Insmed Incorporated ($INSM)

I am Zemansky. I'm one of the SMID cap analyst here at BofA, and thank you for joining us on this our first day, second half of our Healthcare Conference in Veeva, Las Vegas. Hard enough for everyone. Very pleased to have join us right now. Will Lewis, Chair and CEO of Insmed. Will, thanks so much for joining us.

It's a pleasure.

Perfect. Let's dive right in. So last week, despite reporting remarkably strong [indiscernible] numbers, sales of $208 million up 44% sequentially, there were some concerns raised over the discontinuation rates. So thus far, can you comment on the discontinuation rates and how that tracks to your expectations? And I guess, relative to similar oral small modules.

Yes. So maybe I could just take a moment to set the stage. When we put out the additional information, our intention, which obviously did not go as planned, was to provide the anchor points for what is currently one of the strongest launches in recent years. We are on track to be a top 25 launch of all time in our industry, and we are very proud of that. The team continues to deliver, and we're super excited about it. So we're trying to provide the anchor points that give us the ability to speak with confidence about the future based on the success we've had in Q4 and Q1. There are 2 elements I want you to take away from today. The first is that the execution on the operational side is going extremely well. And every metric we have within our models, we are at or above. And the original model was designed prior to launch, and it has been remarkably accurate and kudos to our commercial effectiveness team for that kind of capability. But what it's allowed us to do is understand that all the things that are unfolding before us, that we talked out on this call were exactly what we expected them to be. And that operational I fully expect will continue. The other component of this that I want you to realize is that we mentioned discontinuation rate. It was but one metric among many. And unfortunately, the Street, I would say, was not prepared to hear that metric. And so on us for not doing a better job of educating the Street about it. But the important thing to realize is it's not isolated as a variable. If you adjust the discontinuation rate consistent with precedent, which is what we said ours at. In fact, we said it that of statins, which are one of the best-performing continuation medicines, the small molecule out there, and we are exceeding that at the moment, which is very exciting. And that process of establishing that caused some people to plug only that number into their model and the Cascade was the peak sales number came crashing down. And that was unfortunate because the other dimension that we should have talked about is the growth of this market. And one of the exciting things that we see within this market is that the total addressable market is growing. The last update we gave you, which was the total bronchiectasis market defined as of 3 years ago. And as a consequence, it does need to be updated. It is growing every year. It grows because of population. It grows because it creates diagnosis. It grows because patients are living even though they decline in health -- it's not like IPF or PAH where they fall off because of fatality. So the incidence rate is meeting the prevalence rate and stacking on top of it and that increases the size of the market over time. So a different way to think about this is if the discontinuation rate that we discussed was incongruent with what was in your model, you could have easily understood if you hadn't adjusted it, that the growing market would more than compensate for that. And that is, again, one of the reasons why we're so bold. So those are the 2 components: great operational excellence, and a growing market that gives us such confidence that the performance you've seen will continue.

Excellent. Maybe we can just delve a little bit deeper into persistence. What are the factors right now that you can drive -- how are these metrics going to evolve over time?

Well, I think the thing to understand about persistence is that right now, we are essentially best in class in terms of our performance in regards to this metric. So because it caught some people on Wall Street off guard, the assumption was that we need to do a lot of work on persistence. And in point of fact, we are performing exceptionally well on persistence. So it isn't that there's a problem that needs to be fixed there. There's an opportunity, of course, to gain patients and I think the Q4 to Q1 dynamics is an illustration of one driver that we can address as we go forward that may, in fact, help us to continue to improve on that. But time will tell.

Excellent. I guess if you think about it, you talked a lot about the reading and waiting patients in your earnings call last week. Are these patients more or less willing to stay on treatment? Do you have a sense of how that's going to track with a patient kind of coming on later this year.

We don't see any trends yet evolving in that regard. And I can understand how people think that, well, if a patient is ready and waiting, perhaps they're more motivated, they would be more likely to stay on drug but the counterpoint to that is, as we described, we had a lot of ready and waiting patients who are part or a byproduct of a physician's list at a large institution in a way to describe it, 1 week, we had no prescriptions in the next week, we had 100 and that was because the electronic medical record had been updated, and then they were able to suddenly write prescriptions. It's not that 100 people came into the hospital that day. So that's the basis for why we feel good about that particular metric. I would say that I think we can continue to work on improving it, and we have means of doing that because 80% of these patients opt into the inLighten program, which is fantastic. It means we have an interaction with them. That's way above industry benchmarks, just to tune our horn one more time and a shout out to the team that accomplishes that at inLighten. The industry benchmark is comfortably below 50%, and we have north of 80%. So it's really a remarkable engagement with the patient and our ability to support them as they go on their use journey.

