Hi, everyone. I'm Charlie Mabbutt, equity research analyst at Morgan Stanley. Before we get started, for important disclosures, please see Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. I'm delighted to be joined today by Will Lewis, CEO of Insmed, ahead of a Catalyst Rich 2024. So let's get started, and I think I'll pass over to you for some introductory remarks.
Sure. So I'd always like to frame out Insmed as a company made up of four different pillars. I haven't come up with a more creative way of describing it than that. But each of these pillars has either recently revealed or will soon be revealing very important data, which is gonna really cause 2024 to be an unbelievably transformational year for the company. I have recently said in a town hall that the next six months at this company will be more important than the last 11 years that I've been CEO, and that's a time that has watched the company grow from 30 employees to more than 1,000, and the launch of a product in the U.S., Europe, and Japan. The four pillars that give rise to this transformation are: the first one is ARIKAYCE.
That's our approved product for the treatment of refractory NTM. The second is brensocatib. This is a monster drug opportunity that will read out of phase III pivotal trial in the second quarter of next year. The third is TPIP. This is a treatment for pulmonary arterial hypertension, and that is gonna have two phase IIs, one of which will read out in the second quarter of next year. And then the fourth is our research pillar, and that has more than 30 preclinical compounds that are advancing to the clinic from a variety of therapeutic areas and technologies. We're very excited about that as the future pipeline of Insmed. So with that as a backdrop, we can maybe dig into some of those areas.
Yeah, exactly. Let's go through each pillar one by one. So if we start with ARIKAYCE, in September, you announced the top-line results from ARISE. So can you just walk through the goal of that study and what you saw?
Yeah. So ARISE is the first of two phase III programs designed to expand the addressable market opportunity from the refractory population of MAC NTM, which is the disease that this drug treats, to all MAC NTM. And to put that into numbers for you, in the areas where we have commercial infrastructure, which are the U.S., Europe, and Japan, it numbers probably 30,000 patients that have refractory MAC, roughly. If we were to secure the frontline indication, that would take that to north of 200,000 patients. So it's a very substantial increase in addressable market, and it's empowered by these two studies, one called ARISE, the other called ENCORE. The ARISE study read out in September, and it gave a clear line that the patient-reported outcome tool we were using was very successful. It's going to work.
In addition, the trial showed a clear sign of culture conversion, which is what we'd seen in the refractory patient population. These two elements are crucial for securing approval. The PRO for the U.S., the FDA requires that, and culture conversion for Japan, which is what they require. Indeed, the results were so compelling that, we are going to be approaching both regulatory authorities about the possibility of an accelerated approval. Now, we think that's a low likelihood, but we think it's prudent to do so, given the strength of these results. In a base case scenario, we would assume that the second phase III trial, called ENCORE, which is still currently enrolling, would be the basis for approval.
Is there any particular timeline when you'd expect to definitively know around the accelerated filing?
Yeah. I think by the end of Q1 of next year, we should have had the conversations necessary with both the U.S. and Japanese regulatory authorities.
Okay, great. And as you said, ENCORE remains on track to complete enrollment by the end of the year. So can you remind us what you want to see in that confirmatory study to consider it a success? And can you talk about the rationale for continuing to enroll patients?
Yeah. So ENCORE is designed to secure this frontline approval indication. The U.S. requirements for approval are that the PRO, or patient-reported outcome, has to be the primary endpoint of the study. Since ARISE has demonstrated that that PRO is going to work, and is viable, once the FDA has certified that, which is a process that's ongoing right now, then we will use that as the primary endpoint for the U.S. approval. In Japan, it's culture conversion that they are looking for as the primary endpoint of the study, and the ENCORE trial design contemplates two separate primary endpoints for those different respective regulatory authorities. So ENCORE is expected to enroll 250 patients by the end of this year. Depending on what the final agreement is with FDA on the PRO, that will adjust our final statistical powering for the ENCORE study.
And so once that is clear, we'll announce that in the first quarter of next year, and that will lay the final time track for when we can expect those results sometime in 2025.
Are there particular aspects of the ARISE data that give you, I guess, heightened, improved confidence for the ENCORE data in 2025?
