Insmed Incorporated (NASDAQ:INSM) Q3 2023 Earnings Call Transcript

Insmed Incorporated (NASDAQ:INSM) Q3 2023 Earnings Call Transcript October 26, 2023

Insmed Incorporated misses on earnings expectations. Reported EPS is $-1.11 EPS, expectations were $-1.04.

Operator: Thank you for standing by. My name is Caleb Baker and I will be your conference operator today. At this time, I would like to welcome everyone to the Insmed Third Quarter 2023 Financial Results. [Operator Instructions]. I would now like to turn the call over to Bryan Dunn. You may begin.

Bryan Dunn: Thank you, Caleb. Good day everyone and welcome to today’s conference call to discuss Insmed’s third quarter 2023 financial results and provide a business update. I’m joined today by Will Lewis, Chair and Chief Executive Officer; and Sara Bonstein, Chief Financial Officer, who will each provide prepared remarks before we open it up for your questions. Before we start, please note that today’s call will include forward-looking statements based on our current expectations. These statements represent our judgment as of today and inherently involve risks and uncertainties that may cause actual results to differ materially from the results discussed. Please refer to our filings with the Securities and Exchange Commission for more information concerning the risk factors that could affect the company.

Our call today will also include blinded observations from our ongoing Phase II studies of TPIP. These observations may not be representative of results once the studies are completed, and all data is collected and analyzed. As a result later interim data readouts and final data from these studies may be materially different than the observations described today, including with respect to efficacy, safety and tolerability of TPIP. Finally, the information on today’s call is for the benefit of the investment community, it is not intended for promotional purposes, and it is not sufficient for prescribing decisions. I’ll now turn the call over to Will Lewis for prepared remarks.

William Lewis: Thank you, Bryan. Good morning, everyone. What a quarter this has been for Insmed. Starting with our commercial performance. We have now posted our second quarter in a row of record-setting revenues for ARIKAYCE with sequential growth coming from both the U.S. and Japan. On a year-over-year basis, revenues grew 17% compared to the third quarter last year and 19% for the first 9 months of 2023 compared to the same period last year. It is impressive to recognize that this drug after posting one of the top 10 rare disease launches in history continues to deliver this level of year-over-year growth as we cross the 5-year anniversary of its original launch. Even more exciting, this quarter, we released the top line results from our ARISE trial of ARIKAYCE in patients with newly diagnosed or recurrent MAC lung disease who have not started antibiotics.

I am proud to say that it really couldn’t have been a better result from our perspective. The performance of ARIKAYCE exceeded our expectations in every measurable way. ARISE was clearly established — clearly established the quality of life bronchiectasis respiratory domain questionnaire as a patient-reported outcome measure that works in this patient population, which was the main goal of the trial. But beyond that, it also demonstrated that ARIKAYCE, when added to a true drug control regimen consistently increases the likelihood that a patient will have a meaningful improvement in their PRO scores regardless of what level score improvement is considered meaningful. Additionally and very importantly, ARISE showed extremely compelling benefits on culture conversion for the ARIKAYCE arm compared to the control arm, including the number of patients who converted during the 6-month treatment period, how quickly those patients converted and how durable that conversion was 1 month after the end of treatment, all of which gives us tremendous confidence in the likelihood of success for the larger ongoing ENCORE trial.

I’m also happy to report that we have seen a notable uptick in the rate of enrollment for ENCORE since the ARISE top line readout given the amount of attention and excitement it generated. We continue to expect to reach our goal of enrolling 250 patients in ENCORE by the end of 2023 and plan to leave enrollment open into 2024, pending additional discussions with the FDA. Although we continue to believe the base case is that full approval will be granted by ENCORE data, given the strength of the ARISE data, we feel a duty to our patients to at least explore with regulators the possibility of accelerated approval. In the U.S., we expect that these conversations about a potential filing pathway won’t happen until the first part of next year, given the required first step of validating our PRO work with the FDA.

