Insmed Incorporated (INSM) Earnings Call Transcript & Summary

Hello, everyone. Thank you for joining us. On behalf of JP Morgan team, it's my pleasure to introduce our next speaker, Will Lewis, Chairman and CEO of Insmed. Please note that we will be hosting a Q&A session in the Yorkshire room, down the hall. With that, I will hand it over to Will. Thank you.

Thank you very much, and good morning, everyone. Before we begin, I want to draw your attention to our public filings. I'll be making some forward-looking statements, and these should be placed in the context of those public filings. In addition, I'm very pleased to also draw your attention to our label for our lead product, ARIKAYCE. These are the specific details regarding its conditionally approved use. Our mission at Insmed is to transform the lives of patients with serious and rare diseases. And we start today's presentation, coming off of what is unquestionably the best year in Insmed's history. 2019 set all kinds of records for us, and 2020 promises to be even more exciting. And I want to start by talking about our strategic priorities. The first priority for the company is to focus on continuing to drive strong commercial performance of our lead product ARIKAYCE in the U.S. We guided at the end of 2019 to $133 million to $138 million of net revenue. And that, I'd like to draw attention to the fact that this time last year, was estimated by most of Wall Street to be a 2019 year that should have come in around $45 million. So the performance in 2019 by the commercial team is nothing short of exceptional. And I have every confidence that they'll continue this momentum into 2020. Beyond that U.S. commercial performance, we are going to be advancing ARIKAYCE in a confirmatory clinical study. To remind everybody, ARIKAYCE was conditionally approved by the FDA for the treatment of severe refractory MAC lung disease, and we need to, as a part of our post-approval commitment, complete an additional study for full approval. We've agreed that we'll be in the front-line setting of patients. We'll talk more about that. We'll also be initiating a study this year in Mycobacterium abscessus. So the clinical development program behind ARIKAYCE continues to enhance our label expansion. These programs will be designed and conducted around the world to support our global expansion. Right now, we have a presence, not only in the United States with our lead commercial program, but also in Europe and Japan. And I'm extremely pleased with the progress we've made in 2019, laying the groundwork for what we hope will be approval in Europe in 2020 and approval in Japan in 2021. Behind the strong program, label expansion and global growth of ARIKAYCE, we intend to advance our pipeline, including in the first quarter of this year, the revelation of data around our Phase II study of INS1007 in non-CF bronchiectasis. We'll be spending a little bit more time on that later in the presentation. And behind that, our program in INS1009, which is going to be going into clinical trials this year for the treatment of pulmonary arterial hypertension. So let's talk about ARIKAYCE. What is ARIKAYCE and what does it treat? It treats a disease called MAC lung disease. And this is a disease that affects patients who have typically other comorbidities in their lung. Oftentimes, they are immune suppressed or have a history of smoking, COPD, other conditions that make them vulnerable to potential infection by these bacteria, including non-CF bronchiectasis. And that lays the strategic background for why our INS1007 program we're very hopeful about. But in the treatment of MAC, this is a disease that comes to patients because the bacteria are ubiquitous in the environment. They're in the air, the soil, the water. Patients breathe in these bacteria, and they get lodged in the lung and then they proliferate. And it is extremely difficult to get rid of. Prior to the approval of ARIKAYCE, there were no inhaled therapies approved, specifically for the treatment of patients with this disease. So we're very pleased to be able to bring this to the treatment paradigm for these patients. ARIKAYCE is itself a drug-device combination. It's made up of a potent aminoglycoside antibiotic called amikacin that is wrapped inside a liposomal shell. That liposome conveys important properties that enhance the ability of the drug to be effective. It makes it a charge-neutral particle. It is preferentially taken up by the macrophage in the lung, which is extremely important because this is where the disease is resident, and it makes very difficult to treat with oral or IV antibiotics, which fail to reach inside the macrophage in sufficient concentrations. This is all a part of our technology, which we've branded PULMOVANCE. This liposomal technology has application in other arenas, and we'll talk more about that later on. So if we look at the commercial opportunity for this compound, we're focused, again, on severe refractory MAC in the U.S. We hope to be launching in Europe and