Let's dive a little bit deeper into that. I mean you mentioned patient feedback, but do you have a sense of what the for an average patient on therapy, what are they experiencing good and bad? And similarly, what about physicians as they prescribe this mission?

So a really important point to get across is that this medicine is perceived as a fantastic, good medicine. It does not have adverse events that are unusual and distinct so far that we have seen from any of the clinical trial work we've done. It's very predictable to remind everybody, we had a discontinuation rate in the clinical trial that was comparable to placebo. Actually, it was a point better, 12% versus 13%. So profile of drug means it's pretty easy to take. The physicians are enthusiastic in many cases, particularly those who have worked with the drug before. And that sets us up for expanding both breadth and depth among those physicians -- and targeting those who we think can be trialist.

Got it. Maybe to connect some of the dots from your previous comments, you've long guided to a population that's about 250,000 out of [indiscernible] that have two or more exacerbations. You mentioned that, that market might be growing? What are some of the puts and takes there? Do you see near term the potential of moving that 250,000 to a larger number?

Well, as we learn more about the market, we will certainly update -- the Street on what we believe is going on I think we want to be cautious and learned the lesson from last week that changes that are unexpected or new metrics that are not familiar can be disruptive to the market interpretation of our results. But I certainly think that, that market has been growing for the last 3 years. We expect it to continue to grow, possibly accelerate in its growth because the diagnosis rate is something that we think is going to continue to increase. So collectively, this creates a lot of wind in our sales as we continue throughout the launch.

Got it. And then another one of the metrics you brought up on last week's call is the number of prescribing physicians, it's sitting about 25%. And how do you see that number growing? And how much of a lever is that in the overall sort of trajectory in near term? .

So this is another point of accomplishment for the team, getting 25% of all pulmonologists who have written the script by the end of the second quarter is fantastic. It means we have breadth of prescribing behavior that goes down into the community level physician. This is not just high-volume prescribers a big institution. This is also the community level physician. And that is particularly important as you think about the middle launch of this drug because that's where a lot of the demand is going to come from over time. So again, great performance. I think we can continue to do that. We will be working on breadth and depth. It's something we called out on the call last week, but I think the team has done an excellent job. .

Hope if we could dive a little bit deeper. I mean what do you think are some of the main barriers here? Is it institutional P&T processes conservatism, something else?

We know it's not reimbursement. That is a very, very, very small component of why patients are choosing not to continue on drug. If we talk about physicians and why they're putting patients on drug, those that have familiarity with the drug are very comfortable writing scripts generally. When we think about those physicians who have never seen the mechanism or don't know the drug, that takes a little bit more effort, and they become what we call trialists. Just to put a finer point on that, in the fourth quarter, we had 1,800 physicians who won prescription out of a total of 4,100. By the first quarter -- the end of the first quarter, 900 of those 1,800 physicians had written at least one other prescription. So that means we have a lot of opportunity given the performance of Q4 and Q1 if we just get those physicians to write more prescriptions. So to give you another metric that sort of frames this out, -- about 20% of the physicians that we have reached have written 5 or more prescriptions. That leaves 80% who have written less than 5 and if you think about our tiering, our top tiers are very significant numbers of patients at the very top, it's well over 100. So that gives us a huge opportunity to dive deeper in those that are writing and to invite those who have not to experiment and collectively, that should continue to grow as we go. I want to be clear that what we talked about at the end of the last quarter and what we spent a lot of time in the conference talking about is the number that we need that is organic demand, right? This distinction between organic and ready and weighting we were talking about earlier, the organic demand, and this is art not science, admittedly, but this matches our internal model, and we feel very good about those numbers. The organic demand continues to look good. What we have tried to guide people to is that the first quarter organic demand number of 6,300 patients ads is something that you can straight line out through the rest of the year, and we would still get comfortably over $1 billion. So I think the opportunity for us is to try to build on that. We're not representing -- we're going to be able to accomplish that. Most launches start to plateau by quarter 2 or 3 or so. And I think we'll see what ours does. I can tell you, maybe this is the moment to do it, just to share with you because we mentioned to everybody that the total prescriptions produced by Symphony. We don't know how they get their data, but they do -- and we mentioned on last week that the TRx number, total prescriptions is almost sits proportionally right on top of our numbers inside the company. And I'm pleased to report that for the month of April, that has continued. And if you look at the Symphony TRx number, you will see it going up and to the right for each of the weeks of April. So that continues to be an encouraging sign, and we'll see what the future holds, but we feel good about that.

