Insmed Incorporated (INSM) Earnings Call Transcript & Summary

Welcome, everyone, to the 39th Annual JPMorgan Healthcare Conference. My name is Felipe Velasquez, the Vice President on our Health Care Investment Banking team. I'm here with our next presenting company's Chairman and CEO, Will Lewis of Insmed. [Operator Instructions] I'll now turn it over to Will.

Thank you. Referring to the forward-looking statement slide, I'd like to ask you to review our filings with the SEC for important disclosures. Please turn to Slide 3. More than any other year in our company's history, 2020 was the year of our greatest transformation. The last year has seen the evolution of Insmed from 1- into a 3-program story. Critically, each of these programs or pillars, as we like to think of them, could potentially become the cornerstone of treatment in each of their diseases. I cannot overstate the degree of positive change in terms of patient impact, business diversification and ultimately, future shareholder value that this change will represent. If we look at just ARIKAYCE, a year ago, we had a single product with a single approval in a single territory. Today, we have a global program. With approval and launch underway in Europe, Japan is now filed with approval and launch expected by the middle of the year. We've been included in the newly released international guidelines with a strong recommendation for use, and our final clinical trial for frontline approval is now underway. A year ago at this conference, I described our second program, brensocatib, as a lottery ticket. Unlikely to work, but if it did work, of immense value. Well, it did work. The Phase II WILLOW study in bronchiectasis was an astonishing success. It resulted in publication in the New England Journal of Medicine and Breakthrough Therapy designation as well as PRIME designation from Europe. And our Phase III ASPEN study is now underway. Our third program, treprostinil palmitil inhalation powder, or TPIP, was not even being discussed last year. And today, we sit having shared the incredibly promising animal model data, which suggests we may even have a disease-modifying impact in pulmonary arterial hypertension. And we now have completed Phase I, and Phase IIa is about to kick off. Now all of these programs exist at Insmed because they align with our mission. Insmed is a rare disease company. And on Slide 4, we can see our mission and vision spelled out clearly. We want our drugs to make a difference in the lives of patients, and we want to be recognized globally for this by letting our people urgently and compassionately bring forward therapies that will make a major difference in the lives of patients with significant health challenges. On Slide 5, we can see what this means for investors. We have everything we need within the company now in terms of opportunity and talent. We've proven our capabilities. We are one of the few companies that has gone from a concept through clinical development approval and successful commercialization in the United States and now around the world. This next chapter of Insmed is all about doing this with multiple products. There are 2 important takeaways on Slide 6. The first is there are 3 ways for us to drive value. The second takeaway is a little more subtle, and it's in the middle section, brensocatib and DPP1 inhibition. The last year, we have spent building our knowledge because we want to be the leader in the field of neutrophil-mediated diseases exploiting this DPP1 pathway. As a result, you're going to see this middle section grow as we bring this compound and our knowledge to the treatment of additional neutrophil-mediated diseases. We're going to examine some of these in greater detail later in the presentation. But first, let's take a deeper dive into TPIP. On Slide 8, we can see that pulmonary arterial hypertension is caused by blood vessels that become narrowed, blocked or destroyed. High blood pressure affects the arteries and the current lifespan for the heavily treated patient is about 7 to 10 years, which, while a significant improvement, shows the need for additional treatments. Now prostanoids were a major advance. They cause vasodilation. And in this way, they provide relief. However, this relief is limited by their rapid metabolism and tolerability issues. TPIP represents the possibility of unlocking the full benefits of prostanoid therapy with the vasodilation benefit sustained for an extended period of time. What is this innovation? It's the molecule treprostinil with a 16-carbon chain appended to it, as depicted on Slide 9. It is inhaled as a dry powder twice or perhaps even only once a day. This alone would represent a major advance for the patients who currently use products that require being used 4 to 7 times a day. It is inhaled as an inner drug and then becomes active when this carbon chain is cleaved off by the esterases in the lung. The active drug, treprostinil, is well documented to be clinically beneficial to patients with pulmonary arterial hypertension. Our approach results in a very slow release of the active drug from the lung, which results in higher local concentrations and ultimately lower systemic concentrations, all of which we think are clinically desirable. Now let's take a look at some of the data on Slide 10. Here, we can see how different the PK is of TPIP from treprostinil. In the charts on the left-hand side in a rat model, we can see higher levels of treprostinil sustained over a much longer period of time as reflected by the light and dark green lines in the top chart and the red line in the lower left chart. On the right, in a dog model, we see how much lower the Cmax level is using TPIP, and the benefit of this finding is that