Yeah, I think the first is that the PRO, as I say, was successful. The thing about PROs is that they're very qualitative, and it can be very difficult to get them to a place where they reliably report out. In this case, we had a very definitive and clear win. The aspect of a PRO is what is the minimally important improvement difference between the treated arm and the non-treated arm? In our case, no matter where you set that difference, whether it's a wide range or a narrow range, our drug outperformed, and that's what you want to see in a PRO design. We saw that very clearly in the ARISE studies. That gives us very great conviction that no matter where FDA sets their threshold for improvement, we will be...
We will win, and the study will be powered to reflect that. As we look at culture conversion, there were several aspects that were very clear in this study. The first is, we convert patients sooner, we convert them in greater numbers, and we convert them more durably than any other standard of care that we were looking at. So that's quite dramatic. To put numbers behind that, we culture converted, which is to eradicate the presence of this infection in 80% of the patients in six months. Now, if you compare that to patients in the refractory setting, these are patients who have been on all other medications for a number of years.
We were able to convert them to the tune of just north of 30% of the patient population for the original approval. So if you think about that for a second, what it tells you as a physician is that you wanna treat these patients earlier, and you wanna treat them with our drug because you have a much better percentage chance of getting them to eradicate the infection and to keep that in a durable way away from the patient, and this is the goal of treatment. So it was very exciting data.
I recall when I was in Italy at the time, at the European Respiratory Society meeting, I was getting stopped, literally in the hallway of the hotel by key opinion leaders who were saying how impressed they were by the data and how excited they were to be able to shift their attention to frontline treatment.
The refractory launch has been very strong. So I guess could you just go into some details in how the launch has gone, I guess how well penetrated you are in the settings, in the different geographies, considering I think you're already guiding for $300 million in sales this year? I guess, where are you expecting growth to come from going forward?
Yeah. So the launch, I always like to remind everyone, when we first launched this drug, the Street had estimates of $40 million-$60 million of revenue in the first year, and we did just over $130 million. So this drug has had a very strong launch from day one. I think it speaks to the ability of the drug to really impact these patients for the better and the desperate need. This was a first-ever approved drug in this disease indication. We typically target either first in disease or best in class for our criteria for drugs that we're developing. And as we think about this drug, which has now completed five years of launch in the U.S., even through COVID, we were able to have good performance.
Most recently, we had our strongest quarter, so we were up year-over-year, I think 17% in the third quarter results, which is very encouraging, and we'd expect to continue to see growth as we go forward. Japan is another area that's very strong. It's not well known by people who aren't as close to the story, but there are actually more diagnosed refractory MAC patients in Japan than there are in the U.S. There's about 15,000 in the U.S. and close to 18,000 in Japan. So Japan is just coming off this year of their COVID restrictions, and in fact, they were only lifted in about May, June of this year.
So we're seeing that begin to rebound as well, and we have some new leadership over in Japan that is just doing an exceptional job in taking advantage of that opportunity. So the refractory market has been strong over the years. We expect it to continue to perform, and to that, we will add this frontline opportunity, which is really quite substantial.
And do people tend to get retreated, or is it the case that once the first-line setting comes in, you'd expect that refractory setting to decline quite considerably?
With any luck, we can get to a place where these patients are treated and the bacteria is eradicated, and they don't need to come back in. Unfortunately, the pathogens that give rise to this disease are ubiquitous in the environment. They're in the water, the soil, the air, and patients who are vulnerable to this infection will get reinfected. In fact, it's often said by key opinion leaders that patients who come into their clinic never leave. What we've tried to do in this circumstance is to provide a medicine that is very effective at eradicating the bacteria for as long as possible.
But it is true, it follows a sort of acute-chronic cycle where the patients will be treated, the bacteria will be eliminated, and then when they get reinfected, they come back into, if you will, the top of the funnel for retreatment. The incidence rate year-over-year is about 6%-8% growth, so it's, despite the small numbers, it's constantly having new patients added. And, in fact, in the last couple of years, NTM surpassed tuberculosis in Japan as, in terms of mortality. So this is a disease that is on the rise. It's not entirely clear why, but, but it has been that way for a while, and that's why it has the full attention and support of the regulatory authorities.
