Insmed - Earnings Call - Q4 2016

Transcript

Speaker 0

Good day, ladies and gentlemen, and welcome to the Insmed Fourth Quarter twenty sixteen Financial Results Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Ms.

Laura Perry with Investor Relations. You may begin.

Speaker 1

Thank you, Sandra. Good morning, and welcome to today's conference call to discuss our fourth quarter and year end financial results. Before we start, let me remind you that today's call will include forward looking statements based on current expectations. Such statements represent our judgment as of today and may involve risks and uncertainties that may cause actual results to differ from the results discussed in the forward looking statements. Please refer to our filings with the SEC, which are available from the SEC or from our website, for information concerning the risk factors that could affect the company.

Joining me on today's call are members of the Insmed executive management team, including Will Lewis, Insmed's President and Chief Executive Officer Andy Drexler, our Chief Financial Officer and Roger Adset, Chief Commercial Officer. For today's call, Will will provide a corporate update, and Andy will then review the fourth quarter financials. Following brief closing comments from Will, we will then open the call for questions. At this time, let me turn the call over to Will.

Speaker 2

Thank you, Laura. Good morning, everyone, and thank you for joining us today. Over the past year, we've made significant progress toward our goal of building a self sustaining biopharmaceutical company that addresses the unmet needs of patients with rare diseases. We are now approaching the pivotal moment that we have been working towards for many years, the readout of our Phase III convert study for our lead product ARIKAYCE. ARIKAYCE is a combination of the immunoglycoside antibiotic amikacin, encapsulated in a specialized liposome made up of DPPC and cholesterol, which enhances its potential to treat certain infections and delivered directly to the lungs through a customized ultrasonic nebulizer.

Positive results have the potential to put Insmed on a new trajectory of growth. As many of you know, we are developing ARIKAYCE initially as a treatment for the thousands patients who suffer from refractory nontuberculous mycobacteria, or NTM, lung disease. This disease is caused by Mycobacterium avium complex, or MAC. NTM lung disease is a debilitating, pervasive, and costly disorder with no approved therapies. It typically affects an older population, many of whom have multiple comorbidities, and it is associated with a high mortality rate.

This past November, we announced that we achieved our patient enrollment objective in CONVERT. We remain on track to report top line data in the second half of this year, most likely in the September timeframe, plus or minus a month. CONVERT is a rigorous and robust study that was informed by our Phase II study results, input from KOLs and discussions with regulators. It is the largest study in NTM undertaken to date and when fully completed, we believe the data will inform the most thorough understanding of the treatment of NTM. The study is being conducted in 18 countries and over 125 sites around the world.

We randomized three thirty six patients with two to one randomization in favor of the ARIKAYCE treatment arm. Patients receive either ARIKAYCE plus standard of care or standard of care alone. The primary endpoint is the proportion of patients achieving culture conversion by month six, with culture conversion defined as three consecutive negative monthly sputum cultures. This is the gold standard for measuring culture conversion. We have powered the study at a 90% confidence level to demonstrate a 15% difference between the treatment group and the control group.

Patients who achieve culture conversion by month six will continue in the convert study for an additional twelve months of treatment, mirroring clinical practice. Nonconverting patients have the option of enrolling in the three twelve open label study to receive ARIKAYCE plus guideline based background therapy for twelve months. With these extension studies, we will be able to evaluate the durability of culture conversion, as well as the impact of ARIKAYCE on other longer term clinical objectives. We continue to remain blinded to the data. However, we can provide an update on some aspects of the trial conduct thus far.

The pace of enrollment was steady throughout the course of the study. And as of today, over half the patients have completed the six month treatment period. The dropout rate seen to date continues to be consistent with our expectations. Additionally, there have been a total of six Data Safety Monitoring Board or DSMB meetings thus far. With each of those reviews, the DSMB has recommended that the study continue without modification.

In terms of our regulatory efforts, we continue to interact with regulatory agencies worldwide, including the US Food and Drug Administration or FDA, the Pharmaceuticals and Medical Devices Agency or PMDA in Japan, and the European Medicines Agency or EMA in Europe. Should we achieve the primary endpoint, we will move quickly to file for approval in The U. S. Under Subpart H. This regulation enables sponsors to file on an accelerated basis and subsequently complete post market activities to verify and further describe clinical benefit.

