Insmed Incorporated (INSM) Earnings Call Transcript & Summary

Hi. Good morning. Hi, It's [ Navanty ]. I cover spec pharma at Citi and today I have the pleasure of having Will Lewis, CEO of Insmed. Thanks a lot for joining us, Will.

Thanks for having me, Navan.

I'll just start with questions, if that's okay. So, maybe I'll start with the Japan launch for ARIKAYCE. How -- maybe if you could tell us how has it been going. Do you still expect to see an adoption curve similar to the U.S.?

Sure. So I think we're in an exciting time at the company, obviously, because we're now globally launched with ARIKAYCE for the treatment of refractory MAC NTM. And that indication is at varying degrees of prevalence around the world. Japan is particularly exciting because there it has the highest number of patients with refractory MAC NTM diagnosed anywhere, more than the U.S. even. So our efforts to prepare for the commercial launch over there have been really very successful. Starting out, the process on the regulatory front went very smoothly, notwithstanding, the limits of the COVID circumstance. The price we secured, actually, is equivalent to the U.S. So we were really excited to be able to accomplish that. It's almost sort of unheard of. And then with that as the backdrop, we then launched in the third quarter. So that process is underway. And obviously, it's hit the delta variant's arrival. And I think Japan can be fairly described as a little bit behind the U.S. in terms of its rate of vaccination. So those two things do factor in to the degree of success of the launch, but not so much. I think we're still enjoying early traction, early embracing of the use of the drug. And, well, next year, we'll certainly show the full capability because I think COVID will be behind us as far as that goes and the opportunity for the drug to really show its stuff in the treatment of these patients. But I would just describe that, early on, the physician engagement has been good, our therapeutic specialists have good access, notwithstanding the limitations. So while there's clearly an impact around the world of the delta variant, so far so good.

And I wanted to touch base on the patient access in Japan. Has it been improving recently?

Yes. So you mentioned earlier about will it follow a trajectory like the U.S. There really isn't a precedent for a Japanese launch to track the way the U.S. launch goes. But I do think that we'll do well once we get underway here through the variant's impact. And from that point of view, that is facilitated by the fact that it's a single-payer system over in Japan. And once that drug is approved and the price is approved, then the system for getting that reimbursement is pretty straightforward. So I don't see that as an impediment. It doesn't operate in the same way that the U.S. does to introduce additional variability.

Any update on the range of outcomes for ARISE that you're looking for and how the enrollment has been affected? If you could give us an update on that?

Sure. So I think of the company as having really four pillars, one of which is the ARIKAYCE franchise. And we start with refractory NTM MAC, like we've just described, the launch in the U.S., Europe and Japan. And then we pursue a label expansion strategy to front line. And the way that is facilitated is through the ARISE and ENCORE studies. And the ARISE study and ENCORE study are both underway. They're enrolling patients as we speak. ARISE will complete first. It's effectively a snapshot of the ENCORE study. It's intended to be a shorter version of it, same patient profile, same treatment regimen, so that the PRO we're using for approval in front line in the U.S. can be tested and validated to ensure that it performs as we expect it will. I'll remind you that we have quite a bit of experience in using patient-reported outcomes. We've used them in all of our clinical trials to date. So this is not a new territory for us. This specific tailoring of this PRO for this population is new, but it's not a major deviation from what we've done in the past. And so we feel really good about its chances for success. Notwithstanding that, we're running the ARISE study to validate that. And we run that in parallel to the ENCORE study. And what that means is, ARISE will run for 7 months, we'll see the impact of the PRO and the drug on those patients' measures. And if they go as expected, then we won't do anything to the ENCORE study. If it shows us that the PRO is more sensitive at picking up performance of our drug in certain areas, then we can re-weight the PRO for the ENCORE study for full approval because that study is still blinded. So we can take the learnings from the ARISE study, apply them to ENCORE and increase the likelihood of success and approval in front line in the U.S. setting. In Japan, it will still be a culture conversion that is the primary endpoint, not the PRO. Obviously, the PRO will be probative, but it's not controlling in the same way as it will be more important in the U.S. So different endpoints for different territories, but a high degree of conviction that will hit on both.

Thanks also for letting us know how ARISE is informing the ENCORE trial. How is enrollment progressing in the Phase III ASPEN study? What are you looking for in the data?

