Insmed Incorporated (INSM) Earnings Call Transcript & Summary

Hello, everyone, and welcome to this session of the Nasdaq Investor Conference. My name is Laura Hindley. I'm an analyst in the Morgan Stanley European pharma research team. And I am delighted to have with me Will Lewis, the CEO and Chair at Insmed. 2024 has been an incredibly strong year for the company. To set the scene, Will, would you like to give us a brief introduction just for those of us who are a little bit less familiar?

Sure. Thank you for the opportunity to come here and to talk to you all. 2024 has indeed been a fantastic year for Insmed. Insmed is a company that is built up around what we noncreatively describe as four pillars. The first of those is our first product called ARIKAYCE that is approved for the treatment of a condition called refractory NTM. The important thing to know about that is there -- up until we arrived, there was nothing approved to treat that condition. And that has been very successful in the U.S., Europe and Japan. That call point where that commercial infrastructure focuses is the same place that our second drug, brensocatib, will be sold. Brensocatib, assuming it's approved as expected, had its Phase III data readout this year. And this was really the catalyst that put the company on radar screens where it was not already. We went from around $20 a share to, in a day, $50 and now sit in the $70s as a byproduct of this data readout. We'll come back to that, I'm sure, and spend more time on it. But importantly, that drug not only unlocked great data for the treatment of one condition called bronchiectasis, but it unlocks the potential drug as a mechanism of action that is applicable in a broad range of diseases. And that's where a lot of the value is really embedded. And then our third program, our third pillar is a drug for the treatment of pulmonary arterial hypertension. That one had good Phase II data this year and has another Phase II readout next year, and that's quite exciting. We talk about that as well. And then we have behind all that a research platform that is comprised of several different platform technologies we acquired over the last several years. So the picture here is a company that is already commercial in the U.S., Europe and Japan, has a rich pipeline of late-stage programs that include multibillion-dollar potential product applications and a broad research platform behind it that will be able to produce drugs that will answer the question of what's next for the company for many years to come.

Perfect. So if we kick off with digging into brensocatib. If we start with an overview of bronchiectasis, how it impacts patients, lung function, quality of life, where is the unmet need with current treatment? And why is this drug so important?

Yes. So if we think about the conditions we target, we always try to be first or best-in-class for any drug or a disease we're targeting. Bronchiectasis is a good example. This is a disease that has nothing approved to treat it right now. There are more than 1 million patients diagnosed with this condition in the U.S., Europe and Japan, where we have our existing commercial infrastructure. The condition itself is sort of, they call it, a vicious vortex, their words, not mine. But it really represents a situation where the lung has poor mucociliary clearance that creates an environment where infection can take hold. The consequence of that is patients experience something called an exacerbation. An exacerbation is like a heart attack for the lung. It does permanent damage, it's debilitating to the patient, it often requires them to be hospitalized. And the consequence of that is the cycle continues. They now have even worse poor mucociliary clearance and the cycle, as they say, continues on. And so that vortex of complications makes the patient worse and worse. One of the most noteworthy things from our Phase III trial was that we saw patients on our 25-milligram dose actually saw preservation of lung function, which was unexpected. That suggests as many of the key opinion leaders have stated, that this drug is disease-modifying. And that is a very exciting thing for patients, who've never had anything to treat this condition before learn about, and it's what the physician community is so excited for its arrival.

Yes. Well, you touched on it there. The Phase III ASPEN data were one of the most highly anticipated readouts in biotech this year. Can you again just dig a little bit more detail on the data? Anything that you would pick out that is particularly interesting, particularly relevant? You touched on that 25-milligram disease-modifying status, but anything else that you can share with us?

