Insmed Incorporated (NASDAQ:INSM) Q1 2024 Earnings Call Transcript May 9, 2024

Insmed Incorporated beats earnings expectations. Reported EPS is $-1.05817, expectations were $-1.21. Insmed Incorporated isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Thank you for standing by. My name is Dee, and I will be your conference operator today. At this time, I would like to welcome everyone to the Insmed's First Quarter 2024 Financial Results Call. [Operator Instructions]. I would now like to turn the call over to Bryan Dunn, Head of Investor Relations.

Bryan Dunn: Thank you, Dee. Good day, everyone, and welcome to today's conference call to discuss Insmed's first quarter 2024 financial results and provide a business update. I am joined today by Will Lewis, Chair and Chief Executive Officer; Gene Sullivan, Chief Product Strategy 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.

Also note that our call today will include blinded observations from our ongoing Phase 2 study of TPIP in pulmonary arterial hypertension. These observations may not be representative of results once the study is completed and all data is collected and analyzed as a result, any future interim data readouts and the final data from this study may be materially different than the observations described today. 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 will now turn the call over to Will Lewis for prepared remarks.

William Lewis: Thank you, Bryan, and welcome, everyone. Today we intend to review the progress from three of the company's main programs: ARIKAYCE, TPIP, and brensocatib. Let's begin with TPIP The first of this quarter's two important data readouts came this morning with the announcement of the top line results from our Phase 2 study, examining TPIP in patients with pulmonary hypertension associated with interstitial lung disease as well as an update of blinded data from our ongoing Phase 2 study in pulmonary arterial hypertension in a moment, Jim Sullivan will review these data in greater detail, but let me just say that we couldn't be more pleased with the progress and the clinical results that continue to come from this exciting program.

Turning to brensocatib, the highly anticipated top-line release of the Phase 3 ASPEN trial remains on track to readout in the second half of this quarter. Let me take one additional moment to touch on the detailed events and timelines relating to brensocatib. At the end of March, all adult patients in ASPEN have completed their 52-week visit which is the point at which the primary and secondary efficacy endpoints are measured in the trial. As a result, we remain confident that the readout will come during the 45-day window from mid-May to the end of June that we have outlined previously look forward to sharing the top line results, which will include the prespecified primary and secondary endpoints as well as safety data across treatment arms once the work to clean compile lock and analyze the data is completed.

In regard to ARIKAYCE, we were pleased that Eric has delivered double digit year-over-year growth across all three of our geographic regions and 16% growth overall compared to the first quarter of 2023. We delivered this result despite minor headwinds that occurred in the quarter, which Sara will walk you through in her remarks. Notwithstanding those isolated events, our performance this quarter keeps us on track to deliver on our previously announced revenue guidance for the year. Turning now to the potential expansion of ARIKAYCE to all MAC, NTM patients, I'm pleased to report that our presentation of the full ARISE results has been selected for a plenary session at the upcoming ATS conference in San Diego later this month, which speaks to the significance of that study and the excitement for it within the medical community.

I'm also pleased to report that the Data Monitoring Committee for the ongoing Encore trial held their fourth meeting in April, which resulted in a recommendation to continue the study unchanged. As a reminder, there are no interim efficacy analyses built into the ENCORE study. So this represents a best-case outcome from that meeting. With regard to securing agreement on the PRO we are now scheduled to meet with the team of patient reported outcome experts at the FDA in late June, after which we will settle on the final statistical plan for Encore we intend to provide you with additional updates once that work is complete. Finally, I want to take a moment to note the changing approach within the medical community to the treatment of NTM and bronchiectasis and the clear synergies that are being recognized by patient advocacy groups and physicians as they contemplate how to bring forward the best possible care to patients with these two diseases.

This quarter, we signed on to be the founding sponsor of the COPD Foundation's new care center network for patients with bronchiectasis and NTM. Through this initiative, the CLP Foundation aims to create 150 multidisciplinary centers of excellence across the US. This will establish consistent standards of care coming from export-led academic centers and shared them with the broader community in an effort to bring more comprehensive care to patients with NTM and bronchiectasis as they strive to meet treatment goals. This effort recognizes the clear synergy that can be achieved by physicians treating NTM and bronchiectasis, and we will be structuring our medical support efforts to augment this new approach to patient care across the United States.