Yes. So ASPEN is the trial for Brensocatib in the treatment of bronchiectasis patients. This is our second pillar within the company. The first one we just described, which is ARIKAYCE, and the enrollment there is tracking with our internal timelines. Similarly, ASPEN is tracking with our internal timelines. And what that means is that we haven't really seen a major deviation yet from the presence of the COVID epidemic and the delta variant. We're going to continue to monitor that carefully, but so far so good on those two trials. And the company, right now, has a great deal of clinical trial work underway between ARISE and ENCORE for ARIKAYCE, ASPEN for bronchiectasis with Brensocatib in our second pillar and also a PK/PD study in cystic fibrosis ongoing. And then we also have our third pillar, TPIP, which has 3 different clinical trials that are basically getting underway. There's an awful lot of clinical trial work going on. The only place we're really seeing any impact of COVID in enrollments is in the TPIP study in IIa, where it's hard to find a patient to volunteer to go into an ICU. It's hard to find an ICU bed, frankly. But -- so that's sort of the overview of the clinical trial work we're doing. ASPEN is possibly, among all of those, the most exciting, the most impactful study we are running. Why? Because if it is successful as we expect it to be as it was in WILLOW in Phase II, this is going to be a first-in-disease treatment for a indication that is well over 1 million people and for which there is nothing approved to treat it. And it's a once-a-day pill. It was described by the American Thoracic Society representative physician as the holy grail of pulmonary medicine, and it's within our reach. So the sooner we get that enrolled and reading out data, the sooner we're on track to what we want to become, which is an Alexion or Vertex-type company, where we dominate in a major disease category, build off of the success of ARIKAYCE because the commercial infrastructure that has brought success with ARIKAYCE is the same group of people that are going to bring success to the launch of bronchiectasis. So it's a wonderful complement of two first-in-disease compounds and the same overlapping commercial infrastructure, which gives us just a lot of strategic leverage. So super exciting. ASPEN, we hope, will prove once again that we can impact the outcome measure that clinicians and regulatory authorities care about, which is pulmonary exacerbations and ASPEN should build off of the success of WILLOW and be able to demonstrate that.

Can you expand more on your expectation or the planned indications, if possible, for pipeline in a product on Brensocatib?

I think we're starting with bronchiectasis, and that's such a significant market opportunity. There are a lot of people in the outside world who believe that, that is a multi-billion dollar a year product. So in and of itself, it represents an enormous inflection point in this company's value for shareholders; that one pillar and that one indication. However, the innovation that is unlocked by DPP1 inhibition is more substantial than that. And we believe that this pathway is really the real discovery. As we examine that, we see its opportunity to be used in things like cystic fibrosis, which is why we're running a PK/PD study. So that is underway. We have identified now, as finalists, two additional indications that we intend to bring forward in the next 12 months for additional clinical trial work. What I will say about that is, those are not the only two. We've done a lot of pre-clinical modeling work to protect the intellectual property in this space around areas like rheumatoid arthritis and lupus nephritis and those sorts of things. But these next indications would be incremental additions to the label that we expect to secure in bronchiectasis and beyond using this mechanism. And this -- as you mentioned, is a pipeline and a product and I think probably one of the more interesting potential innovations in the pulmonary space in the last decade or two.

And can I follow-up on the cystic fibrosis space? So how would you think about potentially positioning in that space where Vertex is present?

Yes. So it's really important to understand that we are talking about treating patients who are treated successfully with Vertex's drug. Vertex is a major player in this space. They have brought unbelievable innovation in cystic fibrosis for the betterment of patients. But those patients who have had cystic fibrosis for a good portion of their life, the lung damage is already done. They are chronically infected, in most cases, with pseudomonas aeruginosa and the consequence of that is they effectively become, with successful Vertex treatment, bronchiectasis patients. So they have the cyclical process of inflammation brought on by the infection that leads to pulmonary exacerbations that contributes to additional pulmonary irreversible lung damage. That cycle is what ultimately has historically caused cystic fibrosis patients to succumb. So this really represents the last mile of treatment that we can bring to these patients to reduce those pulmonary exacerbations. We take the Vertex cystic fibrosis patient with the Vertex drugs, we create a bronchiectatic patient that we then hopefully treat with our drug and give them that final mile of return to yet even better health. So we see this as a perfect complement to what Vertex is doing for that 30,000, 35,000 U.S. patient population of cystic fibrosis patients and up to 70,000 globally is usually the number that's cited. But I want to draw a contrast between that patient population, which has driven Vertex's value to $50 billion, and our ability to impact bronchiectasis, which has potentially millions of patients around the world and for which there is nothing approved. And we have that impact that was published in the New England Journal of Medicine already from Phase II, treating that outcome. So I think we're looking at cystic fibrosis as a complement, as an add-on, but not the bulk of the value of where this drug will have its impact.