Sure. So just to refresh everyone's recollection, this was a trial that was very substantial, 1,700 patients, 450 centers around the world, a global trial designed to answer definitively whether or not our drug, which had had such good data in Phase II could, in fact, replicate that. For those that aren't aware, bronchiectasis is sort of a graveyard of drug development. No one has ever been able to be successful in it. And if you look at history, some very substantial and well-capitalized companies have tried repeatedly, and every time, they've fallen short. So that's one of the reasons why there was so much enthusiasm for our drug results this year. It was described at the World Bronchiectasis Conference as the vertex moment for the disease of bronchiectasis. And that's because our trial showed that we were able to hit the primary endpoint, which is a reduction of pulmonary exacerbations, but also a delay in the onset of the first pulmonary exacerbation, the increased probability that you would not have any pulmonary exacerbations in a year. Patients saw a preservation of lung function at the 25-milligram dose. We saw nominal statistically significant improvements in patient-reported outcomes. So just across the board, the efficacy was fantastic. And that was coupled with a safety profile that was comparable to placebo. There really was no distinction between placebo, 10 or 25 milligrams in terms of the side effect profile, which was really encouraging to see for a chronic medicine.

Okay. And in terms of steps to market, you intend to file for approval in the U.S. this quarter. Is that right?

Yes.

And is there anything outstanding ahead of the filing? And when can we expect you to communicate the filings is being accepted?

So the filing being accepted is something that happens at what they call the day 74 letter from the FDA. So once we've filed, the clock starts ticking. And 74 days later, the FDA will produce a written document that indicates whether they think there will be an Advisory Committee meeting, whether they are going to give the drug accelerated approval, so a shortened time line to approval, and also what the PDUFA date or the approval date is forecast for a decision. So once all that information is in our hands, we will obviously share it on day 74 in a press release. But between now and then, you sometimes get reports back from FDA, but they can be incomplete. So we just guided everyone to let them know that sometime in the first quarter, we'll provide the day 74 letter update.

And what is -- what are your base case assumptions around those scenarios of priority review and potential scenarios there?

So we're designated a breakthrough medicine in the U.S. under the FDA. So we should -- we expect to get priority review, but you never know. An Advisory Committee meeting is often done for novel mechanisms of action or new first entrants in the diseases. There aren't really scientific questions to be asked from our point of view given the strength of the data that we saw in ASPEN. But the FDA might want to do this, frankly, to celebrate the accomplishment for everyone in the space and -- because we fully expect competition to come along for them to maybe characterize what they would expect to want to see from anyone coming after us. So for a variety of those reasons, they may have an Ad Comm, they may not. PDUFA, if we get accelerated approval, is going to be sooner. We've targeted sort of a launch in the middle of next year. But of course, that will be dependent on what the regulatory authorities say.

Okay. And then given your prior experience commercializing ARIKAYCE and looking at kind of comparable analogs from different disease spaces, how are you thinking about your launch strategy? And you've guided to $5 billion peak sales or over $5 billion peak sales. Can you again speak to your confidence in the commercial power that you have at your organization to achieve that?

Yes. So I love talking about this story because this was our first commercial outing in ARIKAYCE with refractory MAC. That was a disease condition that the most aggressive models from Wall Street at the time thought we would do about $40 million to $60 million in our first year in terms of sales, and we ended up doing $133 million. So the team that we have, that launched ARIKAYCE, is the same team that's going to be launching brenso. And that is a very exciting prospect because all of the call points are the same. It's the pulmonology community. It's a thought leadership community. And the same experts in the field of NTM are the experts in bronchiectasis. One way to highlight this, the COPD Foundation in the U.S. is in the process right now of certifying 150 different centers across the U.S. as centers of excellence if they meet certain criteria in the treatment of NTM and bronchiectasis, the two diseases for which we're going to have therapies available. So it's a very exciting time for patients in those communities because both of these represent first-in-disease treatments. And from that point of view, we want to make sure that our bronchiectasis launch is as successful as our ARIKAYCE launch. The way we're going to accomplish that is to increase our resourcing. So we've added another 120 sales reps in the U.S. We had 64. So that takes us to 184. Just to put in perspective where the market is and their perception of what this launch could be like, we had over 7,000 resumes for the 120 positions we were hiring. It gives you some sense of how broadly appreciated the success of this possible launch will be in the pharmaceutical world. And to that end, we started our disease state awareness already. Those 184 sales reps are now fully trained and in the field as of October 1. They're detailing ARIKAYCE, but they're also providing disease state awareness on bronchiectasis. Equally important to the call effort with the physician community is the market access world, so the insurance companies, et cetera. That work began over a year ago, and we have some fantastic people we've added to the team to help with that effort. I would describe that as going very well. For everyone's orientation, we put out some guidance on the range of where the price could end up for this drug between $40,000 a year and $96,000 a year. That's based on precedent drugs like Fasenra, which is a specialty drug for the treatment of a population of asthma patients that is run by AstraZeneca. That's priced at around $40,000 a year. And at the upper end is the treatment for a condition called idiopathic pulmonary fibrosis, or IPF. This is another respiratory condition. And those drugs are priced at about $96,000 a year. So anywhere in that range, we would be very comfortable based on the dialogue we've had with the market access world. And excellence of launch means you have market access lockdown. It means the disease state has been locked down in terms of education. That's underway. We feel really good about all of this preparation. And I would just say that what we've heard from physicians has been just a very loud endorsement of this compound. I think it's going to launch extremely well. You started out the question by asking me about precedents. We look at, in the world of excellent launches at the lower end, if you just, let's say, take quarters 3 through 6 after launch. So the first calendar year that we would expect to be facing, the low end of that range, you could see $400 million to $500 million in revenue. At the upper bound of that range, it's around $600 million. So anywhere in that range, we could be -- if you combine quarters 3 through 6, and that's what highlights just how exciting this is. The ultimate potential of this drug at north of $5 billion in peak sales is just for bronchiectasis, just in the diagnosed population at launch. I want to be really clear about this point because it should give you some idea of how big this could get. We've said north of $5 billion in peak sales for just the diagnosed patients at launch. In the U.S. that's 0.5 million patients. Behind that are patients with COPD or asthma that are either misdiagnosed or are comorbid with bronchiectasis. That represents several million more patients beyond the initial 500,000. That doesn't include subsequent indications where we're already running clinical trials.

