Insmed Incorporated (INSM) Earnings Call Transcript & Summary

Great. Good afternoon, everybody. Thanks for joining us for the next session. I'm Matthew Harrison, one of the biotech analysts here. Very pleased to have Will Lewis, the CEO of Insmed with us. Quickly before we get started, I just need to read a disclosure statement. Please note that all important disclosures, including personal holdings disclosures and Morgan Stanley disclosures appear on the Morgan Stanley public website at morganstanley.com/researchdisclosures.

So Will, thanks for being here. I thought maybe we'd start off with TPIP, just because you've got some upcoming data there. And maybe the best place to start is just talk to people because I think they're probably a little less familiar, I know you've probably been educating people here, but less familiar with the kind of study you're running here and the endpoints. And so maybe just help people think about what is the data we're going to get? And what's going to be meaningful out of that?

Sure. So first of all, thanks for having me. I would tell you that TPIP is a particularly exciting program, because in many ways, although it's earlier than some of our other programs, there's a degree of de-risking that already takes place because we are starting with a known entity, the treprostinil molecule. And what we have done in our research labs is append a 16-carbon chain to that with an ester bond. That's a dry powder formulation that then is breathed in by the patients and that bond is then cleaved by the esterases in the lung, and the pharmacodynamics that are -- result from that are a sustained release of the drug locally in the lung with the result, we believe, certainly, the animal models suggest this, that we will see both meaningful hemodynamic changes that lead to histologic changes, potentially becoming a disease-modifying drug. So in short, what we're doing is unlocking the full potential of prostanoid therapy. And what is that going to look like? In Phase IIa, the study you're referring to, we're going to take a handful of patients, perhaps 3 or 6 patients, and we're going to put them in an ICU, and we're going to put a right heart catheterization in, and administer a fairly low dose of our drug to see what happens to pulmonary vascular resistance over a 24-hour period. And I think what's exciting about this is if we can see what we think we're going to see, which is, yes, you'll see pulmonary vascular resistance go down, but that will be extended out for an extended period of time. That's what we saw in animal models, upwards of 24 hours in the animal model. If we can see that in the early signs of that longer extension, that's a very meaningful change in the way this drug can be used for patients, and it implies potentially some of that downstream benefit that we're so keen to see. Just to put it in frame of reference for people, Tyvaso last -- the vasodilation of Tyvaso last about 1.5 hours, and its half-life is about 45 minutes. And that's why that drug is constantly re-administered in the inhalation form, whether it's a dry powder or a nebulized version, and that's a benefit to patients. That's been clearly demonstrated. What we propose to do is to extend that out and basically get that patient, that vasodilation for -- as a constant state. And one can imagine that in a disease like pulmonary arterial hypertension, where things like right heart hypertrophy are the byproduct of the disease state that causes patients to succumb, this kind of relaxation and reduction in PVR could really profoundly change outcomes. And that's why this IIa study, while it's early in a small number of patients, we think is going to be quite predictive of some of those downstream benefits. So we're excited about it. We should have 3 to 6 patients, hopefully, by the end of the year. It's a little tough to find people to volunteer to go into a COVID-infested ICU at the moment, as you might imagine, but the KOLs are certainly excited about following this study protocol and getting some data.

Okay. And maybe just to clarify, so have other -- I'm not familiar. I mean, Tyvaso, did they do a PVR study at all? Is the comparison here that you just -- your expectation is if you demonstrate much longer durability of effect that it's not going to be at question compared to what we've got with Tyvaso?

Yes. There's an early paper that was -- a study that was done in Germany that is probably the best available data on the impact of Tyvaso in pulmonary vascular resistance that we've made available to folks who are interested that does the best characterization that we know of what happens with that drug when it's administered. So there is a frame of reference that's out there, and it gives us some understanding that the sort of 1.5 hour kind of reduction -- duration is really the benchmark against which we're going to measure. And it's understandable, right? The drug is used 4 to 7 times a day to try to accomplish that reduction in pulmonary vascular resistance for as long as possible. The result is, of course, the sort of saw tooth pattern of administration and re-administration to get the patient that benefit, and it does result in clinically meaningful outcomes. What we're hoping to do is a step change in raising that outcome to a place of constant PVR reduction or something close to it with all of the benefit that should flow from that.

