Q1 2023 Insmed Incorporated Earnings Call
Earlier in the year.
Which is less than half of the rate we observed in the refractory setting.
We view both of these updates as additional points of validation for the potential success of Erra case in the broader Mac setting.
Finally, a brief update on our PPP program.
Earlier this week the DSM be met to review the safety data from our ongoing phase II ph ILD and ph trials and reported no safety concerns and a recommendation to continue the studies unmodified. This is once again, the best possible outcome and an early positive sign for the program.
Before I turn the call over to Sarah to walk you through the financial performance for the quarter. Let me take just a moment to discuss the <unk> commercial franchise.
We continue to believe Eric cases of growth story, particularly in the U S and Japan.
Despite the softness that is typical in the first quarter in the U S. Due to the impact of deductible and co pay resets for Medicare patients. We saw sequential growth in the first quarter in U S. <unk> sales for the first time since its initial launch.
We see this as a sign of positive momentum for the U S moving forward.
In Japan, as we've said before we anticipate growth may be more weighted to the back half of 'twenty, three, especially now that the nation has announced it is finally lifting its COVID-19 restrictions.
This is reported to begin next week on May eight.
In closing I am proud of what <unk> has accomplished to date in the research lab and the commercial markets and in the lives of our patients.
Im excited by what the future holds as we approach a period when key clinical Readouts will reshape intimate and I believe provide us with multiple potential pathways to transition into a sustainable biotechnology company with a future that is even more impressive than our past.
I'll now turn the remarks to Sarah to walk through our first quarter financials.
Thank you al and good morning, everyone.
I am pleased to share with you.
<unk> Internet financial performance for the first quarter of 2023.
We ended the quarter with $999 million in cash and cash equivalents and marketable securities.
This represents a cash burn of approximately $150 million since year end 2020.
Although this level of burn it's higher than we have seen historically, we do not expect it to continue into future quarters. This year.
While we do have some additional costs that are expected to recur such as the incremental payments related to our newly issued debt, which accounted for approximately $12 million this quarter.
The majority of the increase was specific to this quarter such as our annual employee incentive compensation payout.
It continues to be our expectation that our current cash position will comfortably support our operations as we read out the upcoming strength of important clinical catalysts from each of our pillars, leaving us with meaningful cash remaining on hand, even after the Aspen data readout in the second quarter of 2024.
Looking at <unk> performance for the first quarter of 2023.
Total net revenue for aerospace was $65 $2 million, reflecting 23% year over year.
On a regional basis net revenue was $49 $1 million in the U S $13 $2 million in Japan, and $3 million in Europe and rest of world.
As will mentioned, despite the deductible and co pay dynamics at always negatively impacted U S sales in the first quarter.
Hurricane posted sequential growth in the U S compared to fourth quarter of 2022 and was up 20% compared to the first quarter of last year.
We're encouraged by the continued positive momentum we've seen in the U S. In terms of enrollment forms and new patient starts on aerospace, which supports our belief that there is still more room for growth for the brand and its current indication.
In Japan Aerospace grew 23% this quarter compared to the first quarter of 2022, despite our sales activities being negatively impacted due to persistent COVID-19 restrictions in the country, which have led to revenue coming in slightly below the fourth quarter.
As a parallel example, when the U S entered a period of strict COVID-19 restrictions in 2020 in 2021, we saw a plateauing of aerospace revenue of those restrictions were in place before returning to growth as people resume normal activities.
We are seeing the first part of that play out in Japan right now as there were recent sequential performance of aerospace bottling entity.
As a result, we expect aerospace revenues in Japan to remain range bound through the second quarter. When we expect these restrictions to begin to lift setting up the second half of 2023 for a potential return to sequential growth for the territory.
In addition, as we anticipated next month, a onetime 9% price decline will go into effect in Japan.
Encouragingly. This adjustment is on the low end of the expected range that we laid out on our last earnings call and adds to our confidence that Aric case, we'll be able to achieve attractive growth in Japan in the second half.