most of the adverse events associated with treprostinil are a result of systemic exposure. So we should have a more therapeutic index with this product. We can push the dose to achieve greater efficacy before bumping up against systemic adverse events. Slide 11 is what's called the spider graph. And here, we're using it to depict the various readouts we're trying to achieve, which are listed around the edges of the graph. These include hemodynamic effects and histological remodeling effects, both of which are important clinically. Simply put, the closer to the red dot in the center, the better. And here, we can see the dark green line, which represents the high dose of our drug compared to a variety of approved drugs for pulmonary arterial hypertension. The profile of our drug, TPIP, in this model shows superiority versus these comparators. Now I won't spend a lot of time on Slide 12, but it lays the groundwork for the ways in which we think we could become the cornerstone of therapy for pulmonary arterial hypertension, if we're able to demonstrate in humans what we've seen in the animal models. You will see this slide again, as we, over time, reveal the target product profile in comparison to other approved therapies. Slide 13 actually comes from a company that made its name in pulmonary arterial hypertension, and it depicts how they see the future of treprostinil. I'll remind you that this is already a multibillion-dollar market. This slide shows that the cornerstone of therapy using treprostinil is just really beginning its journey of use. It's now believed by some that there are other diseases where this drug may show benefit in patients that could number in the tens, if not hundreds of thousands. The simple takeaway is this: if treprostinil works in these diseases, we believe TPIP will work better. Slide 14 shows where we are along this journey to prove the thesis. Phase I is now done, and the top line results will be out shortly. We're moving quickly into Phase IIa and are on track to kick that off in the early part of this year. That should provide clinical data in PAH patients in the second half of this year. We expect to launch our Phase IIb trial in the second half of this year, and we'll be looking closely at the design of this trial and are likely to consider, including additional indications such as PAH, ILD and IPF. So we are advancing this exciting program as fast as we can. Now let's turn to the most exciting and unexpected success story of 2020, brensocatib, our DPP1 inhibitor. Slide 16 shows the focus of our initial clinical study, bronchiectasis. Bronchiectasis is caused by a cycle of reinforcing negative events. Inflammation caused by or creating an infection, which results in poor lung clearance, which results in irreversible airway destruction. Historically, companies have tried to treat this condition by targeting the infection with inhaled antibiotics, something we know a lot about. The goal of this approach was to either reduce or eliminate the infection. Unfortunately, this has not met with clinical success. We chose a novel approach of targeting the inflammatory part of this cascade using our DPP1 inhibitor. We thought if we could break the cycle of inflammation, this would result in the clinical benefit of reducing exacerbations that caused the lung destruction. How does our DPP 1 inhibitor work? Slide 17 shows that by inhibiting DPP1, we inactivate the neutrophil serine proteases, or NSPs, that are normally released by neutrophils when they are recruited to sites of inflammation in the body. In this way, we're lowering the NSPs that exacerbate inflammation without completely wiping them out. The consequence of this mechanism of action being used in this way was a resoundingly successful Phase II study, which is summarized on Slide 18 and was published in the New England Journal of Medicine. We saw an approximately 40% reduction in exacerbations over just 6 months. To put this in context, most thought leaders would tell you a 15% to 20% reduction would be considered clinically meaningful. No one to the best of our knowledge has ever achieved this kind of outcome and certainly not using this novel mechanism of action. This was discussed at the American Thoracic Society meeting during our data presentation, and I remember the ATS host remarking, if this proves out in Phase III, it would represent the holy grail of pulmonary medicine. Regulatory authorities have been equally enthusiastic with the FDA granting breakthrough therapy designation and EMA granting PRIME designation. The best of our knowledge, the first time PRIME has been granted for a non-orphan respiratory disease treatment. Slide 19 shows what we think will be the key to a successful Phase III program. The most important point being, make as few changes as possible from Phase II. As many of you have heard me say, Phase III is not a time to ask interesting scientific questions. It is a time to replicate success shown in Phase II. We designed Phase II to be a mini Phase III with a significant number of patients, strict entry criteria, and most importantly, endpoints, we knew we would need this study in Phase III. The bottom line is we are studying the same thing in Phase III we studied in Phase II. We're just doing it in a lot more patients. And it's important to remember that success in this study is achieved if either dose proves effective. As you can see, we're well powered to show clinical success in this trial based on what we saw in Phase II. We're taking this conservative approach because we want this trial to win. Slide 20 shows the design of the Phase III study, which is now underway. And as you can see from the right-hand side of the slide, we are heavily resourcing this