Good morning. And welcome to the Insmed Third Quarter 2019 Financial Results Conference Call. [Operator instructions] Please note today's event is being recorded. I would now like to turn the conference over to Blaine Davis, Vice President and Head of Investor Relations. Please go ahead, sir

Thanks, Waco. Good morning, everyone, and welcome to today's conference call to discuss our third quarter financial results for 2019. 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. The information on today's call is not intended for promotional purposes and not sufficient for prescribing decisions. Joining me on today's call are members of the Insmed executive management team, including Will Lewis, Insmed's Chairman and Chief Executive Officer; Roger Adsett, Chief Commercial Officer; and John Goll, Chief Accounting Officer. Once we complete our prepared remarks, we'll open the call to take your questions. Let me now turn the call over to Will.

Thank you, Blaine. Good morning, everyone. And thank you for joining us. We had another quarter for Insmed with continued execution and strong performance of ARIKAYCE delivering $39 million in total revenue. As the launch continues to progress well across all metrics, so does our ability to predict and project future performance with greater confidence. As a result, we are raising and narrowing our full year revenue guidance to a range of $133 million to $138 million. The breadth and depth of prescribing have continued to exceed our expectations. Additionally, the feedback we received from treating physicians remains very positive, underscoring the significant unmet need that ARIKAYCE addresses in this difficult to treat patient population. Patient starts discontinuation and payers report remains positive and we are seeing very encouraging trends on duration of use through the third quarter. Roger will go into each of these in greater detail in just a minute. All of this increases our optimism for the long-term growth potential for the product as our global expansion efforts progress in the EU and Japan. As we discussed last quarter, we filed our MA for the approval of ARIKAYCE with the European Medicine agency to the treatment of patients with persistent MAC lung infection as part of a combination any bacterial drug regimen in adults. The MA was subsequently validated by the EMA. We are working closely with EMA to continue to advance our application in the coming months and we currently expect the 12-month review cycle with a potentially European launch if our MA is approved in the second half of 2020 beginning with the UK and Germany. In Japan, we remain on track to file for regulatory approval of ARIKAYCE in the first half of 2020. A recent meeting with the PMDA indicated that our clinical…

Thanks Will. And good morning, everyone. We remain very excited about the continued strength and outperformance of the US launch of ARIKAYCE. For the third quarter of 2019, we reported global net sales of $38.9 million of which $37.8 million is attributable to the US launch and $1.1 million is attributable to our name patient programs in France and Germany. We continue to see positive trends across the metrics we use to evaluate our launched progress. During the third quarter, we saw a steady rate of new patient starts with slightly more than 600 new patients initiating therapy during the quarter. We believe the continued strength of new patients starts since launch reflects the significant unmet treatment needs for the estimated 12,000 to 17,000 refractory MAC lung disease patients in the US. We anticipate that as treating physicians and patients continue to gain experience with ARIKAYCE and continued strong execution by our commercial teams, we will continue to see solid performance in new patient starts. We have had very productive discussions with physicians at recent medical meetings including the European Respiratory Society Chest and Infectious Disease Week. The discussions in these medical forms continue to demonstrate the increasing attention on the importance of effectively treating patients with MAC lung disease. For example, during the recent chest meeting there was a full-day session dedicated to NTM lung disease with standing room only for many of the sessions. We are increasingly optimistic that the NTM treatment guidelines which are being drafted and agreed upon by four different scientific societies, two us-based and two which are in Europe will be issued before the end of this year. We believe the guidelines will help to refocus treating physicians on the appropriate treatment options for NTM patients, and also assist both payers and community-based healthcare…

