Insmed Incorporated (INSM) Q2 2017 Earnings Report, Transcript and Summary

Good morning ladies and gentlemen and welcome to the Insmed Second Quarter 2017 Financial Results Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] as a reminder this call is being recorded. I'd now like to turn the conference over to your host, Blaine Davis, Head of Investor Relations. Mr. Davis, you may begin your conference.

Thanks, James. Good morning everyone, and welcome to today's conference call to discuss our second quarter financial results. I have recently joined the Insmed team as the Head of Investor Relations and look forward to working with all of you. As many of you know, we recently hosted an Investor day in New York City and I want to encourage everyone to review the content from that event. It is available on our website and also furnished on Form 8-K with the SEC. During the meeting, we conducted a Q&A session that provided additional details beyond our formal presentations. As of this moment, we do not have any new details to share with you and as a result we will not be conducting a Q&A session on the call today. In addition, following today's call, the company will remain in a quiet period until we release topline data from our Phase 3 CONVERT study which we expect to be in September plus or minus one month. While we acknowledge that some of you may have questions, we appreciate your understanding and look forward to reengaging with everyone once we've released the data. 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 website at www.sec.gov 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; and Paolo Tombesi, Chief Financial Officer. For today’s call, Will will provide a corporate update and then Paolo will briefly review the second quarter financials. At this time, let me turn the call over to Will.

Good morning, everyone, and thank you for joining us today. Insmed is on the verge of the most significant event in our more than 10-year history as a company as we expect to report the topline results of our Phase 3 CONVERT study in September plus or minus a month. As Blaine just mentioned, at this point, we have no new information regarding the release of data and therefore our guidance on timing remains the same. Positive topline results from the CONVERT study have the potential to put Insmed on a new trajectory of growth. To prepare for this important milestone and to showcase the depth of the talent at Insmed, we hosted an Investor Day in July. At this event, we shared an overview of our clinical development strategy for amikacin liposome inhalation suspension or ALIS, including the status of the Phase 3 CONVERT study and the follow-on 312 study. The FDA has recently advised Insmed that ALIS is the established name for our Phase 3 product candidate in development for the treatment of refractory NTM lung disease caused by MAC. This replaces what we've previously referred to as LAI. During the investor meeting we also had the opportunity to showcase the talent and the tremendous progress we have made over the last few years at Insmed. We've provided you with the details on our clinical development program, our commercial strategy, as well as our pipeline beyond ALIS. While there were many important areas of our business that we discussed, I wanted to highlight a few of them today. During the meeting we've provided you with extensive detail and background on the work we have done to better understand the potential size of the estimated addressable market in the U.S. and shared new information about the potential opportunity in Japan. Our commercial team has spent a significant amount of time digging into the details of the potential U.S. market and we feel we have an excellent understanding of the areas of patient concentration and treating physicians and we are using those learnings to focus our launch strategy. We are also particularly encouraged by the work we have done regarding the market in Japan. While it is early, our work thus far leads us to believe that there may be more diagnosed and treated NTM patients in Japan than in the U.S. Further, we estimate the refractory patient population may also be larger in Japan. As a reminder, we believe we have included the necessary PK studies in Japanese patients as part of the CONVERT study and we look forward to providing you with future updates on our progress in this important market. In addition, while we are predominantly focused on the upcoming topline data for the CONVERT study and subsequent regulatory and commercial activities that could follow, we are also very excited about the potential for lifecycle management for ALIS. As you know, our initial study is focused on patients with refractory NTM caused by MAC. However, as you've heard at the Investor Day, many treating physicians believe there are unmet medical needs beyond refractory patients. We are exploring the suitability of ALIS to potentially address these areas of unmet need and believe we may have potential in maintenance therapy, front line therapy and [indiscernible]. Evaluation is underway for these clinical trials and we are excited about the potential for lifecycle management. Now I'd like to reiterate the latest information pertaining to the CONVERT study that we shared at the Investor Day. First, we are happy to report that the last subject has passed the month-six time point. You will recall that the primary endpoint for patented approvals is that proportion of patients achieving culture conversion by month-six and the ALIS plus standard of care arm compared to standard of care arm alone. Second, the discontinuation rate in the study was slightly better than our expectations which were based on the assumed rate of 25%. And finally, as we mentioned in the past, the data monitoring committee has met seven times and recommended that the trial proceed without any changes. Now for some of you that may be new to the Insmed story, I'd like to briefly review some of the key components of the CONVERT study. It is the largest study in NTM ever undertaken and its global reach spans over 125 sites in 18 countries. We have completed randomization of a total of 336 patients with 2:1 randomization in favor of the ALIS treatment arm. Patients received either ALIS plus standard of care or standard of care alone. The primary endpoint is the proportion of patients achieving culture conversion by month-six. We define culture conversion as three consecutive negative monthly sputum cultures, a commonly used measure when evaluating patients with diseases like tuberculosis. The study is powered at 90% confidence level to demonstrate a 15% difference between the treatment group and the control group. The current study design was based on the assumption that 20% of patients convert in the ALIS arm and 5% convert in a control group. Patients who achieve culture conversion by month-six will continue in the CONVERT study for an additional 12 months of treatment following the first monthly negative sputum culture. Patients who do not culture convert have the option of enrolling in our INS-312 study. INS-312 is an open label study where patients will receive ALIS plus guideline-based background therapy for 12 months. This extension study will allow us to evaluate several important aspects of the drug's use. Number one, the impact of remaining on the drug for longer than six months to help answer the question, do patients continue to convert after more than six months of therapy? Number two, the durability of culture conversion after use and removal of therapies; and number three, the impact of ALIS on other longer term clinical objectives such as mortality. If the CONVERT study meets its primary endpoint, we believe we are positioned to move quickly to file for approval in the U.S. under subpart H as planned. Subpart H enables sponsors to file on an accelerated basis and subsequently complete clinical activities to verify and further describe clinical benefit. We continue to believe that positive results from the CONVERT study will provide sufficient data to support conditional and full approval. We also plan to pursue regulatory submissions in other geographies, and are particularly excited about the opportunity in Japan. From a manufacturing and supply chain perspective, we believe we are in a solid position as we prepare for commercialization with two sources of clinical and commercial supply up and running for ALIS. Now let me briefly touch on our other clinical development priority INS1007. This is our reversible DPP1 inhibitor taken orally that we licensed last October from AstraZeneca. This Phase 2 ready asset complements our ALIS program directly leveraging our expertise in the rare pulmonary space. We will be targeting non-CF bronchiectasis as an initial indication. This is a rare pulmonary disorder in which as many as 40% of patients are believed to also have NTM. Similar to NTM there are currently no approved therapies specifically indicated for this disease. Patients with this condition experience a vicious cycle of bacterial colonization, inflammation, airway destruction and abnormal mucous clearance. The current standard of care involves utilizing antibiotics to manage the infections and exacerbations rather than targeting the cause of the disease. As a novel inhibitor of DPP1 INS1007 has the potential to impair the activation of three neutrophil serine proteases that reside within our neutrophils; neutrophil elastase, proteinase 3, and cathepsin G. When they are released in excess of endogenous inhibitors it becomes destructive and trigger excessive mucous release and pro-inflammatory events. This then contributes to lung matrix destruction and inflammation. We believe that our understanding of the activity of INS1007 combined with the completed Phase 1 work performed by AstraZeneca and our comprehensive evaluation of the therapeutic area positions us to design a Phase 2 program that will answer questions about the management of non-CF bronchiectasis using this novel mechanism of action. We have plans to initiate enrollment in a Phase 2 trial called the Willow study evaluating INS1007 in non CF bronchiectasis. At our Investor Day we announced that this 3-arm global study is expected to take place at a 125 sites in 16 countries. Pending effectiveness of the IND we plan to enroll approximately 240 patients, 80 patients per arm and evaluate two doses of INS1007, 10 mg and 20 mg versus placebo over 32 weeks. This includes four weeks of screening, 24 weeks of treatment and four weeks of follow up. We believe this will provide evidence of dose response, efficacy, and safety. We will also stratify for background treatment and for presence of Pseudomonas. The primary endpoint for this study is the evaluation of time to first exacerbation and our secondary endpoints are expected to provide insight in the mechanistic, clinical and outcomes-based measures. As many of you know, this collection of endpoints can be challenging in a heterogeneous patient population. Consequently, we have planned to do an interim blinded look at the data during the Phase 2 study to evaluate the number of exacerbation events to ensure that the study has been powered appropriately. The Insmed team is also working to advance a number of other programs in rare disorders. The most advanced program from our internal pipeline is INS1009, a nebulized prodrug formulation of treprostinil. Phase 1 data from this clinical candidate is encouraging and we continue to believe that this program holds value. We are continuing to evaluate our options to further advance this development. With that, let me turn the call over to Paolo for this quarter’s financial update. Paolo?