And Will, can I just ask, given the data that you already have, and given that data demonstrating that you've got much better PK and sort of plasma half-life of your drug, like what's the reason that you wouldn't see that in this study? Or maybe just help us think about like why this wouldn't play out the way you're expecting it?

Well, it's an interesting question. I mean, to be honest with you, we were very excited by the animal data we first saw in this program, and that's why we repeated it in several different animal models. And it's consistent with the early work that other companies had done in animal models, showing the benefits of prostanoid therapy. So when we saw this release profile and the benefit that, that showed hemodynamically and histologically in animal models, we got very excited. And when we went into Phase I, it was equally exciting because as this data was just a peer-reviewed at European Respiratory Society, we were going to doses with a single administration of north of 600 micrograms. The max dose of Tyvaso in their label after titration is 54 micrograms. Now, on a molar equivalent basis, our drug weighs a little bit more. But the simple takeaway is we're getting the doses far in excess of what Tyvaso was able to reach. And that also unlocks the potential for the treprostinil benefit to be more significant. And I think that's another point that excites the physicians that are close to this program. When you ask what's the likelihood it's going to work, we believe it will. But we have to go through these hoops to make sure we're validating what has been seen previously. Why is it de-risked to a certain degree? Because the underlying drug here, treprostinil, is known to be effective. It's known to work. So what we're really doing is optimizing how it works and all of the downstream benefits that have been clinically demonstrated should be able to be extrapolated. And that's why I think, to a large degree, this study really should validate what we've seen so far, and that's going to be exciting data for such an early stage program with just a handful of patients because it's predictive quality.

Okay. Good. And then, I guess, as people think about that program on a more broader perspective, you're obviously going to have more robust Phase II data next year from that broader study that at least on an apples-to-apples basis, it's more similar to some of the clinical outcomes data we've seen. So I guess, as you think about these handful of patients, how does that change your view on that data?

Yes. I think we stepped into the realm of really de-risking where this program is going if the IIa data is good and as expected because then we know physiologically we're doing what we want to do with this formulation. And that sets us up to be able to demonstrate clinically the benefits you're referring to, which is why we're going to be running a Phase IIb program in PAH patients and a Phase II program in PH-ILD patients. Both of those are on track. IIa is not a rate limiter for either one of them. The PAH program will kick off by the end of this year, and the PH-ILD program at the beginning of next year, and those should yield data sets that are much more similar to, as you say, what people have seen 6-minute walk benefit, 16-week studies, that kind of thing. So that's really exciting because that will be more robust examination of this drug in that patient -- in those different patient profiles. I think one of the most exciting aspects of this class is that they found new areas where they can be impactful. PAH for a long time has had many different approaches, as you know. But PH-ILD, up until Tyvaso was approved, had nothing approved to treat it. And we believe everywhere Tyvaso works, our drug should work better. So that opens up those opportunities for us, and we will be moving very quickly to go into places where Tyvaso is trying itself out. So indications like idiopathic pulmonary fibrosis, where they've seen some promising data, we're going to continue to track that. So this drug may find a better profile in PAH and become a cornerstone of therapy, that's our hope, but it will also find applicability in some of these newer populations as well.

Okay. Good. Great. Maybe we could jump to ARIKAYCE and the base commercial business. And just -- I think maybe just a quick update there in terms of -- we saw at the beginning of COVID, right, you faced a lot of headwinds because treating physicians have to treat COVID patients. We've obviously just sort of peaked through a recent Delta wave here and probably we'll have a pretty bumpy path down from here on out. Are you seeing the same things happen in the field or not? And what's the impact of COVID on the base ARIKAYCE business here going forward?

Sure. So I think one of the exciting things about the program is that it has been remarkably resilient within the context of the different surges we've seen. And in Q2, we saw the early green shoots of the return to what we've all been desperately wanting, which is something more approaching, if not normalcy, at least a newer normal. And that looked very encouraging. The Delta wave has definitely hit us, and we are not surprised by that because we've been through this kind of thing before. And in those regions where it's hit us, they happen to be very significant areas of refractory MAC infection, like Florida and Texas, et cetera. But I think we're going to go through this quickly in Q3 and move back to the promising direction we were traveling in previously. And to that, we add the addition in growth markets of Europe and Japan. This drug is now approved for refractory MAC in all 3 of those areas. Our commercial operations are up and running. And while Europe takes time to secure its reimbursement, it is beginning to see success in that regard. So that's encouraging. And of course, Japan has just launched for about 2 months in and early signs there, and notwithstanding the fact that their vaccination rate is about a quarter behind the US by our best guess and the presence of the Delta variant, the early signs there are good. And I think you're going to see Japan contribute as we move into next year for sure. We're just going to have to get through this Delta variant pressure, this overpressure we're facing at the moment. We've done that before. The team is doing exceptional work in finding ways to continue to help patients where they can. But logistically, if you have a sudden influx of patients into the ICU and those ICUs are overflowing, the pulmonologists must be in that setting. They don't have the physical ability or telemedicine ability to diagnose and treat new patients. It's a temporal aspect, but it's a real one for anybody who's calling on the pulmonology community at the moment.

