Q1 2020 Earnings Call
William Lewis: As a next step, we are working with AstraZeneca to form a joint steering committee for the development of brensocatib in either of these indications. Turning to the error case, this quarter saw challenges both expected and unexpected. Nevertheless, we were able to produce solid revenue performance. Roger will address the impact of these cross-currents during his remarks. Overall, we remain confident in the performance and potential of error case. As we look ahead, we are hopeful that we can accelerate growth in the second half of this year, assuming the COVID-19 situation continues to improve. In the meantime, our team continues to adapt seamlessly to the current environment, finding new virtual ways to ensure patient access to and physician support for ArrowCade. We also look forward to initiating a frontline clinical study of error cases and, in parallel, a study to validate the patient-reported outcome that will serve as the primary endpoint in the frontline study in the second half of 2020. Roger will go into more detail on these. Let me now turn the call over to Martina to drill down a bit more on the progress of our development programs. Martina?
Current expectation.
Such statements represent our judgment as of today and may involve risk and uncertainties that may cause actual results could differ materially from the results discussed in the forward looking statements.
Martina Flammer: Thanks, Will, and good morning, everyone. As Will mentioned, we believe Friendship Captive represents the opportunity to build a pipeline around a product. Let me remind you that Prensucatib is a novel oral reversible inhibitor of Tbaptidylpeptidase-1 or TPP-1. CCD1 is an enzyme that catalyzes the activation of neutrophil serine proteases, or NSPs. Key Agents of Neutrophil-Mediated Inflammation
Please refer to our filings with the FCC, which are available through the Fccs website at www Dot FCC dot Gov or from our website for information concerning the risk factors that could affect the company.
We plan to reference non-GAAP financial measure during todays call.
For a reconciliation of GAAP measures through our GAAP results. Please refer to the earnings release, we issued earlier today.
Additionally, the information on today's call is not intended for promotional purposes and not sufficient for prescribing decisions.
Martina Flammer: Last week, we announced the initiation of the superiority trial of protease inhibition in COVID-19, or STOP COVID-19, an investigator-initiated study of francocaptive in hospitalized patients with COVID-19. The rationale for this study, which is being conducted by Professor James Chalmers at the University of Dundee, is that patients with severe COVID-19 neutrophil influx into the lungs is As mentioned, ARDS is a severe outcome of COVID-19 that is associated with the spread of COVID-19 and is associated with high mortality. It is believed that the reduction of neutrophil proteases in these patients may reduce the progression of lung injury and the need for mechanical ventilation.
Joining me on todays call our members of the Internet Executive management team, including will Lewis, Chairman and Chief Executive Officer.
Roger outset, Chief operating officer, and Dr., Martina Frommer, Chief Medical Officer.
Let me now turn the call over will Lewis for prepared remarks.
Upon completion of those remarks, we will open the call for your question well.
Thank you Sarah good morning, everyone and thank you for joining US we hope you and your families are safe and healthy during these challenging times.
First quarter of 2020 will be remembered as one of the most trying in history in light of the unexpected personal and business disruptions brought on by this global Pandemics.
Those of us it insmeds challenges posed by Cobot 19, showing a bright light on the critical needs of patients living with serious and underserved diseases.
Martina Flammer: The STOP COVID-19 trial is a multi-sensitive, prospective, randomized study expected to enroll up to 300 patients with confirmed COVID-19 who present to the hospital at risk of needing increased levels of supplemental oxygen and or ventilation. Patients will be randomized to receive either a 25 milligram dose of Frensor-Castit once daily or matching placebo on top of standard of care. The primary endpoint is clinical improvement on a seven-point ordinal scale, as defined by the World Health Organization. Patients will be treated for up to 28 days, with a sample size reassessment performed once 100 patients have been enrolled and treated. While the timing of the study is enrollment dependent, we look forward to the sample size reassessment, sometime in the third quarter of this year, with final data expected by the end of the year or early next year.
We remain as committed as ever to our mission of serving his patients as well the health care providers, who care for them.
We are pursuing this mission from a position of strength and our solid balance sheet will enable us to stay the course with several meaningful inflection points along the way.
I will turn first to Ioannis window below seven which we are now calling but its new name brand so could do.
Notably last week, we announced we started an investigator initiated study a brand so captive.
In hospitalized patients with severe cobot 19th.
The results we observed from our phase two will have study in patients with non cystic fibrosis bronchiectasis give us hope that the novel mechanism of action Brent. So captive will have an impact on patients with acute respiratory distress syndrome or arts, a devastating outcome of cobot 19 for which there are no currently approved therapies.
We are proud to be a part of the innovative efforts in the fight against this pandemic Martina will go into greater detail about this study and share new data from the Willow study on today's call.