Are you on track regarding the trial with TPIP on PVR to share that out in the second half? And what should we be looking for in that data?

Yes. So TPIP, which is our formulation of treprostinil, really is positioned to unlock the full value of prostanoid therapy. And this IIa study is designed to administer our drug at a fairly low dose to see the impact on pulmonary vascular resistance over a 24-hour period by putting a right heart catheterization in a patient in an ICU bed. Finding a volunteer patient in the current delta surge, to go into an ICU bed is very challenging. It's still our ambition to produce the data by the end of the year. We'll have to see what delta does and what beds become available because, frankly, there are certain centers that simply have no room. And then on top of that, you, of course, have to find a volunteer. We've screened a number of patients that haven't quite made it for a variety of reasons, but I remain confident that we'll be able to produce data in a timely fashion for this indication in this study. It is not a rate limiter on our progression into Phase IIb in PAH or PH-ILD. We're running studies in both of those that are kicking off imminently; one at the end of this year, the PH-ILD the beginning of next year. But IIa, I still think we'll be able to read out a handful of patient data because once the patient is in the ICU bed, it's only 24 hours later, you effectively have the data. What are we looking for? We're looking to show that the pulmonary vascular resistance drops, and it isn't so much the quantification because we can always get more by increasing the dose. We know that from Phase I. It's the time component, and we know that we can extend the time component if we increase the dose. So the real question is, what do we get with this low dose first administration? Tyvaso gets to about 1.5 hours. And its max dose on its label is 54 micrograms. In Phase I, we went north of 600 micrograms with our drug, and we are hoping, based on the animal model data, which we think is predictive, that we'll be able to extend out many hours beyond just a 1.5 hours. If we can get to 6, 8, 12 or even longer period of time of PVR extension, we're not only creating that hemodynamic change, it promises histologic change, disease modification. And that is the real secret of what we've unlocked with this formulation. If we can do that, we know from the KOLs that, that would result in their using this drug as the cornerstone of therapy in the treatment of PAH, very likely the treatment of PH-ILD, and we'll, of course, be tracking its potential in other areas like IPF as well. But this drug is our third pillar, quite exciting. The IIa data we hope by the end of this year, Phase IIb and PAH will kick off by the end of this year and Phase II in PH-ILD at the beginning of next year. So quite a bit of clinical trial work going on here and one for a compound that I think could become very important in this space, and frankly, where we think, to a great degree, it's already substantially de-risked.

And any color you would like to add from the recent European Cardiology Congress?

So at the ERS, European Respiratory Society, we had a number of different posters and sessions. There was -- they drew attention, I think, to what's going on both in NTM and in PAH, and I think it was palpable, the enthusiasm that exists for the potential of Brensocatib in the treatment of bronchiectasis. And I would just emphasize that as you look across that, those three pillars, the thought leadership that exists in the clinical community, we have those relationships. We have their -- the ability to get their information on what they think is exciting and how to make impact. And for that reason, we're very excited to see these clinical programs come to fruition. But I also want to draw attention to what I refer to as our fourth pillar. Right? Because these first three pillars are well underway with Phase II and III work. This is a very advanced pipeline with multiple products that can punch way above their weight. And I would submit -- would suggest that our current stock value is very modest relative to the potential. But I'd match our pipeline against any small-to-mid-cap company. What Alexion and Celgene and Vertex all teach us is, when you get that success with that first major drug. Right? So ARIKAYCE goes to front line, TPIP in these multiple indications and Brensocatib in bronchiectasis and beyond. The question that investors always ask is what's next? And that's really where our fourth pillar comes in. This is an area of translational medicine, where we've been spending a lot of time and effort. I'm hopeful that within the next 12 months, we'll be able to bring forward our first IND. This will not be in the same category of what you've seen in the past from Insmed. It's the technology that is very cutting edge, coupled with talent that I think is really going to be able to allow us to punch way above our weight in terms of what our pipeline will be bringing forward. I think it's going to be surprising to people. We need to see that pre-clinical data readout. Our practice is to get promising therapies past the animal data point so that we're ready to go into the IND stage so that investors can have a reason to pay attention. All of these four pillars are backed by $928 million on the balance sheet that we have as of the end of last quarter. So we feel like we're in a great position to have a meaningful impact with what we have under our control, and we're extremely excited about what we're going to be talking about in the next 12 months and beyond.