Great! So, so let's move on to brensocatib. So ASPEN data, as you said, are on track to read out in the second quarter of next year. So can you talk about the learnings you've applied from the phase II study to ASPEN?
Yeah, just to remind everybody, so the phase II study was called the WILLOW study, and that study was about 250 odd patients. It was a hit on the primary endpoint, statistically significant at both the 10 mg and 25 mg dose, which was very significant. It was published in the New England Journal of Medicine. This is the first time I think the New England Journal had published in bronchiectasis in almost 20 years. So this is widely viewed as one of the more exciting developments in this field. Phase III is designed to be just like phase II, just much, much larger. So whereas phase II was perhaps 250 patients, phase III is more than 1,600. It's a massive trial. It's taken several years.
It enrolled very quickly, but we're very excited for these data in Q2 of next year. It's important to understand that although the trial is a scale-up and not any material changes from phase II, we have lowered the threshold for what we're trying to accomplish. So in phase II, we had 80% statistical power to show a 40% reduction in pulmonary exacerbations, which is the endpoint you wanna measure. Exacerbations are like a heart attack for the lung. It does permanent damage, and you wanna reduce or eliminate those to the greatest extent possible. And that 40% reduction was sort of unprecedented. It was a dramatic and exciting development for the field.
Phase III, we're targeting 90%+ statistical power to show a 30% reduction, which means we've lowered the bar, and we've raised the power and probability of being able to demonstrate that. So we are feeling very good about this study. The baseline characteristics of both studies are almost identical. We're seeing a lot of events, which is what you want to see in this kind of a trial setting. You want to be able to show that your drug can have impact. This is, without a question of a doubt, one of the bigger biotech catalysts in 2024, and like we say, it's Q2. It's powered to win, it's powered to work, and we'll know in six months.
So, I guess, could you just, with reference, I guess, to that, that 90% power for the 30% benefit, can you just talk to what you need to see to be clinically meaningful in your mind?
Yeah.
Um, yeah.
Sure. So when we ask the FDA or we ask key opinion leaders, they want to see a pulmonary exacerbation reduction somewhere in the 15% range. 15%-20% is considered clinically meaningful. So we're powered to show statistically relevant result down into the low 20s with this study design. So we're in a very good position to to clear that hurdle comfortably, and I think that's, that's one of the reasons why we feel so excited about the phase II results, 'cause we saw a 40% reduction there, which, as I said, was sort of unheard of.
Thinking of, I guess, about the launch, what kind of commercial activities have you begun, if any, and how are you planning to target patients?
Now, more than ever, with IRA and large opportunity launches like this one, we think we're talking about 1 million patients that we've identified, that are diagnosed, that would meet the entry criteria of our study, that we would be targeting at launch. About 450,000 of those in the U.S., 400,000 of those in Europe, and another 150 in Japan. So the effort to access those markets in terms of education has already begun. We've done doctor education and disease state awareness. We're doing patient education and awareness. To be very clear, this is about the disease. It's all very compliant. It's, it's very. We're very focused on that as a company.
When you're first in disease, these kinds of educational efforts are really critical because there's nothing approved to treat these patients. The physician and patient community, which is currently, to a certain extent, drifting without a lot of help or input in terms of information, is really desperate to learn more about this condition and how to spot it, how to think about it, what is available to do about it right now. At some distant point, you know, when we get successful results and approval, we would then begin to shift our narrative to include discussion of the product, although that obviously won't happen for several years. We're also spending a lot of time on market access, to educate the market access world, 'cause now more than ever, market access hurdles are high.
Here, once again, by preventing that exacerbation, we're treating the exact part of the disease that market access wants to go after. So this is a very compelling story for that world, and we expect reimbursement to be strong. We expect the launch to be strong. And we have said publicly on several occasions, to put this in perspective, 'cause it's quite a statement to come from a company that is currently forecasting roughly $300 million in revenue. We've said that ARIKAYCE and BRENSO alone should take us comfortably over $5 billion in revenue at peak sales.