Martina Flammer: Should Frensucatib prove effective in this study, we believe the trial design could support a regulatory pathway for Frensucatib as a potential treatment for patients with COVID-19 at risk for ARDS. In the meantime, we continue our efforts to advance Prince of Captives into phase 3 development for bronchiectasis. Bronchiectasis stands out as one of the more significant pulmonary diseases with no approved therapies. It is marked by frequent pulmonary exacerbations requiring antibiotic therapy and, or hospitalization. Prevalence estimates for non-CS bronchiectasis range from about 330,000 to 520,000 in the U.S., with significant overlap with patients who have nonduberculous microbacterial lung disease or NTM lung disease. Given the strength of the top-line results,
We originally in licensed brands of captive from Astra zeneca to explore potential in patients with bronchiectasis.
On the heels of the successful phase two Willow study, we are continuing to advance advanced Brent So captive into phase three development and expect to begin this program in the second half of this year.
We believe that brings so captive also has the potential in multiple indications beyond bronchiectasis. We do this drug is a pipeline within a product and our increasingly excited about the future of what brands of cat that may offer to patients.
Our belief in the potential of Brent. So captive was further validated last month when astrazeneca exercised its first option under our license agreement, allowing Astra zeneca to pursue clinical development of rents are catching up to an including phase twob clinical trials, persio PV or asthma.
The next step we are working with Astrazeneca to form a joint steering committee for the development Brent So cats it in either of these indications.
Martina Flammer: We observed in the Willow study and, subject to our discussion with the FDA, we plan to focus the phase three program on bronchiectasis patients with two or more exacerbations within the prior year. We expect to initiate this program in the second half of 2020 following alignment with the FDA on the trial. We're also planning to share additional results from the Phase 2 Willow Study during a virtual forum anticipated to be held by the American Thoracic Society or APS. While we will provide a more detailed update at that time, we can share that our analysis of the data validates top-line results.
Turning to Eric case, this quarter saw challenges both expected an unexpected. Nevertheless, we were able to produce solid revenue performance Roger will address the impact of these cross currents. During his remarks overall, we remain confident in the performance and potential of air case.
As we look ahead, we're hopeful that we can accelerate growth in the second half of this year, assuming the cobot 19 situation continues to improve.
In the meantime, our team continues to adapt seamlessly to the current environment, finding new virtual ways to ensure patient access to and physician support for Eric case.
We also look forward to initiating a frontline clinical study of air case and in parallel a study to validate the patient reported outcome that will serve as the primary endpoint in the frontline study in the second half of 2020, Roger will go into more detail on these plants. Let me now turn the call over to Martina to drill down a bit more on the progress.
Martina Flammer: For example, we saw a significant improvement for several of the QOLB domains, including physical functioning, emotional functioning, vitality, and health perception. In addition, changes in FEV1 showed a trend in favor of Frencetaxib over placebo, even in this six-month study. Finally, in addition to the reduction of sputum neutrophil allostates that we observed with the brain with brain sarcastic as a result of its mechanism of action, we have also observed a correlation between sputum neutrophil allostase reduction and the reduction of pulmonary exacerbation based on pharmacokinetic and pharmacodynamic modeling analysis. The overall safety profile was similar across three things.
Most of our development programs Martina.
Thanks, well and good morning, everyone.
Well mentioned literally right. It's a captive represents the opportunity to build the pipeline around the product.
Let me remind you that renter cat that is a novel oral reversible inhibitor, let's get back the deals have today, one why TPP one.
Tpd why is it any time that capitalizing the activation of neutrophil serine proteases for Enett peace.
He agent a future filled mediated inflammation.
Martina Flammer: However, headache, skin, and dental-related adverse events were numerically higher with frantzocastis than with placebo. Following the virtual ATS forum, we plan to host an investor call with a key opinion leader featuring the data. We look forward to sharing further details and the broader set with you once the details of this virtual ATS session are finalized, which we currently expect will be before the end of June. Beyond bronchiectasis, we believe that frenzyl catnip has the potential to be effective in treating other neutrophil-driven diseases, including cystic fibrosis. PF patients have even greater levels of neutrophil allostate than bronchiectasis patients.
Last week, we announced initiation of the superiority trial of protein inhibition in coated 19 or stop Cobot 19, an investigator initiated study of France, a captive in hospitalized patients with covert 19.
The rationale for the study, which is being conducted by professor James Chalmers at the University of Sandy is that the patients with severe cold. It 19, new to fill influx into the line is the defining characteristic of acute respiratory distress syndrome or art.
As Bill mentioned art. This is severe outcome of cobot 19 that is a so.
I stated with high mortality.