And I think that's a nice segue into the subsequent clinical exploration. So can you remind us of where you are with the Phase II BiRCh study for chronic rhinosinusitis without nasal polyps? What's the next potential catalyst for that program? When can we expect data? What are your expectations?

Yes. So this is a super exciting follow-on indication. We kicked off the Phase II work for this before we knew the Phase III data of brensocatib in bronchiectasis. Chronic rhinosinusitis without nasal polyps is a condition for which the only approved medicine is an inhaled steroid. And it's a generic steroid. So there's nothing remarkable about that and it doesn't really help the patients. There are 26 million people in the U.S. that have CRS without nasal polyps, and there is nothing novel approved to treat it. So that provides an enormous indication and opportunity behind bronchiectasis. We are going to have the BiRCh study results -- the Phase II results next year, before the end of next year. And that will unlock potentially a market opportunity equally as big as the bronchiectasis market. So it's a very rare thing to have a drug on the market at a call point that is entirely pulmonologists. You then add a second product that the call point is at the exact same place. And then the indications for both of those products are bigger, the second indications than the original indications. It's just a very interesting time to be around Insmed. I've been here for 12.5 years. When I started, the company had 30 people. We have 1,200 now, and we have these two drugs that are right on the verge of launching either their first or second indications, and they should carry the company in terms of value creation for many years to come.

And you're also looking at the drug in HS, hidradenitis suppurativa. Again, what are the next catalysts for that program? And what can we expect there?

So I'm pleased to say that, that program just kicked off. We opened our first site to begin enrolling patients this quarter and so that should begin to recruit patients. And once we understand what that looks like, we'll give a better indication of what the time line will be for data readout. .

Perfect. And then if we move to ARIKAYCE now in a bit more detail, you've sustained continued double-digit growth year-on-year since launch. Can you speak to the drivers behind that? And then how sustainable is that double-digit growth going forward?

It's a very interesting disease state because basically, the pathogens that cause this infection in your lung are ubiquitous in the environment. They're in the air, the soil, the water. And if you are -- have a propensity to getting the infection, you're going to get it more than once in all likelihood. In fact, one of the KOLs in the field described it as a condition where once the patient joins his clinic, they never leave. And the drug that we have is proven to eradicate evidence in our clinical trial studies. So it is really a very important medicine for these patients. It is strongly recommended for use in the international guidelines. That's been a key part of why we've been able to continue to grow its consumption over the last 7, now going on 8 years, at double-digit rates. Incidentally, we haven't provided guidance for the future, but I certainly expect that kind of range to continue. And I'm very excited about what the team has been able to do with what we had. We've just added 120 additional sales reps. So with 184 reps, we should be able to continue to see that growth come along. But fundamentally, you have a disease that's incredibly debilitating. There's nothing else approved to treat it. And every drug that has been attempted in the last several years to treat this condition has failed. Companies like AN2 and Spiro have really struggled to show that they can create a medicine to impact the disease. We hope they do because then this becomes a combination market, but it's a very difficult disease to treat.