Okay. Can we talk about the OUS launches? Maybe let's start with Japan. I've always thought of Japan is an interesting market because of purely the number of patients there relative to the US and some other international market. So maybe just sort of remind people of the opportunity there? And then just how you think about penetrating that opportunity?

Sure. So to start with, we're talking about refractory MAC patients. And this is relevant, because in a little while, when we think about the readout of ARISE and ENCORE studies, we'll be moving to front line treatment, and those patient populations are about fivefold larger than what we're about to talk about. But in the refractory space, in the US, we sort of estimate 12,000 to 15,000 diagnosed refractory patients. In Japan, it's closer to 18,000. So there are actually more patients in Japan diagnosed with refractory MAC NTM infections than there are in the US. Our price point in Japan is at parity with the US. On a list basis, the US, Europe and Japan are the same. It's almost unprecedented outcome that we've been able to achieve, and I think it speaks to the need and the promise of the drug. So the fundamentals in Japan are really strong from the point of view of a meaningful price and a meaningful patient population and the ability to help the patients over there through the contact with these physicians. Our team over there has just done fantastic work. Early on, they put our 20 sales reps in the field, promoting a generic antibiotic that allow them to build relationships with NTM treating docs. So they used this generic antibiotic as a basis for a dialogue to begin their relationship building. And then once our drug was approved in March, they were able to immediately shift and start talking about ARIKAYCE. So as we got to the launch in the beginning of the third quarter, those relationships were built, patients have been identified, we really were in a good place. And of course, the Delta variant hit and the vaccination is overpressure. But I think that opportunity, we're very excited about. Will it be a US launch? No, I don't think so, but it will be a meaningful launch. And I think however muted it may be out of the gate, as we move into next year, we really look forward to Japan being an important contributor. Europe too will be coming online. It goes more slowly for every new drug approved in Europe, you then undergo the process of reimbursement. And securing reimbursement in Europe can take a year or 1.5 years. So far, we've gotten reimbursement secured in Germany and the Netherlands. France has taken the unusual step of extending their temporary authorization program to us during the time of our negotiation. We will shortly have the UK and Italy approval -- reimbursements secured. So that next year, Europe should have those countries online and reimbursed. And while that's a smaller patient population, its diagnosis number is around 1,400. Nonetheless, we're looking forward to that coming online as well. So all 3 of these, as we get to the other side of Delta, should really start to kick in and provide a meaningful opportunity for that first indication of refractory MAC. From there, obviously, with ARISE and ENCORE, presuming that those readouts successfully, we then get to turn to accessing front-line patients. And that, as I said, is about a fivefold increase in addressable market, in both the US and Japan and possibly Europe.

And when you think about Japan, you said we shouldn't expect it to have the similar launch dynamics to the US, but just given the price and the patient numbers, should -- do you think it's possible that peak sales in Japan can ultimately be the same as the US? Or if they're not, what are the factors that are going to limit that?

Yes. I think we've got a lot to learn in Japan, to be very candid. And this is an unusual circumstance where the population of identified patients is larger there than it is in the US. Precedent here wouldn't suggest that you would see Japan match or outstrip the US, but you would see a meaningful performance out of Japan. And I think we feel comfortable based on the strength of the team over there and what they've been able to do that, that is something we can look forward to. What's unclear is the slope of that journey because of the overpressure of COVID and their relative position in terms of vaccination.

Okay. Good. Well, you've alluded to it, so maybe it's a good time to transition to front line and just talk about progress there and remind people because you have somewhat of a unique study design with one study influencing the second. So maybe just remind people about basically the timeline of how that plays out and ultimately the data we should be looking for?