That process has begun with our recent submission of the PRO results to the FDA for their review. We will provide you with updates as we know more. As encouraging as these developments for ARIKAYCE have been, we recognize that the focus for many who follow our company is on the upcoming top line data from the Phase III ASPEN trial of brensocatib in patients with bronchiectasis, which remains on track for read out in the second quarter of 2024. It is difficult to overstate the increase in attention and focus being paid to bronchiectasis by the medical community just in the past year. As an example, at the CHEST Medical Conference earlier this month, there was a line across the convention center, the length of a city block and standing room only in the room where a session on bronchiectasis was being held.

Clearly, the incredible disease state awareness work being done by our colleagues is already making an impact. As far as ASPEN goes, we have no meaningful updates to give, which is actually a really good thing. The trial continues to progress on schedule towards its ultimate readout, and we remain as confident as ever in the outcome. No safety concerns have been flagged by our data monitoring committee to date, and we continue to hear from investigators in the study who are reporting anecdotally, they are seeing improvements in some of their patients, although granted they don’t know who is getting brensocatib or a placebo. In addition to ASPEN, I am pleased to share today that we have already opened several sites in our Phase IIb BIRCH trial of brensocatib in patients with chronic rhinosinusitis without nasal polyps and are nearing randomization of our first patients.

As we’ve mentioned before, there are approximately 26 million patients suffering with this condition in the U.S. alone, and there are currently no approved therapies available to them. And while we will initially target only the severe end of that population, which we estimate to number in the hundreds of thousands every year, we believe that if successful, it represents another very large opportunity for brensocatib. Now moving to our TPIP program. We continue to be excited and impressed by the blinded data being generated from our 2 ongoing Phase II studies of TPIP in patients with PAH and PH-ILD. Today, I want to give you a peek into some of the blinded data to illustrate how profoundly we have been able to safely increase the delivery of treprostinil to the lungs over currently approved prostanoid therapies and some of the early signs we are seeing of the potential impact it may be having on patients.

Let me start with dose titration. As background, let me remind you that Tyvaso, which is another form of inhaled treprostinil has a maximum labeled dose of 64 micrograms for its dry powder formulation. The label directs that it is to be administered 4 times per day for the treatment of PAH or PH-ILD. Assuming all 4 doses are taken, the maximum amount of treprostinil being delivered during the daytime is 256 micrograms. In our current studies, we are titrating up to a maximum of 640 micrograms of TPIP administered just once per day to provide 24 hours of coverage. After excluding the weight of the 16 carbon chain in our formulation, that maximum dose administers nearly 60% more treprostinil than Tyvaso DPI at its 24-hour maximum approved dosing schedule.

Now for our latest data. In the PAH study of the 24 patients who had reached their week 5 visit, which is the last possible point at which the dose can be increased in the trial, 83% of patients were able to titrate up to the maximum dose of 640 micrograms. In the PH-ILD study of the 10 patients who had reached the week 5 visit, 80% reached the highest dose. As you consider these blinded data, please keep in mind that our PAH and PH-ILD studies are randomized 2:1 and 3:1 respectively, meaning that roughly 67% of PAH patients and 75% of PH-ILD patients in these blinded results are likely receiving TPIP. Importantly, we have seen no new or unexpected safety concerns arising from either trial so far. Adverse events observed to date have been consistent with the events commonly seen in patients with PAH or PH-ILD and with the known effects of inhaled prostacyclin therapies.

Notably, adverse events related to cough have been mostly mild, and we have seen no instances of throat irritation or pain, which are among the most common reasons for limiting the dose of inhaled treprostinil in clinical practice. Given that these studies are currently ongoing, the safety profile could certainly evolve as we continue to enroll and monitor more patients, but we feel very good about what we have seen to date. We are further encouraged by the fact that our Data Safety Monitoring Committee met most recently earlier this week and indicated no concerns with either trial. In addition to being able to safely reach these high levels of treprostinil delivery to the local pulmonary vasculature in these patients, we have also seen encouraging signs that the increased dose is potentially having the desired effect on vasodilation, observing reductions in pulmonary vascular resistance, or PVR, that have been, in certain cases, dramatic.