And then can you set the scene for us with your potential expansion into first line from the refractory setting? You got ENCORE trial data reading out, set the scene for what we can expect there? And then what is the commercial unlock that you can drive if you move into that first-line setting?

Yes. So if we think about ARIKAYCE, right now, we forecasted $340 million to $360 million in revenue this year, and we're still very comfortable with that range. The addressable market to generate that in the U.S. is about 12,000 to 15,000 patients, and in Japan, it's about 15,000 to 18,000 patients. If you look at the all MAC NTM population, the next population we're targeting, it's about 100,000 patients in the U.S. and about 140,000 in Japan. So a very significant expansion in the addressable market population and something that we believe we'll be able to demonstrate definitively we can treat effectively. We have two studies we had to complete to get the broader indication. The first is called ARISE. ARISE read out a little over a year ago, and it showed very clearly that we were able to eradicate the bacteria of this infection in over 80% of the patients in just 6 months. That is a dramatic impact on this patient population and bodes well for the success. We also showed using a patient-reported outcome that patients felt better using the drug, which is important for approval as well. So both of those things set us up for this significant expansion in what is already an approved therapy. And we think peak sales as a consequence, if we get that expansion, we'll be comfortably over $1 billion a year. And that's a very dramatic opportunity to have as our base case, to which we will add the $5 billion-plus peak sales we estimate in brensocatib, not including its subsequent indications. And then our third program, which is TPIP, which we haven't talked about yet but represents another mid- to late-stage program that could create substantial revenue.

Yes, that's a good moment to move on to TPIP. So you had two potential indications there, PAH and PH-ILD, and you guided to more than $2 billion in peak sales. Can you speak to the differences between those two conditions? And again, where is the unmet need? What are current treatments missing in both of those spaces? Where can you be differentiated?

Yes. So if you think about pulmonary hypertension as a disease, the constriction of the vessels is -- it causes the right heart to have to work harder, and as a consequence, this is a fatal condition which patients typically succumb as a byproduct of right heart failure. So one of the important things to look at is how can you improve the pulmonary vascular resistance, which is a measure that's used to examine that, among others, can you improve the patient's ability to effectively exercise doing what they call a 6-minute walk test. And using these measures, products have secured approval and a multibillion-dollar market was created by some folks that preceded us. What we are trying to do is bring the very best version of a drug that would represent the cornerstone of therapy in both of these conditions. Why would that happen? Simply put, one of the main ways to treat this is to use a prostanoid, results in vasodilatation or expansion of those vessels, so that, that resistance that builds up inside them is basically alleviated and the right heart doesn't have to work as hard. Historically, the drugs that have been created to accomplish that have passed very quickly through the tissue where that is needed. And the consequence is the benefit of the drug is short-lived. So repeat dosing 4 to 7 times a day is common, and there's no nighttime coverage because these patients don't get the drug administered overnight. We've created a drug that we've shown has a lower peak and a longer trough in terms of efficacy above a therapeutic level so that patients get 24 hours of benefit from our drug, and we can get more of the drug to the patient because of our formulation. The consequence of all of that should be dramatically better results for these patients. And as a result of that, we will become the cornerstone of therapy used in this multibillion-dollar market opportunity. Just to put this in perspective, a measure like pulmonary vascular resistance is one of the important measures. There's a drug called sotatercept, which got to about a 34% pulmonary vascular resistance reduction, and that is superior to everything else that have been seen before that was really in the high teens, low 20s. We think we can get close to or possibly even match that. That drug was bought by Merck for $11.5 billion after their Phase II data. So when I say the Phase II data coming out in PAH next year is going to be significant and a value driver, that's the basis for that assertion.