We consider it an honor to be supporting this important work on behalf of patients. Now let me turn the call over to Gene to talk about the big news of the day. The results from our TPIP program.

Eugene Sullivan: Thank you, Will, and good morning, everyone. I'm pleased to share with you the data we have produced to date from each of our two programs that have been running in parallel for TPIP I will start with the top line results from our recently completed Phase 2 safety study of TPIP in patients with pulmonary hypertension associated with interstitial lung disease, which were posted to our website this morning. I will then walk through the most recent blended blinded data from our ongoing Phase 2 efficacy study of TPIP in patients with pulmonary arterial hypertension. Let's begin with PH-ILD. This study originally targeted and enrollment of 32 patients, but was overenrolled with 39 patients. The study utilized a three to one randomization scheme.

And as a result, 29 patients were randomized to receive TPIP and 10 were randomized to receive placebo for the 16-week treatment period. The maximum TPIP Dose allowed in the trial was 640 micrograms once daily as a reminder, the TPIP dose of 640 micrograms contains roughly 60% more treprostinil as compared with the total daily dose of the current market leading treprostinil dry powder product, which is dosed four times daily patients were titrated up to their maximum tolerated dose over the course of the first three weeks of treatment with a final dose increase allowed at the five week visit patients were not permitted to increase their dose for the remaining 11 weeks of treatment participant demographics and baseline characteristics were generally well-balanced between study arms.

However, a higher percentage of female participants were randomized to TPIP arm at 31% versus the placebo arm at 20%. Also on average patients in the TPIP arm of the study required one additional liter per minute of supplemental oxygen at baseline. The study's primary objective was to evaluate the safety and tolerability of TPIP in patients with PH-ILD, including assessments of oxygenation at rest and during exercise. Let's begin with tolerability among patients in the TPIP arm, 79.3% were successfully able to reach the maximum dose of 640 micrograms by week five compared with 100% of those taking placebo. If we look at the patients who were able to reach at least 480 micrograms by week five, nearly 90% of TPIHP. patients were able to achieve that threshold.

This indicator of the tolerability of TPIP in this patient population is very encouraging given the relatively short titration period included in the trial and considering the severity of the underlying disease process. Of note, while we adopted a titration period of five weeks for the purposes of this trial in clinical practice, a more prolonged titration period could be applied, which may allow for even more patients to reach higher doses. Additionally, we saw that patients taking TPIP were less likely to experience a treatment emergent adverse events that would lead them to discontinue the treatment with 13.8% of patients in the TPIPR. experiencing such an event compared to 30% in the placebo arm. We consider a higher treatment discontinue rate in the placebo versus treatment to be very noteworthy in terms of overall safety, 93% percent of patients in the TPIP arm experienced any adverse events, which was similar to the 90% of patients on placebo and 20.7% of TPIP treated patients experienced a serious adverse event compared to 40% of placebo-treated patients.

Zero patients in either arm experienced a serious adverse event that were judged to be related to study drug. There were four deaths in the trial, including 6.9% of patients randomized to the TPIP arm and 20% of patients randomized to placebo arm. All deaths in the trial were related to disease progression or co-morbid causes, and none were attributed to study drug. What are the key reasons to conduct an initial safety trial in this population was to confirm that installation of TPIP would not negatively impact oxygenation. Therefore, we were very pleased that we saw no worsening of oxygen saturation levels at rest and no increase in the use of supplemental oxygen for patients taking TPIP Additionally, we also measured oxygen saturation continuously during and after the six-minute walk test to capture the lowest blood oxygen levels reached during that entire period of time and found no meaningful differences between the TPIP and placebo arms on that measure, which is what we had hoped to see.

I do want to note that we did see a slight decrease in oxygen saturation from baseline levels when measured after the six-minute walk test with the TPIP arm showing an absolute decrease of 8% compared to placebo patients who saw an absolute increase from baseline of 1%. However, I would emphasize that there was no standardization in the trial regarding the timing for when that measure was recorded following exercise. So there is likely to be significant variability in that data point as a result, we believe that the values reflecting the resting and the lowest oxygen saturation are the best indicators of the effect of the drug on oxygenation. Although we were previously not sure whether we would have any results from our exploratory endpoints in this study to share with you at the time of the top line safety readout.

