Welcome to the Dayton Smed Second Quarter 2021 Financial Results Conference Call. My name is Elliot, and I will be coordinating your call today. I'll now hand over to our host, Perna Barissa to begin. Elena, please go ahead when you're ready.
Thank you, Elliot. Good morning, and welcome to today's conference call to discuss our Q2 2021 financial results and provide
a business update. 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 materially from the results discussed in the forward looking statements. Please refer to our filings with the Securities and Exchange Commission, 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, Chair and Chief Executive Officer Doctor.
Martina Farmer, Chief Medical Officer Roger Aztek, Chief Operating Officer and Sarah Let me now turn the call over to Bill Lewis for prepared remarks. Upon completion of those remarks, we will open the call up for your questions.
Thank you, Eleonore, and good morning, everyone. We are pleased to be sharing our Q2 results with you today. From Insmed's point of view, we have begun to see some signs of improvement in our commercial and clinical activities in the U. S. And we believe given current information that Europe and Japan are behind the U.
S. In terms of recovery trajectory. While the full impact of the Delta variant remains unknown, we are closely monitoring the entire COVID-nineteen landscape and remain optimistic about Insmed's future. Let me frame out the Insmed story in a way that captures the progress we have made and our plans for the future. Insmed is currently advancing programs aligned 4 strategic pillars.
These are ARIKAYCE, Bremzocatib, TPIP and translational medicine. Within each pillar is the potential for significant expansion well beyond our initial near term development plans. Let me briefly address each of these four pillars. Starting with ARIKAYCE, we are very excited to announce that the launch of ARIKAYCE in Japan kicked off just last month. We now have approval and launch of ARIKAYCE for refractory NTM in the U.
S, Europe and Japan. Notably, the list price in each of these territories is roughly equivalent. In the U. S, while uncertainty lingers around the trajectory of the pandemic, we remain confident in growth in the second half of this year. You'll hear more about our commercial progress from Roger later on the call.
Our ARIKAYCE frontline program also continues to advance with the goal of establishing a new standard of care for frontline patients suffering from NTM Lung Disease. Let's now turn to the 2nd pillar, bremzocatib, which we view as a launchpad for the treatment of neutrophil mediated diseases. Our Phase 3 ASPEN study is underway and if we see positive results from this study and receive regulatory approval, we see the opportunity for brincicatib in bronchiectasis as very significant, underscored by the potential applicability of the mechanism of action in a range of indications regulated by the DPP-one pathway. We believe our 3rd pillar, creprostinil palmitil inhalation powder or TPIP has the potential to be the cornerstone of therapy for the treatment of PAH and PHILD. By unlocking the full potential of prostenoid therapy, we believe TPIP could provide a disease modifying impact for patients in need.
Our 4th pillar, translational medicine, is built upon our core competency of treating serious and rare diseases and importantly is not limited to a particular technology or therapeutic area. Our approach will follow the same historic pattern where we progress through animal work followed by a public announcement of candidates ready to enter a Phase 1 study. We look forward to sharing developments from our translational medicine efforts in the next 12 months. We expect that these four pillars and the capital and talent behind them will enable us to achieve our vision of becoming a globally recognized leading biotechnology company. I believe that this framework will deliver for patients and therefore our shareholders a very bright future for Insmed.
And with that, I'll turn the call over to Sarah to walk through our financial results.
Thank you, Will, and good morning, everyone. Insmed made several important accomplishments across our business during the Q2. Earlier today, we issued our detailed second quarter financial results in the press release. Let me highlight a few of those results for you now. As reported this morning, including the proceeds from our recent financing, we ended the 2nd quarter with 928 $1,000,000 in cash and cash equivalents.
