Good morning. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the Insmed First Quarter 2017 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. Laura Perry, Investor Relations, you may begin your conference.

Thank you, Chris. Good morning, and welcome to today's conference call to discuss our first quarter 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 through the SEC’s Web site at www.sec.gov or from our Web site 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; John Goll, Vice President, Finance and Corporate Controller; and Roger Adsett, Chief Commercial Officer. For today’s call, Will will provide a corporate update and then John will review the first 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.

Good morning, everyone, and thank you for joining us today. 2017 is undoubtedly the most significant year in our more than 10-year history as a company. It will be truly transformative as we reveal the top line results of our phase 3 CONVERT study. Positive results would be an important milestone in our efforts to reach our goal of building a self-sustaining biopharmaceutical company that addresses the unmet needs of patients with rare diseases. Positive top line results from the CONVERT study have the potential to put Insmed on a new trajectory of growth. The CONVERT study is investigating ARIKAYCE, liposomal amikacin for inhalation or LAI, as a treatment for the thousands of patients who suffer from refractory nontuberculous mycobacteria lung disease or NTM caused by Mycobacterium avium complex or MAC. This is a potentially debilitating, pervasive and costly disorder with no approved therapies available in either the U.S. or Europe. Typically, the disease affects an older population and is associated with an increased mortality rate that is further complicated by multiple comorbidities in these patients. The best available information informs us that the five-year mortality rate for NTM is approximately 25%. It is far higher for those patients who are refractory to current therapeutic approaches. To remind you, LAI is a combination of the aminoglycoside antibiotic amikacin. Amikacin is encapsulated in a specialized liposome made up of DPPC and cholesterol, which enhances its potential to treat certain infections. LAI is taken directly into the lungs through a customized ultrasonic nebulizer. Following the achievement of our patient enrollment objective late last fall, we remain on track to report top line data as planned later this year. We expect that this will occur in the September timeframe plus or minus a month. CONVERT is the largest study in NTM undertaken to-date.…

Thanks, Will. Good morning, everyone. Turning now to our quarterly results. This morning, we reported a net loss of 37.4 million or $0.60 per share compared with a net loss of 33.5 million or $0.54 per share for the first quarter of 2016. Research and development expenses increased to 22.3 million compared to 20.5 million in the first quarter of 2016. The increase in research and development was primarily due to an increase in headcount and related expenses. First quarter G&A expenses were 13.7 million versus 12.5 million in 2016. The increase was primarily due to higher expenses related to our pre-commercial activities for LAI. As of March 31, 2017, we had cash and cash equivalents of approximately 126 million and our cash-based operating expenses for the first quarter were 31.2 million. Note that we have now added a reconciliation in our press release of our GAAP operating expenses to our cash-based operating expenses. With regard to our cash guidance, we continue to expect cash-based operating expenses to land within the range of 67 million to 77 million for the first half of 2017. This range primarily reflects spending for the CONVERT study, the follow-on 312 study for those NTM patients that do not convert, the continued regulatory and pre-commercial development of LAI. The estimates also include expenses related to INS1007 including clinical inventory purchases as well as preclinical and clinical start-up activities. As we’ve mentioned in the past, we will remain disciplined in our use of capital and we will ensure our two priority programs, LAI and INS1007, are appropriately resourced. With that, I’ll turn the call back to Will.

Thank you, John. The Insmed team is committed to developing what we hope will be the first approved drug for a globally prevalent rare disease with no approved treatment options currently available. We believe that for patients struggling with NTM lung disease, LAI has the potential to provide welcome relief to a potentially debilitating and deadly condition. We are also excited about our emerging pipeline of therapies to address unmet needs in other rare diseases. 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&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&A. Operator?

[Operator Instructions]. Your first question comes from Josh Schimmer with Piper Jaffray. Please go ahead.

Great. Thanks for taking the question. As we’re getting closer to the CONVERT data, so a lot more interest from investors. I was hoping to start, maybe can you just review the commercial opportunity for ARIKAYCE, the patient demographics for the particular subset that you’re exploring? One quick follow up after that.