I believe you've also expanded the program. So could you talk about your phase II-B for chronic rhinosinusitis without nasal polyps, and why you chose that indication? And then also, we can maybe discuss future development plans beyond that.
Yeah. So what we really have here is not just a treatment for bronchiectasis, it's the mechanism of action for those in the scientific side of this world is DPP-1 inhibition. And the way this works is by inhibiting DPP-1, which is an enzyme that catalyzes the activation of neutrophil serine proteases. The ones that you would be familiar with are neutrophil elastase, cathepsin G, proteinase 3, NSP4. These are released by neutrophils into the body when the neutrophil is recruited to a site of inflammation. In bronchiectasis, by interrupting that inflammatory cycle, we tamp down the potential for an exacerbation, and that's really the key to unlocking the value in the bronchiectasis setting.
But wherever there is neutrophil-driven inflammation in the body, things like rheumatoid arthritis, things like lupus nephritis, diseases that we're looking at, CRS without nasal polyps. This is chronic rhinosinusitis without nasal polyps. That CRS without nasal polyps, we started a phase II study recently, that is targeting that indication. That's a neutrophil-driven indication. It is without any treatment at the moment, much like bronchiectasis, nothing approved to treat it. To put it in perspective, there are 26 million people in the U.S. that have CRS without nasal polyps. We're targeting the severest end of that spectrum that undergoes surgery, but this is another very significant market opportunity that wasn't contemplated by my earlier remarks. And we'll be looking forward to enrolling that and setting a timeline for the readout of that study, likely in 2025.
In the second half of next year, probably the late second half of next year, we'll also kick off a trial in a disease called hidradenitis suppurativa, or HS. This is a dermatology condition, but again, neutrophil driven. We think it could be a complement to some treatments that are available in that indication, and a very substantial market opportunity. For some of the other companies that are out there that you may have heard of, like MoonLake, that are creating antibodies for this space, ours would be a once-a-day pill. So an interesting complement in terms of treatment and delivery method to those efforts, and that market is currently sized at $10 billion.
So these are very substantial markets we're targeting, and as I say, we have a catalyst-rich year or so ahead, where we'll be able to reveal whether or not we're gonna be able to have a big impact on them.
... Great! So moving on to the third pillar of TPIP. So again, we'll continue. We'll start to see data in the first half of next year. So I think in this case, there's obviously other therapies on the market. So could you first talk about what differentiates TPIP from the other analogs on the market, and how you see TPIP fitting into the treatment landscape?
Sure. So pulmonary arterial hypertension is a fatal disease that there are a lot of companies that are involved in, Merck, J&J, United Therapeutics really pioneered this space. And they have a variety of different treatments that are available for this condition. One of the classes that's very important is what are called prostanoids, and these are involved in vasodilation or essentially relaxing the vasculature to permit blood flow more effectively in patients who suffer from this condition. Because what causes these patients to succumb is that the right heart fails. After having to pump blood with greater and greater difficulty as a result of the occlusions and the constriction in these vessels, the right heart eventually gives way.
So, prostanoids dilate the vessels and lower that pulmonary vascular resistance and make it easier for the heart to operate. To date, all of those that have been developed are limited because they only provide that relief for a very abbreviated period of time, and so you see drugs on the market that are dosed four or seven times a day. They don't provide any relief overnight. Our drug is a dry powder formulation of a prostanoid that provides 24 hours of coverage. It's a slow-release delivery, which means the patients breathe in an inert molecule, which is important because they tend to have cough and throat pain that are limiting the ability to take these drugs.
And in so doing, we provide a really superior offering right out of the gate, once a day, 24 hours of coverage. What's been striking in the most recent data, in which we'll see full data release for the first indication before our phase III bronchiectasis study. So it's gonna stack up a lot of events next year. But this data, looking at the measure of pulmonary vascular resistance, which is probably the best, most objective measure of what kind of effect you're having. We saw a very substantial reduction in pulmonary vascular resistance. To put this in perspective, across all patients, those in placebo and those in the treatment arms, the reduction is about 21.5% of those patients that we were able to look at.
