals for our product candidates, as well as approval for ARIKAYCE in front-line NTM lung disease or for ARIKAYCE or BRINSUPRI in other jurisdictions presents significant obstacles.
We are continuing to conduct our confirmatory clinical trial program for full approval of ARIKAYCE in the broader population of patients with MAC lung disease through our ENCORE trial, and this trial program, along with any other clinical trials of ARIKAYCE, may not be successful. Additional results from ongoing and recently completed studies may affect the FDA’s benefit-risk analysis for the product. If we are unable to expand the indication for use of ARIKAYCE, our prospects and the value of our common stock may be materially adversely affected.
Approval processes in the US, Europe, Japan and other markets require the submission of extensive pre-clinical and clinical data, manufacturing and quality information regarding the manufacturing process and any manufacturing facility, scientific data characterizing our product and other supporting data in order to establish safety and effectiveness. These processes are complex, lengthy, expensive, resource intensive and uncertain. Regulators will also conduct a rigorous review of any trade name we intend to use for our products. Even after they approve a trade name, these regulators may request that we adopt an alternative name for the product if adverse event reports indicate a potential for confusion with other trade names and medication error. If we are required to adopt an alternative name, potential commercialization of our product candidates or continued commercialization of ARIKAYCE or BRINSUPRI may be delayed or interrupted. We have limited experience in submitting and pursuing applications necessary to obtain these regulatory approvals.
Data submitted to regulators are subject to varying interpretations that may delay, limit or prevent regulatory agency approval. Even if we believe our clinical trial results are promising, regulators may disagree with our interpretation of data, study design or execution and may refuse to accept our application for review or decline to grant approval.
In addition, the grant of an orphan designation by the FDA or EC or approval by the FDA, EC, MHRA or MHLW does not ensure a similar decision by the regulatory authorities of other countries, and a decision by one foreign regulatory authority does not ensure regulatory authorities in other foreign countries or the FDA will agree with the decision. For instance, although ARIKAYCE received orphan drug designation in the US for the treatment of infections caused by NTM, ARIKAYCE did not qualify for orphan drug designation in Japan due to the estimated number of NTM patients in Japan exceeding 50,000. Similarly, clinical studies conducted in one country may not be accepted by regulatory authorities in other countries. Approval procedures vary among countries and can involve additional product testing, including additional pre-clinical studies or clinical trials, and administrative review periods. The time required to obtain approval in these other territories might differ from that required to obtain FDA approval. We may never obtain approval for our product candidates in the US or other jurisdictions, for ARIKAYCE outside of the US, Europe and Japan, or for BRINSUPRI outside of the US and the EU, which would limit our market opportunities and may materially adversely affect our business. Even if any of our product candidates is approved, if ARIKAYCE is approved outside of the US, Europe and Japan, or if BRINSUPRI is approved outside of the US and the EU, regulators may limit the indications for which the product may be marketed, require extensive warnings on the product labeling, require other burdensome risk mitigation measures, such as distribution restrictions, or require expensive and time-consuming additional clinical trials or reporting as conditions of approval.
We may also encounter delays or rejections based on changes in regulatory agency policies or resources during the period in which we develop a product and the period required for review of any application for regulatory agency approval of a particular product. Resolving such delays may force us or third parties to incur significant costs, limit our allowed activities or the allowed activities of third parties, diminish any competitive advantages that we or our third parties may attain or adversely affect our ability to receive royalties, any of which may materially adversely affect our business, financial condition, results of operations and prospects and the value of our common stock.
The commercial success of ARIKAYCE and BRINSUPRI depend on market acceptance by physicians, patients, third-party payors and others in the healthcare community, and the commercial success of our product candidates, if approved, may similarly depend on market acceptance.
Despite receiving FDA, EC and Japan’s MHLW approval of ARIKAYCE and FDA and EC approval of BRINSUPRI for the specified indications, market acceptance may vary among physicians, patients, third-party payors or others in the healthcare community and is dependent on a number of factors, including the following:
• The willingness of the target patient populations to use, and of physicians to prescribe, ARIKAYCE and BRINSUPRI;
• The efficacy and potential advantages of ARIKAYCE and BRINSUPRI over alternative treatments;
• The risk and safety profile of ARIKAYCE and BRINSUPRI, including, among other things: with respect to ARIKAYCE, physician and patient concern regarding the US boxed warning and other safety precautions resulting from its association with an increased risk of respiratory adverse reactions; whether patients experience adverse events, including adverse events that did not occur or went undetected or unreported in our clinical trials; and any adverse safety information that becomes available as a result of longer-term use of ARIKAYCE and BRINSUPRI;
• Relative convenience and ease of administration, including any requirements for hospital administration of ARIKAYCE;
• The ability of the patient to tolerate ARIKAYCE and BRINSUPRI;
• The pricing of ARIKAYCE and BRINSUPRI;
• The ability and willingness of the patient to pay out of pocket costs for ARIKAYCE and BRINSUPRI (for example, co-payments);
• Sufficient government or third-party insurance coverage and reimbursement;
• The strength of marketing and distribution support and timing of market introduction of competitive products and treatments; and
• Publicity concerning ARIKAYCE and BRINSUPRI or any potential competitive products and treatments.
Our efforts to educate physicians, patients, third-party payors and others in the healthcare community on the benefits of ARIKAYCE and BRINSUPRI have required and will continue to require significant resources, which may be greater than those required to commercialize more established technologies and these efforts may never be successful. If approved, the market acceptance of our product candidates may vary among physicians, patients, third-party payors or others in the healthcare community and will depend on substantially similar factors.
We obtained regulatory approval of ARIKAYCE in the US through an accelerated approval process, and full approval will be contingent on successful and timely completion of a confirmatory post-marketing clinical trial. Failure to obtain full approval or otherwise meet our post-marketing requirements and commitments may have a material adverse effect on our business, prospects and the value of our common stock.
The FDA approved ARIKAYCE under the LPAD and accelerated approval pathways, and full approval will be based on results from a post-marketing confirmatory clinical trial. FDA may grant accelerated approval to a product for a serious or life-threatening disease or condition upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit or on a clinical endpoint that can be measured earlier than or irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality, or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. Accelerated approval of ARIKAYCE was supported by preliminary data from the Phase 3 CONVERT study, which evaluated the safety and efficacy of ARIKAYCE in adult patients with refractory MAC lung disease, using achievement of sputum culture conversion (defined as three consecutive negative monthly sputum cultures) by Month 6 as the primary endpoint.
As a condition of accelerated approval, we must conduct a post-marketing confirmatory clinical trial for ARIKAYCE in patients with MAC lung disease, which we commenced in the fourth quarter of 2020, and submit periodic reports on the progress of this clinical trial. The confirmatory clinical trial program consists of the ARISE trial, an interventional study designed to validate cross-sectional and longitudinal characteristics of a PRO tool in MAC lung disease, and the ENCORE trial, designed to establish the clinical benefits and evaluate the safety of ARIKAYCE in patients with newly diagnosed or recurrent MAC lung disease using the PRO tool validated in the ARISE trial.
The confirmatory clinical trial program is intended to fulfill the FDA’s post-marketing requirement to allow for full approval of ARIKAYCE by the FDA, and verification and description of clinical benefit in the ENCORE trial will be necessary for full approval of ARIKAYCE.
In September 2023, we announced positive topline results from the ARISE trial. The study met its primary objective of demonstrating that the QOL-B respiratory domain works effectively as a PRO tool in patients with MAC lung disease. Based on feedback and in alignment with the FDA, we determined that the primary endpoint for the ENCORE trial would include eight questions from the QOL-B respiratory domain PRO. We completed enrollment of the ENCORE trial in the fourth quarter of 2024, with 425 patients enrolled. However, we may encounter substantial delays in conducting the ENCORE trial, and we may not be able to conduct the trial in a manner satisfactory to the FDA or within the time period required by the FDA. In addition, the use of the PRO tool in the ENCORE trial, which involves patients’ subjective assessments of efficacy of the treatments they receive in the trial, may increase the uncertainty of, and adversely impact, the clinical trial outcomes.
The FDA could, among other things, withdraw its approval of ARIKAYCE using expedited procedures if the ENCORE trial is not successful or if the FDA concludes that we failed to conduct the ENCORE trial with due diligence, that other evidence demonstrates that ARIKAYCE is not shown to be safe and effective, or that we disseminated false or misleading promotional materials with respect to ARIKAYCE. Additionally, under the amendments to the FDCA made by the Consolidated Appropriations Act, 2023, the FDA could pursue administrative and judicial remedies for a violation of the FDCA if we were to fail to conduct the ENCORE trial with due diligence or not timely submit the required reports on the progress of the ENCORE trial. Separate from the confirmatory trial, additional results from ongoing and recently completed studies may affect the FDA’s benefit-risk analysis for the product. Failure to meet all post-marketing commitments may raise additional regulatory challenges.
We are subject to substantial, ongoing regulatory requirements, including with respect to advertising and promotion, and failure to comply with these requirements may lead to enforcement action or otherwise materially harm our business.
We are subject to a variety of manufacturing, packaging, storage, labeling, advertising, promotion, record-keeping and reporting requirements in the US, Europe, and Japan, including requirements to:
• Conduct sales, marketing and promotion, scientific exchange, speaker programs, charitable donations and educational grant programs in compliance with federal and state laws;
• Disclose clinical trial information and payments to healthcare professionals and healthcare organizations on publicly available databases;
• Monitor and report complaints, AEs and instances of failure to meet product specifications;
• Comply with cGMP requirements for drugs and quality systems requirements for devices;
• Comply with requirements regarding the security and integrity of the distribution supply chain;
• Acquire licenses for marketing authorization and certifications for our third-party manufacturers when importing and selling pharmaceutical products manufactured in one country into another country;
• Negotiate with national governments and other counterparties on pricing and reimbursement status;
• Carry out post-approval confirmatory clinical trials;
• Comply with ongoing pharmacovigilance requirements;
• Se ek supplemental approvals for changes in product labeling or manufacturing; and
• Disclose payments to healthcare professionals and healthcare organizations to national regulatory authorities and/or on publicly available websites.
In addition, advertising and promotion of any product candidate that obtains approval in the US is heavily scrutinized by the FDA, the Department of Justice, the Department of Health and Human Services’ Office of Inspector General, state attorneys general, members of Congress, other government agencies and the public. While physicians may prescribe products for off-label uses as the FDA and other regulatory agencies do not regulate a physician’s choice of drug treatment made in the physician’s independent medical judgment, they do restrict promotional communications from companies or their sales force with respect to off-label uses of products for which marketing authorization has not been obtained. Companies may only share truthful and not misleading information that is otherwise consistent with a product’s FDA-approved labeling. Violations, including promotion of our products for unapproved (or off-label) uses, may be subject to untitled or warning letters, inquiries and investigations, and civil and criminal sanctions by the government. Additionally, foreign regulatory authorities will heavily scrutinize advertising and promotion of any product candidate that obtains approval in their respective jurisdictions.
Furthermore, on September 9, 2025, President Trump issued a Memorandum directing the US Department of Health and Human Services, or HHS, to “ensure transparency and accuracy in direct-to-consumer prescription drug advertising, including by increasing the amount of information regarding any risks associated with the use of any such prescription drug required to be provided in prescription drug advertisements.” The same day, the FDA declared that it will no longer tolerate what it characterized as “deceptive practices” in prescription drug advertising and that the agency would “aggressively deploy” its available enforcement tools with “heightened scrutiny” of fair balance and disclosures in social media promotions. The FDA issued a generic “notice letter” to all holders of approved drug and biologic applications, including us, directing such companies to “remove any noncompliant advertising and bring all promotional communications into compliance.” Any failure by us to comply with any of these requirements may lead to onerous government investigations or enforcement action or otherwise materially harm our business.
If we ultimately receive approval for ARIKAYCE, BRINSUPRI or any of our product candidates in jurisdictions other than the US, Europe, or Japan, we expect to be subject to similar ongoing regulatory oversight by the relevant foreign regulatory authorities, including the requirement to negotiate with national governments and other counterparties on pricing and reimbursement prices for each new jurisdiction.
Failure to comply with these ongoing regulatory obligations could have significant negative consequences, including:
• Issuance of warning letters or untitled letters by the FDA asserting that we are in violation of the law;
• Imposition of injunctions or civil monetary penalties or pursuit by regulators of civil or criminalprosecutions and finesagainst us or our responsible officers;
• Suspension or withdrawal of regulatory approval;
• Suspension or termination of ongoing clinical trials or refusal by regulators to approve pending marketing applications or supplements to approved applications;
• Seizure of products, required product recalls or refusal to allow us to enter into supply contracts, including government contracts, or to import or export products;
• Enforcement actions, such as a product recalls, or product shortages due to failure to meet certain manufacturing or regulatory requirements, including the successful completion and results of quality control or release testing;
• Suspension of, or imposition of restrictions on, our operations, including costly new manufacturing requirements with respect to ARIKAYCE, BRINSUPRI, or any of our product candidates; and
• Negative publicity, including communications issued by regulatory authorities, which may negatively impact the perception of us or ARIKAYCE, BRINSUPRI, or any of our product candidates by patients, physicians, third-party payors or the healthcare community.