Sure, Josh, and thanks for the question. For that, I’m going to turn it over to Roger to answer, our Chief Commercial Officer.

Yes, thanks Will. It’s a great question. It’s one of the areas that we’ve been spending quite a lot of time over the past few months trying to really understand what the opportunity looks like. We’ve been getting a lot more granular in looking at patient opportunity and mapping those patients across the globe. We’re encouraged by what we’re seeing. I think we’d like to give you more commentary on that at the session that we have that Will alluded to coming up in the summer. But we definitely are encouraged by what we’re finding today.

Is there any way to get a little bit more granular than encouraged in terms of number of thousands of patients that you’ve been able to identify [indiscernible]?

I think what we’ve previously guided is we feel very comfortable with that and I think that before we commit to anything more than that, we’d like to just complete that analysis and give you a further update in the summer time.

Yes. And Josh, just for the benefit of those on the phone that haven’t heard that previous guidance again, the NIH came out with an estimate that the prevalence in the U.S. is about 181,000 patients. This is just U.S. numbers. We had previously discussed a diagnosed prevalence of around 55,000 patients. And of that when we target, as this study does severe refractory MAC-induced NTM patients who’ve been on background therapy for a minimum of six months. That profile and if we were to get that kind of a label, we estimate that the addressable market there would be about 10,000 patients in the U.S. Obviously, the exciting part of this is the opportunity to go beyond that at some point in the future. And that is certainly – as we dissect the market, we’re looking both at our current opportunity informed by this trial and then the potential for the future.

Got it. And then, Will, you had talked about demonstrating the economic value of the product. Do you expect that any other clinical trial endpoints in CONVERT will provide direct evidence of economic value, or is it going to have to be extrapolated from evidence that you’ve assembled for patients who culture convert? And then maybe you can kind of elaborate on the economic value you think you’ve been able to show for those patients? And is that value extrapolated then to patients who convert and then relapse and then maybe can go back on [indiscernible]? Thanks.

Yes. So obviously we’re going to be doing a lot of work around the value for money story which has been our mantra from day one here and long before it was the topic of the day in the media. And I think what we have found from the work that we did in the distant past is that culture conversion results in a drop in hospitalization. And that correlation while not extracted from our clinical data nonetheless suggest that given that is our primary endpoint, we’re focused on the right outcome measure for the benefit of insurance companies to understand that they’re getting value for money by achieving that endpoint. We’ll look at this extensively in our phase 3 study obviously, but I think finding that information that these patients are actually surprisingly expensive, that they’re spending much, much more time in the hospital than age-matched controls and if that data comes from an insurance company’s database, it’s not something we went out and researched. This is to clarify for everybody on the phone. We paid an insurance company to go in and look at their data and tell us what it cost them to treat an NTM patient and then how that has changed if the patient culture converts. And if you look at our Investor Relations deck which is available online, you will see that data spelled out in summary form in one of our slides and the reference to the poster that captures this and the publications behind it. So I would encourage everyone to turn their attention to that, because what it frames out is a very compelling value for money story. I don’t know, Roger, if you want to add anything to that in terms of where we’re putting our time and efforts right now.

No, I think that captures it very well, Will. I think that one of the interesting things around this effort is partnering with the insurance companies to actually taking a look in their data is actually very valuable and educational for payers as well. So I think that the opportunities to raise the awareness of the expense of this disease and the fact that we can come with a solution at the appropriate time I think will be very well received.

Great. Thanks very much.

Your next question comes from Adam Walsh of Stifel. Your line is open.

Three here. The first one is, Will, can you discuss how we should think about the potential performance of the standard of care arm in the phase 3 CONVERT study? And then number two, how we should think about the secondary endpoint of six-minute walk test? Is that something that the FDA has said to you is of critical importance to get the drug approved under SubPart H? And then number three, can you talk about a little bit about the timing of filings in other geographies beyond the U.S.? Thank you.