More notably, the 2/3 of the patients who were responders to this saw a pulmonary vascular resistance reduction of 47%. Now, I wanna put some caveats out there. This is early data. It's small numbers. It's blinded and blended, so we don't know everything. But those data are really quite striking. To put that in perspective, so sotatercept, which was bought by Merck for $11.5 billion, had phase II data that, at their highest dose, had pulmonary vascular resistance of 33.4%. So this data is really exciting, and we'll see where it goes. We need to complete the studies. We need to look at where we are.
But the key to understanding why this drug is working so well for us is we're really able to dose much higher levels of prostanoid to these patients. You know, the best available comparator is a drug called Tyvaso, made by United Therapeutics. We're dosing at our current highest dose, 60% more drug than they are, and that's the key to unlocking the benefit of the drug. Now, we've just announced, our steering committee has asked us to double again the max tolerated dose we're targeting. So we were at 640 micrograms. They're saying, "Go to 1,280 and see how high you can get the patients." So it's quite a dramatic evolution in the use of prostanoids. Physicians have said it will change the way they use the drug in the treatment of these patients.
You know, that's the most important thing. It's an exciting development for patients and patient outcome.
I guess just on the fact that you're dosing so much higher than other options, could you just give a brief comment on safety? And then also, I guess, what do you need to consider the study a success?
Yeah. So for safety, the encouraging thing is we don't see anything any different than other prostanoids. In fact, in some ways, we see less, even though we're dosing more, which is what's so encouraging and why the steering committee wanted us to go and double the dose again. When we first designed this drug, we offered to the KOLs, "We think we can take away the adverse event profile completely." And they said: "No, no, no, we don't worry about that. We'll manage through the adverse events. We want these patients at the highest possible dose you can reach," and that's how they treat them today. They'll take them to the max tolerated dose as quickly as they can.
So our ability to do that is empowered by the fact that the inhaled drug, when it's inhaled, does not create some of the dose-limiting toxicities of other prostanoids: throat pain, extreme cough, those kinds of things that prevent them from dosing more. So not seeing that, even at 640 micrograms in any large measure, is really hugely exciting to the field. And I think as we go forward, we're gonna continue to watch pulmonary vascular resistance as the important biomarker, directly measured in terms of benefits to these patients, 'cause that's really what you wanna do. You wanna return this patient to a level of PVR that is as close as possible to normal, so that the right heart isn't working so hard.
Okay, great. On to the earlier stage pipeline. You'll be starting a trial of the DMD gene therapy shortly. Could you remind us of how it's differentiated and how you think, I guess, about the gene therapy space more broadly and the differentiation of your technology that you have in-house?
Yeah. So what we've done with our fourth pillar, it includes gene therapy. It includes a research facility here in Cambridge, Synthetic Rescue, under Professor Sir Steve Jackson, and team. It includes a protein deimmunization effort that's fueled by AI out of some folks in New Hampshire that we stole from Dartmouth. And includes our original research team in New Jersey. We have more than 30 preclinical compounds currently making their way forward. The strategy behind this is that the first three pillars we've just described will provide the cash flow to fuel the development of this research pillar. One of those programs, among many, in the gene therapy space in our facility in San Diego, is in DMD. But we're taking a strategic approach to gene therapy, so that includes novel delivery.
We're gonna be doing intrathecal delivery for the treatment of DMD. It also includes this technology called RNA enjoining, which allows us to put mid and even full-length dystrophin proteins into patients, which is unprecedented at the moment. We look at novel manufacturing methods. We're making these proteins using algae, and we're trying to advance that technology. And we're also looking to be able to redose the viral capsids so that you could have gene therapy that's dosed more than once. So there's a lot going on in our strategic approach to gene therapy and DMD in particular, and we're excited to get that work further advanced.
As I've said to a lot of investors, we're not really talking a lot about our research at the moment because people are very focused, understandably, on the late-stage programs that read out in the next six months. But shortly after those are successful, people will begin to ask the typical question, which is: What's next? And we have a robust answer to that in this collection of research programs. And I'll just comment that I think we've done this over the last two or three years as the market has collapsed, and the support for original research has just fallen away entirely. So we've gotten some of the very best teams in the world assembled for a very modest investment, and I think that's gonna pay dividends for Insmed in the medium term in a dramatic way.