Okay. And then in the PH-ILD indication, can you speak to how you're thinking about designing that Phase III program, what the factors are that you're considering? And it's expected to start second half '25, is that correct? And then when could we expect to see data from that potential program?

So the Phase III trials that will run for PAH and PH-ILD, which are the two indications we've been talking about here, we're going to kick off both Phase IIIs within close proximity to one another. We're waiting for the PAH data, and we want to complete some tech ops or manufacturing work to optimize one of the doses so that the patient only has one capsule that they have to inhale as opposed to several, just as a convenience matter. So we'll accomplish that so that we can start the Phase III program in ILD by the end of next year and PAH the following year, assuming those data are good in both cases. And that should get us all the information we need. Those trials typically take several years to get accomplished. I think given the strength of our data, if the PAH data is as good as we think it's going to be, that will help us accelerate that pretty dramatically, but we'll see.

And when you're looking at that PAH data, what will you be most focused on when you're deciding whether or not to move to Phase III?

So it's going to be a combination of looking at the pulmonary vascular resistance, the 6-minute walk test. We also look at a measure of something called NT-proBNP. The combination of these different markers allows us to evaluate the impact of the drug on the patient and its likely perception from key opinion leaders. One of the most remarkable things about this space is that even though there's been a lot of innovation that's been brought forward, what we're bringing forward really represents the first time that a patient would have that 24 hours of coverage. And we think that's going to a lot of benefit to the patients on the other side. And what we've heard from key opinion leaders is if we are really able to do this, if we can bring forward this drug and show those data, they will fundamentally alter the way they use the drug and expand it dramatically in the treatment of these patient populations. So I think this is what we refer to in the company as the hidden gem. ARIKAYCE has already proven as a success and it's going to get an expansion of its label, we believe. Brensocatib Phase III data in ASPEN was dramatic and remarkable, and it's a massive market opportunity. But TPIP is every bit as significant and important to this company, and that data reads out next year. So we're going to have, in the first 3 programs, a combination of 3 drugs that would make us 3 for 3, which in biotech -- I don't know that anyone's ever done that before, maybe Genentech. It's very, very hard to have 3 wins in a row. And that really looks like what we have, and they're all going to be reading out and starting at about the same time. So that should create a kind of flywheel of value for our investors.

And then thinking down the line to the scenario where TPIP is approved in those indications, how much of kind of the existing commercial infrastructure that you're building out for ARIKAYCE, you're building up for brensocatib? Could you leverage to support this launch? Or would it be kind of seen as separately within your company?

I would think it as a new sales force construction. And the reason for that is it's a cardiopulmonary call point. So it's a little bit different. Certainly, there'll be some overlap. But also when you have two really important drugs for a call point, you really don't want to add a third because it's too much to try to convey in a meeting with a physician. If you're going to address two and both are novel and have impact on their patients, that's probably as much as you want to give them. And then you create a separate call point. The good news for PAH generally is that it's a specialty call point. So it would not need to be a very big sales force. And the potential of the drug certainly would justify it.

And you often speak about your fourth pillar as being the company's R&D engine. Can you speak more about potential areas of interest and where Insmed might go next with the early pipeline?

So this is 1 of the areas that I'm the most excited about. We haven't really talked about it because people aren't as interested in preclinical data or early-stage data when you have such potent late-stage commercial opportunities. But we have acquired these companies over the last several years when the market correction was in full swing so that we could create these opportunities. We expect to be able to produce 1 to 2 new drugs a year in terms of new INDs from here on out. We're on track for that. We are going to have patients going on to the gene therapy for Duchenne muscular dystrophy next year. That's going to be very exciting to see those early data probably by the end of next year or the beginning of the following year. It's unclear what the timing will be, but it does look like that program is in a really good spot. Behind that, we have a program for ALS, Stargardt. We have programs that are deimmunizing therapeutic proteins out of our team in New Hampshire. We have synthetic rescue taking place right here or just north of here in Cambridge, England under the leadership of Professor Sir Steve Jackson, who is a remarkably talented scientist. So the bottom line is we are looking at the answer to what's next sitting already within the company. One of the biggest things that we like to track is how do you create the next great biotech company. And one of the mistakes that gets made is you have success with 1 or 2 programs and then the company has to go out and do very aggressive business development to answer the question of what's next. We have built that capability in-house so we have that already. We are in a very, very strong position right now. We've got over $1.5 billion of cash. We have readouts clinically that are relevant and very material in the next 12 months, and we have one of the bigger launches in our industry and that's going to take place next year on top of what is already a double-digit growth in our existing product. So it's a very good place for us to be at the moment.