We anticipate this cash position will support our operations for the next several years, including data readouts from the ARIKAYCE frontline program, the Phase 3 trial and bronchiectasis as well as Phase 2 results for TPIP. In line with our internal expectations, our Q2 cash burn level was lower compared to that of the Q1, demonstrating our commitment to a prudent use of cash. For the Q2 of 2021, total net revenue for ARIKAYCE was $45,400,000 which marks our highest global net sales since the pandemic began. Our 2nd quarter revenue reflects 13% growth compared to the Q1 of this year and 7% growth compared to the Q2 of 2020. Please note, this does not include any revenue from Japan as we launched in July.
Our gross to net for the Q2 of 2021 were approximately 11%. As previously disclosed, we anticipate our gross to net to be in the mid teens for the full year 2020 1. Cost of product revenues for the Q2 was $10,800,000 or 24 percent of revenues, which was in line with our cost of product revenues in the Q2 2020. Let's now turn to our GAAP operating expenses. For the Q2 of 2021, research and development expenses were $64,700,000 and SG and A expenses were $57,200,000 These spend levels were in line with our internal expectations as we support our growing development pipeline and invest in our research and development capabilities.
With that, I'll turn the call over to Martina for an update on our pipeline. Martina?
Thank you, Sarah, and good morning, everyone. Let me begin by addressing the ongoing efforts within Insmed to generate and present data at medical congresses around
the globe.
As you may recall, data from the Phase II WILLOW study of forensic cathode was included as one of the best oral presentations of 2021 at the 2nd Annual European NTM and Bronchiectasis Workshop held in early July. The presentation described that the activity of neutrophilcerin proteases or NSP was significantly reduced both in blood and in sputum for patients taking brancocatas during this trial. Further, a larger reduction of NSCs was observed in sputum than in blood, which further supports the anti inflammatory mechanism of action of brancocapsis. PBC1 inhibition by brancocapsis during the maturation of neutrophils in the bone marrow impacts the inflammation cascade. These effects help explain the clinical efficacy of brancocatids in reducing its preservation, suggesting a relevant role of neutrophil inflammation in the pathophysiology of these events.
We're also excited to report that the clinical development program. Our Phase III absent trial of brancic acid in patients with bronchiectasis and our ARRISE and ENCORE study for ARIKAYCE as a frontline treatment for patients with necroembathy both remain on track and enrollment is progressing in line with our expectations. In addition, we're pleased to report that the CS Therapeutic Development Network has endorsed our study protocol for pancreatic acid in cystic fibrosis. The process for initiating study sites for the Phase 2 pharmacokinetics and pharmacodynamics multiple dose study is now underway, and we look forward to keeping you informed on our progress. Let's now turn to TPIP, a dry powder formulation of Tecrostenil Palmitil.
Our current plan to pursue TPIP in PAH involves 2 Phase II studies. The first study will measure the impact of CTIP on pulmonary vascular resistance, or PVR, over 24 hours. We anticipate sharing data from this study in a small number of patients with PAH in the second half of the year. The second study will affect the impact of TPIG on QDR and 6 minute walk distance in patients with PAH over a 16 week period. We look forward to initiating this study in the Q4 of this year.
We also remain on track to initiate early next year a Phase II study of TPIP in pulmonary hypertension associated with interstitial lung disease or PH ILD. As Will mentioned, in addition to our clinical development program, our translational medicine capabilities are a key focus as we work to grow this platform so we can continue to build our pipeline from within Internet. Important to this work is the early identification and validation of preclinical targets based on ability of animal model work, which we hope will allow us to pursue potential with the development and regulatory pathways in a range of indications. We have continued to build these capabilities during my tenure as I'm a strong believer in leveraging the proven drug development capabilities of Insmed. We will continue to support and develop novel and cutting edge technologies to address a broad range of rare disease across the therapeutic areas.
We look forward to sharing updates from our translational medicine efforts in the form of expected Phase 1 ready candidates within the next 12 months. With that, let me turn the call over to Roger to discuss some key operational updates. Roger?