Martina Flammer: And therefore, we believe front stochastics may benefit CF patients by addressing the harmful effects of neutrophil allostates in inflammation and sputum production. Thus, this is our core development interest. If this compound remains effective in bronchiectasis and CF, there is a biological rationale that suggests brenzotaptive may be applicable across a broad range of indications, including alpha-1 antitrypsin deficiency, granulomatosis with polyangiitis, inflammatory bowel disease, Lupus, and Rheumatoid Arthritis. And, as Will mentioned earlier, Subject to our ultimate agreement regarding commercially acceptable terms, our pipeline also includes 1009, which we are now calling by its new name, Tryprostenil Palmitoyl. This is a dry powder inhaled tropophenyl prodrug formulation that we are advancing for the potential treatment of pulmonary arterial hypertension, or PAA. We remain on track to file an IND and initiate a Phase I study of troprostenylpalmodule later this year. We're very excited about the multiple opportunities in our pipeline. Let me now turn the call over to Raja to discuss some key operational updates, including the RIK franchise. Raja?
And it believes that the reduction in the future. So protivitis in these patients may reduce the progression of lung injury Anthony for mechanical ventilation.
The stop Cobiz 19 trial is a multicenter.
Prospective randomized study expected to enroll up to 300 patients with confirmed Cobot 19, who presented a hospital at risk of eating increased levels of supplemental oxygen and or ventilation.
Patients will be randomized to receive either a 25 milligram dose offensive captive once daily or matching placebo on top of standard of care.
The primary endpoint its clinical improvement on a seven point or didn't know scale as defined by the World Health organization.
Patients will be treated for up to 28 days with the sample size reassessment performed one to 100 patients have been enrolled and treated.
Well the timing of the study is enrolling dependent we look forward to the sample size reassessments.
Sometimes in the third quarter of this year.
With final data expected by the end of the year early next year.
Sure Prensa Cat M prove effective in this study we believe the trial design could support a regulatory pathway for friends the cat that at the potential treatment for patients with cobot 19 addressed for area.
In the meantime, we continue our efforts to advance brings a captive into phase three development for projects with it.
In Texas, the spin out as one of the more significant pulmonary diseases with no approved therapies.
Roger Aspet: Thanks, Martina, and good morning, everyone. I'm pleased to report that from an operational perspective, we continue to execute on our strategy, delivering across all areas of our organization, including research and development, manufacturing, and international expansion. While we have adjusted our approach significantly, we continue to support our customers and patients and execute at a high level across medical affairs and commercial. As we've previously shared, COVID-19 has had an impact on our U.S. commercial efforts related to Arrogate. In mid-March, we pulled our sales force from the field to ensure the safety of our team, our patients, and physicians and to respect the tremendous efforts that healthcare professionals were directing to the care of COVID-19 patients. Our first quarter sales were also impacted by the expected reset of deductibles, including the donut hole.
This marked by frequent pulmonary exacerbation, requiring antibiotic therapy and or hospitalization.
Prevalence estimates for non T.S. from the exited ranged from about 330000 to 520000 in the U.S.
With significant overlap with patients who have non tuberculosis mycobacterial lung disease for NTM lung disease.
Given the strength of the topline results.
We observed in the will of study and subject to our discussion with the FDA. We plan to focus the phase three program I'm proud to exit patients with two or more exacerbation within the prior year.
We expect to initiate this program in the second half of Twentytwenty falling alignment with the FDA on the trial design.
Roger Aspet: Notwithstanding these obstacles, we announced early today total net sales of $36.9 million for our case for the first quarter of 2020. I am extremely proud of the commercial team's ability to deliver this result in the face of the significant challenges we face. To dig a bit deeper, we are seeing regional variability around the response to COVID-19 and the impact it is having on our case, but no clear trends have emerged. In light of the necessary adaptation of our sales force to a remote model, we expect new patient ads to be modest in the near term. That said, while these are challenging times, we remain confident in the long-term strength of the Aircase franchise and are hopeful that we can continue to grow in the second half of this year, assuming the COVID-19 situation continues to improve.
We're also planning to share additional result from the phase two will this study during a virtual forum anticipated to be held by the American thoracic society or ATM.
Well, we will provide a more detailed update at that time, we can't share that our analysis of the data validate topline results.
For example, we saw a significant improvement for several of the Q L.D. domain, including physical functioning emotional functioning.
Hi, Talenti and health perception.
In addition changes in an easy one showed a trend in favor of friends attacked it over 50, though even in the six month study.
Finally in addition to the reduction of beautiful neutrophil outlets states that we observed with Brent with rental captive as a result of its mechanism of action. We have also observed a correlation between sputum neutrophil out assays reduction and the reduction of pulmonary exacerbation based on.
Roger Aspet: In the meantime, our teams are continuing to support customers through virtual engagements, and we are encouraged that physicians are continuing to start new patients. Additionally, in recent survey work with targeted physicians, over half of the targets say they anticipate an increase in their index of suspicion for pulmonary infection, with the majority of those saying they will test more often. In fact, two-thirds of those surveyed say they will bring patients into the office with urgency to assess their progress and consider changes to current treatment when the crisis subsides. We were also encouraged to see that existing patients are remaining on therapy, and new patients are receiving support. Our ARACARES trainers are providing remote training for new patients, and our ARACARES coordinators provide frequent remote support for existing patients and doctors. Patients have expressed how much they appreciate the support Insmed continues to provide and that the comfort and familiarity of hearing from their coordinator is especially meaningful right now. In addition, our market access team is working with payers to address patient and physician access to diagnostic tests.