I'm pleased to report that we do have several of those data points available to share today. Let me begin with the six-minute walk distance. We were pleased to see a 30-meter improvement compared to placebo at week 16 in patients taking TPIP using the study's prespecified analysis for that comparison. However, let me provide a note of caution on over interpreting that exploratory endpoint in a study this small, as we have said many times in the past, six-minute walk distance often includes a substantial amount of variability as emphasized by the wide confidence intervals we see in this dataset as expected in a study, this small improvement in six-minute walk distance did not approach statistical significance on NT Pro-BNP levels. The TPIP arm showed a slight improvement from baseline in the placebo group showed a slight worsening.

However, the difference between groups was not meaningful, which is to be expected in this small study. Finally, in this study, we measured events of clinical worsening, which was defined as a hospitalization to a cardiopulmonary indication, a lung transplantation or death from any cause for a decrease in six-minute walk distance of 15% or more from baseline. To be clear, we did not expect to see a signal on this exploratory measure given the study small size. However, clinical worsening events were shown to be more common in the placebo arm with 50% of placebo treated patients experiencing such event compared to 10.3% of TPIP treated patients. This difference produced a nominally significant p-value of 0.0164. We are extremely encouraged and pleased with today's results and look forward to sharing more of the pharmacokinetic and additional safety and exploratory endpoints from the study at an upcoming medical conference later this year.

And importantly, based on today's data, we intend to move this program forward to Phase 3, aiming to initiate a global study and 2025. Now let me spend a few moments providing you an update on our ongoing Phase 2 trial of TPIP in patients with pulmonary arterial hypertension. The trial is progressing as expected now, with well more than half of the target enrollment achieved in March. The second data monitoring committee meeting was held to review the safety data from this trial, and the committee's recommendation was to continue the trial without any changes in regard to dosing. Among the first 43 patients in the trial to complete their five-week visit, 79% were able to reach the maximum dose of 640 micrograms or matching placebo, which is consistent with our last update and is very encouraging.

We have already received the necessary regulatory approvals in 10 of 17 countries where the study is being conducted to amend the protocol in the open label extension of this trial to allow for even higher dosing up to a maximum of 1,280 micrograms once daily. We are excited about what these higher doses could potentially mean for patient outcomes. Today, I would like to share an update on the blinded efficacy data we have seen thus far in this trial. This update includes data from the first 44 patients randomized in the trial. All those patients for discontinued the trial prior to completion, leaving 40 patients who completed the full 16 weeks of treatment. As a reminder, this trial is randomized two to one. So roughly two thirds of the patients will be receiving TPIP and one-third will be on placebo starting now with the blinded data on pulmonary vascular resistance or PVR.

Among the 40 patients who completed the study as of the data cutoff, the mean percentage reduction in PVR at week 16 compared to baseline is 19.9%. This observed reduction in PVR is comparable to the best clinical results produced with prostanoid treatments in the past. Despite the fact that our result for TPIP is a blend of treated and placebo patients. What is equally encouraging is that we continue to see patients in this study who experienced dramatic improvements in PVR. We are also excited by what we're seeing on six-minute walk distance, which is another key efficacy measure for these patients. On average across these 40 patients, including the TPIP and placebo arms of the trial, the improvement in six-minute walk distance from baseline was 43 meters.

As I mentioned a few moments ago, six-minute walk distance is a highly variable measure and especially difficult to interpret on a blinded basis. But we are nonetheless encouraged by what we have seen so far. It is worth pointing out that for both efficacy endpoints that I've described today, PVR and six-minute walk distance. These measures were taken at the end of the dosing interval or nearly 24 hours after the most recent dose. This was designed intentionally to highlight the potential durability of TPIPs effects. However, it makes these results more difficult to compare to the other key study of inhaled treprostinil, which reported hemodynamic measures obtained in the period immediately following the dose at the time of the drug's maximum effect, the fact that we are seeing profound effects in some patients in our study.

Nearly a full day after taking one dose makes us very excited for the potential of this treatment. As a final reminder, we do not know which of these 41st 40 patients were taking TPIP and which we're taking placebo. And the numbers I have shared today on PVR and six-minute walk distance will continue to change as more patient data is generated. However, we believe today's data supports our view that TPIP has the potential to be a best-in-class treatment for patients with PAH and PH-ILD, combining a potentially differentiated clinical profile with the convenience of once daily dosing. Now let me turn the call over to Sara to walk through the detailed financial results from the first quarter.