And please note, this is occurring in patients who are already on at least 1 or 2 additional medications, making the observed reductions all the more striking. So how dramatic is the reduction in PVR that we’re seeing in our PAH study? While we recognize the limitations of analyzing blended and blinded data, nonetheless, just looking at the averages across the entire study, it seems fairly clear that something meaningful is happening. Specifically, the average rate of PVR reduction in all 22 patients who completed the study at the time of data cutoff was 21.5%. If we examine just the 64% of trial participants who saw their PVR go down, the average rate of reduction was 47%, and we have several patients who have seen PVR reductions in excess of 65%.

Reductions in PVR that are spontaneous are not common in PAH patients. So we feel this particular metric provides good insight into the significant potential benefit resulting from administering substantially higher doses of treprostinil in a safe manner. Now I want to acknowledge again that we don’t know which patients within the data set are actually taking TPIP nor is this trial designed to draw comparisons against other therapies. So we’ll leave it to all of you to decide how meaningful these data are and how they fit into the context of the broader treatment landscape in PAH. However, it is worth noting that across all clinical studies of current marketed and investigational treatments of which we are aware, which include not just vasodilators like TPIP, but also other treatment modalities, PVR percentage reductions from baseline in treated patients range from the low 10s to the mid-30s with most coming in at or around the high teens to low 20s.

If you drill down and look only at other inhaled treprostinil products, PVR data in the public domain is relatively sparse but a Phase III trial of oral treprostinil has shown a 21.5% reduction in PVR from baseline after 24 weeks of treatment. When you remember that we are showing a PVR reduction of 21.5% in our trial, including patients who are on placebo and that this was achieved in just 16 weeks of treatment, we hope you can understand why we have been so excited about the potential of this program and why we refer to it as the sleeper within Insmed. Beyond this exciting PVR data, we are also seeing other encouraging signs of potential activity within this trial. On 6-minute walk distance, we have seen a 31-meter average improvement across all 22 patients and a 36-meter average improvement in those patients who also exhibited a reduction in PVR.

We are also seeing improvements in cardiac index, which is an important measure of heart pump efficiency. As impressive as everything I’ve just told you is, it may be just the beginning. Notwithstanding the extraordinary levels of treprostinil we have been able to administer to date to these patients, the investigators running these TPIP studies and the key opinion leaders who make up the steering committee have strongly advocated for us to further increase the maximum allowable dose in the studies beyond 640 micrograms. Practically speaking, this means we plan to submit a protocol amendment to the FDA to enable patients to continue to increase the dose to their individual maximum tolerated level up to a new ceiling as high as twice the current level or 1,280 micrograms once a day.

We are pursuing this approach based on the favorable safety profile shown to date among the vast majority of patients who have already achieved levels as high as 640 micrograms. And the highly encouraging results we have observed in the blinded data. We can only imagine what this could mean for patients who may already be experiencing meaningful PVR reductions at 640 micrograms. We believe this has the potential to position TPIP as a best-in-class treatment option for these patients should these results be indicative of unblinded data from these trials. Now before I turn it over to Sara, I want to take a moment to step back and look at the bigger picture of Insmed and the truly unique and wonderful position in which it currently finds itself.

First, we see the continued strong performance of ARIKAYCE through our existing commercial infrastructure in the U.S., Japan and E.U. We see incredibly strong ARISE data for ARIKAYCE, which we believe positions it to potentially become the standard of care as part of a multidrug regimen for the treatment of all patients with NTM MAC lung disease, potentially increasing the drug’s addressable patient population by 3 to 5 times. Next, we are rounding the corner on the ASPEN Phase III results anticipated in the second quarter of next year and remain excited about the prospects for that compound and the initial indication for bronchiectasis. If that study proves successful, we are poised to take advantage of its status as a breakthrough medicine with priority review to bring it as quickly as possible to a community of patients and physicians who have never been more engaged and excited about this potential treatment.

In addition, today, we shared our progress toward initiating the BIRCH study of brensocatib in CRS without nasal polyps, highlighting the broad range of patients that this treatment can potentially serve due to it being an entirely new mechanism of action focused on mitigating neutrophil-mediated diseases. Finally, today, we shared with you the compelling developments in TPIP. The high doses achieved the encouraging safety profile and the early data on PVR reductions, all of which are extremely exciting. Add to that the potential to go up in dose to as high as double what we were originally targeting and the fact that this is the first and only once-daily DPI formulation, and you have what we believe could be a game-changing product addressing a substantial unmet medical need.