Pharmacokinetic and Pharmacodynamic modeling analysis.
The overall safety profile with similar across treatment group, however, headache in dental related adverse events were numerically higher with friends attached to them with placebo.
Following the virtual Ats Forum, we plan to host an investor calls with a key opinion leader featuring the data.
We look forward to sharing further detailed and the broadest that with you once the details of this virtual Ats sessions are finalized.
We currently expect will be before the end of June.
Beyond Funky excesses, we believe that forensic captive has the potential to be effective in treating other neutrophil driven diseases, including cystic fibrosis.
Roger Aspet: We are pleased that most payers are extending reauthorization times or waiving certain reauthorization requirements. It's extremely encouraging that payers have acted quickly to ensure NTM patients continue to have access to their medication throughout this crisis. I'm also pleased to note that, to date, a supply chain and manufacturing infrastructure remain intact. To date, patients on the drug continue to receive drug shipments with no interruption. We believe we have an adequate supply of the active pharmaceutical ingredient used in our case to meet our anticipated global requirements, including commercial, clinical, and compassionate use through the end of 2022. Our case may also benefit from two other potential catalysts for growth. First, a peer-reviewed paper was published in early March that provides potential practical solutions to address the most common adverse events that can accompany the use of arachates in the treatment of refractory lung disease caused by Mycobacterium avium complex or MAC. We expect that these practical solutions will serve to improve patients' continuation on therapy. And second, we continue to anticipate the introduction of a set of new treatment guidelines from multiple scientific societies, including the American Thoracic Society.
CF patients have even greater levels of neutrophil Elastase, then bronchiectasis patient.
Therefore, we believe front the cap that may benefit CF patients by addressing the harmful effects of neutrophil elastase inflammation is viewed on production.
Well, our corporate development interest.
But this compound remains weak funky excesses NCS there is a biological rationale that suggest sprays attack that maybe applicable across a broad range of indication.
Including Alpha one antitrypsin deficiency.
Frenulum Aptoses was poor CNG itis inflammatory bowel disease.
Lupus and rheumatoid arthritis.
And as will mentioned earlier after Seneca has exercised its option, which allows for the pursuit of clinical development offensive captive in few PD or asked not.
Subject to our ultimate agreement regarding commercially acceptable terms.
Our pipeline also include.
Isn't that one 009, which we are now calling bites new name to cross the nail Polish until.
Roger Aspet: The Society, the Infectious Disease Society of America, and the European Respiratory Society, which we will remain optimistic will support the use of our case for appropriate patients. While we await the new guidelines, we are encouraged that on a recent European Respiratory Society webinar, a member of the committee announced that Arrakis will be included in the guidelines, with a recommendation that it be added to background therapy if a patient remains culture positive after six months of treatment. This is consistent with our clinical trials and U.S. approved labeling. We are excited about the potential inclusion of our case in the guidelines and the impact it may have, especially with community pulmonologists and infectious disease specialists. We view the anticipated arrival of these guidelines as an important opportunity to reinforce the appropriate approach to treating refractory MAG patients, including the recommended duration of therapy for these patients. Let me turn now to our global expansion efforts in both Japan and Europe.
This is a dry powder inhaled treprostinil pro drug formulation that we are advancing for the potential treatment of pulmonary arterial hypertension or P.H.
We remain on track to violent I Indy and initiate a phase one study after Prost to know Palmatier later this year.
They're very excited about the multiple opportunities in our pipeline.
Let me now turn the call over to Roger to discuss some key operational update including barricade franchise Roger.
Thanks, much Rena and good morning, everyone.
I'm pleased to report that from an operational perspective, we continue to execute on our strategy delivering across all areas of our organization, including research and development manufacturing and international expansion.
Well, we've adjusted our approach significantly we continued to support our customers and patients and executed at a high level across medical affairs and commercial.
Roger Aspet: In Japan, we have submitted a new drug application to the Ministry of Health, Labor, and Welfare for our case for the treatment of patients with NTM lung disease caused by MAC who did not sufficiently respond to prior treatment. As we previously disclosed, we plan to deploy an Insmed sales force dedicated to educating Japanese physicians on MAC lung disease and promoting the appropriate standard of care regimen, including the use of a macrolide, to treat patients. We expect to begin to hire our sales team when the global health crisis will allow us to safely execute on this opportunity.
As we previously shared Koby 19 has had an impact on a U.S. commercial efforts related to Eric is.
In mid March we put our sales force in the field to ensure the safety of our team our patients and physicians. That's a respect a tremendous efforts in health care professionals with direct into the care of cobot 19 patients.