Thank you, Martina, and good morning, everyone. From an operational perspective, Insmed continued to make important advancements during the Q2. Our global commercial footprint expanded during the quarter and ARIKAYCE has now launched in the U. S, Europe and Japan. While the impact of the delta variant globally will vary, we are encouraged by the potential of ARIKAYCE in each of these markets.
Our current ARIKAYCE sales reflect preliminary signs of positive growth in the U. S. As well as our early efforts in Europe. Starting with our U. S.
Business, we were pleased with solid ARIKAYCE performance during the Q2. We continue to keep a close eye on the shifting COVID-nineteen landscape where we see regional variability, particularly in the southern states where vaccination rates are generally lower than in the other regions. We anticipate U. S. ARIKAYCE growth will be accelerated by 3 main drivers: the return of our therapeutic specialists in person in the field, physician offices reopening and patients returning to in office visits.
Our therapeutic specialists are largely back in the field and have achieved solid customer engagement. While regional variability persists across physician centers in the U. S, we are encouraged by the steady return to in person interactions with our therapeutic specialists. Across the U. S, the majority of these interactions were in person as of the end of June.
We are also seeing a growing trend toward a speaker programs, which we think is beneficial. We've seen similar trends with our ARIKARE's trainers program with an increasing number of patients willing to be trained in their home. We're equally encouraged by CDC data indicating that almost 80% of patients aged 65 and older in the U. S. Are fully vaccinated.
This represents a large proportion of the ARIKAYCE patient population and we hope that increased vaccinations will lead to a greater number of patients returning to in person visits with their physicians. Our commercial efforts in Japan are now underway. Last month, our first product was shipped to patients. We are very excited about this milestone and equally optimistic about the opportunity in Japan, which of the territories we are currently pursuing is estimated to be the largest global market for the refractory MAG patient population with the U. S.
As a close second. We have seen several positive signs from physicians in Japan who are actively working to manage patients in this challenging environment. I'm very excited to see our team manage through these challenges and look forward to providing you updates on their Japan launch in future quarters. Our launch in Europe is also underway and we continue to make progress as we go country by country to secure reimbursement. To date, we have successfully secured reimbursement and launch of ARIKAYCE in Germany and the Netherlands.
The French government also agreed to extend the ATU program. Our efforts now turn to securing reimbursement in Ireland, the UK, Italy and France. Let me take a moment to address our technical operations. We are producing drug product to support demand in all three territories where ARIKAYCE is commercially available and we continue to benefit from a strong ARIKAYCE inventory position. As we support our ongoing trials for ARIKAYCE, resocatib and TBIP, we continue to operate on solid footing with respect to manufacturing of clinical supply product.
In closing, Insmed has made tremendous progress during the Q2. With our lead marketed product now approved and available in 3 major territories around the globe, we have seen incredible growth throughout our organization, marked by expansion across our employee base, clinical programs, product revenue and global footprint. I'll now turn the call back to Will.
Thank you, Roger. I'd like to close out our prepared remarks by thanking the entire Insanid team who have worked tirelessly toward our goal of altering the course of disease for patients. The diligence of our employees was unwavering at a time of unprecedented uncertainty during this global pandemic. I would also like to acknowledge the patients and caregivers who participate in our studies. At Insmed, patients remain at the center of everything we do and we thank you for trusting us to advance medicines for your benefit.
With that, I'd like to open the call to questions. Operator, can we take the first question, please?
Our first question comes from Joseph Schatz from SVB Leerink. Joseph, your line is now open.
Thanks very much. Congrats on all the progress. I was wondering first, if you could talk about how patient adoption patterns in Japan have compared to what we saw play out in the U. S. Early on.
Can you quantify in any way for us how we should expect the launch trajectory there to compare to what we saw here in the U. S. After accounting for obvious things like the difference in prescription duration or anything else that's significantly different?
Sure. Roger, you want to take that?