A quick glance across these 3 programs highlights opportunities rarely seen in a company at our stage of development and valuation. Collectively, this is the commercial and late-stage respiratory portfolio of Insmed. We believe it is unmatched in the small to mid-cap space. We are delivering on our goal of bringing forward first-in-class or best-in-class therapies that have a clear benefit to patients. While we are not spending any time today discussing the pipeline behind these late-stage programs, it is extremely robust with more than 30 identified preclinical programs under development. These programs will only be moved into further development if they produce validating and compelling data, and we continue to expect the totality of these efforts to account for less than 20% of our overall spend.

This early-stage work continues quietly and deliberately all the while generating a range of promising and potential first-in-class or best-in-class therapies in diseases which we also believe may have an accelerated pathway to commercialization should their early-stage results prove as promising as preclinical data to date suggest. Our strategy is to use the financial resources generated by the first 3 pillars to support the pipeline development that emerges on the heels of their commercial success. We expect this strategy to bring about both financial sustainability in the form of a cash flow positive company and ample financial firepower to support the clinical and commercial development of these subsequent pipeline programs should they be successful.

Finally, we are extremely excited to announce just recently our collaboration with Google Cloud, which aims to transform the landscape of the life sciences industry through the use of generative artificial intelligence. We have already identified multiple projects to target within the next 18 months, spanning drug discovery, drug development, commercialization and enabling functions, reducing the time line for drug development and enhancing the delivery of drugs to appropriate patients would represent a major breakthrough for the application of AI. Google Cloud is the clear partner of choice in this effort, and we are thrilled to work together to pursue a future where groundbreaking therapies are developed with unprecedented speed and precision.

We look forward to providing you with updates as this work progresses. In short, we believe we are building a powerhouse of a biotechnology company in a very deliberate way. This transformation is set to take shape over a relatively short period of time as we execute against a range of clinical, regulatory and commercial milestones. It is truly an exciting time at Insmed for our colleagues, our shareholders and most importantly, for the patients we serve. I’ll now turn the call over to Sara to walk through our third quarter financials.

Sara Bonstein: Thank you, Will, and good morning, everyone. I’m happy to share some of the details of Insmed’s financial performance for the third quarter of 2023. We ended the quarter with approximately $786 million in cash, cash equivalents and marketable securities. This represents a cash burn for the quarter of $132 million, which is consistent with our underlying cash burn in the second quarter. I want to point out that a large portion of our quarterly cash burn is directly related to brensocatib’s development, including the cost inherent in conducting a very large Phase III trial as well as ongoing launch readiness activities, all of which we expect to be high return on investment endeavors. We continue to believe that our current cash on hand can support our operations through the ASPEN results in the second quarter of 2024, leaving a meaningful amount of cash remaining on the balance sheet at that time.

Now turning to our commercial performance in the third quarter of 2023. Total net revenues for ARIKAYCE was $79.1 million, reflecting 17% growth year-over-year. For the second quarter in a row, this represents the strongest quarter for ARIKAYCE sales since its launch, up 2.4% compared to an already strong second quarter. On a regional basis, net revenue was $59.2 million in the U.S. and $16 million in Japan, both of which represent the highest quarterly sales for ARIKAYCE in those regions to date. This supports our belief that both of these regions continue to be in a growth phase. Additionally, sales in Europe in the third quarter were $3.8 million. Today, we are reiterating our full year 2023 revenue guidance range of $295 million to $305 million, which represents expected year-over-year sales growth for the company in excess of 20%.