Finally, Europe continues to contribute modestly to global revenues in line with our expectations.
Today, we are reiterating our 2023 revenue guidance for global revenue of Erra case of $285 million to $300 million, reflecting.
Continued strong growth for the brands.
Let me now turn to a few additional financial items from the first quarter.
In the first quarter of 2023, our gross to net in the U S where approximately 18%.
This is consistent with our internal expectations for the first quarter, which always has higher gross to nets in the remaining quarters of the year.
On a full year basis, we continue to expect our gross to nets will be in the mid teen range, which is in line with our historical performance.
Cost of product revenues for the first quarter 2020 screen with $13 $8 million or 21, 2% of revenues on a percentage basis, which is also in line with prior year's first quarter.
Turning to our GAAP operating expenses.
In the first quarter of 2023 research and development expenses were $127 9 million and SG&A expenses were $79 $9 million, reflecting continued investment in both our early and mid to late stage pipelines as well as launch readiness activities for Bristow cabinets.
Importantly, R&D expenses. This quarter included a noncash charge of $10 $3 million related to the previously announced acquisition of virtuous vial.
Excluding that charge R&D expenses for the quarter would have been slightly down compared to the fourth quarter of 2022.
In closing <unk> continues to perform well with strong commercial execution across the geographies, where we operate and a solid cash position that can support the business during the upcoming period of <unk> or in clinical Readouts and beyond.
I'll now turn the call back to well for closing remarks.
Thank you Sarah.
I have never been more excited about the trajectory for Insulet.
Our team is energized inspired and determined to meet the ambitious goals. We have set up ourselves. We believe we are well on our way to creating the next great biotechnology success story with multiple meaningful clinical catalyst points to read out in the near term and in early stage research engine that we can't.
Just to share with you in just four days.
I would like to thank the patients who participated in our studies and the caregivers and families who support them as well as our shareholders all of whom have placed their trust in us to deliver great things for patients with serious and rare diseases. We don't take that trust lightly and we are committed to delivering on those promises.
I'd like to open the call to questions. Operator can we take the first question. Please.
Operator.
Hey, folks bear with US one second while we try to fund our operator.
Okay.
Hello can you hear me.
We can hear you now yes. Thank you can we take the first question. Please.
Of course, please limit your questions to two at the time. The first question comes from the line of Jessica Fye from JP Morgan Jessica. Please go ahead.
Hey, guys. This is Nick on for Jessica Thanks for taking my questions Ed one on the baseline characteristics of Aspen that you recently showed against Willow I believe in the past you've said it positive you could.
Possibly address patients with secondary diagnosis of asthma and COPD can you just provide a recap of that thinking and does that thinking changed at all with regard to the percent of patients in Aspen with secondary diagnosis of asthma or COPD.
So I appreciate the question very much I think one of the great.
Hidden second order potentials of Brent. So in Bronchiectasis is this phenomena of patients who currently have COPD or asthma as their primary diagnosis.
They may well in a large percentage of cases actually also have bronchiectasis.
As of right now with nothing approved to treat bronchiectasis Theres, a little reason for physicians to diagnosis.
And so consequently, the literature suggests that there is a good number of these patients who are actually suffering from bronchiectasis, either as well or even potentially misdiagnosis COPD when they actually have bronchiectasis I want to be really clear on two points, though the first is that we have estimated the addressable market at the time of launch.
To be approximately 1 million patients those are patients that are today diagnosed with bronchiectasis as their primary diagnosis and who are already symptomatic with exacerbations, So our medicine and the entry criteria for our trial perfectly aligned with this population in the U S Europe and <unk>.
What we're talking about now has the potential to go beyond that 1 million patients. So those patients who are comorbid with COPD and asthma and in the event that our drug is approved for the treatment of bronchiectasis patients who experienced exacerbations those patients who also have COPD or asthma and are experiencing exacerbate.
<unk> could well be on label for treatment of that condition. Let me pause just for a second and turn it over to Martina who happens to be joining us today and can comment perhaps further on that and what we've seen in the data.