Thanks, Roger. First, I'll spend just a few minutes reviewing our third quarter financial results. And then we'll cover our financial guidance. This morning we reported total net revenues of $38.9 million comprising $37.8 million in US net sales of ARIKAYCE and $1.1 million of x US net sales of ARIKAYCE. The x US net sales reflect utilization from our name patient programs in both France and Germany. As you will see on our income statement, for the third quarter of 2019, we reported a net loss of $60.7 million or $0.68 per share compared with the net loss of $87.7 million or $1.14 per share for the third quarter of 2018. Our gross to net for the third quarter were approximately 10%. We expect our GTN to remain low double digits for the remainder of the year. Cost of goods sold for third quarter was $6.4 million. The gross margin was 83% for the quarter, consistent with Q2. It's important to remind everyone that our gross margin has been and will continue to benefit in 2019 from inventory expense prior to FDA approval of ARIKAYCE. Research and development expenses were $34.3 million for the quarter compared to $39.5 million in the third quarter of 2018. SG&A expenses were $53.3 million for third quarter of 2019, compared to $44.4 million in the third quarter of 2018. The increase is primarily due to milestone payments and other external expenses associated with ARIKAYCE. Our cash based operating expenses in the third quarter were $72.6 million and we continue to expect cash based operating expenses to be in the range of $140 million to $155 million for the second half of 2019. We will continue to invest in our core operating business, which includes a successful US launch of ARIKAYCE, global expansion activities in Europe and Japan and pipeline advancements. While we have not yet finalized our budget for 2020, we currently do not anticipate substantial increase in our cash based operating expenses as we move forward into 2020. We define cash based operating expenses in our earnings press release as total costs and expenses excluding cost of product revenues, stock based compensation expense, depreciation, amortization of intangibles and milestone payments. In addition, the company continues to expect one-time capital expenditures in support of the large-scale manufacturing facility of Atheon and the company's primary US location to be in the range of $20 million to $30 million for the second half of 2019. In terms of revenue guidance, we now expect full year 2019 total net revenues for ARIKAYCE to be in the range of $133 million to $138 million. With that let me turn the call back to Will for closing remarks. Will?

Thank you, John. Let me close out our prepared remarks by reiterating that we are very pleased with the continued strong execution by the team at Insmed and the progress we've made in bringing ARIKAYCE to NTM patients in need of reliable therapy. We look forward to sharing results from our WILLOW study of INS1007 as a treatment for non-CF bronc in the coming months. And we are very excited about what lies ahead for the company. With that, I'd like to open the call to questions. Operator, can we take the first question, please?

[Operator Instructions] Today's first question comes from Liisa Bayko of JMP Securities. Please go ahead.

Hi. Thanks for taking the question. Can you maybe expand a little bit more upon some of the metrics you were talking about? What's driving the slightly lower discontinuation rate? Can you maybe talk a little bit more about the duration of therapy? How long are patients staying on? What kind of conversion rates are we seeing in real world which I sense are likely higher than what you saw in bigger phase 3 study? That'd be great. Thank you.

Yes. You bet. I think you put your finger on all the key metrics that we watch to understand how the launch is going and of course the top-line takeaway is that throughout the entire launch, all of these have been positive. But let me turn over to Roger for maybe some more color.

Yes. Thanks Lisa. So let me start with a discontinuation rate. And as you know, we put a significant amount of effort into educating physicians and patients about what to expect when our on therapy including our ARIKAYCE field based team who will train, will train the patients on the device and also talk to them about what to expect as they take their dosing. And we think that over time our discontinuation trend will continue to improve as physicians become more adept and adept at managing these patients. And as patients are learned how to manage the side-effects. And as you know, in a clinical trial, we saw the first the majorities within the first month of dropouts were in that first month. So we can get them through that first month then we think that will continue to see some strong persistence, which I think was the second part of your question. And so we've looked at our Q4, 2018 starts and our Q1, 2019 starts because they have a significant duration of therapy. And we are very encouraged by what we're seeing as far as patients continuing on therapy. So we mentioned overall 85% of the patients who started in those first six months are still on therapy. And we think that speaks very strongly to the benefit that patients are seeing of this therapy. The benefit the physicians are seeing for this therapy. And the motivation of patients to stay on therapy. These refractory patients to stay on therapy. So across the board, we're seeing some very strong, very strong metrics in addition to the patient starts, and we continue to be very encouraged through all of this. The duration of therapy as we've mentioned, I think the best information we have which when we talk…

And just one point of clarification. Roger was talking with the 85% who remain on therapy. That's of those patients who have not dropped out in that first few months on therapy due to age or what have you. And just one other point I want to ask, Roger, maybe to comment on it. These metrics we track and certainly the progress we've made commercially has been really remarkable, but it's not static. It's quite dynamic and by that I mean we're constantly looking at ways to improve and advance on each of these metrics and most recently we just introduced a new group to the commercial team. The so called Pals maybe he want to just comment on them because I think they could be helpful to us.

Yes. Absolutely. Thanks Will. Yes, so we, as you mentioned, we deployed the patient access leads to the field and they just have been in the field for a couple weeks. And this is a team that we think is going to be very helpful for us as we look at reimbursement processes, both for getting patients started and getting through the reimbursement process, but also if there are reauthorization processes that need to occur. So this team is charged with educating health care professionals and their staff on the process which for some physicians is can be a new process. So this is a team that can help them understand what is required to support reimbursement and continuation of therapy. And we look forward to seeing the impact of this team in short order.