Sure. And here, once again, we always like to be students of other companies and what they've learned through their clinical trial experiences, the use of a PRO as a primary endpoint, in this case, for front line approval is required by the US. Japan, we believe, will be culture conversion. So this PRO discussion really relates only to the US market. But to generate a novel PRO for the examination of patients who are undergoing treatment in front line required a lot of work, obviously, and we have a lot of experience with these patients, but we wanted to be sure that it was going to work. We saw what happened with Global Blood. Their PRO didn't perform as they expected. They still got their drug approved, but there was some headache around that. And so we wanted to do a dry run, if you will, a sentinel study to ensure that the PRO is going to capture the impact of our treatment the way we think it should. And so the ARISE study is 100 patients, 7 months in duration, where they'll be treated and checked at baseline and then 1 month off of therapy to see what the impact is on the patient-reported outcome. And we believe that, that should work to show benefit from our drugs inclusion in the treatment regimen compared to an active comparator arm. If that is the case, and the PRO works as expected, nothing changes. The ENCORE study, which is the definitive study for full approval in front line, that study is 13 months in length, and it will be running in parallel. So both of those studies are enrolling right now. If the data from the PRO ARISE study somehow indicates that we need to weight certain measures differently because our drug is having a better impact on one measure versus another, for example, sputum expectoration versus cough, if we see a better impact on sputum expectoration than we expected, we can go and adjust the weighting in the definitive study, because it's still blinded. So as long as that study is blinded, whatever we've learned from ARISE, those learnings can be applied. So that gives us a really good chance of basically 2 bites at the apple to ensure that, that study is successful. And so that's the sort of novelty of the design running those 2 in parallel, but we think it's the right way to go to ensure the best possible chance of success for approval in front line. And so doing, not only do we increase the addressable market fivefold, but we position ourselves at becoming the new standard of care in the treatment of any NTM patient who is diagnosed around the world.

Okay. And do you have to -- I mean, I guess one of the common questions I get is, if you want to change the weightings, do you have to go talk to the regulator or this purely can be done totally by you independent of the regulator?

Well, we've had this socialization of the concept of making adjustments based on the learnings, and they are understanding and supportive of that. So that's not a provocative concept. I know it unsettles people sometimes to hear, what do you mean? Why are you going to change the endpoint of the study? You can change the statistical analysis plan of any study before it's unblinded. The trick is to make sure that it's not unblinded. We're running 2 studies that are identical. So the learning from one informs the other. And by making a little bit shorter in reports out earlier, and that's where we'll have the learnings. And in fact, as that data becomes available, we'll be able to share that with the marketplace to give people confidence that, that ENCORE study will perform, we'll get that front line approval in the US. And as I said earlier, the culture conversion measure, where we already have a great deal of conviction will win, will be the measure for Japan, which is important because it's a very sizable market.

Okay. Good. And then I guess the second question is just investors have sort of looked at -- and I know there's been a lot of external factors, which have skewed sort of what's happened with sales in refractory patients, but they sort of look at what's happening with refractory. And I think a certain group of investors, right, are skeptical of the ultimate market size in front line. So maybe you could just talk about the work you've done to think about the market size in front line, to think about what the competitive pieces will be from the generic drugs there, and ultimately, how you gain a sizable chunk of that market, assuming you're successful?

Yes. I think it's a perfectly fair question. One of the good news -- one of the good pieces of information we have is that we know we work in the hardest to treat patient population. So this label expansion strategy is actually going to the easier end of the spectrum in terms of difficulty to treat. And our drug, we know, is highly effective from its success in refractory patients. It stands to follow, it should be effective in the front line setting. What we're really trying to do is create the definitive data that allows a physician the understanding that they want to start patients earlier and treat them more aggressively to ensure that they don't progress to become this refractory patient. One of the things that typifies a refractory MAC patient is not only do they have this degrading situation of lung damage and continuing infection, but it never seems to go away. And one of the things that a lot of the KOLs guide us toward, and they were very intimately involved in the design of the study, is a potent intervention earlier to eradicate this so that those patients don't have that pulmonary damage. So I think that data when it comes out and shows both faster time to culture conversion, more superior culture conversion and patient-reported outcome benefit, which is what this trial should demonstrate, is really a definitive answer to that skepticism. And once it's there, I think we'll be able to use that data effectively. Our commercial group and our medical affairs team is very effective and has proven so in this area, where we really are the only major player who's done anything at NTM in decades. I think as we've unlocked this market, people have realized it's much bigger than they originally thought. As we move into front line patients, assuming that the trial is successful, I know we will have the support of the key opinion leader community, and I think just as we've been included recently in the guidelines with a strong recommendation for use in refractory patients, it would be my expectation that we would become the definitive treatment for front line patients and included in the guidelines in a way that expresses that.

