Insmed Incorporated (INSM) Earnings Call Transcript & Summary

Hi, everyone. Thanks for joining us. My name is Leiyang Wang, and I'm covering SMID Cap file over here at Barclays. I'm pleased to be joined by Sara Bonstein, the Chief Financial Officer of Insmed. Sara, thank you for joining us.

Yes, thanks us for having us. Really appreciate it.

Definitely. So you want to do a little intro with -- about Insmed and then we can get into questions?

Sure. So I'll be happy to give you an overview of -- a high-level overview of the company. As you know, our focus is a serious and rare diseases. And what I -- as we think about our North Star, the patient, it's really about how do we develop either best-in-class, first-in-class, best-in-disease, first-in-disease drugs with the impact to our patients hope have best impact to patients. So as we take those as our guiding principle. We have opened down the company. For our first pillar ARIKAYCE, ARIKAYCE is a commercial product in NTM refractory NTM lung disease. We are commercial in U.S., Europe, Japan, and have relative revenue of $285 million to $300 million this year. In addition, we are underway our label expansion study into frontline which would, assuming success, result in a multifold increase and we'll have data from our frontline program third quarter of this year. Our second pillar, Brensocatib, that's our DPP1 inhibitor that we in-licensed from AstraZeneca back in 2016. That program with a couple of different indications with Bronchiectasis is our leading which we are in pivotal now. We will see in that very large Phase III program this quarter and the look for top line results, second quarter of 2024. And then we will also look to start our Phase II and CRS without nasal polyps. Our third product, our third program, TPIP, Treprostinil Palmitil Inhalation Powder. We have 2 Phase IIs ongoing today, one in PAH, one in PH-ILD, where we will look to provide data second half of this year on blended blinded data on how high can we titrate up to as well as first half of next year, we'll look to provide top line results in ILD. And then lastly, our fourth pillar, which we refer to as our early-stage research and that we will look to have an R&D Day May 8. Where we really dive into all the different facets we have going on in our research engine and be able to provide more information then. All of that is backed by a very secure balance sheet, over $1 billion of cash to allow us to reach these catalysts.

And so why don't we kick off with ARIKAYCE? You came off a very strong year sales, but it's interesting in terms of the sales for this product. You've launched before the pandemic, then you had 2 years during a pandemic, which was very much took away your main prescriber base. But then as you think about the U.S. coming out of COVID I think 2023 pretty much COVID is afterthought at this point. Where do you see the sales increasing on the margins? Like what patients do you think you'll be able to capture? And how or -- how have you adjusted your commercial sales force or any sales strategy to basically make guidance.

Yes, yes. So we were really proud of the achievement in 2022. We put up $245 million, which represented a 30% growth year-over-year, which was the goal we set at the outset. So really proud of the commercial team and the broader global team to be able to reach that goal. In 2023, we have now put out guidance of $285 million to $300 million, again, continued momentum, continued growth. In the U.S. specifically, we are entering our fifth plus year launch. We launched back in 2018, and we really kicked off with a remarkable start putting up well over $130 million in its first full year of launch where The Street thought we put up about $50 million. So really top 10 rare disease launch. COVID was obviously a challenge across the board for folks, especially for a respiratory drug. What we found in that time is we were able to continue to show consistent performance, which I think was remarkable knowing that diagnosis rates were down. And then as recently as last year now be able to return to growth in the U.S., we grew about 15%, 17% in 2022, which was remarkable on a stand-alone basis. U.S. sales force is now fully back to pre-COVID levels. We do believe this is a promotionally sensitive product. And our sales force is now back to pre-COVID levels. It's wonderful getting access to physicians. I think the -- had we not still insist and this is an Internet or anything specific? Is this to health care industry in general and the shortage of health care workers and available appointments and those types of things. So the headwind that patients may experience access to their physicians still exist. But we have to remember, these are patients that have established relation with ID doc. And we've been really encouraged by the performance to date as we enter 2023.

Got you. And in terms of quarter-over-quarter performance, do you see any potential seasonality trends that may be potentially more notable now that we're coming out of COVID versus being in COVID where everybody was kind of just stuck at home and with limited contact with no outdoor activities and those some type of things?