Yes, sure. Thanks, Joe. So I think it's still very early days in Japan. We have had success. The team has had quite a lot of success in engaging with the target accounts and accessing them despite the COVID situation there.
And so while I think it's probably optimistic to expect we're going to see the same kind of ramp in Japan that we saw in the U. S, we're really encouraged by the early signs and early indications that we're getting back from our team, the KOL engagement, the interest from physicians to prescribe ARIKAYCE for their patients. So all the signs we're seeing are very encouraging for us and we look forward to updating you further as we get more in-depth into the Japanese launch.
Okay. Thanks, Roger. And then question on the pipeline. Can you walk us through the range of outcomes from ARISE that you foresee when considering whether you will need to make any changes to ENCORE study design? And how far away from that point are we currently?
Yes. So I appreciate the question. This is for the frontline potential use of ARIKAYCE in the treatment of frontline MAC patients. And ARISE is designed as a kind of sentinel study to test all of the assumptions that we have for our ENCORE study. The ENCORE study, we'll be looking at is the full approval study for ARIKAYCE for frontline patients and ERASIS is sort of a small version of that to make sure that the primary endpoint that's used in the U.
S, which is a PRO or patient reported outcome measure, works as intended. Put this into context for everybody, the PRO that was developed here, we have some experience, quite a bit of experience with and we tested it through a number of different mechanisms and got alignment with FDA on this PRO. FDA has been very supportive of our efforts to bring this drug to frontline patients. They have encouraged us to do so. So this PRO effort that we're making is really intended to address their need to see what they require for full approval, which is that it helps the patient feel function or survive better.
So ARISE will look at that in 100 patients and that trial is enrolling. If we find that the PRO does exactly what we expect, then no change will be need to be made. If we learn that some portion of the ARRISE questionnaire seems to respond better in a practical setting of a clinical trial, then we have the opportunity, but not the obligation to make modifications to the PRO itself or to the statistical analysis a So I feel very good about the design here. I think it's a belt and suspenders approach to give us the best possible chance of winning. We feel highly confident that we will.
But we'll have to see how this plays out and ARRISE gives us an early look. As far as timing, we've been hesitant to give any specific guidance around any of our clinical trials just because of the presence of COVID and the potential influence that could have on timelines. We do have internal timelines. We're hitting all of those and that's very encouraging. But I think the arrival of the Delta variant and the uncertainty it has introduced certainly grounds the logic of our caution about providing any further guidance.
And I know it's frustrating, but we're not giving any more specifics at this time. Once we get a little further down the road, I'm sure we'll be able to give you a book end time. We just want to make sure we're going to hit it.
Our next comes from Ritu Baral from Cowen. Ritu, your line is now open.
Hi, thanks for taking the question. This is Laila on for Ritu and congrats on the quarter. Maybe just really quickly on PFIS and PAH. Can you talk a little bit about how to frame expectations for that early data in terms of the 24 hour PVR? Based on feedback from KOLs, what improvement in 24 hour PVR would they find clinically meaningful?
And what other aspects of the profile are they going to be looking for? Thank
you. Sure. Appreciate
the question and I think this is an interesting study. The first thing I want to make clear, this Phase 2a study in no way has any impact on the other Phase 2b study work, which is running independent of that. So the PAH program, the Phase 2b that will kick off at the end of this year is not rate limited or influenced by any of the outcome of this Phase 2a study, nor is the PAH ILD program we're going to be getting at the beginning of next year impacted by it. However, we think the data will be quite interesting. And this 2a data is going to take PAH patients in an ICU bed and monitor them through a right heart catheterization directly measuring their pulmonary vascular compound.