Sure, Adam, thanks for three questions which I hope I got written down accurately. The standard of care arm in phase 3, I think you put your finger on a very important element of this study. As you know from phase 2, we have an understanding the standard of care for severe refractory MAC NTM patients converted about 5% of patients in the timeframe that we examined, which was roughly three months. In this study, we expect the same performance. But it’s an interesting question because nobody has ever studied the standard of care that’s used. Indeed, the guideline therapy that was generated for use by a specialist in this field is not based on a clinical study. It’s based on the best opinions of key opinion leaders. Now I would support that those folks are pretty good in their judgments, but there isn’t a lot of clinical data behind it. So this study not only examines ARIKAYCE in a very thorough way but it also examines the standard of care and its value in a very thorough way and for the first time. So to put a finer point on it, we are 90% powered to show a 15% difference between our drug plus standard of care versus standard of care alone. And we’ve communicated to the market that we believe standard of care should do about a 5% conversion rate and that our drug consequently should do about a 20% conversion rate after six months of therapy using that triple negative culture as the standard by which we make that judgment. But I think understanding standard of care here will be very important. And the read through would be – it’s more attractive to us the more effective our drug can be relative to standard of care. So…

Excellent. You hit them all. Thank you.

Your next question comes from Ritu Baral with Cowen. Your line is open.

Ritu, I think you’re on mute.

I was indeed. Sorry. Thanks guys for taking the question this morning. Will, my first question – I have a CMC follow up after this. But my first question has to do with the percentage of patients that will have completed the six months additional treatment period after first culture conversion, what percent approximately of course, what percentage do you think will have completed that period at around the September-ish data release? And as that is likely to be I think prospective data, what could that follow-up data have for – what sort of implications could it have for label and claims and other data generated?

Okay. So I’ll take this question and then I’ll come back to you for your CMC question. I don’t have a good estimate before you of how many patients will have completed additional exposure. I think just to frame it out for everyone on the phone the way this study is designed, patients get six months of either standard of care or standard of care plus our drug. And then from the time of their culture conversion, the first of the three in succession is where we begin the additional 12 months of treatment that continues. And that’s per guideline therapy. So a patient comes in, they culture convert in month four, for example, they would get an additional 12 months of therapy after that so that the totality of their treatment period under guideline therapy would be 16 months from start to finish. We then track them for a year off all drugs to see a number of measures including durability of the culture conversion if that’s achieved. So that’s the framework and I think, Ritu, to the question you’re trying to get at is, how much of that information will be available around the September timeframe that looks into that second part of this study where patients continue on drug. And indeed, as of today, we obviously have some patients who’ve completed the entirety of this study. And that information will be available for our filing. I think at this point I would want to set expectations and say our ambition is going to be to quickly turnout the top line result. I don’t know that we’re going to be in a position to add anything to that, because we’re obviously going to want to look at that very carefully before we put it out publicly. And I’m not sure that the top line results will be the right form for that. But shortly thereafter, we would hope to have a pure reviewed setting where we could put out more information about both the initial treatment phase and then the subsequent phase of treatment, whether it’s in a continuation of 212 or the 312 study.

What sort of key either analyses from that follow-up period could be important for either the label or payers do you think even if we don’t have it --?

Yes, that’s a great follow up. So I think what’s really going to be important is – the answer to the first question is going to be patients are exposed for six months and a certain percentage are converted. What of those who don’t convert in that first six months but continue on drug? Do they continue to convert? Do we see by month nine or indeed by month 12 that even more have converted? Because that feeds into the logic of continuing treatment beyond the initial six months treatment phase that we’ve identified in this study and that could be quite important for duration of therapy to achieve that first culture conversion. So I’ll be very interested to see that. I think then the other thing that will be very important is the durability of the conversion. We are going to be watching patients for a full year off all drug. And as we saw in phase 2, we managed to get these patients who had been very resistant to any culture conversion, some of these patients have been on drug for years and never culture converted, we culture converted them. And then one year off drug, they remain culture negative. So that’s quite a surprising and positive finding and we hope to see that again in this study. Where those patients show up culture positive after they’ve converted, it would be very important for us to examine the underlying infection. We’re going to be DNA typing these samples to ensure that we know whether the patient has relapsed. In other words, we didn’t completely eradicate the infection or it’s a re-infection from a new species and therefore would be subject and available to retreatment by LAI. In the phase 2 study in the experience to-date, we expect about a third of the patients will be re-infected with a new strain of NTM that we would then have to retreat.