Okay. Good. Maybe in the last couple of minutes, we should touch on Brenso. Just give people an update there on how things are progressing with that study?

Yes. So this DPP1 inhibitor we have is coming off of the WILLOW study, which was successful in the treatment of bronchiectasis and reducing exacerbations. We're now replicating that study in a sizable Phase III program that is well underway and enrolling patients. It's on track. We haven't seen much in the way of impact of COVID in terms of putting over pressure on enrollment. What I would say that is also encouraging is that on a blinded basis, we're also tracking the number of events in this study. So are we seeing the number of pulmonary exacerbations we expected to see, both overall and then on a geographic basis, because we want to make sure that COVID or the wearing of masks or something along those lines doesn't interfere with the ability of patients to have those exacerbations. So that we know our drug has the opportunity to demonstrate its effect. And indeed, we have not seen any impact on event rate. So that is a very encouraging sign as we go through this study. If we look at other studies that have come close and then ultimately failed, it's because they underestimated or overestimated the event rate within the study and consequently, their powering was inadequate. So I feel really good about where this study is. It's going to be the definitive study. This is a first -- just like NTM, this is the [ first in ] disease opportunity for us. And if we can win here, I think this will accomplish our internal ambition to bring forward a therapy that will address a market sizable enough to justify our transition from a multi-product development company to something in the zip code of an Alexion or Vertex, companies who have owned a particular disease that's sizable enough that [ accountable ] to them into that next echelon. I think this drug and this disease state fit that description, and they are augmented by ARIKAYCE and TPIP, and indeed, our fourth pillar, which is in translational medicine, where we intend to be bringing forward some programs from that engine as well. So collectively, I feel the Company is as strong a place it has ever been in the 9 years I've been here. We're sitting on $928 million of cash as of the end of the second quarter. So we have the resources to go after these indications, and these are very promising opportunities. I match our pipeline against any small to mid-cap company right now and feel pretty good about coming out ahead.

And, Will, maybe just to finish out, I mean, you've talked about other potential indications for Brenso, how should we think about you guys prosecuting them? Or do you feel like you got a full plate right now with what you're looking at across the pipeline?

There's always room on the plate, but it's got to fit that asymmetric return profile that I always look for. And where that has been clearly identified is in cystic fibrosis, so we are running a PK/PD study with Brensocatib in cystic fibrosis patients. Patients who are successfully treated with Vertex's drug are effectively bronchiectatic. They still suffer from exacerbations. And so we represent the opportunity to be that final mile to bring those patients back to a better state of health. And so we're going to be pursuing that aggressively. Beyond that indication, and we'll have that PK/PD study, which is getting underway now, we're looking at 2 other indications that we've identified that we intend to bring forward into the clinic within the next year or so, and we'll have more to say about that in the coming quarters. But this is a byproduct of a lot of preclinical work and a lot of examination by our team, and there's a high degree of conviction that we can have impact in these disease states, and we'll have more to say about what those are and what that looks like. I think what we're looking at here, and this is why I invoke Alexion is that this mechanism, this DPP1 inhibition is really a pathway that we have unlocked. It's not just its impact in bronc, it's the fact that any neutrophil-mediated disease may be benefited by the intervention partially of DPP1 and inhibiting that, so that those enzymes are releasing an inactive state. The consequence of that could be benefit in bronc, CF, we've seen preclinical data in rheumatoid arthritis and lupus nephritis, we're seeing it in a lot of other areas, we're working on the intellectual property protections around that. And the next 2 disease states are not the ones I mentioned, but they are ones that I think would be well positioned to be additive, assuming that bronchiectasis is successful, so that we would daisy chain into multiple indications and an expanding label over time.

Great. Well, good. Will, thanks for being here. Thanks for helping us go through the pipeline, and look forward to maybe seeing you in person in a few months' time.

Yes, thanks very much. Appreciate the opportunity. It's a lot to cover in half hour. So thanks.