We provide financial assistance with out-of-pocket costs to patients enrolled in commercial health insurance plans. In addition, independent foundations may assist with out-of-pocket financial obligations. The ability of these organizations to provide assistance to patients is dependent on funding from external sources, and we cannot guarantee that such funding will be available at adequate levels, if at all. Patient assistance programs, whether provided directly by manufacturers or charitable foundations, have come under recent government scrutiny. If we are deemed to have failed to comply with relevant laws, regulations or government guidance with respect to these programs, we may be subject to significant fines or penalties.
In addition, the policies of the FDA, the EMA, the MHLW, and other comparable regulatory authorities may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our products. Costs arising out of any regulatory developments could be time-consuming and expensive and could divert management resources and attention and, consequently, may adversely affect our business, financial condition and results of operations. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, which may adversely affect our business, prospects and ability to achieve or sustain profitability.
If we are unable to obtain or maintain adequate reimbursement from government or third-party payors for ARIKAYCE, BRINSUPRI or our product candidates, if approved, or if we are unable to obtain or maintain acceptable prices for ARIKAYCE, BRINSUPRI or our product candidates, if approved, our prospects for generating revenue and achievingprofitability may be materially adversely affected.
Our prospects for generating revenue and achievingprofitability depend heavily upon the availability of adequate reimbursement for the use of ARIKAYCE, BRINSUPRI or, if approved, our product candidates, from governmental and other third-party payors, both in the US and in other markets. A significant portion of our current ARIKAYCE and BRINSUPRI revenues in the US are dependent on Medicare reimbursement, and we expect that trend to continue. Reimbursement by a third-party payor depends upon a number of factors, including the third-party payor’s determination that use of a product is:
• A covered benefit under its health plan;
• Safe, effective and medically necessary;
• Appropriate for the specific patient;
• Cost-effective; and
• Neither experimental nor investigational.
Obtaining a determination of coverage and reimbursement for a product from each relevant governmental or other third-party payor is a time-consuming and costly process that could require us to provide supporting scientific, clinical and cost-effectiveness data for the use of our products to each payor. Payors in the US have evaluated ARIKAYCE for inclusion on formularies. Going forward, we may not be able to provide data that are sufficient to gainpositive coverage and reimbursement determinations or we might need to conduct post-marketing studies in order to demonstrate the cost-effectiveness of ARIKAYCE to such payors’ satisfaction. Such studies might require us to commit a significant amount of management time and financial and other resources. Payors in the US continue to evaluate BRINSUPRI and/or write policies related to access. If access requirements adopted by third-party payors or the prior authorization process prove too onerous, physicians and patients may develop a belief that BRINSUPRI is difficult to access, which, in turn, may affect our ability to successfully commercialize BRINSUPRI and adversely impact our business, financial condition, results of operations and prospects and the value of our common stock.
Even when a payor determines that a product is eligible for reimbursement, the payor may impose coverage limitations that preclude payment for some uses that are approved by the FDA or non-US regulatory authorities and/or may set a reimbursement rate that is too low to support a profitable sales price for the product. For example, in France we agreed with the French authorities to a reimbursed price for ARIKAYCE that was lower than the price in our temporary authorization for use (Autorisation Temporaire d’Utilisation or ATU) and are required to refund the difference. As a result, we recorded a revenue reversal in the fourth quarter of 2022, related to revenue recorded in prior periods. In addition, in 2023, we experienced a one-time, prospective price decrease for ARIKAYCE in Japan of 9.4%. In the US, payors have restricted and continue to restrict coverage of ARIKAYCE by using a variable co-payment structure that imposes higher costs on patients for drugs that are not preferred by the payor and by imposing requirements for prior authorization or step edits, and payors may similarly restrict coverage of BRINSUPRI as they continue to evaluate BRINSUPRI for coverage and write coverage policies. Additionally, if the results from our ENCORE trial support a label expansion for ARIKAYCE to include all MAC lung patients, payors may nonetheless restrict reimbursement for ARIKAYCE’s use to refractory MAC patients, despite regulatory approval. Subsequent approvals of competitive products could result in a detrimental change to the reimbursement of our products. The occurrence of
any of these events likely would adversely impact market acceptance and demand for ARIKAYCE and/or BRINSUPRI, which, in turn, may affect our ability to successfully commercialize ARIKAYCE and/or BRINSUPRI and adversely impact our business, financial condition, results of operations and prospects and the value of our common stock.
There is a significant focus in the US healthcare industry and elsewhere on drug prices and value, and public and private payors are taking increasingly aggressive steps to control their expenditures for pharmaceuticals by, among other things, negotiating manufacturer discounts and placing restrictions on reimbursement for, and patient access to, medications. These pressures could negatively affect our business. We expect changes in the Medicare program and state Medicaid programs, as well as managed care organizations and other third-party payors, to continue to put pressure on pharmaceutical product pricing. One significant example of applicable legislative action is the IRA, which was signed into law on August 16, 2022. The IRA gives the HHS the ability and authority to directly negotiate with manufacturers the price that Medicare will pay for certain high-priced drugs and set caps on the negotiated price of such drugs, among other changes. The IRA also requires manufacturers of certain Part B and Part D drugs to issue to HHS rebates based on certain calculations and triggers (i.e., when drug prices increase and outpace the rate of inflation), which may influence the pricing of current and future products. At this time, we believe that ARIKAYCE will be excluded from price negotiation under the IRA due to its orphan drug designation, but BRINSUPRI is likely to be subject to IRA price negotiation in the future. We cannot predict other potential implications the IRA provisions will have on our business or the pricing of our product candidates, if approved. Similarly, we cannot predict the impact on our business of the Trump Administration’s proposed “most favored nation” drug pricing policies. These types of laws may have a significant impact on our ability to set a product price we believe is fair or market and sell our approved products in certain jurisdictions and may adversely affect our ability to generate revenue and achieve or maintain profitability, as well as on our decisions about whether to launch our products in additional markets. We expect further federal and state proposals and healthcare reforms to continue to be proposed, which could limit the prices that can be charged for the products we develop or may otherwise limit our commercial opportunity. In addition, in connection with various government programs, we are required to report certain pricing information to the government, and the failure to do so may subject us to penalties. For further discussion of related risks, see “Risks Related to Government Regulation - Healthcare legislation or other government action may materially adversely affect our business, financial condition, results of operations and prospects and the value of our common stock.”
In markets outside the US, including countries in Europe, Japan and Canada, pricing of pharmaceutical products is subject to governmental control. Evaluation criteria used by many government agencies in European countries for the purposes of pricing and reimbursement typically focus on a product’s degree of innovation and its ability to meet a clinical need unfulfilled by currently available therapies. The Patient Protection and Affordable Care Act (ACA) created a similar entity, the Patient-Centered Outcomes Research Institute, designed to review the effectiveness of treatments and medications in federally-funded healthcare programs. An adverse result could lead to a treatment or product being removed from Medicare or Medicare coverage. The decisions of such governmental agencies could affect our ability to sell our products profitably.
We continue to have discussions with third-party payors regarding our price for ARIKAYCE and BRINSUPRI, and our pricing may meet resistance from them and the public generally. If we are unable to maintain adequate reimbursement for ARIKAYCE in the US, Europe and Japan, or for BRINSUPRI in the US and the EU, the adoption of ARIKAYCE and/or BRINSUPRI by physicians and patients may be limited. If we are unable to negotiate acceptable prices for ARIKAYCE and BRINSUPRI, we may be unable to generate sufficient revenue to achieveprofitability. Both of these risks, in turn, may affect our ability to successfully commercialize ARIKAYCE and BRINSUPRI and adversely impact our business, financial condition, results of operations and prospects and the value of our common stock.
ARIKAYCE, BRINSUPRI, or any of our product candidates may develop unexpected safety or efficacy concerns, which may have a material adverse effect on us.
ARIKAYCE and BRINSUPRI are now being used by larger numbers of patients and, with respect to ARIKAYCE, for longer periods of time than during our clinical trials (including in the CONVERT study), and we and others (including regulatory agencies and private payors) are collecting extensive information on the efficacy and safety of ARIKAYCE and BRINSUPRI by monitoring its use in the marketplace. In addition, we are conducting a confirmatory trial to assess and describe the clinical benefit of ARIKAYCE in patients with MAC lung disease. We may also conduct additional trials in connection with lifecycle management programs for ARIKAYCE, BRINSUPRI, and, if approved, our product candidates. New safety or efficacy data from both market surveillance and our clinical trials may result in negative consequences including the following:
• Modification to product labeling or promotional statements, such as additional boxed or other warnings or contraindications, or the issuance of additional “Dear Doctor Letters” or similar communications to healthcare professionals;
• Required changes in the administration of ARIKAYCE, BRINSUPRI, or our product candidates;
• Imposition of additional post-marketing surveillance, post-marketing clinical trial requirements, distribution restrictions or other risk management measures, such as a risk evaluation and mitigation strategy (REMS) or a REMS with elements to assure safe use in the US;
• Suspension or withdrawal of regulatory approval;
• Suspension or termination of ongoing clinical trials or refusal by regulators to approve pending marketing applications or supplements to approved applications;
• Suspension of, or imposition of restrictions on, our operations, including costly new manufacturing requirements with respect to ARIKAYCE, BRINSUPRI, or our product candidates; and
• Voluntary or mandatory product recalls or withdrawals from the market and costly product liability claims.
Any of these circumstances could reduce ARIKAYCE’s or BRINSUPRI's market acceptance or, if approved, the market acceptance of our product candidates and may materially adversely affect our business.
If our estimates of the size of the potential markets for ARIKAYCE, BRINSUPRI, or our product candidates prove inaccurate, our ability to generate revenue may be materially adversely affected.
We have relied on external sources, including market research funded by us and third parties, and internal analyses and calculations to estimate the potential market opportunities for ARIKAYCE, BRINSUPRI, and our product candidates. The externally sourced information used to develop these estimates has been obtained from sources we believe to be reliable, but we have not verified the data from such sources, and their accuracy and completeness cannot be assured. With respect to ARIKAYCE, our internal analyses and calculations are based upon management’s understanding and assessment of numerous inputs and market conditions, including, but not limited to, the projected increase in prevalence of MAC lung disease, Medicare patient population growth and ongoing population shifts to geographies with increased rates of MAC lung disease.
In addition, we are relying on third-party data to identify the physicians who treat the majority of MAC lung disease patients in the US and to determine how to deploy our resources to market to those physicians; however, we may not be marketing to the appropriate physicians and may therefore be limiting our market opportunity.
With regard to BRINSUPRI, our estimated number of total diagnosed bronchiectasis patients in the US was derived from an external source. A similar per capita prevalence was used to calculate the estimated prevalence in the European 5 and Japan.
Our estimates of the potential addressable market for TPIP in PAH and PH-ILD in the US, the European 5 and Japan were also derived from external sources. However, the studies we reviewed indicate a lack of consensus on prevalence rates.
Furthermore, professional societies, practice management groups, private health and science foundations and other organizations publish guidelines or recommendations to the healthcare and patient communities relating to such matters as usage, dosage, route of administration and use of concomitant therapies. Recommendations or guidelines suggesting the reduced use of our products or the use of competitive or alternative products that are followed by patients and healthcare providers could result in decreased use of our products.
In addition to the foregoing reasons for caution, these understandings and assessments necessarily require assumptions subject to significant judgment and may prove to be inaccurate. As a result, our estimates of the size of these potential markets for ARIKAYCE, BRINSUPRI, and our product candidates could prove to be overstated, perhaps materially.
In the future, we may develop additional estimates with respect to market opportunities for our other product candidates, and such estimates are subject to similar risks. In addition, a potential market opportunity could be reduced if a regulator limits the proposed treatment population for one of our product candidates, similar to the limited population for which ARIKAYCE was approved. In either circumstance, even if we obtain regulatory approval, we may be unable to commercialize the product on a scale sufficient to generate significant revenue from such product candidates, which may have a material adverse effect on our business, financial condition, results of operations and prospects and the value of our common stock.
Risks Related to the Development and Regulatory Approval of Our Product Candidates Generally
Pharmaceutical research and development is very costly and highly uncertain, and we may not succeed in developing product candidates in the future.
Product development in the pharmaceutical industry is an expensive, high-risk, lengthy, complicated, resource intensive process. In order to develop a product successfully, we must, among other things:
• Identify potential product candidates;
• Submit for and receive regulatory approval to perform clinical trials;
• Design and conduct appropriate pre-clinical and clinical trials, including confirmatory clinical trials, according to good laboratory practices and good clinical practices and disease-specific expectations of the FDA and other regulatory bodies;
• Select and recruit clinical investigators and subjects for our clinical trials;
• Obtain and correctly interpret data establishing adequate safety of our product candidates and demonstrating with statistical significance that our product candidates are effective for their proposed indications, as indicated by satisfaction of pre-established endpoints;
• Submit for and receive regulatory approvals for marketing; and
• Manufacture the product candidates and device constituent parts according to cGMP and other applicable standards and regulations.
There is a high rate of failure inherent in this process, and potential products that appear promising at early stages of development may fail for a number of reasons. Importantly, positive results from pre-clinical studies of a product candidate may not be predictive of similar results in human clinical trials, promising results from earlier clinical trials of a product candidate may not be replicated in later clinical trials, and observations from ongoing trials, including observations based on interim, preliminary, or blinded data, may not be representative of results after the trials are completed and all data are collected and analyzed. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials even after achievingpositive results in earlier stages of development and have abandoned development efforts or sought partnerships in order to continue development.