It continues to be our understanding that the successful completion of the entire CONVERT study will provide the data needed for full approval. We are already working to advance some of the necessary aspects of the regulatory filings so that we are in a position to finalize the submission in a timely fashion. In addition, we will be pursuing parallel efforts to support regulatory submissions in other geographies. In anticipation of a successful approval of ARIKAYCE, we have invested in our manufacturing and supply chain capabilities around the world. As we mentioned last quarter, we now have two sources of clinical and commercial supply up and running.

We believe this will provide adequate supply to address the estimated demand for ARIKAYCE as well as improved margins as a result of this scale up. We are also continuing to strengthen our intellectual property position. Just this month, we announced the issuance of a new patent covering the drug device combination. This extends our coverage an extra five years in The U. S.

Into 02/1934. Importantly, this represents a significant extension of protection at the time we anticipate the product will be at a mature point of sales. Together with the multiple drug designations in U. S. And Europe, we have multiple layers of market exclusivity to protect our leading position in this underserved market.

Finally, let me touch on a couple of other priorities, including pricing research and building disease awareness. Regarding pricing, our strategy has always been value based and data driven. It considers the unmet need in NTM, the significant disease burden, cost to the health system, and the ten plus years of investment we've made in this innovative treatment. Recent pharmacoeconomic studies support our view of the unmet need and disease burden associated with NTM. Costs for NTM patients exceed the annual cost for asthma, COPD, or tuberculosis.

Moreover, in the first year following diagnosis, costs to treat NTM exceed those associated with lung cancer patients and idiopathic pulmonary fibrosis, and are almost more than those two combined. As part of our ongoing effort to understand the NTM cost burden, we commissioned a review of data from an insurance database and found NTM patients are costlier than age matched controls across a variety of metrics, including frequency and duration of hospital stays, as well as emergency room visits. Most importantly, once treated to a point where they culture convert, the costs associated with NTM patients drop dramatically. The reduction in cost of treatment is driven primarily by reduced hospitalization. A recent study in Germany found that patients with NTM had a high mortality rate, exceeding that for patients with COPD, bronchiectasis, or cystic fibrosis, and that the management of NTM lung disease was associated with substantial healthcare resource utilization.

Clearly, treatment that achieves durable culture conversion remains the key objective and gold standard for both patients and healthcare systems. We will continue to refine our understanding of the size of the target addressable market based upon our expected label. We expect to publish more in this regard in the future. Another strategic priority is raising disease awareness and providing physician education. Our website, ntmfacts.com, is part of our non branded disease awareness campaign designed to help physicians understand the importance of an appropriate diagnosis.

Through this campaign, we provide valuable information on how to recognize the signs and symptoms early to better manage NTM lung disease. The site also incorporates patient perspectives, sharing the daily challenges of living with NTM. Our awareness campaign is targeted specifically to pulmonologists and specialty infectious disease physicians through medical meetings, emails, banner ads, and journal ads. We've seen an impressive response thus far with a high level of physician engagement. This highlights both the appetite that exists for expert involvement in this disease state and the bridges we're building between Insmed physicians and NTM patients.

Now I'll provide an update on our next highest clinical development priority, INS1007, a reversible oral DPP1 inhibitor which we acquired global exclusive rights from AstraZeneca last October. The Phase II REDI asset is a perfect complement to our ARIKAYCE program as it leverages our established expertise in the rare pulmonary space and directly overlaps with NTM lung disease. We are very excited about the potential 1007 has in multiple disease states. Initially, we will focus our development efforts on non CF bronchiectasis, a rare chronic pulmonary disorder. Approximately forty percent of non CF bronchiectasis patients are believed to have NTM lung disease.

So there is a very good strategic overlap with our current efforts. Patients with this condition experience a vicious cycle of bacterial colonization, inflammation, airway destruction, and abnormal mucus clearance. The unmet need here is great since, as with NTM, there are currently no FDA approved treatments for this disease. Current standard of care focuses on treating the symptoms of the disease such as clearing the airway, reducing the infection, and managing exacerbations. These treatments do not target the underlying inflammation.