Yes and I think reimbursement trends continue to be extremely positive. This is a way to make them even more positive I guess is the way I think about it. So hopefully that answers the question, Liisa in terms of different metrics as best we're able to.

Thank. That's really helpful. And then just one more question for me. We're all excited in looking forward to the results from the WILLOW study and thanks for giving us some kind of high-level comments and how you're thinking about the data. It's very helpful. Can you maybe talk about kind of your strategy assuming that you do see this kind of some kind of correlation between people, the effect on the biomarker, the NSP is going down and some sort of reduction in exacerbation that's kind of what you're looking for? Assuming that you get there, is this a -- this seems to be a very large market opportunity. Can you maybe talk about your plans or something you think about partnering or something you can take forward yourself? Be curious on your thoughts there and thank you very much.

Yes. Appreciate that again. I'd frame this one out as a kind of a lottery ticket. I think it's a --it's a high -- there's nothing approved for the disease state. No one has been successful in cracking that code, but most of the approaches that I'm familiar with have all been inhaled antibiotic approaches to address underlying infections that may be contributing to the exacerbation and hospitalization of these patients. In particular Pseudomonas and you've seen a lot of inhaled ciprofloxacin tried in different formulations, Gilead tried, and others have tried and been unsuccessful. Ours is a novel mechanism, right. We're going at the inflammatory cascade to try and get at it from that side. And I think for that reason it is quite interesting, although I think it's fair to describe as high-risk. So maybe a lower probability of success here, but if we were to see something, I think you're right. This is a massive opportunity and to give you some perspective on that 300,000 to 500,000 patients in the US roughly, I think we can handle that. I'm very confident in our commercial team's capabilities. There's significant overlap with NTM, so strategically this is perfectly aligned. The same is true in Europe and Japan where we have our operations up and running to support, if we were able to secure it, approval for ARIKAYCE in the treatment of refractory NTM and ultimately frontline and other indications. So this is a perfect dovetail into that effort. I'll just highlight that there are some parts of the world where this disease is really quite rampant. China for example, there it's estimated that it's probably 10 times the incidence rate it is in the US. So this is a significant challenge for example in that region of the world. And I think we'll be putting a lot of reflection into how we might be able to take advantage of that should these data be very positive. I do want to say that if they are not very positive, in our assessment this drug will not go forward.

Our next question today comes from Ritu Burrell of Cowen. Please go ahead.

Good morning, everyone. Thanks for taking the question. The first question is on, Will, the PRO that you mentioned for your frontline trial. I understand you're still in conversations with FDA, but can you give us very sort of high-level thoughts on what that composition will be? Is that going to be like an adaptation of the St. George's or some other existing score or a mash-up between a couple? And then is there a high-level strategy for validating that independently of putting it into a Phase 3 or you does it within a Phase 3?

So thanks for the question. The PRO is going to be derived from existing PROs and in particular that there's a non-CF bronc respiratory questionnaire, we are working with in addition to one specifically to look at fatigue. And we are in the middle of the qualification work for that right, so we are deep into that effort now. And we expect that the completion of that will not be controversial in terms of what we produce, but we do want to make sure that we're aligned with FDA that it correctly assesses that patient population. We've been in dialogue with them. I would say that dialogue has been very positive and productive. And as soon as this process is done and they are comfortable with the profile that we have developed based on the research we're doing, we can then move forward. Validation of the questionnaire, we will be conducting that in a number of ways frankly, which would include not just back testing it on existing data that we have, but also looking at it in a clinical setting. I think it's entirely possible that we will break that out separately from the full approval trial. But I would tell you this, every effort is being made to move this forward as quickly as possible because I think what we can say from the conferences we've just come from, Chest and ID week and ERS, the appetite to use this drug in frontline and M abscessus is very, very strong. We need to produce the clinical data to satisfy the regulators that this drug is safe and effective in those populations. But once we're able to do that and get their blessing that this drug is appropriate for those populations, there is clearly desire to use it in that arena based on what we're hearing from these conferences anecdotally. So I'm very, very excited about this. If I were to put my finger on the single most important value driver for this company, it would be that frontline study and getting that done as soon as possible is our number one focus.

Right. So we should expect potentially a separate perspective quick validation study for the PRO before the start of the actual?