Our first quarter sales were also impacted by the expected reset of deductibles, including the donut hole effect.
Notwithstanding these obstacles, we announced earlier today total net sales of $36.9 million barricades for the first quarter of 2020.
Roger Aspet: Once the pandemic subsides, we intend to allow our sales force, in compliance with Japanese law, to establish and build relationships with physicians who are treating MAC lung disease patients. In Europe, as previously shared, our marketing authorization application has been validated by the European Medicines Agency. And we expect that if it is approved, we could potentially launch our case by the end of the year in Germany, with the UK following shortly thereafter. Finally, let me turn to our efforts around label expansion for Arrogate. We are advancing our case in a frontline study that, if approved by the FDA, would allow us to address the estimated 95,000 to 115,000 patients in the U.S. diagnosed with NTM MAC lung disease and that will serve as the necessary confirmatory study for our case, as agreed in that post-approval commitment with the FDA. We anticipate that this study will also address frontline approval requirements for Europe and Japan using the primary endpoint of durable culture conversion, which we intend to discuss with the relevant regulatory authorities.
I'm extremely proud of the commercial teams ability to deliver this result in the faces significant challenges we faced.
The dig deeper we're seeing regional variability around the response to covert 19, and the impact is having on air case, but no clear trends have emerged.
In light of the necessary adaptation of our Salesforce to remove model, we expect new patient adds to be modest in the near term.
That said, while these are challenging times, we remain confident in the long term strength of the air case franchise and hopefully we can continue to grow in the second half of this year, assuming the cobot 19 situation continues to improve.
In the meantime, our teams are continuing to support customers through virtual engagements and we're encouraged that physicians are continuing to start new patients.
Additionally, in recent survey work with targeted physicians over half of the targets say they anticipate an increase in their indexes suspicion for pulmonary infections.
The majority of those saying they will test more often.
Roger Aspet: We've planned for a study duration of 13 months, with treatment for 12 months, followed by one month off therapy. The primary endpoint of this study in the U.S. will be a composite patient-reported outcome, or PRO, in order to demonstrate the clinical benefit, which is required by the FDA. We expect that the validation of the PRO and the confirmatory study will track in parallel, pending alignment with the FDA. We remain on track to initiate these trials in the second half of 2020. In these challenging times, we are working diligently to maintain the strength of the brand and maximize the long-term potential of Arakase in the U.S., Europe, and Japan. I'm very excited about what lies ahead, and I want to thank the team for their continued commitment to the NGM community. From a strategic perspective, when we look at our product portfolio through a broad lens, we see an impressive potential commercial overlap among our programs, particularly the synergies between NTM and bronchiectasis, and we're excited about advancing tropostanil palmitoyl, a promising medicinal candidate for a rare pulmonary disease.
In fact, two thirds of those surveyed said it will bring patients into the office with urgency to assess their progress and consider changes with.
With current treatment when the crisis subsides.
We're also encouraged to see that existing patients are remaining on therapy and new patients receiving support.
Our cares traders are providing remote training for new patients in a Eric has coordinators provide frequent remote support for existing patients and doctors.
Patients have expressed how much. They appreciate the support it was made continues to provide and that the comfort of familiarity of hearing from the coordinator is especially meaningful right now.
In addition, our market access team is working with payers to address patient and physician access to diagnostic test.
We're pleased that most payers are extending reauthorization times and all waving certain reauthorization requirements.
It's extremely encouraging the payers have acted quickly to ensure NTM patients continue to have access to their medication throughout this crisis.
I'm also pleased to note that today as supply chain manufacturing infrastructure remain intact.
Roger Aspet: We remain committed to advancing these programs and look forward to sharing our progress with you. I'll now turn the call over to Sara, our Chief Financial Officer, for the financial update.
To date patients on drug continues to receive drug shipments with no interruptions.
We believe we have an adequate supply of the active pharmaceutical ingredient used in our case to meet our anticipated global requirements, including commercial clinical and compassionate use through the end of 2022.
Sara M. Bonstein: Thanks, Roger. And good morning. In the first quarter of 2020, we made significant progress across all of our programs, maintaining a keen focus on the management of our operating system. As Will mentioned at the start of the call, Insmed is well-positioned to support the next wave of its growth through multiple value inflection points.
Our case May also benefit from two other potential catalyst for growth.
First a peer review paper was published in early March It provides potential practical solutions to address the most common adverse events that could accompany the use of application the treatment of refractory lung disease caused by mycobacteria, even complex or Mac.