As a novel oral inhibitor of DPP1, one thousand and seven impairs the activation of three neutrophil serine proteases that reside within our neutrophils, neutrophil elastase, proteinase three, and cathepsin G. When they're released in excess of endogenous inhibitors they become destructive and trigger excessive mucus release and pro inflammatory events. This then contributes to lung matrix destruction and inflammation. A phase one study of healthy volunteers conducted by AstraZeneca pointed to the potential of the mechanism with 1,007 demonstrating a dose response of inhibition of neutrophil elastase activity. Data from a phase two study evaluating AZD9668, a neutrophil elastase inhibitor with a related mechanism of action provides insights on the potential activity of 1,007.

AstraZeneca evaluated nine thousand six hundred sixty eight in a randomized placebo controlled phase two study in non CF bronchiectasis. After four weeks of treatment a significant increase in lung function was observed, specifically in FEV1 and forced vital capacity. These results suggest that a DPP1 inhibitor, which acts upstream of the neutrophil elastase inhibitors, could have a similar or even greater impact. In addition, data suggests that one thousand and seven may also impair the production of active neutrophil serine proteases and their accumulation at inflammatory sites, which is what contributes to lung matrix destruction and inflammation. We're working to finalize our plans for a Phase II study, which we expect to initiate this year.

Key next steps include a pre IND meeting with FDA, where we'll discuss our proposed study design and the development program in non CF bronchiectasis. It is our expectation that we will develop 1,007 in other disease states as well. We're in the process of evaluating 1,007 in several ongoing preclinical studies. Based on the outcomes of those studies, we plan to provide details for other Phase II studies and additional indications later this year. Regarding our internal research efforts, our talented team of scientists at Insmed are advancing a number of preclinical programs in rare disorders.

The most advanced program from our internal pipeline and the only one I will touch on today is INS1009, a nebulized prodrug formulation of treprostinil. We have been encouraged by the Phase I data from this program, which we presented at the ERS conference in September. We continue to believe that this program holds tremendous value and we are currently evaluating our options to further advance its development. With respect to our financial position, we ended the year with roughly $163,000,000 in cash. This leaves us well positioned to share top line convert results and advance INS1007 into a Phase II study in non CF bronchiectasis.

So in summary, we're pleased to share the progress that has been taking place over the prior quarter at Insmed. We are excited by the year ahead and look forward to sharing top line results with you as they become available. We are continuing to advance our regulatory activities for ARIKAYCE in The U. S, Japan, Europe and other geographies. And we are furthering NTM lung disease awareness among physicians.

Beyond ARIKAYCE, we are investing in our pipeline with 1007 and we look forward to bringing that program into Phase II development this year. With that, I will have Andy share with you this quarter's financial update.

Speaker 3

Andy? Thanks, Will. Good morning, everyone. Turning now to our quarterly results. This morning, we reported a net loss of $68,400,000 or $1.1 per share compared with a net loss of $31,200,000 or $0.51 per share for the fourth quarter of twenty fifteen.

Research and development expenses increased to $54,900,000 compared to $19,600,000 in the fourth quarter of twenty fifteen. The increase was primarily due to the $30,000,000 upfront payment made to AstraZeneca for the exclusive global rights to INS1007. In addition, there were increases in expenses related to the advancement of the company's global Phase III CONVERT study of ARIKAYCE in NTM lung disease and an increase in headcount and related expenses. Fourth quarter G and A expenses were $12,200,000 versus $12,900,000 in 2015. The expenses were relatively flat compared to the prior year and include $3,700,000 of expenses related to pre commercial activities for ARIKAYCE.

We ended this year with $163,000,000 of cash and $55,000,000 in debt. We had $64,000,000 of second half twenty sixteen cash based recurring operating expenses. We would note that this does not reflect the one time $30,000,000 payment to AstraZeneca for the acquisition of 1,007 or stock based compensation or depreciation expenses. With regard to cash guidance, we expect cash operating expenses to land within the range of $67,000,000 to $77,000,000 for the first half of twenty seventeen. This range primarily reflects spending for the convert study, the follow on three twelve study for those NTM patients that do not convert, and continued regulatory and commercial development of ARIKAYCE.