Great and maybe just a quick follow up and kind of thinking about these baseline characteristics between Aspen and Willow I know in the past you've said that because of the time that Aspen enrolled patients. During Covid you had more of a lot you potentially had more reliably exacerbating patients how does that thinking and fit in with what we're seeing within the baseline baseline.
Thanks.
Fact that we were able to identify those patients during a time when people are sequestered in exacerbation rates generally were going down in this population speaks to both the prevalence of this population and the very real clinical need.
What we see here is almost identical between Willow and has been and that is a very encouraging point I know Martina may have some additional comments and thoughts yeah. It is very encouraging with what we see in the baseline characteristics and I would also encourage you. If you haven't seen it is actually a publication from embark this is Pete.
And data from 2015 going to 2022.
Exacerbated some patients that have at least three acts as a nation.
The same number that was actually observed very much before COVID-19 came 26% of these patients are being hospitalized.
And hospitalization rates.
<unk> bin.
It's what we now see coming back even in the anecdotal discussions and many of them that I've had with investigators and with expert and it is oh.
Consistent.
<unk> from them, what do they seem to clinic and from Europe to Japan into the U S. They have seen pretty much the same picture that they have seen prior to COVID-19. So what we see in our baseline characteristics reflect really what the data represents on a much larger scale in this patient population.
Great.
The next question comes from the ninth of Andrea <unk> from Goldman Sachs. Please go ahead.
Good morning, Thanks for taking my question well, thanks for the color on a rise.
Recognize that regulatory agencies may not require that but just given your conversations with physicians. How important do you think or are you hearing that it is to correlate the P. R. O score to culture conversion. Just curious if you think this is a direct link that they would need to see in order to gain you know maybe more comfort with the use of P. R O S.
I appreciate the question I think the direct answer to that is anytime you can get harmony between various measures. It makes it a much easier discussion, but the important point to understand here is that the physicians the market access world.
In the abbreviated timeframe, we're going to be looking at with Piero symptoms is also a benefit but I think because it is just a snapshot in time it isn't necessarily controlling on the interpretation of the elimination of the underlying bacteria. It may in fact take more time for example to manifest that correlation and that would be fine the important.
Point is for approval if the euro shows an improving trend.
Then we are good in the U S. If we see a culture conversion trend, we're good in Japan and elsewhere from a market access point of view there'll be a lot of attention that will continue to be paid on the culture conversion. So I hope that sort of delineate the different measures and how we're thinking about them.
Sure. Thanks, so much.
Next question comes from the line of Judah Frommer from Credit Suisse. Please go ahead.
Yeah, Hi, guys. Thanks for taking the questions a couple on on our case first.
Anything you can comment related to re treatment trends I guess, specifically in the U S.
For our case that youre seeing in the refractory setting and then hopping over to Japan.
Can you give us just a reminder of where the price cut came in relative to internal expectations and then maybe what the messages from the Japanese authorities on where they see peak sales. If there is any conclusion you can draw from the price cut.
Sure so starting with the recruitment trend question.
We continue to see re treatment taking place of course the challenges how do you define re treatment in the context of physicians, who use the drug differently, sometimes they might give a patient a break for a period of time from using the drug some physicians like to extend the duration of treatment. Some will shorten the length of treatment, but then retreat more aggressive.
Lee So theres a mix out there and it makes it difficult to interpret this but theres no doubt that the underlying trend is that we are seeing patients much as we did in the phase III trial successfully culture converted durably. So and then after a period of time some of them get reinfected with new infections.
And consequently are eligible for re treatment and on label. So we will continue to monitor that.
I think all of the trends that we're seeing in the U S. Right now are positive.
Our notion we wanted to make sure we conveyed today.
It really does feel like the U S is back and as you know the diagnosis rates in the U S were lower during the Covid era and I think there is a probably a backlog of patients out there that are getting back into see physicians and we will be looking for those trends to manifest in the coming quarters.