program. We are targeting 40 countries and more than 480 clinical sites around the world. This should not only expedite our recruitment but also enable global approvals, assuming a successful outcome. Slide 21 depicts why success is so important and meaningful for patients and for our investors. The unmet need in this indication is enormous. There is currently nothing approved to treat this disease. There are already more than 1 million patients diagnosed today. And in some regions of the world, this runs up to several million. Perhaps most importantly, on the right-hand side of this slide, you can see the interesting overlap between patients with COPD and asthma. We saw double-digit percentages of patients who were comorbid with COPD or asthma in addition to bronchiectasis in our Phase II trial, and our drug showed benefit in treating them. The literature suggests that many COPD and asthma patients likely also have bronchiectasis, making them a huge additional opportunity for us beyond the numbers already being considered on the left-hand side of this slide. Now as exciting as the possibilities in bronchiectasis are, I want to draw your attention to Slide 22. It is really the mechanism of action that we have harnessed to treat this condition that is the real discovery here. DPP1 inhibition is a new pathway for treating inflammatory diseases. We've already invested human and financial capital in further understanding the fundamental science behind this mechanism of action. We've built out and we'll continue to build out our capabilities in this area, so that we are the leading authority in neutrophil-mediated diseases, utilizing this pathway for potential treatment of disease. Here, we've illustrated some but not all of the potential diseases we think we can address with this mechanism. We've already completed some of the preclinical work in these, and you're going to hear more about these efforts throughout the year. Finally, let's turn to ARIKAYCE. Slide 24 shows the pride of our company, a first-in-disease therapy taken from concept to commercialization. ARIKAYCE was the first-ever therapy conditionally approved to treat refractory pulmonary MAC lung disease. It's caused by bacteria in the environment, which gets lodged in the lung and grows causing damage. Our drug has been shown to reduce and even eliminate evidence of the bacteria in lung sputum. For the first time, patients have a therapy to help them in their quest to eradicate this indolent disease. Slide 25 shows how 2020 saw the further advancement of our commercial program, including ARIKAYCE in the newly released international guidelines, with a strong recommendation for use; approval and commercial launch in Europe, with early signs of success in securing favorable reimbursement; filing in Japan, which should result in approval and launch by the middle of this year; and initiation of our global frontline study to secure full approval and significantly expand our addressable patient population. Overall, we're looking at 2021 as a growth year for ARIKAYCE revenue as we bring this compound literally around the world. As COVID fades into the background, this should only accelerate and magnify this opportunity. Slide 26 helps us as we size the scope of the existing and future opportunities. We can see this is a very substantial market for which we're uniquely positioned. We had amazing success with our U.S. launch. And as you can see, as we add other territories around the world, this year, the refractory market will continue to produce results. Securing the frontline indication would further increase the overall addressable market almost fivefold. To access that broader population, we need to successfully complete the trial you see on Slide 27. This is the clinical trial design of the now ongoing study to secure frontline approval for the much broader market opportunity. To increase our chances of success, we're testing the primary endpoint of the main study in a mini-study to ensure we will accomplish a positive outcome. Once fully enrolled, the overall study will take about a year, and if successful, should facilitate global approval. Turning to Slide 28. Let me summarize where we are. There is a lot going on at Insmed. We are a company transformed. The 3 pillars I've discussed today, TPIP, brensocatib and ARIKAYCE, represent an enormously underappreciated opportunity, as has been pointed out by many research analysts. It may be that our degree of positive transformation that took place in 2020 was lost a bit in the devastation of COVID-19, but we had the most productive year in our company's history. And today, we are already deep in the throes of executing on these opportunities. Most importantly, we have the financial and human resources to accomplish all of our goals, and we've already shown we can do it. Slide 29 is a quick snapshot of our recent accomplishments. From the strength of our commercial launch, to the validation of brensocatib in the bronchiectasis trial, to the arrival of our latest research department accomplishment, TPIP, Insmed is poised for 2021 to clearly demonstrate success across all 3 of these programs. And I expect you to hold me to this. As the scorecard on Slide 30 shows, we will revisit this slide throughout the year to ensure we are delivering for patients and our shareholders. We are entering 2021 with incredible momentum. And as COVID-19 fades into the background, the story of Insmed's transformation into a multiproduct international commercial success is going to become unavoidably evident. I have never been more bullish about where we are as a company and where we're headed. And with that, I'd like to thank you for your time and attention, and I'll turn it back over to Felipe.

