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

Insmed Incorporated (NASDAQ:INSM ^[1]) Q3 2023 Earnings Call Transcript October 26, 2023

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

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

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

A laboratory technician in a lab coat uses a benchtop next generation sequencer.

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

Story continues

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

To continue reading the Q&A session, please click here ^[4].

References

^{^} INSM (finance.yahoo.com)
^{^} 12 Best Cryptocurrency Exchanges and Apps in 2023 (finance.yahoo.com)
^{^} 12 Best Dividend Aristocrats with Over 3% Yield (finance.yahoo.com)
^{^} click here (www.insidermonkey.com)