They may well run in parallel or one with a little bit overlapping the other. We haven't finalized that. And of course all this is subject to agreement with FDA. And that's going to be predicated on what we found in the qualitative research. So there's a little bit of ambiguity at the front end here as we lock down what we think is the appropriate questionnaire, and it's a degree of sensitivity which we'll be testing, but clearly getting the trial started in a way that gives us a high degree of confidence that we'll be successful is our number one goal and so we'll put a lot of creative thought into that. And I think we've made, I would say we've made a lot of progress in recent months in terms of how we might be able to accelerate that. So I'm excited about where we are. I think once the FDA is signed off then we'll feel comfortable talking about it in great detail. And it's my expectation that would involve more than simply a conference call. It's probably an Analyst Day where we bring everybody in to be able to really take a close look and a deep dive at that along with an increasingly robust pipeline I would say.

Okay, very helpful. And that brings me to my follow-up question. The WILLOW study. How should we think about improvements in rates of exacerbations or given that are going to be a key focus? Do you have the baseline exacerbation rate for the patients in WILLOW given that is fully enrolled and what sort of delta is clinically meaningful?

Yes, great question. So if you look at the historic trials done in non-CF bronchiectasis what you'd see is a rate that's typically about 1.2 exacerbations in patients in any given calendar year. This is a six-month study and it takes our drug about a month to get up and running through the bone marrow because of its mechanism of action. So what we're looking to do is establish for patients that are, the entry criteria here is they have to have had two or more exacerbations in the prior 12 -months. So as they come in, we want to see an impact on the rate of exacerbation; that is going to be the primary endpoint in Phase 3 in our discussions with FDA. I will just draw attention to the fact that our Phase 2 study looks as the primary endpoint at time 2 pulmonary exacerbation, but that's because that historically was what the FDA wanted for a primary, they then changed their mind. It's now rate of exacerbation as we have understood it with them. However, they said, it is not necessary for us to change the primary endpoint of our Phase 2 study because we look at both time 2 and rate of pulmonary exacerbations. For us, because of the mechanism of action and the importance of making a biologically plausible argument to FDA, we think it's important to see impact on the neutrophil serine protease in using the assays that we have to identify that the drug is having the intended impact and that there is a correlation between that and the rate of pulmonary exacerbations. That rate delta between treatment arm and placebo from our survey work, we think needs to be 20% or better in order for us to feel good. If you remember for NTM, it was 15% between the two arms. In this case, we think 20% is probably the right range and, and we'll see. I think as I said earlier, I think this is a high-risk, high return kind of trial.

Got it. Very helpful. And then just a very last quick follow-up. The Pals that you mentioned patient access leads. Is there a reason you put them in the field now, are there any sort of new hurdles to reauthorization and how are insurance companies viewing those non-converters?

So just to be clear, that's why I introduced it and then made a quick point of saying that we put these in as an example of how we're dynamically trying to further grow. This is not in response to an issue or a problem of any kind. Market access has been, continues to be extremely positive. In any survey work that anyone does would reveal that, and I think that speaks to the unmet need, the severity of the patient population and the perceived impact that our drug is having on these patients from market access world, but I'll let Roger, talk about the Pals and the timing and how we think they fit into some of the other programs we're looking at. I think about the machine learning for example and targeting.

Yes. Thanks Will. Yes, so it's not in response to any one factor. In fact, I think as Will said, our payer environment remains very supportive and the attestation that's required is something that we are very happy with and are striving to preserve and continue. And we expect that to continue for the majority of our patients. And to date the re-authorizations have not been an issue for us there. The majority of patients are not subject to a reauthorization criteria. So what we found and why we decided to put some pals into the field is that particularly as you go beyond the centers of excellence and as you're talking to community physicians, this paperwork associated with a testing that this is the appropriate refractory patient, and sometimes depending on the experience that these offices have with securing reimbursement and submitting the paperwork to the individual plans, that process can get stuck. So in the interest of making sure that patients receive the therapy as quickly as possible that their physicians feel are appropriate for them we feel that, putting the pals in directly to talk with the office physician and the staff who processing these paperwork and educate them on what they, what that process really looks like, it's going to be beneficial for getting that enrollment form converted into a prescription and for indeed, in case --in those cases where there are re-authorizations to get that reauthorization done as quickly as possible as well. So we think that that's too the enormous benefit of the patient to continue on therapy. So early days still. We expect the payer environment to continue to be supportive, but this is just an effort to in order to accelerate the process if possible.