Sara M. Bonstein: In the current climate, operating expenses are as difficult to predict as revenue. For the first quarter, our operating expenses were well below budget. While we continue to face uncertainties brought on by COVID-19, we can say that our past runway, coupled with our focus on appropriate spending, leaves us confident that our financial resources could carry us into 2022. Our quarterly results are detailed in our press release issued this morning. For today's call, I want to draw your attention to a few key line items. This morning, we reported total net revenue for the first quarter of $36.9 million, comprising $35.2 million in U.S. net sales of aircase and $1.7 million in ex-U.S. net sales of aircase. The XUSNet sales reflect utilization from the Compassionate Youth and Named Patient programs in both France and Germany.
We expect that these practical solutions will serve to improve patients continuation on therapy.
And second we continue to anticipate the introduction of a set of new treatment guidelines for multiple scientific societies, including the American Thoracic Society infectious disease Society of America, and European Respiratory Society, which we will remain optimistic will support the use of our case where appropriate patients.
While we await the new guidelines, we are encouraged that on a recent European respiratory Society Webinars a member of the committee announce an era case will be included in the guidelines with a recommendation that it'd be added to background therapy. If a patient remains culture positive after six months of treatment.
This is consistent with our clinical trials and U.S. approved labeling.
We are excited about the potential inclusion of allocation the guidelines and the impact it may have especially with community pulmonologists and infectious disease specialists.
Sara M. Bonstein: Total net revenue increased 68% as compared to the first quarter of 2019. Our gross margin for the first quarter was approximately 14%, similar to what we saw in the first quarter of 2019. While we anticipated our growth to next in Q1 to be higher due primarily to the coverage gap as a result of the benefit reset at the beginning of the year, we reiterate our previous guidance of our growth to next for the full year to be in the mid-teens.
We view the anticipated a rival of these guidelines as an important opportunity to reinforce the appropriate approach to treating refractory Mac patients, including the recommended duration of therapy for these patients.
Let me turn now to a global expansion efforts in both Japan and Europe.
In Japan, we have submitted the new drug application to the Ministry of Health Labor and welfare barricades for the treatment of patients with NTM lung disease caused by Mac, who did not sufficiently respond to prior treatment.
Sara M. Bonstein: The cost of product revenues for the quarter was $8.4 million, and gross margin was approximately 77%. As a reminder, our gross margin in 2019, which was 81%, benefited from inventory expense prior to FDA approval of our case, and we do not anticipate this will continue at a similar rate in 2020. Turning to expenses,
As we previously disclosed we plan to deploying Insmeds salesforce dedicated to educating Japanese positions on Mac lung disease, and promoting the appropriate standard of care regimen.
Including the use of a macrolide to treat patients.
We expect to begin to hire our sales team with the global health crisis will allow us to safely execute on this opportunity.
Once the pandemic subsides, we intend to allow our salesforce in compliance with Japanese law to establish and build relationships with physicians, who are treating Mac lung disease patients.
Sara M. Bonstein: For the first quarter of 2020, research and development expenses were $36.2 million, and SG&A expenses were $51.3 million. Our GAAP operating expenses for the first quarter were $88.8 million compared to $87.3 million for Q1 2019. We define adjusted operating expense in our earnings press release as GAAP operating expenses, excluding stock-based compensation expense, depreciation, amortization of intangibles, and certain milestones related to error cases payable under our amended agreement with Cystic Fibrosis Foundation Therapeutics. In the first quarter of 2020, our adjusted operating expense was $76.3 million, compared to $78 million in the first quarter of 2019, highlighting our continued efforts and focus on cash discipline For 2020, we will continue to invest in our core operating business, which includes continued commercialization of aircase, global expansion activities in both Europe and Japan, and pipeline advancement. In addition, we will invest in the Plan Phase 3 program for Bredso-Kassab. We ended the quarter with a strong cash position of $428.9 million. We intend to maintain a strong balance sheet where we manage appropriate development investments with responsible cash management. With that, let me turn the call back to Will for closing remarks. Will?
In Europe as previous previously shared our marketing authorization application has been validated by the European Medicines Agency.
We expect that if it is approved we could potentially launch era case by the ended the year in Germany, where the UK following shortly thereafter.
Finally, let me turn to our efforts around label expansion for Eric case.
We're advancing Eric case in a frontline study that if approved by the FDA would allow us to address the estimated 95 to 115000 patients in the U.S. diagnosed with NTM Mac lung disease and that will serve as the necessary confirmatory study for our case as agreed in that post approval commitment with the FDA.
We anticipate that this study will also address frontline approval requirements for Europe, and Japan, using the primary endpoint of durable culture conversion, which we intend to discuss with a relevant regulatory authorities.
We plan for study duration 13 months with treatment for 12 months fall by one month of therapy.
The primary endpoint of this study in the U.S. will be a composite patient reported outcome or PR ROE in order to demonstrate the clinical benefit which is required by the FDA.
We expected the validation of the Bureau, and the confirmatory study will track in parallel.