So, specifically on the DMD, I guess we've seen recent data from a couple of competitors in late stage. So how would you characterize sort of the differences in your product?
So our intrathecal delivery in the, you know, animal models shows very compelling data in terms of ability to transduce muscle, including cardiac tissue and the diaphragm, which are very hard to treat. We do not go through the liver because we're intrathecally delivered, so that means you avoid a lot of the loss of a lot of the original treatment that you're giving. So you can give lower doses, get better transduction, and our process should result in, if the preclinical data are indicative, very compelling results in these patients. I think that's the one thing I would say about this area. There's a lot of interest, there's a lot of support, but we need to hold this to a higher standard.
These patients need to have more than just incremental or barely advanced improvements, and we've set a very high bar for ourselves. This is not gonna be a couple of point move on the patient scale. This should be multiples of that.
I guess when I look at your, your three late-stage products, it's quite a narrow focus on, on respiratory. So how do you think about the, the diversification and whether that's something you want to do, or whether you would rather stay in a more niche area?
Yeah. So I think we've gotten ourselves to a place with the respiratory opportunities that to build more there would require actually rebuilding another commercial infrastructure because the one we have will be fully tapped out, doing refractory, frontline, and bronchiectasis. So the ability to gain synergy there is really more limited than it might otherwise appear. So then, what we would do is think about other areas. Since we're gonna have to build additional infrastructure, where else might we be able to do that? And an important component of how we think about our research is that it's really a productivity tool. We wanna be able to go to market as soon as possible with these therapies.
So these technologies enable, we hope, dramatic improvement in patient outcomes, and if we're able to establish that, then through a phase I/II trial, we could theoretically gain conditional approval and therefore get on the market sooner. So there's a world where several of these programs we're currently pursuing in diseases like DMD, Stargardt, and others, these therapies could reach the market at or even potentially sooner than even TPIP. And that's really the key to understanding why we've diversified into these areas. We want big impact on patients, and the consequence of that is a potential accelerated pathway to commercialization. It's less about synergy and respiratory, it's more about building a company for the future that's gonna have a big impact on patients' lives.
Great. Well, I think that's time. So thanks very much for being here today.
You bet. Thank you.
Great.
All right, perfect. Well, thanks so much. We're closing out today with NiCE Systems. Delighted to have Beth Gaspitch here, who's CFO of NiCE Systems. Maybe just to kick off, just a little bit of an overview of NiCE Systems for those who might not be familiar in the audience.
Yeah. Thank you, Meta, and it's NiCE to be here today. Hope everyone can hear me all right. So NiCE is an enterprise software company. We're selling cloud platforms that are really underlined by a lot of digital and AI capabilities. We have... Just is-
Growth vectors in a minute. I just want to start with just how you would kind of characterize current macro backdrop. You know, you've seen some kind of SMB headwinds. Just any verticals that have been particularly weak or just any commentary about how we to think about 2024.
Yeah. So in terms of the current year, first of all, we're, we're quite pleased with our overall performance. At NiCE, we're about $1.6 billion of ARR in terms of cloud, so a significant base of cloud. And in terms of the macro impact, this year, as you've highlighted, you know, we have seen some impact for the macro, I would say really in two different areas. First is with respect to our SMB space. So we have seen less usage relative to what we've seen historically. So when we're selling our CXone or cloud solution for the customer engagement space, typically it's based on a contractual commitment of the number of agents.
So in the SMB sector, generally this year, what we've seen is, given the macro, they've kind of tightened up their usage, and we do see signs of kind of stabilization around that, but that's one area that's been impacted by the macro. For the SMB sector, it's really not specific to any specific vertical. It's something that's kind of seen broad-based across several of our different SMB companies. And the second area, I would say, is an elongation of the sales cycle. So when we look at what would be typical in prior years for really initially having conversations with a customer and the timeline to close the deal, we've seen that elongated in the current macro as well. All of that aside, I think, you know, we're really proud of our performance this year.
I mentioned the base of revenue and the volume of revenue we have, and we are significantly outpacing in terms of our cloud growth relative to the closest competitors.
Got it. I mean, as we-