The interesting thing about this is, as we've seen in animal data work and certainly in Phase 1 work, we know we can go through titration actually quite high in dosing these patients. But starting out and because it will be only one dose, we're going to be obviously cautious and starting low and then perhaps depending on what happens in this 2a study, we may go up to a higher dose in subsequent patients. I mentioned that because it's not really the quantity of PVR reduction we're looking for, it's the duration. And I think this is really the key to unlocking the entire logic of the program and the compound. If we are able to see a reduction in pulmonary vascular resistance that extends temporally for a long period of time, in animals we saw it out to 24 hours, to put that into context, Tyvaso, you get about an hour and a half of PVR reduction would be a major advance for patients because what it does is it lowers that vascular resistance, which should alleviate the downstream burden on things like the heart and its performance.
And in animal models we saw in fact disease modification. So I think what we're looking for is extended time of PBR reduction. We will be able to directly monitor that through the right heart cath. And as soon as we have a handful of patients of data, we look forward to bringing that out and sharing that with you, which we expect by the end of the second by the end of this year.
All right. Thank you for the helpful color.
Our next question comes from Anita Dushyev from Berenberg. Anita, your line is now open.
Hi, good morning. Just one for
me here. I was kind of curious to know about the whether you will be still considering investigating Renzo in other conditions of the neutrophil LSCs activity now that it kind of showed some effect in the COVID-nineteen patients?
So appreciate that question. We absolutely are going to be bringing it forward in other indications. The work for that is well underway. As we've mentioned previously, one of the really exciting things about brincocativ is that not only did it show such clearly definitive positive results in bronchiectasis, but in many of the preclinical animal models we've been looking at in other disease states, we've seen very encouraging data. Functionally, what we're doing here by inhibiting the DPP1 pathway is impacting the inflammatory cascade and that's relevant in a whole range of neutrophil mediated diseases.
The obvious first follow on candidate was cystic fibrosis. And as you heard today, that program is advancing. We are looking at several others. And I would say the preclinical work to inform the selection of those is largely completed. And so we will be able to direct you to what those programs might be and when those trials might kick off.
But we're super excited about this compound. And I think if ever there was the potential for a pipeline in a product, it's brincocatid.
Thank you. Just to clarify, so it's more of a 2022 story that we might see other studies being initiated?
Yes, I think for study initiation, that's probably fair, but the identification is, I would say, well underway.
Our next question comes from Stephen Willey from Stifel. Stephen, please go ahead.
Yes, good morning. Thanks for taking the questions.
Can you maybe just talk a
little bit about the pace of site activation that's happening in the registrational studies right now, both for brincicada and for ARIKAYCE? And maybe just kind of frame that with respect to where internal expectations are. I guess I'm just trying to think about this from a COVID related perspective. If getting these sites open is kind of the rate limiting step or do you think that recruitment into the sites once open would be the rate step?
Well, so it's a great question, Steve. Thank you for it. It goes to the heart of strategy for clinical trial operation and drug development. And so the path we followed here for our clinical trials is to identify some fast enrolling sites like when you look at the spectrum of clinical sites that get opened in any clinical trial, there's some of these universal truths and that is that if you, for example, were to open 100 sites, fully 25% of them or more will never recruit a single patient. Efforts.
Because we have experience in both of these areas, we know the sites that are high recruiters and we targeted them first. So the priority was to get these sites open early and we managed to do that. We have since expanded to the broad range and reach of the list of sites that we're going after. We've really seen no impediment in our ability to get those sites open. And that's why I think we're able to say with some conviction that our internal timelines have been met and we continue to be excited about the progress we're making in all our clinical trials.
That's very helpful. And then maybe just a quick question for Sarah. I know you gave a gross to net for this quarter. I'm not necessarily sure when was provided for the Q1. But just wondering if I think the implied guidance would suggest that we should see this maybe tick up by, I don't know, 200, 300 basis points at some point through the second half of the year?
Sure, Steve. Happy to answer. So in Q1, our gross
to net was around 17%.
This quarter, we were around 11%. So full year guidance is mid teens, typical to any product like ourselves, highest gross to net in Q1 tends to drop Q2, Q3 and maybe tick up a little over Q4. So full year guidance mid teens, and then you have some of the history of Q1 and Q2 in there.