The estimates also include expenses related to INS1007, including inventory purchases as well as preclinical and clinical startup activities. Going forward, we will remain disciplined in our use of capital, and we will ensure our two priority programs ARIKAYCE and INS1007 are appropriately resourced. With that, I'll turn the call back to Will.

Speaker 2

Thank you, Andy. As a team, we are committed to developing what we hope will be the first approved drug for a globally prevalent rare disease where nothing is approved. We believe ARIKAYCE has the potential to trigger a significant shift in the entire NTM lung disease treatment paradigm and offers hope for the patients suffering from this disease and the doctors working to treat it. We are leveraging our expertise to address unmet needs in other rare diseases. We are excited about the potential for our new 1,007 program to address the underlying pathway involved in bronchiectasis.

2017 is shaping up to be a transformational year for Insmed, and we are looking forward to updating you on our progress. We are planning for an R and D Day this summer, so please stay tuned for details on that event. With that I will hand the call back to the operator to begin Q and A. Operator?

Speaker 0

Our first question comes from the line of Jason Schwartz with Leerink Partners. Your line is now open.

Speaker 4

Hi guys, thanks for taking the question. I guess I misspoke. It's Joe Schwartz. This is dialing in for Joe. Thanks for the clarity on the progress and congratulations.

So looking forward I was wondering if you could provide whether the CONVERT study data will be released in a PR format or at a major medical meeting platform? And also at this point, what are your current thoughts? If you could just remind me on the post marketing, you said full Phase III data could support a full approval, but maybe you can go into a little more detail. And I have a follow-up. Thanks.

Speaker 2

Sure. So the answer to the first question, whether it will be a press release or a medical meeting, it'll be a press release that announces the top line results. We'll obviously go into greater detail on the content of the study at the most proximate medical meeting. So that's how we intend to address the data. And the only reason we would put more limited top line results, as is often the case in the press release, is because we don't want to corrupt the ability to participate in a significant peer reviewed medical meeting subsequent to that.

On the second question, when I make reference to the full phase three, remember that this study begins with a six month primary endpoint, but then the study continues in 03/12 for an additional twelve months of treatment, and then one year off all drugs for follow-up. So we're looking at a study that will span the better part of three years of treatment and observation. And at the conclusion of all of that, we will have very good longitudinal data about treatment, culture conversion, durability, perhaps things like mortality. And it's the totality of that data that we think will be supportive of a full approval. And that has been consistent with our dialogue with FDA to date.

Speaker 4

Great. Thank you for that. And in terms of the INS1009, I was just wondering what your thoughts were given sort of the current developments, if you will, so Atelion and J and J, for example, and the United Therapeutics announcement yesterday. What are some of the strategies that you're contemplating at this point? Thank you.

Speaker 2

Well, at this stage yes, sure. At this stage, I think 1009 is a product that we think has an important potential role to play. How we bring that forward is the subject of internal discussion right now. We want to be prudent with our use of cash while we're awaiting the top line results of the ARIKAYCE study. So I think we're going to continue to evaluate both internal and external development options until we have that data card turned over.

And at that point we would expect to update you with the next steps for 01/2009. But just to refresh everyone's recollection, this is a pro drug formulation of treprostinil. The phase one data was published last year, and it showed the possibility for the first time of having a once or if we wanted to, a twice daily administration of that drug. And the advantage that provides is for the first time patients would have nighttime coverage with pulmonary arterial hypertension. So that's a significant advance clinically and one we want to continue to explore.

Speaker 4

Great, thank you so much.

Speaker 2

You bet.

Speaker 0

Our next question comes from the line of Adam Walsh with Stifel. Your line is now open.

Speaker 5

Hi, guys. Thanks for taking my question. I think this is going to be Andy's last conference call and I just want to congratulate you, on a great job at Insmed and wish you well going forward in your future endeavors.

Speaker 3

I appreciate that, Adam. Thank you very much.

Speaker 5

So I have a couple of questions. First, just can you clarify the timing of filing in ex U. S. Geographies? And then also discuss the commercial prep as it relates to your anticipated filing timelines?