Will, you mentioned Alexion and Vertex and Celgene. So maybe if I can follow-up in terms of strategy, how you compare to those and how you differentiate. I know you mentioned the four pillars. Anything else that is key to investors -- for investors to know?

I think it's just important for investors to understand that our ambition is to build that kind of company. We are not interested in getting to the next data point or to the next inflection or what have you. We are trying to build a global biotech company that sets a new standard in two first-in-disease areas, NTM and bronchiectasis, and has a very rich pipeline that is advanced and largely de-risked in areas beyond that. And I think we brought to bear behind that, some very exciting new technologies that will really put us in a position to, I think, reach to where those companies are. I look at Alexion as being successful, largely driven by its product, SOLIRIS. I look at Vertex as being successful, largely driven by its success in the CF franchise. I see what Insmed has, and I have complete belief that if we can execute on what we possess, we should be able to reach where they are because of the kind of outcomes we're going to generate for patients and the revenue that will be associated with that. It reaches everywhere that you would want it to. We need to bring this to full maturity. But the team we've assembled, the global reach we possess and the track record we've already demonstrated, I think, should give investors confidence that we'll be able to execute on that. That is where we are. Our head is down. We are about enrolling these trials and executing on ARIKAYCE around the world, and that lays the groundwork for success in these other areas. So stay tuned. I would say Alexion and Vertex are -- and Celgene are examples of companies that have done just that. And every couple of years, a company hits that inflection point where it breaks out. And it begins to go for the mantle of that next kind of company, that is what Insmed is after.

You mentioned your balance sheet. Quickly, can you maybe touch base on the balance sheet in [Indiscernible] versus the four pillars?

So we've got a healthy amount of resource now with $928 million on the balance sheet as of the end of the last quarter. And what we've said publicly is that, that should take us through several years, and it should enable us to turn over the important data points that will validate everything that I've been articulating here. Obviously, there's a trade-off between the revenue generation in the COVID world, the operating expense we have. We'll be monitoring both of those and titrating around these different programs to ensure that full value gets realized from them without putting ourselves too far over our skis in terms of our burn profile. And that's really the magic of the next several years; making sure we manage that carefully. And our CFO, Sara, I have complete confidence she's going to handle that well and she'll certainly have my complete support to do so.

And then we touched on the catalysts in the near term, but can you comment maybe on the rest of the year? And also, how has the gross-to-net evolved over the first month of Q3? Are you seeing that drop you expected? And do you still expect it to get from that in Q4?

Yes. So I'll take the gross-to-net question first. We guided to mid-teens on gross-to-net, and we still remain with that guidance. I'm confident that we'll come in at that range over the course of the year. It obviously varies from quarter-to-quarter. We're not going to comment on intra-quarter changes, but I would just say that we remain on track with the guidance that we have provided. We talk about opportunities for bringing the balance sheet to bear on all of these areas and realizing full value. I think that's imminently within our control. We have, I think, a very strong track record of operating excellence in this area. I will be the first to say that I think we were all a little bit disappointed with the way that the last financing went in terms of execution. But having said that, the resources in hand and looking back now, I think it was absolutely the prudent time to be accessing capital, and it puts us in a position to reach way beyond the COVID impact and into the future of what this company can produce, which, as I've said, I think, will match against any emerging mid-cap biotech company on the exchanges.

So we'll stay tuned for all of that. Any final comments? I know you are busy today with one-on-one's. So any final comments you want to share?

Well, if they were one-on-one's, I'd be happy, they are two-on-one's and three-on-one's, and I appreciate that opportunity very much. I would just say, look for the Phase IIa data, look for the start of Phase IIb in PAH, Phase II in PH-ILD, the data next year from the CF PK/PD study, the progress in ARISE and ENCORE and ASPEN and the information and update that will come from our fourth pillar based on translational medicine, including what we hope will be an emerging IND candidate. And thank you very much for your attention and your support.

Thank you very much. Please let us know if there's any other questions, and we'll follow up.

Thanks, everyone.

Thank you.