Got it. And then my CMC question, you mentioned that you have two sources of API I believe. Can you take us through what your facilities are for Fill/Finish and whether all of these facilities are GMP certified and potentially when they’ve last gone through inspection?

Yes, and so what I’ll say to that right now is we’re going to be taking a deeper dive on that at our Analyst Day, because we want – there’s obviously a lot of detail around CMC issues. As we all know, 40% of complete response letters last year were CMC based. We’ve spent the last several years under the direction of Don Nociolo here at Insmed really getting our facilities to a top standard. We now have two sources of supply that’s a creation of drug product. And we have also qualified all the way back through our supply chain and not to beat the point to death, but we know the farm field in China where the soybeans are grown that give rise to the Kanamycin that gives rise to the amikacin sulphate which is the raw material used to create the amikacin that we use. We have second sources of supply or inventory built up all along that supply chain. Similarly, the DPPC and cholesterol sources that are used to create the liposome have either been inventoried, backed up or a second source of supply created. So I think we have really taken to heart the importance of CMC and invested in it heavily over the last several years with the result that we now have one source of supply at 50 liters scale and a second source of supply fully automated at 200 liters, both of which are creating product as we sit here today for our clinical trial. So I would say, never rest but we feel very good about our CMC situation. I hope that’s responsive to your question. And for the details on Fill/Finish and the other aspects that are important of supply chain, I would draw your attention to our July meeting where we’re going to have TechUp [ph] share some of that information.

Very helpful, thank you. And look forward to the July Analyst Day.

Your next question comes from Joseph Schwartz of Leerink Partners. Your line is open.

Good morning. Thanks very much for taking the question. So within MAC NTM, there seems to be some high geographic subspecies variability as you look at the strains that are distributed around the world. And so given that the last study was performed only in North America and CONVERT is distributed across 18 countries as I recall, what do we know about how well ARIKAYCE can work across different isolates based on the MICs in-vitro or is there clinical data comparing the natural history for patients who are treated comparably but have different subspecies strains?

It’s a good question. You’re getting into the weeds as we should. I think the first thing I would observe is and it’s one of the benefits of being an orphan condition. The key opinion leader network is global. So all of the dialogue that surround the analysis of the different subspecies that give rise to NTM is one that happens at every one of the conferences, whether it’s ATS or ERS or what’s being kicked off now as an important conference over in Japan to look at these diseases and what gives rise to them. We are not concerned by the variability that is suggested by the geographic growth or outreach from this study. In fact, we spent a lot of time looking at exactly the question you’re asking before we ever went international. And I think we feel confident. I’m not going to go into more of the details of that other than to say that in looking at the subspecies that give rise to NTM, remember that we are focused exclusively on MAC in this study and that the responsiveness of that particular avium complex to different treatment regimens has been examined. And so that has informed the design of our phase 3 study. So we feel very good about the performance of our drug in all these different settings. And I would go further to say that not just the underlying bug that gives rise to the infection but the various ethnicities that are involved in the behaviors that sometimes are pent [ph] to those kind of variabilities have also been considered in the design and the administration of this study.

Okay, great. I’m just trying to think of all the known, unknowns here. Another one could be, do we know if patients in CONVERT have similar degree of disease severity in terms of their sputum counts as the patients who enrolled in TARGET? And then when you look at TARGET, do you see any baseline effect such as ARIKAYCE converting fewer people with higher sputum counts of NTM bacteria than those with lower sputum counts?