U.S. specific or more broadly?

U.S.

YYes, perfect. Perfect. So what we see as all price very drugs, you always see Q1 is the total -- so that is again ARIKAYCE-specific what we see historically and that would be different this quarter. So that's really the only sort of seasonality component I would mention. You can say a week year 5 of launch in the U.S., are we in year 3 because of the COVID entrance over those last 2 good years and our commercial team is really focused on sort of open like we are in the third year of launch and continue to [indiscernible] .

Got you. And Japan is a key territory for ARIKAYCE. In 2022, that country has been hit by COVID. And really the progression of how they're coming out of COVID is different from what we're seeing over in the U.S. So can you talk about kind of what to expect in Japan being at such a -- it's going to be more and more of a revenue driver? And quite frankly, it seems to be perhaps at an earlier stage, well, it is at earlier stage we launched. So now are we looking to perhaps do 30% plus? Or anything that can kind of help quantify what your expectations are?

Yes, yes, absolutely. So Japan was obviously an important contributor to our revenue last year, put up $55-plus million and had a lot of headwinds. Japan with COVID, I think last year, early this year, they were on their eighth or ninth wave of COVID. Our Japanese colleagues were in a position where they needed to launch this product in the middle of COVID and in the middle was locked down, and we're still able to produced what I would consider a meaningful contribution to the global number, that $55 million to [$1 million] last year. As we progress into 2023 and beyond, I believe that there is continued opportunity for growth in Japan, specifically. While I can't quantify it per se because we kind of disproved promotions at the global level. What I can say is, Japan has a lot of opportunity, 15,000 to 18,000 diagnosed patients, actually slightly higher than the U.S. in numbers. The patients are there. This is something they screen for. Annual physical or is it something that the Japanese regulatory authority are asked to file early the year drug. I think the access to physicians has been a headwind because the country has been locked down. I had the opportunity to finally visit Japan last month. And so that has been -- that was wonderful to be able to see and be with the team there. And access is opening up, it is slower, and I really believe that the second half of the year will be key growth opportunity for the Japanese market.

Got you. That's perfect. So why don't we move on to ASPEN. So as we get closer to the readout in 2Q '24, how has your level of confidence evolved, let's say, from when you initially started the Phase III, and now we're here. Has there let's just say, been anything that you were surprised about throughout the enrollment process or anything you'd like to highlight right now?

Yes. So as a reminder, our ASPEN program, that's our Phase III program in Bronchiectasis. It's an over 1,600 global Phase III. We had New England Journal publication of our Phase II WILLOW data. So obviously, a lot of moment and speed, no approved therapy for these patients. But on the outside of this program, we started enrollment in December of 2020. So right in -- COVID has been with us for a period of time at that juncture, and we were launching global broad respiratory Phase III program. The speed at which we've been able to evolve the program, to put it in context for you, our Phase III is over 50% larger than other development Phase II programs in this space. We have been able to enroll this program just about the same amount of time, a little over 2 years, and that was during a global pandemic. So that gives me a ton of confidence on the need for this drug from patients and the acceptance of the medical community to offer this drug and then to be able to enroll such a sizable program. We probably could have rolled it faster, but we don't have quality we focus on countries in one country would enroll a disproportionate amount of patients. We were very thoughtful on execution criteria around the strictest definition of what an exacerbation is. We powered this program to win. Obviously, work at the end of the day. But the way our philosophy is on drug design is design, the development program to win to don't design to have any gaps that we have overpowered WILLOW our Phase II 80% powered for a 40% reduction. We powered this 90% for a 30% reduction. If there's one complaint that one can give me is you probably anamnesis it's theoretically taking longer and costing more. That's a complaint I'm willing to take to be able to the best ability to be successful for complete screening. We announced that last last-month on earnings. Earlier on track to complete enrollment by the end of this quarter. And I guess we're on track to share data top line second quarter of '24 and remarkable that we've been able to stick to those time lines that we set out right from the beginning of the fiscal.