And I think if you wouldn't mind just commenting on the patient finding. I know it's one of my personal favorites, but the machine learning that we're using, I think is it's such an important part about.

It is, and it's something that I think the team has done a terrific job, where we've got some great commercial minds working on this within Insmed. And so we've talked about the NTM likely patients in the past, so two NTM likely patients for every one currently diagnosed and treated NTM patient. We've also done some work looking at refractory likely patients and so now that we have a body of patients in the database that we know have been prescribed ARIKAYCE, we can look at the characteristics of those refractory patients and identify who are the refractory likely NTM patients and then direct or send the report out to our therapeutic specialists to engage with physicians who may have these refractory likely NTM patients and have a discussion with them. So of course all this information is blinded from a patient perspective, we have no access to those individual patient records. But we do know that blinded, we did there --these NTM likely --refractory likely patients which practice they're in and then hopefully we'll have a timely discussion with the physician about treatment options for the appropriate refractory patients. So something we were deployed and I think is very helpful for our field efforts great.

And our next question today comes from Josh Schimmer of Evercore ISI. Please go ahead.

Thanks for taking the questions. I missed the number of new starts over the third quarter. Could you -- I'm not sure if you mentioned. If so, could you repeat it? Can you also give us a sense of the cadence of the new starts throughout the quarter and into the first weeks of the fourth quarter? And then on the PRO, just trying to get a better sense. What do you think the earliest possible timeframe which a PRO would be available to either adjust the label for indication for ARIKAYCE or at least impact the treatment paradigm? Thank you.

So I'll let Roger speak to the patient starts. One of our strong metrics that I'm basically happy about.

Yes. Thanks Will. So we did have slightly more than 600 new patient starts in Q3. And as far as the cadence what we're particularly encouraged about here is, this was coming out of the summer months. And so this was our first trip through the summer. So we're quite sure what to expect, but we saw some very strong demand and new patient starts throughout that summer period. So we remain encouraged by the demand from physicians and patients for the therapy.

Yes. And on the PRO in terms of earliest time. I mean I think we are. But certainly our intention to start the study next year. So I think between now and then we expect to finalize the PRO, get agreement with FDA and that introduces a little bit of unknown in terms of timing, not because of anything problematic just because you're working with a very busy regulatory agency and you want to make sure that you're perfectly aligned before you flip the switch on what is going to be an incredibly important and significant study for us. The readout of which will increase the addressable market. If it goes as we expected will and the FDA approves this medicine, it's going to increase our addressable market. Close to five fold and based on what we've seen in this first year, that is a game changer for this company. So I'm particularly excited about it. We're moving forward very deliberately and cautiously, but I think in a very positive direction and I'm particularly pleased with the creativity that I've seen out of our team and being able to identify ways to shorten the timeline from here to that day when we're able to hopefully secure frontline approval. So I'm afraid I can't give you specific date, Josh. But I can tell you that once we're past that FDA dialog, we'll frame everything out in great detail and I expect that will be next year on an Analyst Day. So that we can start the trial.

And our next question today comes from Graig Suvannavejh of Goldman Sachs. Please go ahead.

Good morning. Thanks for taking my questions. Congrats on the progress in the quarter. I just have two questions. One, I just want to go back to the timing of next trials for ARIKAYCE. And I know you did mention a little bit about the first line study. I guess the follow-up is while the comment was about entering that study or starting that study sometime next year. It seems as if given all the moving parts it's looking like more maybe mid-year or second half of the year. And so why I just wanted to get your thoughts around that. And then if there was a comment around the timing of maybe any study in M abscessus population. And then just my other question just has to do with this milestone payment in the quarter. I was just wondering how we should think about milestone payments to Perry Farm on a go-forward basis and whether these are one-offs on a periodic basis or on a sequential basis, on a going forward any color would be great. Thanks.