Thanks, Will. [Operator Instructions] Well, before we start questions, did you want to introduce the rest of your team?

Thank you for that opportunity. Sara Bonstein is also on with us today, our Chief Financial Officer.

Great. The first question that's come across is in relation to brenso. How do you view a DPP1 inhibitor as differentiated from a neutrophil elastase inhibitor?

That's one of the scientific questions we're still getting into the details. But the principal distinction is that the DPP1 inhibitor prevents the NSP -- the NSPs, including neutrophil elastase from being activated prior to their release from the neutrophil. So if you think about it this way, the neutrophil is recruited to the site of inflammation, it releases its NSPs, and if they're active, one of them is neutrophil elastase, then they're already going to be contributing to that inflammatory cascade, at least that's how we think about it. If you utilize a neutrophil elastase inhibitor, you've got this active neutrophil elastase that you're trying to find and inhibit. By going at DPP1, you're turning off neutrophil elastase before it's ever released. And the trick is to do that in the right measure so that you're able to prevent that inflammatory cascade. The simplest way to think of it is we're going upstream. Before it's released as an active element, it is inactivated by DPP1. And that's why we think you're seeing the distinction between efficacy of targeting neutrophil elastase versus the DPP1 inhibition. The other point I would make is that there are at least 2 other principle and several other NSPs that DPP1 inhibition inactivates and it may be that these other NSPs or in combination, these NSPs being inactive play a role in that important cascade.

Great. I think the next question is with respect to your TPIP program, what do you believe is going to be the bar for success for TPIP?

Well, there's a lot of debate about this internally and externally. We've had a lot of investors who say to us, stop getting excited about where this drug could go. If it goes -- it takes treprostinil into dry powder and it's once or twice a day, you've already won. And I think we're going to be able to deliver that. The question is, are we able to, through the process of the use of this drug, get some of those downstream benefits, those histologic changes that would indicate that we're basically altering the disease process. Think about this again, prostanoids result in vasodilation, which is well documented and understood to be beneficial. But that process of vasodilation occurs for a very short period of time. And so if you can think about it in an exaggerated way, you're opening the vasculature, then closing it. Opening, closing, opening, closing, 4 to 7 times a day in rapid succession. And it's thought that, that may not be beneficial in its own right. What our drug does is it allows you to have that vasodilation extend for 12, maybe even 24 hours. And so all of the downstream benefits from relaxing that vasculature could be realized, right heart hypertrophy reduced, pulmonary vascular resistance reduced and some of the other targets that I've mentioned. So success is going to be once or twice a day dry powder. Cornerstone of new therapy in PAH may be within reach, and we need to validate that in humans. But if we see what we saw in animals in humans, we've got a game changer. And the other point I would make is that United Therapeutics has done a good job of seeing where else treprostinil can work, including in pulmonary hypertension patients with interstitial lung disease, so-called ILD population. That's another 30,000 patients. But as I mentioned during the presentation, anywhere that treprostinil works, TPIP should work better.

Great. Is there any specific information that you can tell investors about potential possible partnerships for commercial or development purposes?