William Lewis: Thank you, Sara. Let me close out our prepared remarks by reiterating that we are extremely proud of the continued execution by the team at Insmed. We believe we are advancing a pipeline of high-value opportunities in areas of stark unmet medical need. In tandem, we believe our commercial efforts for EraCase have enabled us to create a strong franchise with great future potential globally and across additional indications. I want to congratulate the Insmed team for staying the course and making tremendous progress in these uncertain times. We all remain 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?
Pending alignment with the FDA.
We remain on track to initiate these trials in the second half of 2020.
And these challenging times, we're working diligently to maintain the strength of the brand and maximize the long term potential to Eric case in the U.S. Europe and Japan.
Very excited about what lies ahead and I want to stack the team for their continued commitment to the NTM community.
From a strategic perspective, when we look at our product portfolio through a broad lens, we see an impressive potential commercial overlap among our programs, particularly the synergies between NTM and bronchiectasis, we're excited about advancing for personal pound until a promising miss but additional candidate for rare pulmonary disease.
We remain committed to advancing these programs and look forward to share progress with you.
I'll now turn the call to Sarah our Chief Financial Officer for the financial update Sarah.
Unknown Executive: Yeah. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.
Thanks, Roger and good luck.
In the first quarter 2020, we made significant progress across all of our program.
Unknown Executive: To withdraw your question, please press star then 2. The first question comes from Matthew Harrison from Morgan Stanley. Please go ahead.
Maintaining a keen focus on the management of our operating.
As will mentioned that the started to call Internet is well positioned.
Unknown Executive: Hi, all. Thanks for taking the question. This is Connor Mianon from Matthews.
For the next wave of its growth your multiple value inflection point.
Unknown Executive: So just a couple of questions from us. How has physician and patient engagement trended during COVID? I know you guys mentioned the digital sales force, and I guess we're just looking for maybe some more color on that. And then could you provide some guidance on how?
In the current climate operating expenses are difficult to predict as revenue.
For the first quarter operating expenses were well below budget.
Unknown Executive: Could you provide some guidance on...
While we continue to see some uncertainties brought on by 2019, we can say that our past runway coupled with our focus on appropriate Ben.
Unknown Executive: Transcribed by https://otter.ai
William Lewis: I appreciate the question. I'm actually going to turn this one over to Roger to sort of address from the commercial point of view.
Lisa confidence that our financial resources could carry out into 2022.
Roger Aspet: Thanks, Will. Yeah, so I think that we've had tremendous engagement from physicians and healthcare professionals, and the office staff, in a very different, very trying circumstance. So we have the digital engagement from our sales team, we have the virtual training from our EraCares trainers, and we have engagement from our EraCares coordinators. Now, I would say this regional variation, where some areas of the country have been hit a lot harder than other areas. And that's made, obviously, the priority of physicians to focus on COVID-19 rather than on NTM patients. But I would say that the biggest challenge we're seeing right now is just the patients. We did some survey work, as I mentioned in my prepared remarks, did some survey work, and I think what physicians are telling us is the biggest challenge they're seeing is just the number of patients who aren't comfortable coming into the office yet.
Our quarterly results are detailed in our press release issued this morning.
For today's call I want to draw your attention you key line.
This morning, we reported total net revenue for the first quarter of 30.9 million comprising 35.2 million in you ethanol South America, <unk>, <unk> and 1.7 million extract that delta there Keith.
The ex us net sales reflect utilization from the compassionate use and named patient programs in both France and Germany.
Roger Aspet: We're certainly seeing a rise in telemedicine, but that hasn't offset the volume of patient visits that you would expect in a normal situation. Having said that, we also mentioned that physicians have moved to managing patients and making sure that they stick with their therapy and continue with their therapy for patients who are already on ARRA-CASE. So they really turn their attention away from the new patients because the opportunity is not there right now as robustly as it was previously. But they're focused on making sure that the patients already on therapy continue. And as we mentioned, there was an increase in the index of suspicion that they reported, with over half of the physicians reporting an increase in that index of suspicion with an intention to do more screening once these patients returned.
Total net revenue increased 68% as compared to the first quarter of 2019.
Our gross to nets for the first quarter were approximately 14%.
Similar to what we saw in the first quarter 2019.
While we anticipated our gross snapping Q1 to be higher due primarily to the coverage gap as a result, the benefit reset at the beginning of the year, we reiterate our previous guidance of her gross net for the full year the in the mid teens.
Cost of product revenues for the quarter was 8.4 million and gross margin was approximately 77%.
As a reminder, our gross margin in 2019, which was 81% benefited from inventory than prior CE approval there.
And we do not anticipate this will continue at a similar rate in 2020.
Turning to expenses.
For the first quarter 2020 research and development expenses were 36.2 million NFC and expenses were 51.3 million.
Roger Aspet: And also, about two-thirds of these physicians report pulling the NTM patients in with some urgency, so proactively asking them to come in for screening and to manage their NTM rather than waiting for them to make appointments. So I think all of those trends are very encouraging. I think that what we'll see is just a delay. We're pushing out these diagnoses, and certainly, based on those survey results, we may see a bolus of these NTM patients coming in for therapy in the second half of the year.