Japan. And here, we talk about the prevalence of the disease in these different areas. Severe refractory MAC is a fraction of the overall NTM population. We estimate it to be 12,000 to 17,000 patients in the U.S., and we've seen what the performance of the drug has been in that narrow market context. In Europe, we estimate it to be approximately 1,400. And in Japan, importantly, 15,000 to 18,000. This disease is more prevalent in Japan than it is in the U.S. and that supports the wisdom of going to Japan ourselves to launch the compound. If we look at our launch update, as of the end of September, we have not provided guidance yet on Q4 or where we're going to be going in 2020, that will be forthcoming. But just refreshing everyone's recollection, we did $38.9 million in total net product sales, $37.8 million of that was in the U.S. We have some ex U.S. sales that are the by-product of named patient programs abroad and under the French ATU program, which is a fully reimbursed program for desperate patients. We are very proud of the fact that we've served more than 100 patients in France, and many we've brought back from the brink of death. The healthcare community here is extremely engaged with a lot of positive feedback as a by-product of the support we've been providing to patients through our Arikares program. This is a program that is a high-touch, white glove outreach to patients to ensure that their journey with this product is as successful as it can be. As a result, we've got over 1,600 unique prescribers since launch. And importantly, on the duration of use, 85% of patients who initiated therapy in the first 6 months since launch, have not discontinued and did not discontinue in the first 90 days of treatment have remained on ARIKAYCE. This is a really important point. A lot of people were concerned would they continue on therapy, and I think these data are incredibly encouraging. The payer landscape here has been nothing, but supportive. I think that speaks to the ability of the drug to have an impact, and we've been very pleased with the support we've received there. This is my favorite slide. It shows the hard work of the company, and what it has resulted in. Behind each one of these dollars that is up on this slide showing the revenue ramp is a patient whose life, we believe, has been altered for the better as a consequence of the hard work of everyone in the company. When we look forward to what will happen in 2020, there are important milestones and updates that will represent catalysts for continued growth. That includes direct-to-physician and -patient campaigns we're running as well as what we anticipate to be new treatment guidelines for this disease, which we are hopeful will include ARIKAYCE in them. And in addition, we have made some changes in the way we deploy our commercial operations to support physicians as they try to bring patients on drug. That includes the initiation of something called patient access liaisons, who help with the back-office work in a compliant way that relieves the burden that can often be associated with administering drugs in the orphan drug context. So where we go from here. This slide tries to capture that notion. There is both life cycle management, what I really refer to as label expansion, and the potential for treatment duration expansion. So at the bottom of the slide, this launch population is refractory MAC of 12,000 to 17,000. The trial I referenced earlier for frontline should enable us to address the 80,000 to 90,000 patients in the U.S. that are listed here under NTM caused by MAC. The same is true in Europe and Japan. We anticipate this trial will be adequate for serving those populations. In addition, we are going to be exploring this year the best way to treat these patients from a longitudinal point of view. Right now, guidelines call for the treatment of patients until they culture convert and then for an additional 12 months thereafter. One of the questions that haunts this population is, will they get reinfected. The ubiquity of these pathogens necessarily means that they are constantly exposed to the potential for reinfection. And indeed, the best available information suggests that many of them will be reinfected in a short period of time. So as a consequence, we're going to be looking at ways to use our drug to administer to patients in the hopes that it will be able to document that this would be an effective way to prevent reinfection and that would represent an exciting new opportunity for the use of ARIKAYCE in the treatment of these patients. I mentioned the front-line study. This is a snapshot of what we believe it will look like. There are a couple of important points I want to highlight here. One is that the duration of this study is only 13 months. So treatment for 12 months and then one month off treatment with the primary endpoint of this study in the U.S. being a composite PRO. The patient reported outcome is what has been requested by the FDA, and we have won a grant from the FDA to develop