In the U.S., ARIKAYCE delivered another very strong quarter with revenues up 20% compared to the prior year’s third quarter. This quarter’s results further supports our belief that ARIKAYCE is still in a growth phase. In Japan, ARIKAYCE revenues grew 11% this quarter compared to the third quarter of last year despite the planned 9% price decrease, which went into effect this past June. Recall that we highlighted on our last quarterly call that the growth that we had been expecting in Japan in the second half of this year started earlier than we had anticipated, making the second quarter very strong. Nevertheless, we saw sequential growth of 2.8% this quarter in Japan, which is an encouraging sign for continued growth in this region. Let me now turn to a few additional financial highlights.

In the third quarter of 2023, our gross-to-net in the U.S. were approximately 14%, which is consistent with what we have normally seen in the third quarter. We continue to expect our gross-to-net to be in the mid-teen range for the full year, in line with our historical performance. Cost of product revenues for the third quarter of 2023 was $16.7 million or 21.1% of revenues, which is also relatively consistent with our past performance. Turning to our GAAP operating expenses. In the third quarter of 2023, research and development expenses were $109.1 million and SG&A expenses were $90.6 million, reflecting continued investment in both our early and mid- to late-stage pipelines as well as launch readiness activities for brensocatib. In closing, we are proud of Insmed’s performance this quarter as we continue to deliver on our promises to our patients, shareholders and other stakeholders.

I’ll now turn the call back to Will for closing remarks.

William Lewis: Thank you, Sara. Before we move to Q&A, I just want to take a brief moment to thank all of our investigators and clinical trial participants around the world. We could not achieve any of the bold ambitions embedded in our mission without their courage and commitment. I also want to thank our patients for providing us with the passion to keep pushing every day for life-changing innovations. To our investors for entrusting us with the financial fuel required to make those dreams a reality and our colleagues for their tireless efforts to execute on this vision. Thank you all. Now I’d like to open the call to questions. Operator, can we take the first question, please?

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Q&A Session

Operator: [Operator Instructions]. And your first question comes from the line of Andrea Tan with Goldman Sachs.

Andrea Tan: Two for me. First, Will, recognize it’s early, but just wondering if you could characterize your level of confidence in the ARISE data supporting a path towards accelerated approval for ARIKAYCE.

William Lewis: Yes. So I think — as we mentioned, I think, a number of times, we still consider the base case assumption to be, the ENCORE data is the thing that will allow us to get the approval. But having said that, I think given the strength of the ARISE data, we’d be remiss if we didn’t at least engage with FDA and with Japan, to see about their willingness to permit a faster pathway. And the way I think about this is, if you think about the U.S. Subpart H, is if you have a validated surrogate that’s reasonably likely to predict clinical benefit, then you have a case to at least present. And once the PRO is validated, which we expect will happen by roughly the end of this year, that would then enable us to go to the FDA and say, we’ve seen clear signs of culture conversion, which is linked to, as a surrogate to this clinical benefit of PRO improvement.

And so that’s the basis for the Subpart H request. They may quickly dismiss it or they may want to engage. We’re not going to push this. If FDA shows interest, we will absolutely communicate that and move quickly to try to take advantage of it. In the case of Japan, on the one hand, the strength of the data on the culture conversion side, which is what they focus on, creates an opportunity to have that dialogue — on the other hand, as we’ve disclosed in the ARISE, we didn’t have any Japanese patients. So that’s a limitation. At the same time, the drug is approved in Japan. It’s fully approved and it’s widely used successfully. So I think there’s a comfort there that may permit that to be bridged. But we’ll see. I mean, I’m not — I don’t want to be unrealistic about it, but I think it’s hand on heart, a very reasonable thing to ask of both regulatory bodies.

Andrea Tan: And then just for TPIP, congrats on the disclosures today. But maybe one question here as you think about dose escalating beyond the 640. Just can you remind us what you’ve seen from the preclinical data that supports maybe your comfort in going higher and mechanistically, how are you thinking about the potential that you’ll be coming up on a ceiling effect?

William Lewis: Yes. What we’ve seen so far is a dose response curve in the use of treprostinil where — and this is also clinical practice, the higher you go, the better. And so what is the enabling ability to go higher? Well, you push it as high as you can in clinical practice and the use of something like Tyvaso or other forms of treprostinil. What ends up happening is because of the peak of that drug because the drug diffuses through tissue so quickly is so high it creates things like throat pain, headache, tightness in the chest, those kinds of side effects. And the numbers that we presented today that more than 80% or higher are getting to the 640 dose, and these are disease patients, PAH and PH-ILB patients suggest that we’ve still got further to go.