And digging a little bit on ASPEN, so in WILLOW you talked about hyper exacerbaters and that might have influenced the readout for not having a clear dose response. Can you talk about kind of what we've done to perhaps what you've done in terms of the hyper exacerbation patient populate? And should we see a stratification on the readout or before the readout on how many exacerbations that these patients have from a base-line perspective?

Yes. So one of the learnings that we have from our Phase II study is the inclusion and exclusion criteria as to more exacerbations over the prior 12 months. And so what we saw in WILLOW is we had several hyper exacerbation, meaning they had many exacerbations in the past 12 months. And just sort of the labor [indiscernible] , they all got put in the 25-milligram arm that skewed some of the data because you have some of our exacerbators. Despite that, we were able to in our Phase II static on the primary endpoint primary and secondary in the 10 and primary 25 trending on secondary. So again, we're able to show a success in that program. But we took those learnings and so we stratified for hyper exacerbators. So few exacerbations in the prior 12 months, you would be stratified between the 3 arms 3 or more exacerbations in the following 12 months, you would be set by. More numbers that may have worked out what the strategy is of the program, but we have said as to be brought down with -- we made that stratification. I know we have got some questions on, are you going to share the base-line characteristics and those types of things. We will be thoughtful what makes sense from the medical meeting perspective on those comment on that today. We know everyone is very eager for this data. We fast forward to 2Q of '24, but really, really proud of the team's accomplishments thus far to get this very large global program.

And one of your criteria, and correct me if I'm wrong, was patients who exacerbate within, I think, the first -- within the past 4 weeks or something similar to that. Can you talk about the meaningfulness and how does that kind of influence the potential ASPEN doubt? From our conversations with KOL docs, there seems to be some evidence that folks who have exacerbated recently are more likely to exacerbate, and can you just help about that dynamic?

Yes. So if a patient has experienced exacerbations, they're more likely to experience more frequent exacerbations in the future, right? So the goal here for patients is to reduce the amount of time they exacerbate and they don't want that to have the build-on effect for the patients. And so as we think about sort of the importance of this for the patient, and we want to -- the goal of the drug, right, is to reduce the time to exacerbation and the frequency of how much they are exacerbating our drug specifically takes 2 to 4 weeks to reach full effect -- and what we saw in the WILLOW is we were able to see that we were able to have an effect on time and frequency of exacerbations that have a meaningful impact. So we hope to show the same thing and reduce the amount of continued pressure on these things.

Got you. Okay. So -- and you are pursuing other indications for Brensocatib and Bronchiectasis. CRS without polyps. Can you talk about -- are there overlaps between your Brensocatib population and population CRS without polyps? And if there is, were there any learnings from this or any insight that you could provide?

Yes. So as we think about ARIKAYCE, our commercial program in Brensocatib in Bronchiectasis in either non-CF NCF, lots of synergies there from a commercial infrastructure perspective, assuming success and the ability to have relationships with the pulmonologist ID doc. So the idea would be success in the front line labeled was success with ASPEN that commercial infrastructure will be able to support those programs. CRS without nasal polyps is another very interesting disease that we are going to be pursuing. Before this year, we'll kick off that Phase II program. As we thought about what is the next indication or indications we looked at diseases that were inflammatory by nature. And that, again, back to that force disease, first-in-class and where we can have greatest impact. Today, there's no approved drugs for patients with CRS. There's I don't know, 70 million patients worldwide. We're obviously not targeting 70 million patients worldwide. But we believe we can target the superior end of that patient population, probably around 400,000 at initial call. In the U.S. alone, there's 100,000 patients annually against surgery because of CRS. So this is -- we obviously need to show the clinic, but this is where we think that once-a-day small molecule bill higher dropout rate on placebo than in study arm in our Phase II could really see the difference for our folks. It could be an ESP call point with the costs that would be enanthate I said for ARIKAYCE, refractory front line went so Bronchiectasis CF, non-CF, that's the full bag for rent.

Got you. And the dosing that you have for CRS is kind of booking in at 40-milligram and also have a 10-milligram dosing. Is this basically, should we kind of take this as 40 milligrams. We've seen some data and it looks to be safe. But going forward, because there are so many other indications that Brensocatib can target. Should we expect to see more of, I guess, the bolts of Brensocatib trending to the 40 milligrams -- and if that's the case and have to Bronchiectasis as at 25 milligrams. Do you think that there's a potential to see 40 milligrams future for that patient? Or would there be additional benefit?