Great. Maybe just, again, sort of thinking about levers of growth moving forward. I mean, what gets you into the asthma and COPD population? I know those are sizable, but I mean, what are the barriers there and kind of what breaks you through them.

Yes. So that's obviously a massive opportunity. We consider it a second launch within the company. And if we think about how we forecast and how we think about the future. The majority of what we are talking about is driven by regular way execution of the launch. And that has gone, as I've said very well. To that, we can add this concept of a little bit of a potential flywheel within the physician community if and when we can see that, where physicians start to write multiple prescriptions because they become familiar with the medicine instead of the 1 or 2 that we've seen sort of interspersed in their first 2 full quarters. If that were to happen, that would be a very encouraging sign for both the near and medium term of the launch. Finally, we think about the COPD and asthma comorbid populations and those are patients who have both COPD and/or asthma and bronchiectasis. And there are one CT scan away from being officially diagnosed by a pulmonologist and therefore, on label for the drug. How big is that population? We've said we'll reach peak sales of north of $5 billion from the 500,000 patients with a concentration of 250,000 of them who've had two or more exacerbations. Estimates vary on the COPD market alone but we would put it at several million patients. And so if we can get some portion of those into the top of the funnel, that would be a dramatic improvement. Now this is very hard to do, but we are putting our best minds and efforts on this and hope to be able to pull that through in the coming years. This is not something that's going to show up 1 quarter to the next. We hope we might see the first hint of it by the end of the year, but certainly, we'll be looking for it in earnest in '27 and '28. And that could really improve where we go from a peak sales number.

Got it. Well, one of the, I guess, pushbacks that we got during the last earnings call was, was why not increase guidance if everything looks up and to the right and there's a lot of contention on where things are going to, why not bump that number up?

Yes. This is one of those judgment calls where we feel like and we maybe tend to be a little bit more of a conservative company in this regard. But we want to see more than one quarter in the calendar year before we're going to start to think about those things. I think it is possible to discern positivity within the quarter as we tried to express last week without updating your peak sales number or your yearly target number and still understand that we are trending in a very positive direction. And in the future, we'll certainly look to think about doing so. .

Okay. Well, great segue there. I got to ask. In terms of the pace of these updates, any chance we'll get an mid-cycle?

Well, number I gave you or the information I gave you just a moment ago is the first such example of that, where we have indicated that the month of April tracks to the TRx number of Symphony, we don't typically provide that. We're going to we think that's a helpful way for people to understand the direction that we're traveling because what it does is it helps people not have to guess what the Whisper number is because that can spin out of control. And I think if people track to the TRx number, and we can continue to emphasize that, that's what we're seeing, it really narrows the focus on what that number will be, and that should really help reduce the volatility in terms of the reaction to whatever comes out on the next quarter. And I think doing that at some cadence of broadcast banking conferences, starting with BofA will be the way we manage that. And that hopefully will be helpful to people as they try to understand the direction of the launch.

Got it. Maybe one more on the launch itself. I guess near term, where is the biggest friction point? And when will you have a better sense of how that's going?

Well, I think the breadth and depth is our top focus. Breadth in the middle tier of our calling effort and depth in the top tier of our calling effort. Because with those scores of patients in the top tier, there's really opportunity to move into a broader penetration and really see some lift. The breadth, which is already good has the opportunity to be better, especially in the middle tier and so that's another area of focus. I wouldn't call them friction points. I would just say these are efforts we're making. When we think about friction points, you often think about things like market access and our market access for our specialty pharmacies is 90%. It is absolutely stellar. And the team has done a fantastic job of moving that forward in that way and making it possible for patients to get their medicine made available. And I think as I mentioned before, as that has gone through, Q4 to Q1 dynamics are in operation. We're still learning what those look like. But as we think about patients dropping off or stopping medicine, there is the opportunity to go back to them and explore whether they want to go back on medicine. And what that can look like as a patient takes it for a couple of months, stops taking it and then they have an exacerbation. They're going to go to their pulmonologists, and I would guess that the pulmonologist would immediately say, you should consider going back on BRINSUPRI. And this time, trying to stay on it for 6 or 12 months to see the benefit you might incur. I also want to emphasize that we are already seeing in the patient population in a very significant number, patients feeling better. And that is an incredibly important part of the narrative that is developing around this medicine among physicians and patients, these communities. We have a very good understanding of what's going on. We survey patients and physicians every month in large quantities, and we choose different groups each month and then collectively, that gives us insight into what's going on, and it helps inform why we're so bullish about where we are.