Speaker 2

Sure, thanks for those questions. With regard to ex US filing, we're not going to be giving specific guidance on that. What I would say is clearly, the first priority is to get The U. S. NDA submitted, and we'll be doing that in as timely a fashion as we possibly can manage.

We've already begun that process now, everything from cleaning the database early so that we can get it released as quickly as possible, to framing out the various elements of the NDA submission

Speaker 6

so that we

Speaker 2

can drop data in where that's possible, and advancing things that won't be informed by two twelve-three 12, like CMC and preclinical. So those modules are well underway. And with that, obviously that would form the backbone of a submission in a territory like Japan where frankly the biggest hurdle is translating the submission document. In places like Europe it'll be dialogue and finding the fastest path for filing there, and so on and so forth in other territories. But we'll provide more detail about that as we move forward with the first and greatest focus on The U.

S. Submission. For the second question, I'm going to ask Roger to address that. Yeah, thank you.

Speaker 6

So the pre commercial activities we have underway in The U. S. Primarily are focused on disease awareness and education. One of the things we've discovered as we talk to physicians and patients is that there is a great need for education around the diagnosis of the disease, the symptoms and the burden of the disease. And so we've spent an awful lot of time thinking about how to best communicate that and educate physicians, on the unmet need on the disease, on the burden of the disease.

So our campaign, Will mentioned earlier, we've got ntmfacts.com is our website. And we'll be primarily targeting pulmonologists and infectious disease physicians, through these efforts, including digital, medical meetings, emails, journal ads, etcetera. Ex U. S, we do have a small dedicated team, in Europe, and they continue to interact with the thought leaders in the space. We have some compassionate use programs up and running in France and Germany where we're able to gain significant experience and insight as to how patients are utilizing our product at this time that we'll adapt and use as we find instructive for our U.

S. Launch.

Speaker 5

Hey, Roger. Thanks. That's really helpful. And just one final question. Can you speak to your anticipated capital needs going forward?

The balance sheet seems to be in good shape. You do carry a little bit of debt, but you got a big launch coming up ahead. Can you just speak to the balance sheet where it stands now and kind of what you think your additional capital needs may be as you approach and go through launch? Thanks.

Speaker 3

Sure, Adam. This is Andy. We ended the year with $163,000,000 in cash. As we mentioned, we put out the range there for the first six months of the year. So when we get to data, we'll obviously have around six months of cash remaining.

And on the heels of good data, we'll obviously look to access the capital markets so that we properly fund the filing and launch preparations and eventually launch of ARIKAYCE. You know, that's kind of what we've communicated at JPMorgan as well as, you know, our last conference call, and we're sticking to that plan.

Speaker 2

Yeah, and just perhaps I'll add to that. The 21¢ top line or bottom line miss that is the subject of headlines today obviously is reflecting the $30,000,000 upfront payment for the AstraZeneca asset. So we have very good control over our spending at the moment and feel very good about our financial position.

Speaker 5

That's great. For the record, you missed our estimate by $01 Thanks.

Speaker 2

Way to go.

Speaker 0

I'm showing no further questions at this time. So I'd like to return the call to Mr. Will Lewis for any further remarks.

Speaker 2

Thank you and thank you for your questions. Before we conclude today, I'd like to take a moment to recognize that this is Andy's last call at Insmed. Andy has been instrumental in helping to bring Insmed to this critical point in its evolution. I want to thank him for his dedication and shared commitment to building a company that can rightly claim a culture of integrity and hard work with a passion for helping patients. While he is stepping down from his role as CFO, Andy has generously agreed to remain available to us in an advisory capacity as we continue to work through this transition.

He will be missed. Andy, do you want to say a few words?

Speaker 3

Thank you, Will. I would like to acknowledge the team here at Insmed. I want to thank my colleagues for their support and diligent efforts during my tenure. I'm very proud of what we've accomplished to date, and I can leave here with the confidence that our resources and systems are in place to allow for Insmed sustained growth.

Speaker 2

Thanks, Andy, and thank you all for joining us today. We look forward to updating you on our progress throughout 2017.

Speaker 0

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.