In addition, there are many other difficulties and uncertainties inherent in pharmaceutical research and development that could significantly delay or otherwise materially impair our ability to develop future product candidates, including the following:
• Conditions imposed by regulators, ethics committees or institutional review boards for pre-clinical testing and clinical trials relating to the scope or design of our clinical trials, including selection of endpoints and number of required patients or clinical sites;
• Challenges in designing our clinical trials to support potential claims of superiority over current standard of care or future competitive therapies;
• Restrictions placed upon, or other difficulties with respect to, clinical trials and clinical trial sites, including with respect to potential clinical holds or suspension or termination of clinical trials due to, among other things, potential safety or ethical concerns or noncompliance with regulatory requirements;
• Delayed or reduced enrollment in clinical trials, high discontinuation rates or overly concentrated patient enrollment in specific geographic regions;
• Failure by third-party contractors, contract research organizations (CROs), clinical investigators, clinical laboratories, or suppliers to comply with regulatory requirements or meet their contractual obligations in a timely manner;
• Greater than anticipated cost of our clinical trials; and
• Insufficient product supply or inadequate product quality.
We cannot state with certainty when or whether our product candidates now under development will be approved or launched; whether, if initially granted, such approval will be maintained; whether we will be able to develop, license, or otherwise acquire additional products or product candidates; or whether our products, once launched, will be commercially successful. Failure to successfully develop future product candidates for any of these reasons may materially adversely affect our business, financial condition, results of operations and prospects and the value of our common stock.
Interim, topline and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available, may be interpreted differently if additional data are disclosed, and are subject to audit and verification procedures that may result in material changes in the final data.
From time to time, we may publicly disclose preliminary or topline data from our clinical trials, which may be based on a preliminary analysis of then-available data in a summary or topline format, and the results and related findings may change as more patient data become available, may be interpreted differently if additional data are disclosed at a later time and are subject to audit and verification procedures that could result in material changes in the final data. If additional results from our clinical trials are not consistent with topline data or other previously released data or are not viewed favorably, our ability to obtain approval for and commercialize our approved drug and drug candidates, our business, operating results, prospects, or financial condition may be harmed and our stock price may decrease.
We also make assumptions, estimates, calculations, and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the preliminary or topline results that we report may differ from future results of the same trials, or different conclusions or considerations may qualify such results,
once additional data have been disclosed and/or are received and fully evaluated. Such data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, preliminary and topline data should be viewed with caution until the final data are available. We may also disclose interim data from our clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Differences between preliminary or interim data and final data could significantly harm our business prospects. In addition, blinded data may not be predictive of unblinded data.
Further, other parties, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions, or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular drug candidate or product, and our business in general. In addition, in regards to the information we publicly disclose regarding a particular study or clinical trial, such as topline data, you or others may not agree with what we determine is the material or otherwise appropriate information to include in such disclosure, and any information we determine not to disclose, or to disclose at a later date, such as at a medical meeting may ultimately be deemed significant with respect to future decisions, conclusions, views, activities, or otherwise regarding a particular drug, drug candidate, or our business. If the topline data that we report differ from actual results or are interpreted differently once additional data are disclosed at a later date, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for and commercialize our drug candidates, our business, operating results, prospects, or financial condition may be harmed or our stock price may decline.
As ARIKAYCE is a drug/device combination product, we cannot sell ARIKAYCE without Lamira. Any failure to secure or maintain regulatory approval in each market for Lamira as a delivery system for ARIKAYCE may limit our ability to successfully commercialize ARIKAYCE. Additionally, we plan to submit an NDA for TPIP as a drug/device combination product or as a stand-alone marketing application, as dictated by local regulations. Failure to obtain or maintain regulatory approval or clearance of any of our devices or drug-device combination products may materially harm our business.
Lamira must receive regulatory approval or clearance in connection with each approved product or product candidate it will be used to administer. In the US, the FDA granted accelerated approval of a drug/device combination product comprised of ARIKAYCE with Lamira, and Lamira is CE marked by PARI in Europe and authorized for use by MHLW in Japan. However, outside the US, Europe and Japan, Lamira is labeled as investigational for use in our clinical trials, including in Canada and Australia, and is not approved for commercial use in Canada or certain other markets in which we may seek to commercialize ARIKAYCE in the future.
In addition, we plan to submit a marketing application for TPIP as a drug/device combination product or as a stand-alone application, as dictated by local regulations. We will need to seek additional approvals in connection with the delivery device for TPIP in certain markets before we can market and commercialize TPIP in them.
We will continue to work closely with PARI to coordinate efforts regarding regulatory requirements for Lamira, including our proposed filings. If we and PARI are not successful in obtaining approval for each usage of Lamira in each market, our ability to commercialize ARIKAYCE in those markets would be materially impaired. In addition, failure to maintain regulatory approval or clearance of Lamira may result in increased development costs, withdrawal of regulatory approval, delays or otherwise materially harm our business. Finally, failure to obtain regulatory approval or clearance of the delivery device for TPIP would affect our ability to develop and commercialize TPIP.
If our clinical studies do not produce positive results or our clinical trials are delayed, or if serious side effects are identified during drug development, we may experience delays, incur additional costs and ultimately be unable to obtain regulatory approval for and successfully commercialize our product candidates in the US, Europe, Japan or other markets.
Before obtaining regulatory approval for the sale of our product candidates, we must conduct, at our own expense, extensive pre-clinical tests to demonstrate the safety of our product candidates in animals, and clinical trials to demonstrate the safety and efficacy of our product candidates in humans. If we experience delays in our clinical trials or other testing or the results of these trials or tests are not positive or are only modestly positive, including with respect to safety, we may:
• Experience increased product development costs;
• Be delayed in obtaining, or be unable to obtain, regulatory approval for one or more of our product candidates;
• Obtain approval for indications or patient populations that are not as broad as intended or entirely different than those indications for which we sought approval or with labeling with boxed warnings or other warnings or contraindications;
• Need to change the way the product is administered;
• Be required to perform additional clinical trials to support approval or be subject to additional post-marketing testing requirements;
• Have regulatory authorities withdraw, or suspend, their approval of the product or impose risk mitigation strategies such as a REMS or other restrictions on distribution;
• Face a shortened patent protection period during which we may have the exclusive right to commercialize our products;
• Have competitors that are able to bring similar products to market before us;
• Be sued for allegedinjuries caused to patients using our products; or
• Suffer reputational damage.
Such circumstances would impair our ability to commercialize our products and harm our business and results of operations.
The risk of finding adverse side effects may be particularly heightened in the case of gene therapies. For instance, new gene copies may produce too much or too little of the desired protein or RNA, or the production of the desired protein or RNA may change over time. Because the treatment is irreversible, there may be challenges in managing side effects. Some adverse effects would not be able to be reversed or relieved and might require us to develop additional clinical safety procedures. Furthermore, new gene copies may disrupt other normal biological molecules and processes which could also result in undesirableadverse effects. Adverse side effects may also be experienced by patients as a result of the process for administering the therapy or related procedures.
There have been several significant adverse side effects in gene therapy treatments in the past, including reported cases of leukemia, immune-mediated responses, and death seen in other trials. Gene therapy is still a relatively new approach to disease treatment and additional adverse side effects could develop. For instance, possible adverse side effects that could occur include immunologic-mediated reactions early after administration, which could substantially limit the effectiveness of the treatment, and could lead to further adverse side effects, possibly including organ failure or death. Additional manufacturing, clinical, and pre-clinical testing may be required, as well as additional analyses, assessments, and potential long-term patient and clinical study subject monitoring, beyond what is currently required, and sample testing and associated regulatory reporting. Seriousadverse events in our clinical trials, or other clinical trials involving gene therapy products or our competitors’ products, even if not ultimately attributable to the relevant product candidates, and the resulting publicity, any claims that gene therapy is unsafe, or gene therapy being unable to gain the acceptance of the public or the medical community may further adversely impact our product candidates in the form of increased government regulation, unfavorable public perception, lack of physician adoption, the need for additional testing or monitoring, potential regulatory delays, stricter labeling requirements, and a decrease in demand.
We may not be able to enroll enough patients to conduct and complete our clinical trials or retain a sufficient number of patients in our clinical trials to generate the data necessary for regulatory approval of our product candidates or to gain approval of the use of ARIKAYCE in the broader population of patients with MAC lung disease.
The completion rate of our clinical trials is dependent on, among other factors, the patient enrollment rate. Patient enrollment is a function of many factors, including:
• Investigator identification and recruitment;
• Regulatory approvals to initiate study sites;
• Patient population size;
• The nature of the protocol to be used in the trial;
• Patient proximity to clinical sites;
• Eligibility criteria for the trial;
• Patient willingness to participate in the trial;
• Discontinuation rates; and
• Competition from other companies’ potential clinical trials for the same patient population.
Delays in patient enrollment for our clinical trials could increase costs and delay commercialization and sales, if any, of our products. Once enrolled, patients may elect to discontinue participation in a clinical trial at any time. If patients elect to discontinue participation in our clinical trials at a higher rate than expected, including with respect to our ENCORE trial, we may be unable to generate the data required by regulators for approval of our product candidates.
If another party obtains orphan drug exclusivity for a product that is considered the same or essentially the same as a product we are developing for a particular indication, we may be precluded from or delayed in commercializing the product in that indication.
Under the ODA, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition (i.e., that affects fewer than 200,000 persons in the US). In the EU, the EC grants orphan drug designation to products that are intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating disease or condition affecting not more than five in 10,000 people in the EU. The company that obtains the first regulatory approval from the FDA for a designated orphan drug for an indication within the designated rare disease or condition generally receives marketing exclusivity for use of that drug for that indication for a period of seven years. Similar laws exist in the EU with a term of 10 years. See Business — Government Regulation — Orphan Drug Designation in Item 1 of Part I of this Annual Report on Form 10-K for additional information. If a competitor obtains approval of the same drug for the same indication before we obtain approval, and the FDA grants such orphan drug exclusivity, we would be prohibited from obtaining approval for our product for seven years (or longer if the seven-year exclusivity period is extended for a QIDP or due to pediatric exclusivity), unless our product can be shown to be clinically superior. In addition, even if we obtain our own period of orphan exclusivity, the FDA may approve another product during our orphan exclusivity period that is otherwise the same drug for the same indication under certain circumstances, including if it is clinically superior to our product.
If we fail to obtain or maintain regulatory exclusivity for our product candidates, our business may be materially harmed.
We may be unable to obtain, or may not be able to maintain, regulatory exclusivity for our products or product candidates, including exclusivity under the Hatch-Waxman Act, orphan drug exclusivity, Generating Antibiotic Incentives Now Act exclusivity, or pediatric exclusivity. Even if granted, such exclusivity may be limited in scope or duration and may not prevent competitors from developing or marketing competing products. For example, while BRINSUPRI is eligible for five-year new chemical entity exclusivity, which should block submission of an Abbreviated New Drug Application (ANDA) or 505(b)(2) with the same active moiety for five years (or four years, if a paragraph IV certification of patent invalidity, unenforceability, or non-infringement is filed), if another sponsor submits a 505(b)(1) application for a drug containing the same active moiety, BRINSUPRI’s regulatory exclusivity would not block submission of that product. The loss or expiration of any exclusivity period could allow competitors to introduce generic or other competing products, which may significantly reduce our revenues and adversely affect our business, financial condition, and results of operations.
Generic competition following the expiration or loss of exclusivity may significantly reduce our revenues.
Our products may become subject to competition from generic or follow-on drug manufacturers who seek approval through the ANDA or 505(b)(2) application process. Manufacturers may file ANDAs or 505(b)(2) applications seeking approval to market follow-on versions of our products prior to the expiration of our patents or regulatory exclusivities, including by filing Paragraph IV certifications alleging that our patents are invalid, unenforceable, or not infringed. Such challenges could result in costly and time-consuming litigation, and if successful, could lead to earlier-than-anticipated generic competition, which may materially and adversely affect our revenues and profitability.
Our clinical and pre-clinical research activities include the research and development of novel gene therapy product candidates. It will be difficult to predict the time and cost of development and of subsequently obtaining regulatory approval for any such gene therapy product candidates, or how long it will take to commercialize any gene therapy product candidates.
In addition to our ongoing gene therapy clinical trials, we intend to continue to identify and develop novel gene therapy product candidates as part of our pre-clinical research efforts. We have limited experience in developing gene therapy programs and cannot be certain that any gene therapy product candidates that we develop will successfully complete pre-clinical studies and clinical trials, or that they will not cause significant adverse events or toxicities. Any such results could impact our ability to develop a gene therapy product candidate, including our ability to enroll patients in our clinical trials. Furthermore, there is the potential risk of delayedadverse events following exposure to gene therapy products due to persistent biological activity of the genetic material or other components of products used to carry the genetic material, which may adversely affect our ability to obtain and maintain regulatory approvals for and commercialize any gene therapy products we may develop.