Our GAAP operating expenses for the first quarter were 80.8 million compared to 87.3 million for Q1 2019.
We define adjusted operating expense in our earnings press release as GAAP operating expenses, excluding stock based compensation expense depreciation amortization of intangibles and certain milestones related to educate payable under our amended agreement with cystic fibrosis Foundation therapeutic.
In first quarter 2020, our adjusted operating income was 76.3 million compared to 78 million in the first quarter 2019.
William Lewis: And I would just add to that, I think, you know, one of the interesting and unintended features, of course, of the global pandemic is this increased attention to respiratory conditions generally, so I think we will be the beneficiary of that as it goes forward. Now is actually the time to be a company with products that are focused on pulmonary health and developmental product candidates that are focused on pulmonary health.
Highlighting our continued effort.
Focused on past displays and preservation.
For 2020, we will continue to invest in our core operating but well, which includes continued commercialization of air to global expansion activity in both Europe, and Japan and pipeline there.
In addition, we will invest in the plan phase three program for breast cancer.
Unknown Executive: Great, thank you. The next question comes from Adam Walsh from Stevespool. Please go ahead. Hey, good morning. Thanks for taking my questions. My first one is, you know, you mentioned the donut.
We ended the quarter with a strong cash position of 420.9 million.
We intend to maintain a strong balance sheet, where we manage appropriate development investment with responsible cash management.
With that let me turn the call back well for closing remarks.
Well.
Thank you Sarah let me close out our prepared remarks by reiterating that we're extremely proud of the continued execution by the team at in Smith.
We believe we are advancing a pipeline of high value opportunities in areas of stark unmet medical need.
In tandem we believe our commercial efforts for Eric case have enabled us to create a strong franchise with great future potential globally and across additional indications.
I want to congratulate begin Smith team for staying the course and making tremendous progress in these uncertain times. We all remaining very excited about what lies ahead for the company.
With that I'd like to open the call the questions operator can we take the first question. Please.
Yes, we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
He was any speakerphone, please pick up your handset before pressing the keys to withdraw your question. Please press Star then too.
First question comes from Matthew Harrison from Morgan Stanley.
Please go ahead.
Hi, all thanks for taking the question. This is caught them you know from Matthew.
So just a couple from US how has the physician and patient engagement trend during coated money you guys mentioned, the digital Salesforce and I guess, we're just looking for maybe some more color on that and then could you provide some guidance on how new diagnosis Brent.
Oh falling off if they have.
Appreciate the question I'm actually going to turn this win over to Roger to sort of address from the commercial point of view.
Thanks will yeah. So I think that we've had a tremendous engagement from for physicians and healthcare professionals. The office staff in a very different very trying circumstance. So we have the digital engagement from our from our sales team. We have the virtual training from Eric is trainers, we have engagement from Eric has coordinators now.
I would say, there's regional variation with some areas of the country have been hit a lot harder than other areas and that's made obviously the priority of physicians to focus on cobot 19, rather than an NTM patients, but I would say that the biggest challenge. We're seeing right. Now is just the patience. We just some survey work that I mentioned in the prepared remarks.
Just some survey work and I think what physicians are telling us is the biggest challenges, they're saying, there's just a number of patients who aren't comfortable coming into the office yet we're certainly seeing a rise in tele medicine, but that has an offset the volume patient visits that you would expect in a normal situation, having said that we also mentioned that.
The physicians have moved to.
Managing patients and making sure that they stick with their therapy and continue on their therapy for the patients who are already on our case. So it really turned their attention away from the new new patients because the opportunity is not there right now as it Roche robustly as was previously.
But the there they're focused on on making sure that the patients already on therapy continue and as we mentioned there's an increase in indexes suspicion did they reported with over half of the pace of the physicians reporting an increase in that index suspicion.
With an intention to do more screening once these patients return.
And also over to about two thirds of these these positions report with the pulling the NTM patients in a with some urgency so proactively asking them to come in for for screening and to manage their NTM rather than waiting for them to make appointments. So I think all of those trends are very encouraging I think that we'll see is this.
It's just that delay we're pushing out these diagnoses and certainly we could expect if the so based on the server results. We may see I'm in the second half a year or we may see a bolus of these NTM patients coming in for therapy.
And I would just add to that I think you know one of the interesting.
An unintended features of course, if the global pandemic is this.
Increased attention to restore Tory condition generally.
I think we will be the beneficiary of that as it goes forward now is actually the time to be a company with products that are focused and developmental products candidates that are focused on more pulmonary help.
Great. Thank you.
The next question comes from animals from Stifel. Please go ahead.
Hey, good morning, Thanks for taking my questions. My first one is a you know you mentioned the Donna.