Sure. So on the timing for next trial and trials, the frontline when that's going to kick off, again, it's very hard to specify when in the year because we haven't had the conversation and finalization with FDA. I expect that that will be a fairly predictable steady process. But I want to wait until it's completed before we characterize what we take away from that. I think the upside of that FDA dialog is that it, we're hoping it will continue to position us to move this forward on an expedited basis. And so once we have that in hand, I think we'll share where that comes out, and again I think that's an Analyst Day next year as soon as it is possible to get it done. The M abscessus work is happening in parallel. So we are doing PRO work for both and is my expectation that's something we'll be looking to do as well. I would say, as I think about abscessus and frontline, we certainly have the capability to run both trials. I'm particularly excited about abscessus because of the ATS study that was released, right. So we saw an investigator-initiated study that showed using our drug for abscessus patients a 50% conversion rate in 12 months roughly in those patients, which is an extraordinary outcome for patients with that severe and infection profile. And I think it helps everyone understand why NTM sessions at places Chest are seeing standing room-only, not just in the main room, but in the overflow rooms for these sessions because here is a disease state that has been haunting the pulmonary arena and infectious disease community for decades. And we have finally first approved drug to treat the most severe patients and it appears from the investigator-initiated study and certainly the appetite of people treating these patients that this drug may have applications in other places as well. Once again, we've got to complete the clinical study work to validate that perception. But I think we feel pretty confident that this drug is going to work in those populations. And so it is a timing exercise and an execution exercise for us. And it's getting our full and complete attention. You asked a question about the milestone payment. I'll just ask John, do you want to just comment on that?

Sure. Thanks Will. This expense relates to milestone payments for ARIKAYCE, the milestones result from contractual obligation to the CF Foundation. These obligations were previously disclosed in our 2018 10-K financial statements and as you know, a lot of milestones tend to be lumpy when recorded. But as far as the future goes, at this time, we do not expect any future material milestones related to ARIKAYCE.

And our next question today comes from Matthew Harrison of Morgan Stanley. Please go ahead.

Hey, good morning. Thanks for taking my questions. I guess two from me. Firstly, as I know, I know you've discussed new starts a couple of times already. May be you could just comment a little bit more detail around two factors? I guess the first is, are you seeing any patterns and where this new starts are coming from? Is there any shift not in the total number but sort of in the types of patients' kinds of patients' kinds of physicians driving new starts over the past couple of quarters? And then I have a follow-up after that.

I appreciate the question. I think the one word I would use for this launch and it just goes to the heart of the preparation that went into it is steady. This across all the major metrics that we have that we track has just continued to perform even through some times as Roger was referring where we might have expected to see some softening. In the summer months you sometimes see that and certainly if you look at some of the predicate launches, they might have suggested something along those lines. So just kudos to our commercial team for the excellent work they're doing, which I think speaks to the unmet need here. There are 12,000 to 17,000 that we've identified as addressable in the refractory population. Roger mentioned a moment ago, we think there are two undiagnosed NTM patients for every one that is diagnosed. So that gives us a pretty healthy group of patients to try and go out and help. And I don't know, Roger, if anything you want to add in terms of specifics about the patient starts. I know we don't usually --

No, I think you characterized it well. I think we still see broad support and interest in ARIKAYCE and prescribing of ARIKAYCE. We have over 600 unique prescribers since launch. I haven't seen any discernible shift in trends or patients being prescribed here that in the data. I think we remain encouraged, and I'm pleased with the reception that we're getting for ARIKAYCE and the fact that doctors have a high intent to prescribe for the appropriate patients. And that's I would say that's across the board. So we're very pleased with the launch progress.

Yes. And I'd say look, we've gone up. We traveled this year this path of understanding this market. First drug ever approved to treat a disease state that, here the poor people hadn't really had this kind of tool, the toolbox to go after. And it's remarkable to us, we were reflecting this morning that I think the average revenue estimate for 2019 at the time we started was about $45 million and we raised our guidance today to $133 million to $138 million. So to say that this has gone well I think would be an understatement. I think people have asked is it a bolus? Is it going to rollover? All those sorts of questions and the quarters continue to perform and steady is the watchword. It is absolutely the descriptor for this launch. The team has done an extraordinary job. And I have every reason to believe that they're going to continue to do that.

Okay, great, thanks. And then I guess the second one is just you've talked a lot about parameters for non-CF bronco and what you're looking for maybe and this might be premature, but I think you've talked about some parameters that are top line parameters as well as I think factors that are more secondary endpoints in the data. So I guess what I was just going to ask about was how do you think -- do you think we're going to have all of that information when you see the study initial results or do you think we are going to have to wait for some secondary endpoints for you to be able to make your decision around how to progress this?