In addition, to date, only a small number of gene therapy products have been approved in the US, Europe, Japan, or elsewhere, and regulatory requirements governing gene therapy products continue to evolve and may continue to change in the future. We may seek regulatory approval in territories outside the US, Europe, and Japan, which may have their own regulatory authorities along with frequently changing requirements or guidelines. The regulatory review committees and advisory groups in the US, Europe, Japan, and elsewhere, and any new guidelines they promulgate, may lengthen the regulatory review process, require us to perform additional studies, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of our product candidates or lead to significant post-approval limitations or restrictions. Within the FDA, the Center for Biologics Evaluation and Research (CBER) regulates gene therapy products. Within CBER, the review of gene therapy and related products is consolidated in the Office of Therapeutic Products, and the FDA has established the Cellular, Tissue and Gene Therapies Advisory Committee to advise CBER on its reviews. CBER works closely with the National Institutes of Health (the NIH) in connection with the development of gene therapy.
CBER has experienced leadership changes and broad layoffs and departures under the Trump Administration, which may slow review times.
The FDA has published specific guidance documents with respect to the development and approval of gene therapy products. Amongst these guidance documents are final guidance documents that pertain to the development of gene therapies for the treatment of specific disease categories, including rare diseases of interest to Insmed, and to manufacturing and long-term follow-up issues relevant to gene therapy, among other topics. For example, the FDA issued a final guidance document in September 2021 describing the FDA’s approach for determining whether two gene therapy products are the same or are different for the purpose of orphan-drug designation and orphan-drug exclusivity. On January 11, 2026, the FDA announced information about what the agency called its “flexible approach” to overseeing chemistry, manufacturing and control requirements for cell and gene therapies, although applicable requirements remain rigorous. The FDA has continued to issue additional draft and final guidance documents on the development and manufacture of gene therapy products.
As we advance gene therapy product candidates, we will be required to consult with these regulatory authorities and advisory groups, and comply with applicable guidelines. If we fail to do so, we may be required to delay or discontinue development of certain of our product candidates. These additional processes may result in a review and approval process that is longer than we otherwise would have expected. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product to market could decrease our ability to generate product revenue.
Due to these factors, it is more difficult for us to predict the time and cost of gene therapy product candidate development, and we cannot predict whether the application of our approach to gene therapy, or any similar or competitive programs, will result in the identification, development and regulatory approval of any product candidates, or that the gene therapy programs of our competitors will not be considered better or more attractive or available in the market prior to ours. There can be no assurance that any development problems we experience in the future related to gene therapy product candidates will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays and challenges in achieving sustainable, reproducible and scalable production. Additionally, if a safety concern arises in connection with a gene therapy product from any sponsor, regulatory authorities might apply greaterscrutiny to our gene therapy product candidates and any approved gene therapy products, and it might become more challenging to enroll patients in clinical trials and commercialize approved gene therapy products. Any of these factors may prevent us from completing our pre-clinical studies or clinical trials or commercializing any gene therapy product candidates we may develop on a timely or profitable basis, if at all.
Risks Related to Our Reliance on Third Parties
If we are unable to form and sustain relationships with third-party service providers that are critical to our business, or if any third-party arrangements that we may enter into are unsuccessful, our ability to develop and commercialize our products may be materially adversely affected.
We currently rely, and expect to continue to rely, on third parties for significant research, analytical services, pre-clinical development, clinical development and manufacturing of our product candidates and commercial scale manufacturing of ARIKAYCE, Lamira, and BRINSUPRI. For example, we do not own facilities for clinical-scale or commercial manufacturing of our product candidates, and we expect that our future supply requirements for TPIP will be manufactured by CMOs. We currently rely on Resilience and Patheon to provide our clinical and commercial supply of ARIKAYCE. We currently rely on Esteve and Patheon Inc. to provide our clinical supply of brensocatib and our commercial supply of BRINSUPRI. Additionally, almost all of our clinical trial work is done by CROs, such as PPD, our CRO for the ENCORE and TPIP trials, and clinical laboratories. In addition, we rely on third parties to manufacture clinical materials for our pre-clinical research programs. Reliance on these third parties poses a number of risks, including the following:
• The diversion of management time and cost of third-party advisers associated with the negotiation, documentation and implementation of agreements with third parties in the pharmaceutical industry;
• The inability to control whether third parties devote sufficient resources to our programs or products, including with respect to meeting contractual deadlines;
• The inability to control the regulatory and contractual compliance of third parties, including their quality systems, processes and procedures, systems utilized to collect and analyze data, and equipment used to test drug product and/or clinical supplies;
• The inability to establish and implement collaborations or other alternative arrangements on favorable terms;
• Disputes with third parties, including CROs, leading to loss of intellectual property rights, delay or termination of research, development, or commercialization of product candidates or litigation or arbitration;
• Contracts with our collaboratorsfail to provide sufficient protection of our intellectual property; and
• Difficulty enforcing our contractual rights if one of these third parties fails to perform.
We also rely on third parties to select and enter into agreements with clinical investigators to conduct clinical trials to support approval of our product candidates, and the failure of these third parties to appropriately carry out such evaluation and selection can adversely affect the quality of the data from these studies, compliance with applicable rules, and, potentially, the approval of our products. In particular, as part of future drug approval submissions to the FDA, we must disclose certain financial interests of investigators who participated in any of the clinical studies being submitted in support of approval, or must certify to the absence of such financial interests. The FDA evaluates the information contained in such disclosures to determine whether disclosed interests may have an impact on the reliability of a study. If the FDA determines that financial interests of any clinical investigator raise seriousquestions of data integrity, the FDA can institute a data audit, request that we submit further data analyses, conduct additional independent studies to confirm the results of the questioned study, or refuse to use the data from the questioned study as a basis for approval. A finding by the FDA that a financial relationship of an investigator raises seriousquestions of data integrity could delay or otherwise adversely affect approval of our products.
In December 2025, the BIOSECURE Act was enacted as part of the FY2025 National Defense Authorization Act and signed into law. The BIOSECURE Act prohibits US government contractors and subcontractors from using biotechnology equipment or services from biotechnology companies of concern (BCOC) in performance of a US government contract. BCOCs are: (1) entities on the 1260H List, (2) entities included on a list to be developed by the Office of Management and Budget (OMB) (the OMB List) based on certain criteria set out in the BIOSECURE Act, and (3) any subsidiary, parent, or successor of a BCOC, if that entity meets the criteria set out for the OMB List. We do business with companies in China. If we determine that we do business with a company that is currently or later determined to be a BCOC we may be prohibited from selling certain products to the US government following a five-year grandfathering period starting from the effective date of the BIOSECURE Act’s prohibition. It is possible some of our contractual counterparties may be impacted by this legislation, causing delay in our manufacturing activities while we find replacements.
These risks may materially harm our business, financial condition, results of operations and prospects and the value of our common stock.
We may not have, or may be unable to obtain, sufficient quantities of ARIKAYCE, Lamira, BRINSUPRI, or our product candidates to meet our required supply for commercialization or clinical studies, which may materially harm our business.
We do not have any in-house manufacturing capability other than for small-scale pre-clinical development programs and depend completely on a small number of third-party manufacturers and suppliers for the manufacture of our products and product candidates for both clinical and commercial needs. For instance, we are and expect to remain dependent on Resilience and Patheon to supply ARIKAYCE both for our clinical trials and commercial sale. Resilience manufactures placebo for our clinical trials and our current supply of ARIKAYCE for commercial sale. In addition, Esteve manufactures the active pharmaceutical ingredient for brensocatib, and Patheon Inc. manufactures our current supply of BRINSUPRI. However, we may not be able to maintain adequate quantities to meet future demand, including as a result of manufacturing and/or quality issues experienced by our third-party manufacturers or higher customer demand than expected. If we encounter delays or difficulties in the manufacturing process that disrupt our ability to supply our distributors and others with ARIKAYCE, BRINSUPRI, or our product candidates, including as a result of any efforts to establish manufacturing relationships in the US, we may experience product stock-outs, which would likely have a material adverse effect on our business and reputation.
In addition, we have entered into certain agreements with Patheon related to increasing our long-term production capacity for ARIKAYCE commercial inventory, although Patheon’s supply obligations will commence only after certain technology transfer and construction services are completed. Any delay in the commencement of Patheon’s supply obligations, whether due to delays in technology transfer and construction or from adding Patheon to our NDA as a CMO, would increase the risks associated with Resilience being unable to provide us with an adequate supply of ARIKAYCE.
We are also dependent on PARI being able to provide an adequate supply of nebulizers for commercial sale of ARIKAYCE, any ongoing clinical trials, and future commercial sales of our product candidates that use Lamira as their delivery mechanism, as PARI is the sole manufacturer of Lamira. We have no alternative supplier for the nebulizer, and because significant effort and time were expended in the optimization of the nebulizer for use with ARIKAYCE, we do not intend to seek an alternative or secondary supplier. In the event PARI cannot provide us with sufficient quantities of the nebulizer, replication of the optimized device by another party would likely require considerable time and additional regulatory approval. In the case of certain specified supply failures, we have the right under our commercialization agreement with PARI to make the nebulizer and have it made by certain third parties, but not those deemed under the commercialization agreement to compete with PARI.
We also will be reliant on CMOs to manufacture supply of TPIP for our future requirements. We plan to enter into commercial agreements with CMOs for TPIP, and cannot guarantee that we will be able to locate adequate partners or enter into favorable agreements with them.
We are evaluating developing in-house clinical manufacturing capability for our gene therapy product candidates, but we expect to rely on third-party CMOs for manufacturing of all testing materials for the foreseeable future. Products intended
for use in gene therapies are novel, complex and difficult to manufacture. If we develop in-house clinical manufacturing capability for our gene therapy product candidates, we may encounter delays in obtaining regulatory approval of our manufacturing processes or in complying with ongoing manufacturing regulatory requirements and applicable cGMP, including challenges related to producing adequate quantities of clinical grade materials that meet FDA, EMA, MHLW or other applicable standards or specifications with consistent and acceptable production yields and costs.
We do not have long-term commercial agreements with all of our suppliers and if any of our suppliers are unable or unwilling to perform for any reason, we may not be able to locate suppliers or enter into favorable agreements with them.
An inadequate supply of ARIKAYCE, Lamira, BRINSUPRI, or our product candidates may harm our commercial efforts or delay or impair clinical trials of ARIKAYCE or our product candidates and adversely affect our business, financial condition, results of operations and prospects and the value of our common stock.
Adverse consequences to our business may result if we or our manufacturing partners fail to comply with applicable regulations or maintain required approvals.
Manufacturers of ARIKAYCE, Lamira, BRINSUPRI, and our product candidates are subject to cGMP, Quality System Regulations and similar standards. While we have policies and procedures in place to select third-party manufacturers for our product and product candidates that adhere, and monitor their adherence to, such standards, they may nonetheless fail to do so. Similarly, while we have entered into a Commercialization Agreement with PARI for the manufacture of Lamira for use with ARIKAYCE, PARI and its affiliates involved in manufacturing may fail to adhere to applicable standards. These manufacturers and their facilities will be subject to periodic review and inspections by the FDA and other regulatory authorities following regulatory approval of our products, as with ARIKAYCE and BRINSUPRI. For instance, to monitor compliance with applicable regulations, the FDA routinely conducts inspections of facilities and may identify potential deficiencies. The FDA issues what are referred to as “Form 483s” that set forth observations and concerns identified during its inspections. Failure to satisfactorily address the concerns or potential deficiencies identified in a Form 483 could result in the issuance of a warning letter, which is a notice of the issues that the FDA believes to be significant regulatory violations requiring prompt corrective actions. Failure to respond adequately to a warning letter, or to otherwise fail to comply with applicable regulatory requirements may result in enforcement, remedial and/or punitive actions by the FDA or other regulatory authorities.
If one of these manufacturers fails to maintain compliance with regulatory requirements or experiences supply problems, including in the scale-up of commercial production, the production of ARIKAYCE, Lamira, BRINSUPRI, and our product candidates could be interrupted, resulting in delays, additional costs or restrictions on the marketing or sale of our products. An alternative manufacturer would need to be qualified, through regulatory filings, which could result in further delay. The regulatory authorities may also require additional testing if a new manufacturer is relied upon for commercial production. In addition, with respect to our product candidates, our manufacturers and their facilities are subject to pre-approval cGMP inspection by the FDA and other regulatory authorities, and the findings of the cGMP inspection may result in a failure to obtain, or a delay in obtaining, regulatory approval for future product candidates.
Risks Related to the Operation of our Business
We are dependent on retaining and attracting key personnel, the loss of whose services may materially adversely affect our business, financial condition, results of operations and prospects and the value of our common stock.
We depend heavily on our management team and our principal commercial and clinical personnel, the loss of whose services might significantly delay or prevent the achievement of our research, development or commercialization objectives. Our success depends, in large part, on our ability to attract and retain qualified management, clinical and commercial personnel, including those who join us through our business development activities. Our inability to retain and attract personnel could also negatively impact our ability to develop and maintain important relationships with commercial partners, leading research institutions and key distributors.
Competition for skilled personnel in our industry and market is intense because of the numerous pharmaceutical and biotechnology companies that seek similar personnel. These companies may have greater financial and other resources, offer a greateropportunity for career advancement and have a longer history in the industry than we do. We also experience competition for the hiring of our commercial and clinical personnel from universities, research institutions, and other third parties. We cannot assure that we will attract and retain such personnel or maintain such relationships. Our inability to retain and attract qualified employees may materially harm our business, financial condition, results of operations and prospects and the value of our common stock.