I think one of the questions that often comes back to us is how are we dealing with brensocatib and AstraZeneca has expressed interest in going into potentially COPD or asthma with the drug and what we've said about that is we're continuing to work productively with AstraZeneca. We have ultimately the right to determine whether or not that makes sense for the company. Our focus is really on advancement of this candidate against bronchiectasis and now some other disease indications, As you saw on the pipeline slide, we're looking at cystic fibrosis as well. We're considering others beyond that. It's really important that we protect what we know this drug works in right now, which is bronchiectasis, very high probability of success in cystic fibrosis, possibly GPA and other rarer diseases. So I'm not sure there will ultimately be alignment there, but we're certainly open-minded to the possibility. But that's the only place that we've really thought about our relationship in terms of corporate partners. Regionally, we've thought about something in China because we have a lot of very impactful drugs, and there's a lot of interest in going there. I think we're going to evaluate that over time and find the right way to realize the value that, that country would represent if our drugs were to be approved and launched there.

Got it. And with respect to brenso, what is the current status of development of brenso in COPD and asthma?

Right. So as I mentioned a moment ago, the interest on the part of AstraZeneca in going into those indications has been conveyed. I think for us, the challenge we see in that area is that most of the patients who will benefit from this therapy, and that's really our compass point. How do we bring forward therapy that can impact patients, those patients who can benefit from this therapy who may fall into the COPD or asthma category are probably bronchiectatic. And so we will be able to approach them on label with an approval in bronchiectasis. And our Phase II trial had, as I mentioned, double-digit percentages of COPD and asthma comorbid patients. So we have the data to know that it will work in that population. And I think that gives us a great deal of comfort that the patients who will benefit will receive the medicine simply with the bronchiectasis label.

Okay. With respect to the ASPEN study and the frontline clinical programs for ARIKAYCE, have you seen any COVID-related delays to enrollment or site opening for the trials?

We haven't, really. I mean it's been fairly minimal. We're aware of disruption. And certainly, when surges take place, primary concern for pulmonologists is those patients. But I would say, even in the midst of the current surge, we've been in a good position with regard to initiating sites and getting these trials up and running as evidenced by the fact that they were off the ground by the end of last year, which was quite an accomplishment on the part of the internal team. I would say that as we look out, part of our strategy for going to, in the case of ASPEN, more than 480 sites is to facilitate some surge protection in the event that there's COVID that flares up in one part of the world, for example, right now in the U.K., it's really quite bad. There may be other sites in other parts of the world that could recruit patients during that time and as a consequence, not really impact the overall time line. But it's something we're watching carefully. And obviously, we're going to continue to monitor.

And are you able to disclose, I guess, the geographic split of trial sites between U.S. and non-U.S.?

Yes. So I don't know the specific number off the top of my head. Obviously, one of the things we're focused on, and in fact, it's a stratification in ASPEN is the geographic distribution of patients within the trial. That's an important thing to keep a close eye on. As I said during the presentation, it's really important for Phase II to Phase III to change as little as possible. Obviously, we've upped the number of sites, so that introduces a new variable. But remember that this is a disease state that has been extensively studied in clinical trials. And so there are a lot of clinical sites around the world that have good experience in running Phase III trials in the treatment of bronchiectasis. So there's quite a long list to choose from, quality first is always going to be the mantra. And I think we feel very good about the sites we've identified and their ability to recruit good quality patients.

Great. I think with respect to ARIKAYCE, when do you think that we'll be able to see kind of a normalization of new starts given the disruption that we saw in the last year and possibly continuing into the beginning of this year?