Thanks, Will. Good morning, everyone. I am very excited to have joined the Insmed team in early June. It has been a busy few months since I have joined Insmed as we plan for the upcoming release of data and implementation of our strategic plans thereafter. I look forward to getting to know all of you as we move the company forward from here. Turning now to our quarterly results, this morning, we reported a net loss of $44.7 million or $0.72 per share compared with a net loss of $36.6 million or $0.59 per share for the second quarter of 2016. Research and development expenses increased to $26.9 million compared to $23.9 million in the second quarter of 2016. The increase was mainly due to an increase in expenses related to INS1007 and higher compensation and related expenses due to an increase in the headcount partially offset by decreases in ALIS manufacturing expenses. Second quarter G&A expenses were $16.6 million versus $12.3 million in 2016. The increase was mainly due to higher expenses related to our pre-commercial planning activities for ALIS and higher compensation related expenses due to an increase in headcount. As of June 30, 2017, we had cash and cash equivalents of approximately $91.1 million and our cash-based operating expenses for the second quarter were $38.2 million. Our cash operating expenses for the first half of 2017 were $69.4 million. These results are in line with our previously issued guidance for cash operating expenses for the first half of 2017 to be between $67 million and $77 million. A reconciliation of our GAAP operating expenses to our cash-based operating expenses is included in our press release which is available in the Investor Relations section of our website. As we have mentioned in the past, we plan to remain disciplined in our use of capital and to ensure our two priority programs, ALIS and INS1007 are appropriately resourced. With that, I’ll turn the call back to Will.

Thank you, Paolo. We are incredibly excited to be at this transformational point in Insmed's history as we work to build this company and prepare to share topline results from the CONVERT study. As many of you saw at our investor meeting we have an exceptional team capable of fulfilling this company’s mission. With that, I want to close the call by thanking all of you for the role you played in our success and your continued support and interest in Insmed. We look forward to reengaging with you following the release of topline data. Enjoy the rest of your summer.

This concludes today’s conference call. You may now disconnect.

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