We expect to continue to expand our development, regulatory and sales and marketing capabilities and, as a result, may encounter difficulties in managing our growth, which may disrupt our operations.
In connection with our commercialization of ARIKAYCE in the US, Europe, and Japan and BRINSUPRI in the US, our continued international expansion efforts, and our ongoing development and planned commercialization of our product
candidates, if approved, we expect to continue to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of drug development, regulatory affairs, quality, commercial compliance, medical affairs, and sales and marketing. For example, we plan to continue to hire additional personnel to support ARIKAYCE and BRINSUPRI and advance our clinical and pre-clinical programs. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel, all while seeking to maintain our culture. Due to the limited experience of our management team in managing a company with this anticipated growth, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The physical expansion of our operations may lead to significant costs and may divert our management and business development resources. We may not be able to effectively manage the expansion of our operations, which may delay the execution of our business plans or disrupt our operations.
Any acquisitions we have made or may make in the future, or collaborative relationships we have entered into or may enter into in the future, may not be clinically or commercially successful, and may require financing or a significant amount of cash, which may adversely affect our business.
As part of our business strategy, we may effect acquisitions or licenses to obtain additional businesses (or rights therein), products, technologies, capabilities and personnel. For example, we acquired Motus Biosciences, Inc. (Motus) and AlgaeneX, Inc. (AlgaeneX) in August 2021 (together, the Business Acquisition), Vertuis Bio, Inc. (Vertuis) in January 2023, and Adrestia Therapeutics Ltd. (Adrestia) in June 2023, each a privately-held, pre-clinical stage company. In December 2025, we acquired INS1148, an investigational monoclonal antibody, which we plan to advance into Phase 2 development programs in interstitial lung disease and moderate to severe asthma. Acquisitions involve a number of operational risks, including:
• Failure to achieve expected synergies;
• The possibility that our acquired technologies, products and product candidates may not be commercially successful;
• Difficulty and expense of assimilating the operations, technology and personnel of any acquired business;
• The inability to retain the management, key personnel and other employees of any acquired business;
• The inability to maintain any acquired company’s relationship with key third parties, such as alliance partners;
• Exposure to legal claims or other liabilities for activities of or related to any acquired business or asset prior to acquisition;
• Diversion of our management’s attention from our core business; and
• Potential impairment of intangible assets, adversely affecting our reported results of operations and financial condition.
We also may enter into collaborative relationships that would involve our collaborators conducting proprietary development programs. Disagreements with collaborators may develop over the rights to our intellectual property, and any conflict with our collaborators could limit our ability to obtain future collaboration agreements and negatively influence our relationship with existing collaborators.
If we make one or more significant acquisitions or enter into a significant collaboration in which the consideration includes cash, we may be required to use a substantial portion of our available cash and/or need to raise additional capital, which may adversely affect our financial condition.
We may be subject to product liability claims, and we have only limited product liability insurance.
The manufacture and sale of human therapeutic products involve an inherent risk of product liability claims, particularly as we continue to commercialize ARIKAYCE and BRINSUPRI and look to commercialize our product candidates, if approved. Regardless of merit or eventual outcome, liability claims may result in:
• Decreased demand for ARIKAYCE, BRINSUPRI, and any other products that we may commercialize, and a corresponding loss of revenue;
• Substantial monetary awards to patients or trial participants;
• Significant time and costs to defend the related litigation;
• Withdrawal or reduced enrollment of clinical trial participants; and
• Reputational harm and significant negative media attention.
We have limited product liability insurance for our products. We do not know if we will be able to maintain existing, or obtain additional, product liability insurance on acceptable terms or with adequate coverage against potential liabilities. This type of insurance is expensive and may not be available on acceptable terms. If we are unable to obtain or maintain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims, we may be unable to commercialize our products. A successful product liability claim brought against us in excess of our insurance coverage, if any, may require us to pay substantial amounts and may materially adversely affect our business, financial condition, results of operations and prospects and the value of our common stock.
Our business and operations, including our drug development and commercialization programs, may be materially disrupted and/or subject to reputational harm in the event of system failures, security breaches, cyber-attacks, deficiencies in cybersecurity, violations of data protection laws or data loss or damage by us or third parties.
We are dependent on information technology systems, infrastructure, and data to operate our business. In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information and that of our suppliers, as well as personally identifiable information, including health information, of clinical trial participants, patients and employees. Despite the implementation of security measures, our internal computer systems and those of our CROs, CMOs and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. Such an event could have a material adverse effect on our business operations, including a material disruption of our drug development and commercialization programs.
It is critical that we maintain such sensitive data in a manner that preserves its confidentiality and integrity. Unauthorized use or disclosure of or access to sensitive patient or employee data, including personally identifiable information, whether through breach of computer systems, systems failure, employee negligence, fraud or misappropriation, or otherwise, or whether by our employees or third parties, could result in negative publicity, legal liability and damage to our reputation. Unauthorized use or disclosure of or access to personally identifiable information could also expose us to sanctions for violations of data privacy laws and regulations around the world. In addition, the loss of clinical trial data for our product candidates could result in delays in our regulatory submissions and approval efforts and significantly increase our costs to recover or reproduce the data, if such recovery or reproduction is possible. To the extent that any disruption or security breach resulted in a loss of or damage to data or applications, or unauthorized disclosure of confidential or proprietary information, we could incur liability and the further development of our product candidates could be delayed. For example, the loss of or damage to clinical trial data, such as from completed or ongoing clinical trials, for any of our product candidates could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on third parties for the manufacture of our drug candidates or any future drug candidates and to conduct clinical trials, and similar events relating to their systems and operations may also have a material adverse effect on our business.
We have previously been, and expect to remain, the target of cyber-attacks. We may not be able to anticipate all types of security threats, and we may not be able to implement preventive measures effectiveagainst all such security threats. The techniques used by cyber criminals change frequently, may not be recognized until launched, and can originate from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations, or hostile foreign governments or agencies. Notifications and follow-up actions related to a security incident could impact our reputation or cause us to incur substantial costs, including legal and remediation costs, in connection with these measures and otherwise in connection with any actual or suspected security breach. Although we have general liability insurance coverage, including coverage for errors and omissions and potential cybersecurity breaches, our insurance may not cover all claims, continue to be available on reasonable terms or be sufficient in amount to cover one or more large claims; additionally, the insurer may disclaim coverage as to any claim. The successful assertion of one or more large claimsagainst us that exceed or are not covered by our insurance coverage or changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, may have a material adverse effect on our business, financial condition, results of operations and prospects and the value of our common stock.
We are subject to laws and regulations that govern how we can collect, process, store, and transfer personal data and sensitive data, and violations may result in meaningful penalties, enforcement, and/or reputational harm and have a significant impact on our operations.
Laws and regulations governing personal data and sensitive data continue to develop at a rapid pace, and jurisdictions around the world continue to propose new legislation and rules. For example, a number of US states have passed consumer privacy laws, consumer health data laws, and genetic privacy laws. Other jurisdictions outside of the US either have data protection laws in place or continue to advance proposals for similar legislation and regulation. In the US, the Department of Justice also has adopted rules for bulk US sensitive data, including health and genomic data. These laws place restrictions on how we collect, use, and transfer data, and they result in increased compliance and operational costs, especially if we continue to expand our international operations. Noncompliance with data protection laws and regulations can result in meaningful penalties, enforcement, and/or reputational harm and have a significant impact on our operations.
Our inability to access, upgrade or expand our technology systems or difficulties in updating our existing technology or developing or implementing new technology may have a material adverse effect on our business or results of operations.
If we are unable to successfully continue upgrading or expanding our technological capabilities to support our growth or if there are deficiencies in the design or implementation of such capabilities, we may not be able to take advantage of market opportunities, manage our costs effectively, manage our inventory, maintain a secure data environment, file timely reports with the SEC, or otherwise efficiently manage our internal controls. In addition, costs, potential problems and interruptions associated with the implementation of new or upgraded systems and technology, or with maintenance or adequate support of existing systems, could also disrupt or reduce the efficiency of our operations. Moreover, many of our vendors provide their
services to us via a cloud-based model instead of software that is installed on our premises. As a result, we depend upon our vendors to provide us with services that are always available and are free of errors or defects that could cause disruptions in our business processes. Any failure by such vendors to do so, or any disruption in our ability to access the Internet, may materially and adversely affect our ability to manage our operations.
We are subject to a number of risks associated with our international activities and operations and may not be successful in any efforts to further expand internationally.
As of December 31, 2025, we had 238 employees located in Europe and 152 employees located in Japan, although we have clinical trial sites and suppliers located around the world. In order to meet our long-term goals, we may further expand our international operations over the next several years, including in Europe and Japan, and continue to source material used in the manufacture of our product candidates from abroad. Additionally, a substantial portion of our commercial supply of ARIKAYCE is currently manufactured in Canada, our commercial supply of BRINSUPRI is also manufactured in Canada, and our supply of treprostinil palmitil, the treprostinil prodrug present in TPIP, is currently dependent on a single supplier located in Taiwan. Consequently, we are and will continue to be subject to risks related to operating in foreign countries, including:
• Difficulties ensuring compliance with international regulatory requirements;
• An inability to achieve optimal pricing and reimbursement for ARIKAYCE and/or BRINSUPRI, if approved in another jurisdiction, or subsequent changes in reimbursement, pricing and other regulatory requirements;
• Any implementation of, or changes to, tariffs, trade barriers and other import-export regulations in the US or other countries in which we, or our third-party partners, operate;
• Unexpected AEs related to ARIKAYCE, BRINSUPRI or our product candidates occurring in foreign markets that we have not experienced in the US, Europe or Japan;
• Scrutiny from customers, regulators, investors and other stakeholders related to environmental, health and safety, diversity, labor conditions, human rights and other concerns in the countries in which we, or our third-party partners, operate;
• Economic and political conditions, including foreign currency fluctuations, and inflation, could result in reduced revenue, increased or unpredictable operating expenses and other obligations incident to doing business in, or with a company located in, another country;
• Geopolitical events, such as conflicts, war and terrorism, could cause disruptions in our international operations, including our supply chain and planned or ongoing clinical studies, such as the geopolitical risks with respect to China and Taiwan, which could impact our ability to manufacture TPIP drug substance; and
• Compliance with foreign or US laws, rules and regulations, including data privacy requirements, labor relations laws, tax laws, anti-competition regulations, import, export and trade restrictions, anti-bribery/anti-corruption laws, regulations or rules, which could lead to actions by us or our distributors, manufacturers, other third parties who act on our behalf or with whom we do business in foreign countries or our employees who are working abroad that could subject us to investigation or prosecution under such foreign or US laws.
These and other risks associated with our international operations may materially adversely affect our business, financial condition, results of operations and prospects and the value of our common stock.
We operate in a highly competitive and changing environment, and if we are unable to adapt to our environment, we may be unable to compete successfully.
Biotechnology and related pharmaceutical technology have undergone and are likely to continue to experience rapid and significant change. Our future success will depend in large part on our ability to maintain a competitive position with respect to these technologies and to obtain and maintain protection for our intellectual property. Compounds, products or processes that we develop or that are developed on our behalf may become obsolete before we recover any expenses incurred in connection with their development. We face substantial competition from pharmaceutical, biotechnology and other companies, universities and research institutions with respect to NTM lung disease, bronchiectasis, PAH, PH-ILD, PPF, and IPF, and our gene therapy indications, and will face substantial competition with respect to future product candidates we may develop in these and other disease areas. Relative to us, some of these entities have substantially greater capital resources, research and development staffs, facilities and experience in conducting clinical studies, obtaining regulatory approvals, and manufacturing and marketing pharmaceutical products. Many of our competitors may achieve product commercialization or obtain patent protection earlier than us. Furthermore, we believe that our competitors have used, and may continue to use, litigation and patent office challenges to gain a competitive advantage. Our competitors may also use different technologies or approaches to develop products similar to ARIKAYCE, BRINSUPRI, and our product candidates.
We expect that competing successfully will depend on, among other things, the relative speed with which we can develop products, complete the clinical testing and regulatory approval processes and supply commercial quantities of the product to the market, as well as product efficacy, safety, reliability, availability, timing and scope of regulatory approval and
price. We expect competition to increase as technological advances are made and commercial applications broaden. There are potential competitive products, both approved and in development, which include oral, systemic, or inhaled antibiotic products to treat chronic respiratory infections. For instance, certain entities have expressed interest in studying their products for lung disease and are seeking to advance studies in lung disease, including NTM lung disease caused by mycobacterial species other than MAC. We are not aware of any entities currently conducting clinical trials for the treatment of refractory MAC lung disease or of any other approved inhaled therapies specifically indicated for NTM lung disease in North America, Europe or Japan. If any of our competitors develops a product that is more effective, safe, tolerable or convenient, or less expensive than ARIKAYCE, BRINSUPRI, or our product candidates, if approved, it would likely materially adversely affect our ability to generate revenue. We also may face lower priced generic competitors if third-party payors encourage use of generic or lower-priced versions of our product or if competing products are imported into the US or other countries where we may sell ARIKAYCE or BRINSUPRI. In addition, in an effort to put downward pressure on drug pricing, Congress and the FDA are working to facilitate generic competition, which could result in our experiencing competition earlier than otherwise would be the case.