Yes. So ARIKAYCE continues to produce steady results, even in the face of COVID-19. And I have to say, I think our commercial team has done an extraordinary job in accomplishing that outcome in a world that has been devastated by COVID-19, and where we're calling on the front line of people who are dealing with this disease. So as it surges, it absolutely introduces challenges. But I would say as we look out, we feel very good about the future of ARIKAYCE and a return to growth, the likes of which we saw in the U.S. prior to COVID. To get around COVID, we obviously need the vaccination program to continue. The good news for our patients is they're going to be some of the first people that are receiving that vaccination, and that should alleviate their concerns and bring them back into the physician's office sooner rather than later. And once COVID-19 is behind us, not only do we believe that we will see a return to the prior growth in the U.S., but we're going to be adding additional territories. We're already approved and launched in Europe right now with additional countries coming along the way. And soon, by the middle of this year, Japan -- and Japan, as you may remember, is a market that is larger than the U.S. in terms of refractory patients. And given that we're going to be launching in the middle of the year, our expectation is that the vast majority of patients we'll be targeting will have already been vaccinated. And so we're hopeful that it won't be as impactful in that launch. It will probably show itself a little bit in Europe, but my guess is that since most of the early patients have effectively already been identified, it shouldn't mute it too much.

Got it. And in a related question, it seems like consensus estimates have come to for ARIKAYCE sales in 2021 to $218 million. How should we think about the impact of COVID-19 and your ability to, I guess, achieve the type of sales growth you had in the past?

Yes. I think when we look at this year, the reason we haven't provided any financial guidance is because I'm not a believer that you do that until you have real conviction as to what the future will hold. It's very hard to know what COVID-19 is going to do and what that's going to look like over the next 3, 6 months, let alone the calendar year. What I can say is we are extremely well positioned, and the team is doing everything it can to make sure patients who will benefit from the medicine will receive it. And that effort is going to continue as we enter 2021. And I am -- I have a high degree of confidence that we should be able to return to the prior growth, but we need COVID to be in the rearview mirror. COVID is a headwind. But as I say, I think the franchise itself is steady. The other side of this equation for us, which I think it bares mentioning is, COVID-19 has raised awareness about respiratory health. And so as we come out of COVID, it will be a long time before someone has a cough or feels ill where they don't proactively go and seek out their physician and say, what's wrong with my lungs or what's wrong with me? This is going to really raise the sensitivity quotient, and I think index of suspicion. We know from our market research that physicians are already thinking that way. So we think this could really be an additional element that would raise awareness about refractory MAC lung disease. And of course, we have a number of things in the backdrop that are going to facilitate that, like inclusion in the international guidelines, our ability to talk about that. We just had an sNDA updated that talks about some additional data and durable culture conversion. So there's a whole raft of things that I think will support this new world order that is post-COVID-19 and will make ARIKAYCE a more attractive profile than it was even prior to it.

And that's a good point. I mean another question that we just received is, do you see any change in the role of ARIKAYCE in cystic fibrosis patients with the addition of Vertex CFTR modulator drugs?

So we're approved to treat refractory MAC lung disease conditionally, and that is the area where we have our focus. We don't seek out the cystic fibrosis populations, very important for people to understand that. I do think that there are some trends in the treatment of cystic fibrosis patients that are relevant more broadly. So if we think about the tremendous success that Vertex has enjoyed in the treatment of CF patients, it's a wonderful change for those patients. However, the lung damage is already done. So their risk of infection, and more importantly, the risk of bronchiectasis is significant. Most of the patients who are successfully treated with Vertex drugs effectively become bronchiectasis patients. So they fall directly within the sweet spot of where brensocatib can be beneficial. And that is why we are kicking off a PK study to determine what dose would be appropriate to try to help these patients benefit from DPP1 inhibition. We'll have those -- that trial will get going by the middle of this year, and that opens the second indication potential for brensocatib for the company.

Great. [Operator Instructions] Otherwise, I think if there aren't any other questions, well, we really appreciate your time speaking to us and Sara as well.

Well, Felipe, let me just say, I think it's an unusual situation we're in. The amount of transformation that has taken place in the company, the fact that we have ARIKAYCE, brensocatib and TPIP now running in parallel. Each of these is a very significant program. Each of these is largely derisked in many ways. And as Sara could articulate better than I, our resources to support these are in place. So this is going to be a big year for Insmed. And it portends really great things. I think it would be hard-pressed to find something in the small to mid-cap space that has the breadth of opportunity that we possess. And we're excited to bring that to the attention of investors. But thank you, again, for the opportunity to come and present and answer questions today.

No, thank you. And it does sound like a very exciting year for Insmed. So we look forward to hearing more about it.

Appreciate it.

Thank you, and have a great morning.

Bye, everyone.