Sara Bonstein: Thank you, Gene, and good morning, everyone. I'm happy to be with you to share some of the details of Insmed's financial performance for the first quarter of 2024. We ended the quarter with $596 million in cash and cash equivalents. This represents a cash burn for the quarter of approximately $185 million. As we have stated previously, our cash burn in the first quarter is higher than other quarters in the year due to the timing of our annual employee incentive compensation payout. In addition, this quarter was also impacted by larger payments for contract manufacturing services and inventory build for clinical and preclinical products than our usual cadence When these items are excluded, the underlying cash burn was approximately $125 million, which is in line with recent quarters.

Consistent with our statements on last quarter's call. We have not used our at-the-market equity offering since last year, and we do not intend to use this program between now and the ASPEN data readouts. Turning to our commercial performance in the first quarter of 2024. Global net revenues for the first quarter of 2024 were $75.5 million, representing 16% year-over-year growth compared to the first quarter of 2023. In the US, net revenues for Q1 2024 was $56.3 million, up 15% compared to the prior year quarter. The growth this quarter was driven by the highest level of enrollment forms that we have seen in the US since the third quarter of 2019 when ARIKAYCE was in its fourth quarter of launch and ramping quickly. Positive impact of this increase in enrollment forms was partially mitigated, however, by temporary disruptions to the distribution of our case due to the changed health care cyber-attack, which impacted the dispensing of medicines across the United States, particularly for patients starting a new treatment.

That said, we are continuing to work to help patients gain access to ARIKAYCE who had difficulty starting treatment due to the cyberattack. In Japan, first quarter 2024 net revenue was $14.9 million representing 13% growth over the same quarter last year. Although foreign exchange did not have a material impact on the overall business, the impact of changes in the foreign exchange rate on our revenue in Japan this quarter was notable. In fact, if average exchange rates this quarter were the same as they were in the first quarter of 2023. The year-over-year growth in Japan would have been approximately 27% or more than double the reported growth rate. I would also point out that the timing of inventory drawdowns led to a sequential decline in sales in Japan compared to the fourth quarter, which saw record-setting strength in aerospace sales volumes.

Overall, our view on the opportunity in Japan continues to be very positive, and we look forward to the progress from this important region in coming quarters. In Europe and rest of world, net revenue in the first quarter 2024 came in at $4.3 million, up 42% compared to the same quarter last year and well ahead of our internal expectations as that region's collective efforts are paying off while we continue to expect the relative contribution to global sales from Europe to remain modest, we are pleased to see their efforts gain momentum, especially as we round the corner to the potential launch of brensocatib, assuming positive ASPEN and regulatory approvals. Importantly, today, we are reiterating our full year 2024 global revenue guidance of $340 million to $360 million.

As a reminder, the midpoint of that guidance range represents 15% growth compared to 2023, which is consistent with the 16% year-over-year growth that was delivered in the first quarter. Furthermore, as I mentioned on last quarter's call, the first quarter of each year historically contributes slightly more than a fifth of each year's total sales due to the seasonal impacts in both the US and Japan. By that same measure, our first quarter performance puts us squarely on track to achieve our guidance range for the full year. Let me now turn to a few additional financial items. In the first quarter 2024, our gross-to-nets in the US were approximately 21%. As in prior years. We expect the gross-to-net in the first quarter of the year to be a bit higher before coming down in the remaining quarters of the year.

We continue to expect gross-to-nets will settle in the mid-to-high teens range for the full year. Cost of product revenues for the first quarter of 2024 was $17.5 million or 23.1% of revenues, which is consistent with our historical performance. Turning to our GAAP operating expenses. In the first quarter 2024, research and development expenses were $121.1 million and SG&A expenses were $93.1 million, reflecting continued investment in both our early and mid to late-stage pipelines as well as launch readiness activities for brensocatib. In closing, Insmed's solid financial performance in the first quarter keeps us on track to deliver on our full year guidance. More importantly, we remain well positioned financially as we see double-digit growth from our global commercial efforts, positive top-line results from the investment and clinical work and TPIP continued progress across all of our clinical programs and the imminent ASPEN data readout with nearly $600 million of cash, giving us substantial optionality on the other side of that event.

Now we would like to open the call to your questions. Operator, can we take the first question, please?

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