There are also other amikacin products that have been approved by the FDA, MHLW and other regulatory agencies for use in other indications, and physicians may elect to prescribe those products rather than ARIKAYCE to treat the indications for which ARIKAYCE has received approval, which is commonly referred to as off-label use. Although regulations prohibit a drug company from promoting off-label use of its product, the FDA and other regulatory agencies do not regulate the practice of medicine and cannot direct physicians as to what product to prescribe to their patients. As a result, we would have limited ability to prevent any off-label use of a competitor’s product to treat diseases for which we have received FDA or other regulatory agency approval, even if this use violates our patents or any statutory exclusivities that the FDA may grant for the use of amikacin to treat such diseases.
In addition, based in part on our successful Phase 2b WILLOW and Phase 3 ASPEN trials in bronchiectasis, certain entities have expressed interest in studying other DPP1 inhibitors for the treatment of bronchiectasis. We are aware of several other entities currently conducting clinical trials for the treatment of bronchiectasis with a DPP1 inhibitor. If any of these competitors develops a DPP1 inhibitor product that is more effective, safe, tolerable or convenient, it would likely materially adversely affect our ability to generate revenue through sales of BRINSUPRI. Additionally, based in part on our Phase 2b trial of TPIP in PAH, we have also initiated, or plan to initiate, Phase 3 trials of TPIP in PAH, PH-ILD, PPF, and IPF, for each of which indications there exist approved commercial therapies. If TPIP is approved for any of these indications, we will face substantial competition, and physicians may elect to prescribe, or patients may prefer, our competitors’ products rather than TPIP. If we are unable to compete successfully, it would materially adversely affect our business, financial condition, results of operations and prospects and the value of our common stock.
We have a limited number of significant customers and losing any of them may have an adverse effect on our financial condition and results of operations.
Our three largest customers as of December 31, 2025 accounted for 74% and 85% of our total gross product revenue for the years ended December 31, 2025 and 2024, respectively. The degree to which a limited number of customers make up a significant portion of our gross product revenue may change as we continue to commercialize ARIKAYCE, BRINSUPRI, and, if approved, our product candidates in additional markets. There can be no guarantee that we will be able to sustain our accounts receivable or gross sales levels from our key customers. If, for any reason, we were to lose, or experience a decrease in the amount of business with our largest customers, whether directly or through our distributor relationships, our financial condition and results of operations may be negatively affected.
Deterioration in general economic conditions in the US, Europe, Japan and globally, including the effect of prolonged periods of inflation on our suppliers, third-party service providers and potential partners, may harm our business and results of operations.
Our business and results of operations may be adversely affected by changes in national or global economic conditions. These conditions include but are not limited to inflation, rising interest rates, limited availability of financing, energy availability and costs, the negative impacts caused by public health crises, negative impacts resulting from the military conflict between Russia and Ukraine or the instability in the Middle East, relations between the US and China, and the effects of governmental initiatives to manage economic conditions. Impacts of such conditions may be passed on to our business in the form of higher costs for labor and materials, possible reductions in pharmaceutical industry-wide spending on research and development and acquisitions and higher costs of capital.
The emergence of a pandemic, and efforts to reduce its spread, may negatively impact our business and operations.
Our global operations expose us to risks associated with public health crises and pandemics, particularly as the patients we seek to treat suffer from serious diseases that may make them especially vulnerable. A pandemic may also have an adverse impac t on our operations and supply chain as a result of (i) our or our third-party manufacturers’ employees or other key personnel becoming infected, (ii) preventive and precautionary measures that governments and we and other businesses,
including our third-party manufacturers, are taking, such as border closures, prolonged quarantines and other travel restrictions, (iii) shortages of supplies necessary for the manufacture of ARIKAYCE or BRINSUPRI, including as a result of government orders providing for the requisition of personal protective equipment and other medical supplies and equipment, and (iv) cold-chain storage and shipping limitations resulting from the need to prioritize delivery of vaccines, which could cause disruptions or delays in our ability to distribute ARIKAYCE due to lack of sufficient cold-chain storage and shipping capacity. Any of these circumstances could impact the ability of third parties on which we rely to manufacture ARIKAYCE and BRINSUPRI or their components and our ability to perform critical functions, which could significantly hamper our ability to supply ARIKAYCE and BRINSUPRI to patients. While we have experienced no disruption to date in our supply chain due to a pandemic, if we encounter delays or difficulties in the manufacturing process that disrupt our ability to supply ARIKAYCE or BRINSUPRI, we may not be able to satisfy patient demand or we may experience a product stock-out, which may have a material adverse effect on our business.
The emergence of a pandemic could also require us to delay the start of new clinical trials or otherwise impair our ability to complete those trials. For instance, our ability to enroll patients and retain principal investigators and site staff could be impaired due to an outbreak in their geography or prioritization of hospital resources toward the outbreak, or as a result of quarantines and other travel restrictions that interrupt healthcare services. Furthermore, patients, investigators, or site staff may be unwilling or unable to comply with clinical trial protocols due to illness, concerns about a pandemic, or quarantines or other travel restrictions that impede their movement. Additionally, any interruption in the supply of the study drug might delay our ability to start or complete clinical trials. Significant delays in the timing and completion of our clinical trials are costly and may adversely affect our ability to satisfy our post-marketing requirements for ARIKAYCE and to obtain regulatory approval for and to commercialize our product candidates.
Our current and potential future use of AI and machine learning may not be successful and presents new risks and challenges to our business.
We currently integrate AI and machine learning in certain of our research and development activities, including identification of potential product candidates, and are seeking to further integrate AI and machine learning throughout our business. We are exploring additional opportunities to incorporate AI and machine learning into our processes for drug discovery, drug development, drug commercialization, and in connection with our enabling functions. For example, we are using AI to explore potential business development opportunities. Such efforts may not be successful. Issues relating to the use of new and evolving technologies such as AI and machine learning may cause us to experience brand or reputational harm, competitive harm, legal liability, and new or enhanced governmental or regulatory scrutiny, and we may incur additional costs to resolve such issues.
As with many innovations, AI presents risks and challenges that could undermine or slow its adoption, and therefore harm our business. Developing, testing and deploying AI systems may also increase our operating costs due to the nature of the computing costs involved in such systems, which could adversely affect our business, financial condition and results of operations. The use of AI by us and our business partners may lead to novel and urgent cybersecurity risks, which could have a material adverse effect on our operations and reputation as well as the operations of any of our business partners. We may also face increased competition from other companies that are using AI, some of whom may develop more effective methods than we and any of our business partners have, which could have a material adverse effect on our business, results of operations, or financial condition. In addition, our efforts to develop, acquire or integrate these technologies will involve significant time, costs, and other resources, and may divert our management team’s attention and focus from executing on other elements of our strategy. Furthermore, laws and regulations governing the use of AI continue to develop at a rapid pace, and jurisdictions around the world continue to propose new legislation and rules. Uncertainties regarding developing legal and regulatory requirements and standards may require significant resources to modify and maintain business practices to comply with US and non-US laws concerning the use of AI.
Risks Related to Our Intellectual Property
If we are unable to protect our intellectual property rights adequately, the value of ARIKAYCE, BRINSUPRI, and our product candidates may be materially diminished.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain and involves complex legal, technical, scientific and factual questions, and our success depends in large part on our ability to protect our proprietary technology and to obtain and maintain patent protection for our products, prevent third parties from infringing our patents, both domestically and internationally. We have sought to protect our proprietary position by filing patent applications in the US and abroad related to our novel technologies and products that are important to our business. This process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Our existing patents and any future patents we obtain may
not be sufficiently broad to prevent others from using our technologies or from developing competing products and technologies.
Even if our owned and licensed patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection or otherwise provide us with any competitive advantage. Any conclusions we may reach regarding non-infringement, inapplicability or invalidity of a third party’s intellectual property vis-à-vis our proprietary rights, or those of a licensor, are based in significant part on a review of publicly available databases and other information. There may be information not available to us or otherwise not reviewed by us that could render these conclusions inaccurate. Our competitors may also be able to circumvent our owned or in-licensed patents by developing similar or alternative technologies or products in a non-infringing manner.
Additionally, patents issued to us or our licensors may be challenged, narrowed, invalidated, held to be unenforceable or circumvented through litigation, either in district court, the US international trade commission (ITC) or US patent office (USPTO), or in analogous foreign courts and patent offices, which could limit our ability to stop competitors from marketing similar products or reduce the term of patent protection for ARIKAYCE, BRINSUPRI, or our product candidates. US patents and patent applications may also be subject to interference or derivation proceedings, and US patents may be subject to re-examination proceedings, reissue, post-grant review and/or inter partes review in the USPTO. Our foreign patents have been and may be in the future subject to opposition or comparable proceedings in the corresponding foreign patent office, which could result in either loss of the patent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. See Intellectual Property—ARIKAYCE Patents in Item 1 of Part I of this Annual Report on Form 10-K for more information on our European patents that have been previously opposed.
Changes in either patent laws or in interpretations of patent laws in the US and other countries may also diminish the value of our intellectual property or narrow the scope of our patent protection, including making it easier for competitors to challenge our patents. For example, the America Invents Act included a number of changes to established practices, including the transition to a first-inventor-to-file system and new procedures for challenging patents and implementation of different methods for invalidating patents.
If we do not obtain patent term extension for BRINSUPRI or our product candidates, if needed, our business may be harmed.
Under the Drug Price Competition and Patent Term Restoration Act of 1984 (the Hatch-Waxman Amendments), which amended the FDCA, one or more of our US patents that we may own in the future may be eligible for limited patent term extension, depending upon the timing, duration and specifics of any FDA marketing approval of our product candidates and our technology. The Hatch-Waxman Amendments permit a patent extension term of up to five years as compensation for patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval. Only one patent may be extended and only those claims covering the approved product, a method for using it for its approved use, or a method for manufacturing it may be extended. In addition, patent term extension is only applicable for the first approved indication for a product. The application for the extension must be submitted prior to the expiration of the patent for which extension is sought, and, in the US, within 60 days of product approval. A patent that covers multiple products for which approval is sought can only be extended in connection with one of the approvals. However, we may not be granted an extension because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is less than we request, our competitors may obtain approval of competing products following our patent expiration, and our revenue could be reduced. Any of the foregoing may have a material adverse effect on our business, financial condition, results of operations and prospects.
If we are not able to adequately prevent disclosure of trade secrets and other proprietary information, the value of ARIKAYCE, BRINSUPRI, and our product candidates may be materially diminished.
We rely on trade secrets to protect our proprietary technologies, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality and restrictive covenant agreements with our employees, consultants, advisors, collaborators, and other third parties and partners to protect our trade secrets and other proprietary information. These agreements may not effectively prevent disclosure of confidential information or may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, third parties may independently develop or discover our trade secrets and proprietary information. Regulators also may disclose information we consider to be proprietary to third parties under certain circumstances, including in response to third-party requests for such disclosure under the Freedom of Information Act or comparable laws. Additionally, the FDA, as part of its Transparency Initiative, has made additional information publicly available on a routine basis, including information that we may consider to be trade secrets or other proprietary information, and it is not clear at the present time whether and how the FDA’s disclosure policies may change further in the future. Further, several states have limited or prohibited the use of post-employment non-compete agreements, and the Federal Trade Commission is challenging non-compete agreements on a
targeted, case-by-case basis, which could increase the difficulty of protecting trade secrets and other proprietary information. There are similar risks outside the US, such as the risk that a foreign regulatory agency would make available information we consider to be proprietary to third parties or the public, and the risks arising from other factors making it difficult to protect trade secrets, such as prohibitions or restrictions on post-employment non-compete agreements and other rules and regulations.
We may not be able to enforce our intellectual property rights throughout the world, which may harm our business.
The legal systems of some foreign countries, particularly developing countries, do not favor the enforcement of patents and other intellectual property protection, especially those relating to life sciences. Many companies have encountered significant problems in protecting and defending intellectual property rights in such foreign jurisdictions. For example, certain foreign countries have compulsory licensing laws under which a patent owner may be required to grant licenses to third parties. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. This legal environment could make it difficult for us to stop the infringement of our patents or in-licensed patents or the misappropriation of our other intellectual property rights. Proceedings to enforce our patent rights in foreign jurisdictions may result in substantial costs and divert our efforts and attention from other aspects of our business, and our efforts to protect our intellectual property rights in such countries may be inadequate.
The drug research and development industry has a history of intellectual property litigation, and we may become involved in costly intellectual property disputes, which may delay or impair our product development efforts or prevent us from, or increase the cost of, commercializing ARIKAYCE, BRINSUPRI, or any other product candidates, if approved.
Third parties may claim that we have infringed upon or misappropriated their proprietary rights. Any existing third-party patents, or patents that may later issue to third parties, could negatively affect our commercialization of ARIKAYCE, BRINSUPRI, or any product candidate that receives regulatory approval. For instance, PAH is a competitive indication with established products, including other formulations of treprostinil. Our supply of treprostinil palmitil, the treprostinil prodrug present in TPIP, is dependent on a single supplier located in Taiwan. The supplier owns patents on its manufacturing process and crystalline drug product, and we have filed patent applications for TPIP; however, a competitor in the PAH or PH-ILD indication may claim that we or our supplier have infringed upon or misappropriated its proprietary rights. Moreover, in the event that we pursue approval of one of our product candidates via the 505(b)(2) regulatory pathway, we will be required to file a certification of non-infringement or invalidityagainst any unexpired patents listed in the Orange Book for the third-party drug we reference as part of our regulatory submission. This certification process may lead to litigation and could also delay approval and launch of a product candidate, if approved by regulators.