Yes, so this goes back for the benefit of those on the phone to the primary endpoint of the phase 2 study which was the reduction in bacterial density that was examined at the time. It was felt that that endpoint would be predictive of future culture conversion, because at the time in the short period that we were administering our drug, nobody believed we would actually accomplish any culture conversion. And the unexpected but positive outcome of achieving culture conversion in so many patients is what led to breakthrough therapy designation and our pursuit of that as the primary endpoint in phase 3. I think what we learned from phase 2 was that that primary endpoint was ill advised. It was not particularly correlated with any outcome. It had not been used in the clinical study before. And subsequently we do not feel it’s beneficial to even examine bacterial density. This was a seven-step scale that was sort of created for individual patient examination but really not meant as a comparative tool across patients given the inherent variability of sputum. Moreover, the actual ranking of the sputum density does not correlate to any clinical benefit that anyone’s established. So I think we have to set that endpoint aside as an informative tool and accept that it was probably too broad and too blunt to be helpful for us, and really just hold ourselves to the higher standard of culture conversion. The goal of treatment in these patients is eradication of the infection. That’s what culture conversion represents. That’s what we were able to demonstrate in phase 2 and that’s what we’re looking at in phase 3.

But do we know if ARIKAYCE is able to convert people to negative, easier if the sputum counts are lower as opposed to if they were higher?

We don’t because the challenge of sputum density is when you take a sample, to get into the finer point, you don’t know whether that sample is actually representative of the density within the lung. You’re getting A sample. There’s inherent variability in sputum sampling. You’ll hear that over and over again. And so bacterial density as a measure gives a full sense of confidence that you’ve got a good read on the bacterial density inside the patient’s lung. That’s why we set it aside. It’s not that there isn’t a point of interest around your question. It’s just that there is no reliable way to measure it.

Right. Okay, great. Thanks for taking my questions.

You bet.

Your next question comes from Liisa Bayko of JMP Securities. Your line is open.

Hi, there. Thanks for taking the question. Just curious if you could give any more color on discontinuation rates? I know you said they were in line with expectations. Maybe if you can’t say specifically, maybe remind us of what you were expecting?

Yes, it’s a good question, Liisa, and thank you for it. We’re not talking more specifically about numbers here and I know that’s disappointing. But I think the important thing about this is that we remain within our expectations and we’ll look forward to providing greater detail in the future. I will just comment that one of the things that holds us back is you never know how the behavior of the last bolus of patients is going to be and we don’t want to get ourselves caught up by making a comment about where we are, if it then changes because for some reason the last group of patients has a higher dropout rate for whatever reason. So that’s the explanation for why we’re not providing more color. Your specific question about what percentage do we expect? I think what we saw in phase 2 was around 25%, 30% of patients dropped out over the duration of the study. And I think when we talk about meeting expectations, we want to be within reach of those kinds of numbers. And we won’t know where we are specifically until all patients are through the study.

And the discontinuation rate pretty consistent across arms?

You mean with regard to phase 2 or are you trying to ask me something about phase 3 and can’t?

Well, I guess we’ll stick to phase 2 as you probably don’t want to comment on phase 3. But we do want a comment on phase 3. Please go ahead.

No, I think we’re going to hold off on phase 3 again for the reasons previously said. And in phase 2, you do see a higher discontinuation and AE rate as you would expect in the patients who were administered LAI. Consistent with other inhaled antibiotics, you find the experience of breathing in drug can be unsettling to people who are not used to it. And once they have used it for a period of time and pushed through the initial discomfort, the AEs drop off to almost nothing. And that’s consistent with other inhaled antibiotics like tobramycin and Cayston and others. In our case, we saw that in phase 2. And so there is a higher discontinuation rate in the treatment arm. We would expect to see that here to be sure. But the question will be, will it be within the reach of that previously mentioned number?