I think we’re all not surprised but encouraged by what we’ve seen. Our formulation has a 16 carbon chain appended to the treprostinil molecule. That means when they breathe it in as a dry powder, it’s inert. It’s not an active drug. So the esterases in the lung cleave off that 16 carbon chain and result in a slow release in the lung of the active drug. So you sort of — that’s why we think we’re not seeing the threat pain and irritation that is commonly the dose-limiting side effect of other forms of treprostinil. We’re able to get to 640. The PVR reductions here, I think, have, in some cases, been jaw dropping. Again, I want to emphasize, we don’t know who’s on drug and who isn’t, but at the same time to see that and to know the background that we’ve seen with other drugs, it’s really, I would say those discussions during KOL dialogue and with our steering committee have been very exciting.

And so that’s the reason why they have encouraged us to go higher. And in practice, that’s what physicians do. They go to max tolerated dose on an individual patient basis. So I think everything we’ve seen so far gives us a lot of comfort that the safety is there, and we’ll be cautious, but I’m not concerned about going above 640.

Operator: And your next question comes from the line of Jennifer Kim with Cantor.

Jennifer Kim: Congrats on the quarter. I want to start off on TPIP. I think you talked about the 6-minute walk test. If my math is right, I think the patients who didn’t show PVR improvement average 20-minute walk improvement and the ones who did show improvement showed an average of 36 minute walk improvement. First of all, is that math right? But also, can you sort of contextualize that data for us? And I recognize this is at 16 weeks.

William Lewis: Yes. It’s difficult, of course. When we talk about the 6-minute walk test, let’s be very transparent about this. This is always a highly variable readout. But to see improvement above 30 meters in these — across all patients and even higher than that among patients with a PVR reduction is highly encouraging. If we think about blended blinded data and its limitations, we look for signs of elements that can’t — that are unlikely to be spontaneously adjusted. So pulmonary vascular resistance does not typically spontaneously occur in these sick patients. So that would be highly unusual. So to see those reductions and to think that, okay, it’s roughly 2/3 of the patients in the trial that’s randomized 2:1 is pretty interesting.

To see 6-minute walk test improvement on these small numbers already, I think, is quite striking. I’m aware that there was some public data which got one of the treprostinil forms approved with, I think, only a 20-meter 6-minute walk improvement and that was among patients who received drug. So here, we don’t know what the actual outcome will be. I do want to highlight that there is often a wide standard deviation around 6-minute walk test in every place it’s used, but it seems to be the best available measure to give the FDA comfort and secure a path to approval. So not only is the PVR reduction exciting, but its correlation with 6-minute walk improvement is also suggestive and exciting. And for that reason, we provided it. But again, I think I want to highlight — the KOLs, the steering committee, they’re very excited by these results.

So we are excited by these results. And we’ll see what comes in the future.

Jennifer Kim: And then I know you talked about enrollment sort of ticking up in ARIKAYCE after the recent data. Could you give any more color on that in terms of — is that continuing to accelerate as though we go and buy? And how does that impact how many patients you could potentially enroll through the course of 2024?

William Lewis: Look, I think what’s striking about it is everyone knows NTM trials can be challenging to enroll perhaps not as challenging as PAH, but they’re pretty challenging. And so I would just complement once again, our clinical operations team for producing the ARISE data on time. And on the basis of that strong data, we have seen a notable uptick in enrollment since then. Now that was given out at the beginning of September. So it’s been a fairly short period of time, but it has remained, and it is significant. So we’re hoping that will continue. It does give us encouragement that we think whenever we end up deciding to enroll in ENCORE, we’ll be able to get there in a fairly efficient way, but we’ll have to see if that continues to be the pattern.

But I would say I’m very encouraged by what we’ve seen. And I’m not surprised. When I was at ERS walking through the hotel lobby in Italy, we had people coming up and stopping us and saying those ARISE data are really unbelievably good.