In the event of successfullitigation or settlement of claimsagainst us for infringement or misappropriation of a third party’s proprietary rights, we may be required to take actions including, but not limited to, the following:
• Paying damages, including up to treble damages, royalties, and the other party’s attorneys’ fees, which may be substantial;
• Ceasing development, manufacture, marketing and sale of products or use of processes that infringe the proprietary rights of others;
• Expending significant resources to redesign our products or our processes so that they do not infringe the proprietary rights of others, which may not be possible, or may result in significant regulatory delays associated with conducting additional clinical trials or other steps to obtain regulatory approval; and/or
• Acquiring one or more licenses from third parties, which may not be available to us on acceptable terms or at all.
We may also have to undertake costlylitigation or engage in other proceedings, such as interference or inter partes review, to enforce or defend the validity of any patents issued or licensed to us, to confirm the scope and validity of our or a licensor’s proprietary rights or to defendagainstallegations that we have infringed a third party’s intellectual property rights. Any proceedings regarding our intellectual property rights are likely to be time consuming and may divert management attention from operation of our business, and may have a material adverse effect on our business, financial condition, results of operations and prospects and the value of our common stock.
If we fail to comply with obligations in our third-party agreements, our business may be adversely affected, including by the loss of license rights that are important to our business.
We are a party to various agreements related to ARIKAYCE, BRINSUPRI, and our product candidates, including licensing agreements with PARI and AstraZeneca, which we view as material to our business. For additional information regarding the terms of these agreements, see Business—License and Other Agreements in Item 1 of Part I of this Annual Report on Form 10-K. These agreements impose a number of obligations on us and our business, including restrictions on our ability to freely develop or commercialize our products and product candidates and requirements to make milestone and royalty payments to our counterparties upon certain events. For example, under our license agreement with AstraZeneca, AstraZeneca retains a right of first negotiation pursuant to which it may exclusively negotiate with us before we can negotiate with a third party
regarding any transaction to develop or commercialize brensocatib, subject to certain exceptions. While this right of first negotiation is not triggered by a change of control, it may impede or delay our ability to consummate certain other transactions involving brensocatib.
If we fail to comply with our obligations under these agreements, our counterparties may have the right to take action against us, up to and including termination of a relevant license. For instance, under our license agreement with AstraZeneca, AstraZeneca may terminate our license to brensocatib if we fail to use commercially reasonable efforts to develop and commercialize a product based on brensocatib, or we are subject to a bankruptcy or insolvency. Reduction or elimination of our licensed rights may result in our having to negotiate new or reinstated licenses with less favorable terms and may materially harm our business.
Risks Related to Government Regulation
Healthcare legislation or other government action may materially adversely affect our business, financial condition, results of operations and prospects and the value of our common stock.
Our industry is highly regulated and changes in or revisions to laws and regulations that make gaining regulatory approval, reimbursement and pricing more difficult or subject to different criteria and standards may adversely impact our business, operations or financial results.
Changes to the ACA, to the Medicare or Medicaid programs, or to the ability of the federal government to negotiate or otherwise affect drug prices, or other federal legislation regarding healthcare access, financing or legislation in individual states, may affect our business, financial condition, results of operations and prospects and the value of our common stock. We may face similar challenges to gaining regulatory approval and sufficient reimbursement and pricing due to government healthcare reform in the EU, Japan and other jurisdictions where ARIKAYCE, BRINSUPRI, or any of our product candidates are approved. The Trump Administration has discussed several changes to the reach and oversight of the FDA, which may affect its relationship with the pharmaceutical industry, transparency in decision making and ultimately the cost and availability of prescription drugs.
Drug pricing is an active area for regulatory reform at both the federal and state levels, and additional significant changes to current drug pricing and reimbursement structures in the US and in other jurisdictions could be forthcoming. On May 12, 2025, the Trump Administration issued Executive Order 14297, “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients” (Executive Order 14297). Executive Order 14297 seeks to reduce prescription drug costs in the US by requiring manufacturers to sell certain drugs in the US at no higher than the lowest prices paid for those same drugs in other developed countries. Executive Order 14297 directs HHS to facilitate direct-to-consumer (DTC) purchasing programs for prescription drugs at the most-favored-nation (MFN) price that may bypass traditional supply chain intermediaries. The Trump Administration has warned that manufacturers that fail to make “significant progress” toward MFN pricing will face enumerated regulatory and enforcement consequences, and it sent a group of manufacturers a letter requesting engagement on such pricing. In September 2025, the Trump Administration began announcing deals with specific manufacturers to address its MFN goals. In addition, in late 2025, HHS proposed three payment models that would test MFN pricing in Medicaid, Medicare Part D, and Medicare Part B. On November 6, 2025, the Centers for Medicare & Medicaid Services (CMS) announced the “GENErating cost Reductions fOr U.S.” (GENEROUS) model under which manufacturers can provide MFN pricing to state Medicaid agencies on a voluntary basis, and on December 19, 2025, CMS published as a proposed rule the “Guarding U.S. Medicare Against Rising Drug Costs” (GUARD) model for products covered under Medicare Part D. If GUARD is finalized, pharmaceutical manufacturers would be required to pay MFN-based rebates on eligible products for 25% of eligible Medicare beneficiaries during the applicable testing period. MFN pricing pressures and DTC mechanisms could lead to voluntary or involuntary manufacturer price changes, which could be either temporary or long term, but all of which may adversely affect our business. Additionally, if our products are deemed subject to GUARD, we may determine to forego commercializing our products outside of the US, which may adversely affect our business.
The Trump Administration has also entered into agreements with several large pharmaceutical companies to reduce or offer discounts on the prices of certain of their products, and efforts by the Trump Administration to expand the number of companies entering into such agreements may result in us entering into such an agreement, which may adversely affect our business.
It also remains unclear how GENEROUS, GUARD or any other new legislation or regulation might affect the prices we may obtain for ARIKAYCE, BRINSUPRI, or any of our product candidates for which regulatory approval is obtained.
If we are found in violation of federal or state “fraud and abuse” laws, we may be required to pay a penalty or may be suspended from participation in federal or state healthcare programs, which may adversely affect our business, financial condition, results of operations and prospects and the value of our common stock.
In the US, we are subject to various federal and state healthcare “fraud and abuse” laws, including anti-kickback laws, falseclaims laws and other laws intended to reduce fraud and abuse in federal and state healthcare programs. Although we seek
to structure our business arrangements in compliance with all applicable requirements, these laws are broadly written, and it is often difficult to determine precisely how the law will be applied in specific circumstances. Accordingly, it is possible that our practices may be challenged under these laws. Violations of fraud and abuse laws may be punishable by criminal and/or civil sanctions, including fines or exclusion or suspension from federal and state healthcare programs such as Medicare and Medicaid and debarment from contracting with the US government, and our business, financial condition, results of operations and prospects and the value of our common stock may be adversely affected. Our reputation could also suffer. In addition, private individuals have the ability to bring actions on behalf of the government under the federal FalseClaims Act as well as under the falseclaims laws of several states.
Under the ACA and certain state laws, we are required to report information on payments or transfers of value to any US physicians, physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, or certified nurse-midwives (in each case who are not bona fide employees of the applicable manufacturer that is reporting the payment) and teaching hospitals, which is posted in searchable form on a public website. Failure to submit required information may result in civil monetary penalties.
Several states also impose other marketing restrictions or require pharmaceutical companies to make marketing or price disclosures to the state. In addition to the federal government, some states, as well as other countries, including France, require the disclosure of certain payments to healthcare professionals. The Health Insurance Portability and Accountability Act of 1996 (HIPAA), state, and foreign privacy laws may limit access to information identifying those individuals who may be prospective users or limit the ability to market to them. Some of these laws are new or ambiguous as to what is required to comply with their requirements, and we could be subject to penalties if it is determined that we have failed to comply with an applicable legal requirement.
We are subject to anti-corruption laws and trade control laws, as well as other laws governing our operations. If we fail to comply with these laws, we could be subject to negative publicity, civil or criminalpenalties, other remedial measures, and legal expenses, which may adversely affect our business, financial condition, results of operations and prospects and the value of our common stock.
Our operations are subject to anti-corruption laws, including the US Foreign Corrupt Practices Act (FCPA), the UK Bribery Act and other anti-corruption laws that apply in countries where we do business. The FCPA, UK Bribery Act and these other laws generally prohibit us, our employees and our intermediaries from making prohibited payments to government officials or other persons to obtain or retain business or gain some other business advantage. We have conducted various studies at a broad range of trial sites around the world. Certain of these jurisdictions pose a risk of potential FCPA violations, and we have relationships with third parties whose actions could potentially subject us to liability under the FCPA or local anti-corruption laws. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted.
We are also subject to other laws and regulations governing our international operations, including regulations administered by the US Department of Commerce’s Bureau of Industry and Security, the US Department of Treasury’s Office of Foreign Assets Control, and various non-US government entities, including applicable export control regulations, economic sanctions on countries and persons, customs requirements, currency exchange regulations and transfer pricing regulations (collectively, Trade Control laws).
We may not be effective in ensuring our compliance with all applicable anti-corruption laws, including the FCPA or other legal requirements, including Trade Control laws. If we are not in compliance with the FCPA and other anti-corruption laws or Trade Control laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which may have an adverse impact on our business, financial condition, results of operations and prospects and the value of our common stock. Likewise, even an investigation by US or foreign authorities of potential violations of the FCPA other anti-corruption laws or Trade Control laws may have an adverse impact on our reputation, business, financial condition, results of operations and prospects and the value of our common stock.
Our research, development and manufacturing activities used in the production of ARIKAYCE, BRINSUPRI, and our product candidates involve the use of hazardous materials, which may expose us to damages, fines, penalties and sanctions and materially adversely affect our results of operations and financial condition.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our research and development program and manufacturing activities for ARIKAYCE, BRINSUPRI, and our product candidates involve the controlled use of hazardous materials and chemicals. We generally contract with third parties for the disposal of these materials and wastes.
Although we strive to comply with all pertinent regulations, the risk of environmental contamination, damage to facilities or injury to personnel from the accidental or improper use or control of these materials remains. In addition to any
liability we could have for any misuse by us of hazardous materials and chemicals, we may also potentially be liable for activities of our CMOs or other third parties. Any such liability, or even allegations of such liability, may materially adversely affect our results of operations and financial condition. We also may incur significant costs as a result of civil or criminalfines and penalties.
In addition, we may incur substantial costs to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
Inadequate funding for the FDA and other government agencies and/or shifting perspectives and/or priorities under the Trump Administration could continue to hinder the FDA's and/or those other government agencies' ability to hire and retain key leadership and other personnel or otherwise continue to negatively impact staffing, prevent new products and services from being developed or commercialized in a timely manner, or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which may negatively impact our business.
The ability of the FDA to review and approve new products, provide feedback on clinical trials and development programs, meet with sponsors and otherwise review regulatory submissions can be affected by a variety of factors, including government budget and funding levels; ability to hire and retain personnel and accept the payment of user fees; and statutory, regulatory, and policy changes, among other factors. Average review times at the agency may fluctuate as a result. In addition, government funding of other government agencies on which our operations may rely is subject to the political process, which is inherently fluid and unpredictable.
Disruptions or decreased staffing at the FDA and other agencies may also increase the time necessary for new drugs to be reviewed and/or approved by necessary government agencies or to otherwise respond to regulatory submissions which may adversely affect our business. In 2025, the FDA also experienced significant reductions in force that have impacted, and may continue to impact, the agency’s ability to review applications in a timely manner. Additionally, over the last several years, the US government has shut down multiple times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA and other government employees and stop critical activities. If funding for the FDA is reduced, agency staff continue to depart voluntarily or involuntarily, FDA priorities change, or a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which may have a material adverse effect on our business.
Risks Related to Our Financial Condition and Need for Additional Capital
We have a history of operating losses, expect to incur operating losses in the near term, and may never achieve or maintain profitability.
Since 2010, we have incurred losses in each year of our operation. As of December 31, 2025, our accumulated deficit was $5.6 billion. For the years ended December 31, 2025, 2024 and 2023, our consolidated net loss was $1,276.8 million, $913.8 million and $749.6 million, respectively. Our ability to generate revenue depends on the success of commercial sales of ARIKAYCE and BRINSUPRI; however, we do not anticipate achievingprofitability for the foreseeable future. Despite commercialization of ARIKAYCE in the US, Europe, and Japan and BRINSUPRI in the US, we expect to continue to incur substantial operating expenses, and resulting operating losses, in the near term, as we:
• Initiate or continue clinical studies of our product candidates;
• Complete a post-marketing clinical trial of ARIKAYCE, consisting of the completed ARISE and ongoing ENCORE trials, as required by the FDA;
• Seek to discover or in-license additional product candidates;
• Support the sales and marketing efforts necessary for the continued commercialization of ARIKAYCE and BRINSUPRI;
• Scale-up manufacturing capabilities for future production of ARIKAYCE and BRINSUPRI, including the increase of production capacity at our manufacturers and process improvements in order to manufacture at a larger commercial scale;
• Seek the approval of BRINSUPRI in the UK and Japan and, if approved, potentially support the commercial launch of BRINSUPRI in those jurisdictions;
• Seek the approval of our product candidates in various markets and, if approved, support their commercial launch;
• File, prosecute, defend, and enforce patent claims related to ARIKAYCE, BRINSUPRI, and our product candidates; and
• Enhance operational, compliance, financial, quality and information management systems and hire more personnel, including personnel to support our commercialization efforts and development of our product candidates.