You bring up an interesting point, and that is sort of managing the patient journey, whether it's going to take x amount of months to start to feel better, side effects, whatnot. As you think about these parameters moving forward, what are your expectations towards that -- the ability of the physicians as they become more familiar as they become more educated of keeping a patient on therapy.

Well, you see this a lot as medicines become more understood in the treating community as our speaker programs begin to educate other physicians about how to use the medicine most effectively and their stories get carried forward about the impact it's had on patients it tends to motivate physicians to follow those guidelines. And we see this very dramatically with the ARIKAYCE. So we would expect to see it once again with BRINSUPRI. And in that case, that should an -- benefit to those patients perhaps having a more successful experience with the drug, and it's just another driver that may address the continuation rate. .

Got it. Well, we have about 10 minutes left, and I do want to get to TPIP because that's a significant driver. So Jackie from the team.

So what is the potential of improving the efficacy overall over the standard of care, sorry. Especially if the majority of patients can move into the 1280 dose.

Yes. So what we're really excited about with this program is that it has gone from impressive data for the treatment of PAH to data for PH-ILD and now supported by work done by a competitor trials for IPF and PPF. And that means we are running 4 Phase III trials for TPIP. IPF and PPF will start later this year. IPF may slip into early next year. But the point of that is, we are in a good place with regard to TPIP. The data we've shown to date is absolutely best-in-class in prostanoids. There is nothing that comes close. Our 34% reduction in pulmonary vascular resistance, edges out sotatercept. So it is an extremely impressive use of a well-known moat. What does that mean for us that was when we were a Phase 2 and going up to 640 micrograms. The treating community and the FDA have agreed to is to permit us to go up to double that dose. So if the response curve continues to go up into the right, that bode really well for these patients. We talk about efficacy measures. We're going to be looking in this open-label data release, which will come out in the third quarter at whether or not they stay on their current dose. And if so, do they continue to see the same benefit if they uptitrate and we have updates on that, 25% of the patients up titrated from 640 when they were in the open-label study. and 7 of the 90 some patients made it all the way to 1,280. Now it's important to understand that we did not promote or push for these physicians to increase the dosing of these patients that was done by them. And so these are really exciting data when we unblend show them to the world, we're going to be particularly excited to see, do we see continued efficacy above what we've already established as best-in-class as we go up in higher doses, what happens to the placebo patients that went on to active drug. What about those 7 patients at 1,280 because the Phase III trials, all 4 of them target 1,280 as the MAX tolerated dose, in contrast to the 640 we used in phase 2. So stellar results from Phase II, we're now doubling the potential dose patients can take and that should result in our ability to demonstrate the superior efficacy even above materially, we hope, what we showed in Phase II.

If you think about the results of previous studies exposure to treprostinil, the more exposure, the better the outcomes. So I'm curious how much do you think you could push something like 6-minute walk distance PVO2 as a patient reaches these doses that they really haven't been able to sustain or tolerate in the past.

Well, that's what's most exciting about this because the 6-minute walk test, the NT-proBNP measure, the pulmonary vascular resistance during the course of the trial were all fasted. And I might add that the adverse event profile was very encouraging and dramatically different from what the competitive products are showing. That gives us a lot of encouragement that we'll be able to push up the dose and time will tell third quarter, in particular, what those results look like. But I think this is probably the single most overlooked item at the company. TPIP, we believe, can be a monster drug if it continues to perform as it has, and especially if we show any improvements in the third quarter. That really positions this in a very interesting place. And I think becomes the next leg of growth for the company.

So similarly, your competitors are trying to move new formulations forward, including software inhalers or next-gen vasodilators. What's the risk here? .

From the competitors, we don't perceive a risk. And that's not a statement about their performance or our performance. We see the enemy here as the disease and we think everybody can bring forward novel impactful medicines should do so. We happen to believe that ours is the best. And I think the margin for being better is going quite significant. The data comparisons will tell. It's not perfect because they won't be in the same trial. But we know the treprostinil mechanism. Essentially what we're doing with this formulation is capturing the original intent of prostanoid therapy. The original model -- animal model for this disease was a sheep model. And what was conducted by a competitive company was an inhalation study where the sheep were breathing it in constantly, and they essentially return to normal as a result of that. Now we can put masks over people and have in breath in treprostinil all the time. What we have effectively done with this formulation is create that outcome. This molecule treprostinil with a 16 carbon chain appended to it in dry powder form. It's breathed into the lungs as an inner drug. So the upper airway irritation that is associated with treprostinil, we don't see in the same way that others do. And that's incredibly encouraging. Moreover, we're getting to much higher doses, as we talked about earlier, and that dose is sustained in the lung over an extended period of time, resulting in us being able to target a once-a-day treatment that covers nighttime as well. And there is not an example of that out there right now. There is a lot of talk about so there's stuff coming. I hope it's successful, but I look forward to seeing where we stand relative to them when we each produce our data.