that PRO. We are hard at work on that development. And we are confident that, that will be completed in the not-too-distant future, which would enable us to kick this trial off in 2020. Importantly, at the bottom of this slide, you see what we call the cohort study. Now the design here is intended to ensure that we have validated this PRO in real time, while we are kicking off the study that is outlined on the top. The benefit of that is to have a 7-month look at the impact of our drug on the PRO measures, so that, should we need to, we can adjust the statistical analysis plan and/or the enrollment numbers for the top study. That should enhance the probability of success and give us all good confidence that this is going to be a successful study. In addition, that will be an open label -- open study at the bottom, so we'll be able to report data from the study on the bottom as we go. We currently anticipate that the top study will be no more than 200 or 300 patients. We haven't finalized that, but that's the best guess we have right now, and the bottom study is somewhere in the neighborhood of 50 to 100. So we're very excited about these studies and getting them kicked off to reiterate. Should we successfully complete these studies and demonstrate the efficacy of our drug in combination with azithromycin and ethambutol, this would represent a new standard of care for front-line treatment and a 5-fold expansion in the addressable market for our drug. Because we're going to be looking at that kind of expansion, we've made significant investments in our technical operations. Specifically, we have 3 different facilities, two of which are approved for the manufacture of ARIKAYCE: Althea, out in California at 50 liters; Therapure, up in Canada at 200 liters; and I'm very pleased to have completed the capital expenditures associated with the creation of our facility at Patheon, which is well underway to -- on its way to completion. We hope that this will be online and being able to provide commercial supply as early as the beginning of next year. That would represent 450 liters of capacity. And I'm also happy to say that should we get the front line approval, we will need all of these facilities in order to satisfy the demand for our compound. We're going to be doing this for a long time. As this slide shows, we have market exclusivity around the world that has already issued. It comes from both regulatory authorities. QIDP and Fast Track gives us 12 years of exclusivity in the U.S. and in the EU because it's an orphan-designated drug. We have 10 years of exclusivity, and our patent coverage right now in the U.S. extends all the way to 2035. We're hopeful that we'll be able to extend to 2035 in Europe and Japan as well. That work is well underway, and we'll have more to say about that later this year. Behind ARIKAYCE and the label expansion and the global expansion, we have other compounds. I've mentioned 1007 and 1009. And then behind that, a research engine that has been hard at work. We tend not to talk about what's going on there until it gets to Phase I, but I can share with you today, there's a lot of exciting projects that we're going to be speaking more about as we make our way through 2020 and 2021. We are also active in corporate development. We've looked at an awful lot of stuff. We have a very high hurdle, and we're well aware that most acquisitions or in-licensing programs tend not to create shareholder value. So we're very disciplined about this. But we remain very active in that area, and we'll be opportunistic where we believe we can create an arbitrage of value. I want to take some time to talk about INS1007 for non-CF bronchiectasis, the second program in our development pipeline, specifically, because we will be reporting data on this compound in the first quarter of this year. Non-CF bronchiectasis is a by-product of a process that is sort of a cyclical degradation of the lung. Inflammation leads to airway destruction and abnormal mucociliary clearance, which results in bacterial colonization and therefore, inflammation. So this cycle continues. It's extremely difficult to treat. Currently, there is nothing approved to treat this disease. Approaches to date have focused on bacterial elimination, and those have failed. They've been pursued by some of the bigger companies in the industry. Our approach is to utilize a DPP1 inhibitor, which we in-licensed from AstraZeneca. And should it be effective, it would be able to address the moderate-to-severe patients. This is a population that represents around 300,000 to 500,000 patients in the U.S., again, with nothing approved to treat it. Our program is an oral, reversible inhibitor of dipeptidase, DPP1. I'll talk a little bit more about that in a second. The status of this trial is the results of the 6 months, what we call the WILLOW study, will be coming out in the first quarter. The way this program works is it inactivates the 3 neutrophil serine proteases that are brought by neutrophils to the site of inflammation