In my mind I really appreciate that question. Let me be as clear as I can be. I expect to see an impact on rate of pulmonary exacerbation in this study. Within that overall dataset, I expect to see our drug dropping the NSPs in patients using the best available assays we have. And that those patients who have those NSP reductions should see a correlation between that and the reduction in pulmonary exacerbations. That links the primary endpoint of the Phase 3 study rate of pulmonary exacerbations that the FDA wants to see. And frankly, the treating physicians want to see to the mechanism of action of the drug for patients that have the profile coming into this study, which are two or more exacerbations in the last year. That is a very attractive patient population. This is not going to be one where there is going to be a lot of post hoc analysis. So we will have this data at the time we released the results and we will have a clear message about whether we think there is something there. And I want to be clear that message may be that we don't see enough there to move forward. In order to bring this drug to approval, we will need to have two Phase 3 studies in order to secure the necessary data for such a patient population of this size because it's non orphan. Because of that requirement, the hurdle is up, it's higher than it would normally be from my point of view, and we're not going to spend that kind of capital on a drug to see if it can be improved in Phase 3. Phase 2 has to be demonstrative. It has to be easily understood how it's going to be replicated in Phase 3, and we have to be able to scale those studies to do this in a capital-efficient way.

And our next question today comes from Adam Walsh with Stifel. Please go ahead.

Hi. Good morning, everybody. Thanks for taking my questions and congrats on the execution and progress here from me as well. In terms of the referenced bolus that you talked about, Will, and the potential for drop-offs, it's been a concern on the street. I'm curious with respect to one of the components there may be reimbursement. And, Roger, you talked about physician attestation being kind of the primary mechanism by which these patients get on the drug. Where are we in the reimbursement process? Would we expect the physician attestation to change over time? Is a mechanism for starting patients on drug? When would that happen and how would you see that playing out is my first question? Thanks.

Yes. Thanks Adam. So we think that that's going to continue. So even with -- by the way we're putting in positioning ourselves for Medicare formularies for 2020. Obviously, those are ongoing and we expect that even with the additions in the coverage adds that we'll see that primarily plans are going to look to the attestation that this is the appropriate patient is getting this therapy. So according to label is the refractory patients and they're looking for physicians to attest to that. We expect that to continue. And so and we are in a very good position in order for that to occur. So one of the reasons why we wanted to put our pals out there was to make sure that physicians who are going to be going through this paperwork and the staff that they have to support that are educated on that process and are able to do that in the most expeditious manner.

That's helpful. And then in terms of duration of therapy. Roger, you had mentioned that 85% who initiated therapy during, I think it was the fourth quarter of last year. And did not drop out in the first three months remain on the drug. I think you've been kind of following that metric I believe it at some conferences and I think it had been 90. It's still a great retention rate. I'm just curious of the patients that are dropping out over the longer term, over the course of maybe 9 to 12 months. Do you have a handle on why those patients are dropping off the drug deep into their treatment and what are you doing, and what kind of things are you doing internally to try to at that margin maintain these drugs, I'm sorry, these patients on drug for longer periods of time. Thanks.

Yee, sure. So it's a great question. We have looked a little more deeply into that data and there is no one driving reason for why these patients of -- in the fourth quarter I think it were 85%. Why they would drop off? There is a variety of reasons. So there are patients who want to take a break, right. So they want to take a break from therapy. Those physicians who have decided that they had completed therapy and therefore we will monitor the patients going forward. Unfortunately there is a significant mortality rate associated with the disease. So we have some patients who have died there. So it's a variety of reasons. No one driving reasons that I would talk to, or I could point to, but I would say that overall the persistence and the commitment of therapy. Once you make it past those first three months, we're very encouraged and we see the trends between Q4 and Q1 is being very consistent for that patient group.

Our next question comes from Joseph Schwartz of SVB Leerink. Please go ahead.

Hi, congrats on the strong performance and thanks for all the helpful color. I was just wondering with the upcoming ATS guideline update plus, plus, plus year et cetera. I was wondering if you see that there are different scenarios that could impact ARIKAYCE and maybe how your commercial efforts could dovetail or evolve accordingly.

Yes. So I'll just make a quick comment about the guidelines. We've obviously been anxious to see those come out and it's a testament to how challenging it can be to get four different academic societies to agree on a single set of guidelines. That it's taken this long, but it is quite significant in my mind that this is four different societies, right. The British Thoracic Society; the European Respiratory Society; the American Thoracic Society and the Infectious Diseases Society. All are agreeing on these guidelines and actually it's also interesting to note that I think the Japanese Respiratory Society wanted to join in on this effort, but in the last minute they said if they were to do that, it would add substantial additional time. So --there -- it's a statement about how unified the key opinion leader network is around NTM, it's really quite an extraordinary thing. You can get all of these different groups together to have consensus on the importance of treating these patients in a certain way and for an extended period of time. Just to dovetail to the last question that was asked. These 85% of patients who remain on therapy, those that may be stepping away from the therapy in that 15%. I would be very surprised if some of them were not judge to need therapy again and get retreated. And that'll be something we're watching closely in the coming quarters. But overall, these guidelines are just going to confirm we believe what we've been seeing all along, which is the need to treat these patients. There is a very specific and agreed-upon standard approach in terms of duration of therapy. And we're seeing that play out in our real world experience. I don't know, Roger, if you want to add anything about.