Even if we do achieveprofitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.
We may need to raise additional funds to continue our operations, and any failure to obtain capital when needed on acceptable terms, or at all, may force us to delay, reduce, or eliminate our development programs, commercialization efforts or other operations.
Our operations have consumed substantial amounts of cash since our inception. We expect to expend substantial financial resources to continue to commercialize ARIKAYCE and BRINSUPRI and conduct the confirmatory post-marketing ENCORE trial, seek full regulatory approval for ARIKAYCE, as well as continue research and development of our product candidates. We may need to raise additional capital to fund these activities, including due to changes in our product development plans or misjudgment of expected costs, to fund corporate development, to maintain our intellectual property portfolio or for other purposes, including to resolvelitigation. Our operating expenses and long-term investments were significantly higher in 2025 than in 2024, reflecting our continued investment in the build-out of our commercial organization to support global expansion activities for ARIKAYCE, preparation for and execution of the commercial launch of BRINSUPRI, the manufacture of commercial inventory, which includes capital and long-term investments, and continued investment in research and development, including asset acquisitions, as well as selling, general and administrative expenses. We do not know whether additional financing will be available when needed, or, if available, whether the terms will be favorable to us. If adequate funds are not available to us when needed, we may be forced to delay, restrict or eliminate all or a portion of our development programs or commercialization efforts.
We have outstanding indebtedness in the form of a term loan and a royalty financing arrangement and may incur additional indebtedness in the future, which may adversely affect our financial position, prevent us from implementing our strategy, and, in certain cases, dilute the ownership interest of our existing shareholders.
In October 2022, we entered into a loan agreement (the Loan Agreement) with certain funds managed by Pharmakon and a revenue interest purchase agreement (the Royalty Financing Agreement) with OrbiMed. In October 2024, we entered into an Amended and Restated Loan Agreement (as subsequently amended on July 10, 2025, the A&R Loan Agreement) and amended the Royalty Financing Agreement.
The A&R Loan Agreement provides for a senior secured term loan of $350.0 million (in addition to the accrual and capitalization of $46.8 million of paid-in-kind interest under the Loan Agreement), which we drew in full in connection with our entry into the Loan Agreement (the Tranche A Term Loan). The A&R Loan Agreement amends the Loan Agreement to, among other items, add a new $150.0 million senior secured term loan tranche (the Tranche B Term Loan and, together with the Tranche A Term Loan, the Term Loans). The Term Loans bear interest at a fixed rate of 9.60% per annum. The A&R Loan Agreement extends the maturity date of the Term Loans to September 30, 2029, subject to acceleration to February 1, 2028 on the occurrence of certain prespecified events. As consideration for the provision of the Tranche B Term Loan, we agreed to pay Pharmakon a fee equal to 2.00% of the Tranche B Term Loan at the closing date of the Tranche B Term Loan and an additional exit fee of 2.00% of the amount of each prepayment or repayment of the Term Loans. The Term Loans will be repaid in eight equal quarterly payments starting on January 3, 2028.
Under the Royalty Financing Agreement, OrbiMed paid us $150.0 million in exchange for the right to receive, on a quarterly basis, royalties (the Royalty Financing) in an amount equal to 4.0% of ARIKAYCE global net sales prior to September 1, 2025 and 4.5% of ARIKAYCE global net sales on or after September 1, 2025, as well as 0.75% of brensocatib global net sales, which includes global net sales of BRINSUPRI (the Revenue Interest Payments). In the event that OrbiMed has not received aggregate Revenue Interest Payments equal to or greater than $150.0 million on or prior to March 31, 2028, the royalty rate for ARIKAYCE will be increased for all subsequent fiscal quarters to a rate that, if applied retroactively, would have resulted in aggregate Revenue Interest Payments to OrbiMed for all fiscal quarters ended on or prior to March 31, 2028 equal to $150.0 million. In addition, we must make a one-time payment to OrbiMed in an amount that, when added to the aggregate amount of Revenue Interest Payments received by OrbiMed as of March 31, 2028, would equal $150.0 million. The total Revenue Interest Payments payable by us to OrbiMed are capped at 1.8x of the purchase price or up to a maximum of 1.9x of the purchase price under certain conditions.
Our debt service obligations and the degree to which we are leveraged could have negative consequences on our business, such as the following:
• We may be more vulnerable to economic downturns, less able to withstand competitive pressures, and less flexible in responding to changing economic conditions;
• Our ability to obtain financing in the future may be limited;
• We may be required to sell debt or equity securities or to sell some of our core assets, possibly on unfavorable terms, to meet payment obligations;
• We may be placed at a possible competitive disadvantage with less leveraged competitors and competitors that may have better access to capital resources; and
• A substantial portion of our cash flows from operations in the future may be required for the payment of our interest or principal payments under the A&R Loan Agreement or Revenue Interest Payments under the Royalty Financing Agreement when they or any additional indebtedness become due, thereby reducing the amount of our cash flow available for other purposes, including funds for clinical development or to pursue future business opportunities.
Our ability to pay principal or interest on or, if desired, to refinance our indebtedness, including the A&R Loan Agreement and the Royalty Financing Agreement, depends on our future performance, which is subject to economic, financial, competitive and other factors, some of which are beyond our control. Our business may not generate cash flow from operations in the future sufficient to satisfy any obligations under the A&R Loan Agreement and the Royalty Financing Agreement or our obligations under any future indebtedness we may incur. If we are unable to generate such cash flow, we may be required to delay, restrict or eliminate all or a portion of our development programs or commercialization efforts or refinance or obtain additional equity capital on terms that may be onerous or highly dilutive. If we do not meet our debt obligations, it may materially adversely affect our results of operations, financial condition and the value of our common stock.
The A&R Loan Agreement and the Royalty Financing Agreement each contain customary affirmative and negative covenants that restrict our operations, including, among other things, restrictions on our ability to incur liens, incur additional indebtedness, make investments, engage in certain mergers and acquisitions or asset sales, and declare dividends or redeem or repurchase capital stock. The A&R Loan Agreement includes certain customary events of default. If a default occurs and is continuing, we may be required to repay all amounts outstanding under the A&R Loan Agreement. The Royalty Financing Agreement gives OrbiMed the option (the Put Option) to terminate the Royalty Financing Agreement and to require us to repurchase future Revenue Interest Payments upon enumerated events such as a bankruptcy event, a payment default, an uncured material breach or a change of control. The triggering of the Put Option, including by our failure to comply with these covenants, could permit OrbiMed to declare certain amounts to be immediately due and payable. Further, if we are liquidated, Pharmakon’s and OrbiMed’s rights to repayment would be senior to the rights of the holders of our common stock. Any triggering of the Put Option or other event of default under the A&R Loan Agreement or Royalty Financing Agreement could significantly harm our financial condition, business and prospects and could cause the price of our common stock to decline.
We may also incur additional indebtedness in the future which may result in increased fixed payment obligations, dilute the ownership interests of our existing shareholders, or result in additional restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license assets or intellectual property rights and other operating restrictions that may adversely impact our ability to conduct our business.
We may be unable to use certain of our net operating losses and other tax assets.
We have substantial tax loss carry forwards in the US (both federal and state), Ireland, the UK, and Switzerland. In general, our net operating losses and tax credits have been fully offset by a valuation allowance due to uncertainties surrounding our ability to realize these tax benefits. In particular, our ability to fully use certain US tax loss carry forwards and general business tax credit carry forwards recorded prior to December 2010 to offset future income or tax liability is limited under section 382 of the Internal Revenue Code of 1986, as amended. Changes in the ownership of our stock, including those resulting from the issuance of shares of our common stock offerings or upon exercise of outstanding options, may limit or eliminate our ability to use certain net operating losses and tax credit carry forwards in the future.
Changes in our effective income tax rate and future changes to US and non-US tax laws may adversely affect our results of operations.
We are subject to income taxes in the US and various ex-US jurisdictions in which we operate globally. Various factors may have favorable or unfavorable impacts on our effective tax rate, including changes in tax rates and laws, interpretations of existing laws, changes in accounting standards, changes in the jurisdiction of our pre-tax earnings and examinations of our tax filings. Changes in our effective income tax rate and future changes to US and non-US tax laws may adversely affect our results of operations.
Goodwill impairment charges in the future may have a material adverse effect on our business, results of operations and financial condition.
We have recorded a significant amount of goodwill on our consolidated balance sheet as a result of acquisitions. We review the recoverability of goodwill annually and whenever events or circumstances indicate that the carrying value of a reporting unit may not be recoverable.
The impairment tests require us to make an estimate of the fair value of our reporting units. An impairment could be recorded as a result of changes in assumptions, estimates or circumstances, some of which are beyond our control. Since a number of factors may influence determinations of fair value of goodwill, we are unable to predict whether impairments of goodwill will occur in the future, and there can be no assurance that continued conditions will not result in future impairments of goodwill. The future occurrence of a potential indicator of impairment could include matters such as (i) a decrease in expected net earnings, (ii) adverse equity market conditions, (iii) a decline in current market multiples, (iv) a decline in our common stock price, (v) a significant adverse change in legal factors or the general business climate, and (vi) an adverse action
or assessment by a regulator. Any such impairment would result in us recognizing a non-cash charge in our consolidated financial statements, which may adversely affect our business, results of operations and financial condition.
Risks Related to Ownership of Our Common Stock
Our shareholders may experience dilution of their ownership interests because of the future issuance of additional shares of our common stock.
In the future, we may issue additional equity securities for capital raising purposes, in connection with hiring or retaining employees, to fund or as consideration for acquisitions, or for other business purposes. We have previously funded, and expect to continue to fund, acquisitions using shares of our common stock as consideration. The future issuance of any additional shares of common stock will dilute our current shareholders and may create downward pressure on the value of our shares.
The market price of our stock has been and may continue to be highly volatile, which may lead to shareholder litigationagainst us.
Our common stock is listed on the Nasdaq Global Select Market under the ticker symbol “INSM”. The market price of our stock has been and may continue to be highly volatile and could be subject to wide fluctuations in price in response to various factors, including those discussed herein, many of which are beyond our control. In addition, the stock market has from time to time experienced extreme price and volume fluctuations, which have particularly affected the market prices for biotechnology and pharmaceutical companies like us, and which have often appeared unrelated to their operating performance.
Historically, when the market price of a stock has been volatile, shareholders are more likely to institute securities and derivative class action litigationagainst the issuer of such stock. We previously faced a shareholder suit following a decline in our stock price. If any of our shareholders bring a lawsuit against us in the future, it may have a material adverse effect on our business. We have insurance policies related to some of the risks associated with our business, including directors’ and officers’ liability insurance policies; however, our insurance coverage may not be sufficient and our insurance carriers may not cover all claims in a given litigation. If we are not successful in our defense of claims asserted in shareholder litigation, those claims are not covered by insurance or they exceed our insurance coverage, we may have to pay damage awards, indemnify our executive officers, directors and third parties from damage awards that may be entered against them and pay our and their costs and expenses incurred in defense of, or in any settlement of, such claims. In addition, such shareholder suits could divert the time and attention of management from our business.
Certain provisions of Virginia law, our articles of incorporation and amended and restated bylaws and arrangements between us and our employees may hamper a third party’s acquisition of us or discourage a third party from attempting to acquire control of us.
Certain provisions of Virginia law, our articles of incorporation and amended and restated bylaws and arrangements with our employees may hamper a third party’s acquisition of us or discourage a third party from attempting to acquire control of us, or limit the price that investors might be willing to pay for shares of our common stock. These provisions or arrangements include:
• The ability to issue preferred stock with rights senior to those of our common stock without any further vote or action by the holders of our common stock. The issuance of preferred stock could decrease the amount of earnings and assets available for distribution to the holders of our common stock or could adversely affect the rights and powers, including voting rights, of the holders of our common stock. In certain circumstances, such issuance could have the effect of decreasing the market price of our common stock.
• The existence of a staggered board of directors in which there are three classes of directors serving staggered three-year terms, thus expanding the time required to change the composition of a majority of directors.
• The requirement that shareholders provide advance notice when nominating director candidates to serve on our board of directors.
• The inability of shareholders to convene a shareholders’ meeting without the chairman of the board, the president or a majority of the board of directors first calling the meeting.
• The prohibition against entering into a business combination with the beneficial owner of 10% or more of our outstanding voting stock for a period of three years after the 10% or greater owner first reached that level of stock ownership, unless certain criteria are met.
• In addition to severance agreements with our officers and provisions in our incentive plans that permit acceleration of equity awards upon a change in control, a severance plan for eligible full-time employees that provides such employees with severance equal to six months of their then-current base salaries in connection with a termination of employment without cause upon, or within 18 months following, a change in control.
Under Virginia law, our board of directors may implement a shareholders’ rights plan or "poison pill" without shareholder approval. Our board of directors regularly considers this matter, even in the absence of specific circumstances or takeover proposals, to facilitate its future ability to quickly and effectively protect shareholder value.