and destruction in the lung. These 3 neutrophil serine proteases, when inactivated, are thought to be beneficial in reducing the inflammatory side of this disease state. This is the design of the study. We have a 10-milligram dose, a 25-milligram dose and placebo for a 24-week treatment period and 4 weeks of treatment follow-up. The important aspect about this DPP1 inhibitor, which is the most advanced in the class, is that it is reversible. This is also a once-a-day pill. This is not a drug device. This is a very elegant way, someone called it the gold ring, that everyone would look to achieve, which is treating a pulmonary condition using a pill. So we'll see what this data looks like imminently. The primary endpoint here, and I'm going to spend a little bit of time on expectations, is time to first pulmonary exacerbation. This used to be the time of the primary endpoint that FDA found most compelling and important and was asked to be studied in Phase III programs. They have now changed their view on this. Our understanding is that frequency of pulmonary exacerbation is now the primary endpoint that is the subject of the focus. We offered -- since they changed that point of view, once the study was underway, we offered to change the primary endpoint of the study. They said that was not necessary since it's a directional finding study. It's not a pivotal, but we will be looking at both of those endpoints, in any case. We'll also be examining some other impacts of the drug, like change in post-bronchodilator FEV1, et cetera. And we'll be looking at the NSPs that this drug inactivates to see if we see reductions in that biomarker. What are the expectations for this study? I refer to this study as a lottery ticket. This is a very high science, and I would convey a high-risk study. We think it's sensible. There was a paper written by one of the key opinion leaders in the space that created an association between reduction in neutrophil elastase, one of those 3 neutrophil serine proteases that DPP1 inactivates, that reduction and reduction in frequency of pulmonary exacerbations. So there is a basis for this biologically, but we have not ever been able to see in anyone using the DPP1 the kind of impact we're hoping to demonstrate here. The study is powered with an 80% confidence to show a 40% difference in the time to pulmonary exacerbations. I'm here today to tell you, I'm not looking for statistical significance on the primary endpoint. I'm looking for directional evidence in order to move this program forward, that would be 20% reduction in the frequency of exacerbations between the treatment arm and placebo. If we see that and we see reduction in neutrophil serine proteases associated with that reduction, then we will have the confidence to bring this program forward. If we do not clear that threshold, unless there is additional data or the totality of the data suggests otherwise, we will cancel this program. So that data will be coming out very shortly, and we're very excited to show it. Again, I think, it will be -- it's still -- we're all still blinded to it at the moment, but this is very much a lottery ticket. Our financial position at this company is extremely strong. The revenues way exceeded what everyone thought last year, and we're super proud of that. I think we're equally proud of the fact that in the middle of last year, we began an operating expense control initiative and pleased to see that, that was very successful. We've guided $140 million to $155 million for the second half of the year. That includes all of the programs that I covered earlier that we've been working on. We have a significant balance sheet as of the end of September 30, $535 million of cash. And so this positions us very well for what we hope to be a very exciting 2020. I just want to close by saying 2019 was the strongest year in Insmed's history. 2020 promises to be even stronger with the reporting of 1007; the advance of 1009 in pulmonary arterial hypertension; the expansion in Europe and Japan; the hope for approval in Europe; the label expansion studies that will look at front line use of ARIKAYCE, that will be applicable around the world, that will include a 5-fold expansion in the addressable market. This company is just at the beginning of creating a franchise around the treatment of NTM with ARIKAYCE, and I think history will show that we have unearthed a disease that was neglected by industry, and we are now impacting in a way that will define the company much like United Therapeutics did in pulmonary arterial hypertension and others have done when bringing meaningful medicines to change the lives of patients with these kinds of diseases. I'm extremely hopeful that 1007 will surprise all of us and be successful. But if it is not, I am not concerned, I am very focused on ARIKAYCE as the primary driver for value and for shareholders, and most importantly, the value it brings to patients. So thank you for your attention, and we'll be going to the breakout session for questions.