Yes, I think we are, I mean we've been anxiously awaiting the guidelines and expect by the end of the year, we'll see those and you asked about the commercial efforts and what we are hoping and anticipating and I think that there was a good hint of the ERS as to the data supporting ARIKAYCE has been reviewed in the context of the guidelines. And so what we are hoping is that the guidelines reference, the refractory, the use of ARIKAYCE in refractory patients and what that will enable us to do is utilize those guidelines with the physicians promotionally. And obviously, we'll have to go through to make sure we're doing that compliantly. But I think that's a great educational opportunity for our team, particularly with community physicians to really talk about the appropriate therapy and the fact that the academics and the folks who are really the experts here endorse the treatment regimen for NTM and endorse ARIKAYCE for the appropriate refractory patients. So we think that's a very exciting opportunity for us. And we're positioned to maximize that as soon as those are available.

Great, thanks, that's helpful. And then on, WILLOW, given the mechanism of action that you're testing there, I was wondering do the patients that are enrolled in WILLOW have high, low or a range of NSPs and how is this biomarker related to the rate of exacerbations? And have you made any effort or do you think there'll be any opportunity to look and see in the data whether or not there is either the requirement or opportunity for patient enrichment to enhance response?

Yes, no, I appreciate that question. So we are at the bleeding edge with the use of the assays to evaluate the three different neutrophil serine protease is in both blood and sputum, and will be examining those and coming to some conclusions about what is the right way to quantify this. And I think we feel really good about our ability to do so. It is a relative marker in my mind that is to say, if it's elevated and then it is reduced, we know that that is a byproduct of the drug. And therefore correlations between that reduction and an ultimate rate of exacerbations are what we're looking for. Is there opportunity? We don't know what those levels are now, It is a double-blind study, so we have no idea what's going on in the study right now just to be clear, but when we unblind, we will absolutely look at baseline levels of NSPs in the patient population. We segment for macrolide use and we stratify rather for macrolide use and stratify also for the presence of Pseudomonas, so we'll be looking at that as well. We'll be looking at NSPs and there may indeed be a way to enrich if we see those correlations for patients in the Phase 3 studies either by stratification or by explicit entry criteria. So that's going to be something we're looking very closely at. Again, if we're moving forward, we will see, that means we've seen a strong signal here and then all eyes will be on making that those Phase 3 studies as successful as possible.

And today's final question is a follow-up from Liisa Bayko and AMC Securities. Please go ahead.

Hi. Just like another quick question. I noticed in Nature had published an interesting article, looking at the correlation between cardiovascular risk and NTM infection. And I was just wondering if that's-- I mean that was news to me. Is that a wisely appreciated kind of fact and does that have any implications for your development and/or marketing strategy? Thank you.

So that's the Nature. Thanks for the question, Liisa. So that's a Nature article that was published. I think yesterday and it looked at the Korean National Health Care database and showed a correlation between patients with NTM and higher rates of MI, Myocardial Infarction and coronary disease, I can't remember what the specifics were, but there were a number of different correlations between higher rates of mortality and patients who had NTM. And so that's quite an interesting study. It's hot off the press and certainly something we're going to be taking a closer look at. One of the advantages of places like Korea, which are really thought leaders in research and NTM, is that they have national database that they can look at and cross examined. So this is news and obviously the fact that Nature published it tells me that it's got some real credibility. So another interesting correlate between the presence of NTM and negative sequelae relating to increased levels of mortality. End of Q&A

And, ladies and gentlemen, this concludes the question-and-answer session. I'd like to turn the conference back over to Will Lewis for any closing remarks.

I want to thank everyone for dialing in today. At the conclusion of another strong quarter for Insmed. Appreciate all the questions and we look forward to seeing you at upcoming conferences in the coming months.

Thank you, sir. Today's conference has now concluded. And we thank you all for attending today's presentation. You may now disconnect your lines. And have a wonderful day.