Yes. Yes. So when we did the [ Gilead ] study, we had the tox work for 10 and 25 with this the rationale to move those 2 doses forward. What we saw in that program was 10 was showing a lot of effect obviously 25 should affect as well. So we think those are the point those out the tox work for 46 -- we went up to 40 milligrams in the CF study that we shared earlier this year. We saw a clear dose response across all 3 MSPs on 10, 25 with clear response on what any all 3 of the study sort of run of an MSP in this space. So a lot of confidence on dose response for the mechanism in general. As we evaluated CRS, we have said moving forward with 10 and 40 development perspective. We're going to be thoughtful on how much we invest in each one of our pillars. And so we will progress this forward. And we've not looked to progress another indication forward on identified until after the ASPEN card.

Okay. So in terms of the now moving on to -- probably the second was talk about readout outside of ASPEN and that's ARISE. Can you -- so -- there's been some confusion regarding the just for those maybe unfamiliar. Can you give us a quick background? And really, what should investors expect on the readout in the third quarter.

Yes. So third quarter will be the readout for ARISE. That's our frontline program. As you know, there's 2 frontline programs. ARISE is the first of them. ENCORE is 12 we advised that we look to be doubling is for the PRO for respiratory at for those 2 domains, all be able to see directional change, a difference between treatment arm versus non-treatment arm. Obviously, ARISE is not powered statistically significant. That's what ENCORE is for, but the idea is to be able to show a directional difference between treatment and nontreatment arm. We will also look to show for culture converted effects and time on culture conversion and then the correlation between those. That complete data package is what we will look to share with you all in third of this year. One of the goals out of ARISE is as though there's not a validated PRO for NTM patients today. We have taken a question here Q1 will be from a fatigue and all our knowledge in the space to create what we believe is the appropriate PRO for NTM patients, but any learnings that we get out of the ARISE program, we would be able to make any adjustments, if necessary, and how that be affected in ENCORE, as ENCORE will still be blinded and it would essentially be a change in the SAP for ENCORE. So same data would be collected and all of that has been discussed and aligned with from FDA. So if we do need to make change, what those changes would be, we obviously need to talk to FDA first. So we won't be able to communicate that in this quarter, probably take a couple of months to have those conversations, but we will be parent as we count with the market around what the change are we seeing on [ 0 ] scores baseline to 1 month after therapy as well as what impact are we seeing on cultural conversion time to an effect of and then the correlations.

Can you talk about some of what you have seen in terms of conversion in the first line? Would you say that there is a bar to hit more percentage culture conversion at this point?

Yes. So it depends on what trading position you asked on, what they see in culture conversion for their frontline patients. So it varies. What we are really looking to show is how much change and how much effect can we have on increasing conversion and your refractory setting, we've been able to show [indiscernible] setting 5-plus years in market of effect on culture conversion, so much so that we're seeing the refractory setting patients complete therapy, culture convert, clear their bug, get reinfected with [indiscernible] come back on therapy -- and that, I think, also to be dense on how effective this drug is and the patients you're seeing as well as.

So one1 of the other things that was surprising about why is that the discontinuation rates were a lot more than what you've seen before. So a couple of questions in the time we have left, has your discontinuation rate in ARISE while you're enrolling, has that kind of always trended around. Basically, has there been a change between when you first started well discontinuation versus what you see now in terms of discontinuation.

Yes. So what I can comment on the discontinuation rate in the refractory pivotal program, we saw a little over 30% discontinuation rate. In ARISE, we saw a 15% discontinuation rate. So that we were really encouraged and excited about as frontline patients or they going to be less formal therapy -- and what we saw is that there was a very favorable discontinuation rate, and that also gives a lot of confidence in some of the power assumptions for ENCORE because as you think about, we obviously that's a low discontinuation rate than what we saw in the refractory setting so that it gives us more comfort in the dividend size of ENCORE.

All right. Amazing Sara, thanks for coming.

TThanks so much for having us. Really appreciate it.

Great.