Okay. And then just curious about the six-minute walk test. What’s the correlation between culture conversion and change in six-minute walk improvement? I guess I would say six-minute walk and what’s the timing of that. Is it holds – like if you culture and convert, you then should kind of immediately see a benefit in six-minute walk or where to think about the connection between the two in terms of both just actually improvement and also timing?

Well, your question actually raises the very issue that makes us uncomfortable which is that we don’t enough data to really make definitive answers to those inquiries. We do know that we saw post-hoc a good correlation between culture conversion and improvement in six-minute walk test at the time that that was measured, which is baseline to three of six months out. And that appeared to relate to patients who had culture converted. So we will be more explicitly exploring that in this study. But again, we’ve got a lot of variables in operation here that was post-hoc analysis and in this situation, we don’t know if we’ll see that same behavior in evidence. And a lot of it will depend on the characteristics of the patient at baseline. If patients are very healthy relatively speaking in terms of their ability to walk at baseline, will we see the same degree of improvement if they’re very sick, do we see a more dramatic degree of improvement? Those are the nuances that we’ll be looking at to try and understand how and why six-minute walk test maybe a valuable measure.

Okay, thanks.

There is time for one more question and it comes from the line of Josh Schimmer of Piper Jaffray. Your line is open.

Josh, you’re muted. Josh, are you still there?

Yes, sorry about that. I had to unlock my phone to un-mute myself. Nicely done on my end. So I take it you couldn’t hear my question?

No.

Thanks for taking the follow up. Just want to continue the line of questioning from Liisa and Joe. How do we think about making a case for patients who don’t culture convert to stay on therapy? And if we can’t make a strong case for those, how do we think about this market dynamic? Do kind of most patients wind up on therapy for 16 months and then maybe a third of them kind of turn into a chronic relapsing, remitting type control state? Just kind of address those two points. Thanks.

Yes, I think the phase 3 study is going to give us a lot of the answers to that question, which is what happens to the patient after they’ve been on drug for six months versus three months versus nine months. Once we know that and can extrapolate that line, I think we’ll be in a better position to comment how long patients should be on drug. It’s an interesting question because if you speak to KOLs now, as I know you have, what you will hear is that most of them say when they enter the clinic with NTM, they don’t ever leave. And so they give them this cocktail of drugs for a long period of time and they rotate different permutations to try and make some improvement and achieve that culture negativity in a durable way. At the PFDD meeting that the FDA held where they examined what it meant to have NTM, there were patients who were standing up talking about how they’ve been on drug for 10 or 20 years and had never been culture negative. So we don’t know how long patients will be on drug. I think the clinician’s instinct is going to be to continue to treat. That’s currently the practice right now. I think what we need to tease out is how do we reconcile that with the payment community and ensure that we’re getting the right outcomes that they need to see. I don’t know, Roger, if you want to add anything to that.

I think that’s exactly right. I think the – it’s pretty clear cut with patients who achieved the culture conversion and then an additional 12 months of therapy according to the guidelines. Clinicians I think while they desire to have culture conversion as a hard endpoint that they’d like to achieve, keeping the infection in check is also a goal that they pursue. And that’s why as long as the patient will continue to tolerate the therapy, they’re willing to continue to treat them in order to achieve that goal. As we engage with the payer community and talk about what success looks like for those patients and as we get more health economic data and get more information from our phase 3 trial, I think that picture becomes much more clear as to how physicians should be thinking about treating those patients who don’t achieve that immediate culture conversion but are seeing some sort of a benefit from continued treatment.

And that goes back to the whole CF model, right, inhaled antibiotic that is not ever intended to eradicate the underlying infection, it’s taken to keep it at bay. And so what we’re trying to do is figure out how this model’s going to operate and obviously data will help us inform that – answer that question.

Great. Thanks very much.

This concludes today’s question period. I’ll now return the call to Mr. Will Lewis.

Thank you again for joining us. We look forward to meeting and speaking with you in the months to come. Have a great day, everyone.