And on that theme, can you remind us of the cash runway that you have right now, your cash position? How far does that take you? What's encompassed within that?

Of course, that's all driven by puts and takes. If we were to have a stronger revenue ramp and we chose to delay or perhaps postpone some of our spend, we could probably get to cash flow positive now. But the truth is that we're not going to do that. If our data is good, we're going to continue to invest in these programs and that looks like multiple Phase III programs in the next 1 to 2 years, which will come with some costs. But that's a cost worth paying in our mind because of the potential that it represents. .

And then we've got a question in the audience here. Thank you.

So can I just ask conceptually how are you thinking about that because you have, I mean, incredibly ambitious plans, very exciting future. But -- so what are the positives of the strength of being an independent company versus having a partnership or whatever way that would look like or even being the part of a large organization? Like what are the pros and cons...

Yes. Sure. And I think my answer to that is it's -- the way we have to approach it or the way I have to think about it, and I do -- and again, in my dark past, I was an investment banker, so don't hold that against me. But it means that I understand how this process works. And I can tell you that companies are bought, not sold. So it's really not any part of our strategy to think about cooperating with larger companies. We're focused on building the next great biotech company. And as a consequence of that, I can assure you, there's plenty of attention coming our way. But the issue that we have is how do we create the greatest value for shareholders by creating medicines that are first or best-in-class for these patient populations. And we think we have a formula there that works, including commercializing.

Can I ask you something else?

Please.

So I think that you have in the past had or you maybe still have something -- some kind of partnership with Google AI, is that right, Google Cloud? So there was an announcement yesterday with Alphabet something about quantum computing, where they're doing their Project Willow finally having some kind of breakthrough. And they're mentioning as potential area for usage in the future could be for drug discovery or for the health care setting. Like from your point of view, how do you think about that? Like is that a pie in the sky and absolutely 10 years away? Or is that something that is very interesting and interesting to kind of explore? Like where are you with that?

So we acquired some artificial intelligence capability through the acquisition of Deimmunized by Design, a company based off of some excellent work from professors at Dartmouth in America. And in fact, I was just talking with Chris Bailey-Kellogg, who is the AI component of that acquisition. He's our leader in this field. And our discussion was about this innovation. It's a quantum computing chip that did a calculation that they estimated it should have taken, I can't remember what the number was, some insane number of billions of years to calculate and they did it in 5 minutes. So yes, I sent him the article and I said this constitutes innovation. Where does this take us? And his comment was this. The Willow chip, coincidently named after the same as our Phase II study for brensocatib was named the WILLOW study, so I love the synergy. But our partnership with Google AI, they are very committed to doing things like AlphaFold and trying to advance how to think about proteins and their interaction and their construction to help on the discovery side. A lot of progress has been made there. When that quantum chip gets to a place probably within the next 10 years that it can be used in a practical way, it will fundamentally transform how we think about drug discovery. But we have to get from here to there. And that process maybe ambitiously looks like it's within a decade, it could be longer. But we are on the cusp, in my opinion, of some tremendously transformative technologies that will really revolutionize drug discovery and ultimately commercialization, how to find patients. Generative AI right now is fabulous at writing things like book reports. I know because I have two children, and they use it, I'm sure, all the time. But importantly, pharma has huge sets of captive data. And to be able to bring generative AI to look at that data and discern understanding, identify parallel patients or even think about how we could summarize that data more rapidly and then examine it more rapidly so that the time for review, it takes us about a year to get a drug -- to write the application, it's 2 million pages of information that goes to FDA when we file, right? So -- and then they have to read it. So if we could bring generative AI to generate that and review it, that could shrink down what is right now about 1.5 years to 2-year process to something that could happen in less than 30 days. It's a very exciting time.

Very exciting time. So thank you all for listening. That's all we have time for. Thank you for your questions, and thank you, Will, very much for that session.

Thank you so much. Appreciate it.