Understood. Thank you for the color.
Our next question comes from Greg Sernanov from Goldman Sachs.
One has to do with Japan. And I'm wondering, I realize Roger mentioned this very early days, of us may be watching Olympics. And so I'm just trying to figure out if COVID if you can kind of characterize what the COVID dynamic is in Japan right now and how you expect that to play out and how that might impact how we should be thinking about the launch in Japan? So that's my first question. And then my second question has to do with ARIKAYCE quarterly sales.
And Sarah, I think you mentioned that quarter over quarter growth was 13%. And I'm wondering, as we think about the second half and given the uncertainty with delta variant in the U. S. And the regional variability that Roger mentioned, is 13%, perhaps a good or not assumption for kind of growth throughout the balance of the year?
So I'll ask Roger to take the question. Roger, you can take the question on Japan and Sarah, you can take the quarterly one.
Yes, perfect. Thank you. So you're right. So COVID in Japan, I think as we look at this, they're probably about significantly behind the U. S.
And we look forward to them rolling out the vaccine and catching up as quickly as possible. I will say that talking to the Japanese team, we have been able to access the accounts and patients are accessing physicians and are getting treatment. We've shipped our first shipment of ARIKAYCE to patients last month. So we are able to get those access to the physicians. They are able to access patients.
I think it's reasonable to say that the access is somewhat limited. And I think it's we don't have any basis to say that in Japan, it's going to be any different than we see
in the U. S.
As we see vaccination rates, as we see more in person visits, I think we're going to see increased traction for ARIKAYCE. But certainly as we think about this as potentially the largest market for refractory MAC patients, we're really encouraged by the interactions and we think that this has gotten really very strong long term potential based on just the literature and the epidemiology, but also the reaction of the engagement we're seeing from the physicians.
And Greg, thanks for the question.
Nice to hear from you. So we were obviously encouraged by Q2 sales, highest since the pandemic on a global basis, actually highest since we've launched. We obviously have Delta variant, which is adding an additional variable in the equation. We're cautiously optimistic. Optimistic.
We now see regional variability depending on, as Roger mentioned, some of maybe potentially the southern states in the U. S. That aren't don't have the same vaccination rates as other areas. We do have the Japan launch now here in July. So we are not providing guidance.
So I can't provide specific color on certain percentage growth quarter over quarter, but hopefully that gives you
a little
color what we're thinking.
Thanks. And if I can follow-up just on Roger's comments. Given that you're launching in Japan and that I assume vaccination rates are higher relative to the U. S. As the product is rolling out, but given that maybe culturally there are some differences with the elderly wanting to go to their doctors.
Is there a way to think about the different pushes and pulls on how we should think about that Japan launch? Should we maybe just more conservatively think of that as a just a gradual slower launch or any other color you can provide there?
Yes, sure. So the information that I have from the Japanese team is that the vaccination rates still lag
behind the U. S. Although I think
that once it's more widely available, I expect or hope that there will be more of an acceptance of the vaccine we'll see more people taking that. As you think about the ramp, and I think embedded in your question is probably how do we think about that versus the U. S. Ramp. I think it's probably prudent to say we're probably not
going to see a steep
a ramp in Japan as
we did in the U. S.
A number of factors for that as you mentioned is the push and pull of COVID and potentially being dampening. On the other hand, I do think that there is significant willingness to prescribe and excitement about the product for these patients who have been waiting for ARIKAYCE to be approved and launched in Japan. There's a couple of other drags, I would say, there's the 2 week limitation on prescriptions for the 1st year of any product that's approved in Japan. So that requires the patient to go back to the physician and the pharmacy to get refills. But as we think longer term and get on the other side of this, I think there's tremendous potential there.
Okay. Thank you very much.
We currently have no more questions. I want to hand back to Will for any further comments.
Thank you very much for joining our call today. Have a great day.