One more on TPIP. What are the implications and opportunities for TPIP as we start to move to a world that's dominated by sotatercept?

Well, I think we're looking at what is already a combination market. So these patients come -- they get diagnosed. This is a fatal condition, patients decline fairly rapidly. The 5-year mortality rate is remarkably high, and it's incredibly unfortunate but what we are looking at now is a new era where the arrival of sotatercept, the arrival of what we believe will be a very successful TPIP drug. I could see those 2 being used in combination and really getting these patients where they need to go. We haven't done any work on that, but that is certainly my expectation that you will see physicians wanting to try that because as I said before, we saw a 34% reduction in pulmonary vascular resistance and I think in sotatercept's best data, they were at 32 or 33. I can't recall.

Got it. So we have a microphone in the back if anyone from the audience wants to ask a question as we -- just raise your hand. As we're pulling here, one more for you, Will. As you think about the so-called fourth pillar, obviously, some very interesting and intriguing candidates. Can you just give us sort of a rundown of one that you think is especially intriguing and then sort of balance that out with being disciplined and sort of investing in these higher risk, higher reward opportunities.

Yes. So the success of ARIKAYCE and BRINSUPRI, and even TPIP, have really enabled us to continue to develop our research capabilities and target the addition and introduction of 1 to 2 INDs every year. That's our goal. This year, we have a gene therapy for Duchenne muscular dystrophy delivered by intrathecal delivery. We have an ALS gene therapy, and we have INS 1033, which is a DPP1 inhibitor, distinct from BRINSUPRI, which is targeting rheumatoid arthritis and IBD. That the INS1033 will enter the clinic this year. The other two are currently enrolling patients. in trial. Beyond that, we have -- managed therapeutic proteins using AI up in New Hampshire. We have a synthetic rescue going on for a variety of conditions in our Cambridge England office and we have the DPP 1s that I just referenced coming out of New Jersey. So each one has a fairly distinct approach to what they're trying to contribute. They all look exciting, and I'm super interested to see what that data looks like next year. On top of that, I'll just mention business development. We brought in INS1148 for the treatment of fibrotic disease, and that is moving forward into a Phase II trial. We're super excited back in to that may be just the beginning of where that may be applied. So inside of Insmed beneath the 3 programs that are multiplexing right now and delivering on every front, we have a robust pipeline, which really puts us in a strong position and as we move into next year and become cash flow positive, which we expect to do without having to raise any additional money that puts us in a powerful position to really accelerate into the earnings per share transition that this company will undergo. And that's where the discipline on research will get increased because we need to make sure that EPS is on a healthy trajectory, and I think we're going to be able to do that. If the standard for any medicine we are developing at Insmed has always been the same. If it is not first or best-in-class, we discontinue it. And that is a discipline we're going to continue to hold.

Got it. Any questions from the audience? I have one. When you think about ratios, at least in Aspen, they're very well defined, very easily adjudicated but when we get to the real world, a lot of the docs we've talked to have commented that it's not as cut and dry as be asked to sort of portrayed. What are you seeing in the real world? Is it challenging? Is it easy to diagnose an exacerbation? And again, what do you think it's going to have on overall diagnosis rates?

Well, heterogeneity is certainly the watch word associated with pulmonologists who are evaluating exacerbations. And I would expect that to continue. It is certainly the case that we expect exacerbation rates, diagnosis rates to increase, both because we're raising awareness with patients to look for these exacerbations and to document them and tell their physicians about them, also raising awareness with physicians on the importance of looking for those, diagnosing those and thinking about the implications of those. This is a progressive disease. And so you lose lung function every year. There is an undercurrent of urgency to treat these patients so that, that lung function can be preserved if they're taking the 25-milligram dose because that was seen statistically significantly in the Phase III trial. So that's a powerful message to the treating community and one of the reasons why we're going to continue to see a strong launch.

Got it. Well, Will, thank you so much for joining us.

My pleasure. Thank you.