As we think about Japan, I'll ask <unk> to address the price cut question in a second but I will just take the issue of the message from the Japanese authorities. We were all just over in Japan, and I can tell you to a person from eight kols or from a patient work.
Ah patient advocacy group.
On our last call, we had guided towards a price cut would be in the second quarter would be high single to mid teens. So we're what we're able to report today is that price cut will be in June so that.
And of the second quarter. So that's obviously a positive and it will be 9%. So on the low end of that range and as will said it gives us a lot of encouragement on the performance we've been able to put up to date in Japan, and it being 20% plus.
Plus of our revenue on a global basis, the diagnosis rate in Japan is obviously significant 15 to 18000 refractory patients sentiment. We believe Japan has been and will continue to be a meaningful contributor to revenue.
Okay.
Yeah.
The next question comes from Jennifer Kim from Cantor Fitzgerald.
Joseph Please go ahead.
Hi, Thanks for taking my questions I have a few here maybe first to follow up on your comments on the second order potential for Brent. So do you have any thoughts on how the role of your biologics like <unk> might play into that opportunity given the recent data and is that a tailwind or headwind in your view in line.
Yes, so it's really important to understand what we think we have with Renzo, Canada. The DPP. One inhibitor is unlocking the neutrophil driven inflammation cascade inhibiting that in blocking that from taking place is really the exploration of a new pathway and so when you.
Think about complement Alexia or you think about CFT our modulation at vertex. These are pathways that unlock enormous potential because it's not simply a disease treatment.
<unk> really understanding the biology of how a disease process begins and can be impacted and from that perspective bronchiectasis, while the first and most logical and interesting arena for us to pursue is just the beginning within bronchiectasis theres sort of two layers of opportunity. One is those that are eyes.
This trial will not fail. This drug it is very well designed very well executed.
This quarter against past quarters that can characterize the level of influence that to air case sales and the other question.
There were some additional parameters such as bronchiectasis severity score and <unk>.
I was just wondering if you plan to show bills in the future and how did those kind of upfront compared to between Aspen.
The answer to the first part of that question is remember that from Willow.
It is not really a question as it is validated in the Mac population and we also didn't really see that he was well responded to in Conway reason being that this is a question added namely developed really sure.
Other data that we collect that could be interesting to examine but I think the most important point is that we're going to be using the qol b and promised fatigue.
How comfortable are you in that placebo effect, considering its kind of range a bit higher in the literature.
Culture conversion rates and downsize are you expecting for horizon.
Yes, thanks for the question.
The literature is a bit all over the place and part of the reason for that is if you dig into the literature and get to know the Kols. The way. We do you begin to understand that most of that data comes from single Center studies of those single centers also have kind of incentive to make sure that the culture conversion rate is as high as it possibly can be so then instead.
<unk> people to select that particular hospital no disparagement, but it is sometimes a facet of these datasets that they will exclude patients from the denominator.
They examined the percentage culture conversion rate. So that's why when we sort of give our best guess, we say it's somewhere in the range of 50%, but that is by no means controlling I wouldn't be surprised to see a very difference remember that this is the first study of its kind looking at patients in a controlled way to see what kind of culture convert.
<unk> is actually achieved and how that compares to what we're going to be bringing forward.
The data points on culture conversion that I think are particularly important or not only overall conversion rate, but also time to culture conversion and as Youll recall from the convert study in refractory patients. We saw a remarkably rapid onset and culture conversion, which the FDA noted and was very complementary up so I think.
That too could serve as a as an important element in the assessment of the overall impact of the drug in these populations.
Beyond that it's tough to say what we'll see in the study were super excited to flip over the data card and share. It with you all and as we said, we'll do a conference call to enable you to ask whatever questions. Once the data is in hand.
Got it I wanted to throw in a quick follow up.
How do you project.
Eric.
<unk> will affect the relapsed refractory.
Your sales staff and relapsed refractory.
N P M.
Well to be clear when we think about the all MTM Mac market, which is what we would be.
In a position to command if.
The Encore study is successful and we and we find ourselves approved in that world. We're talking about an addressable population in the U S. That's well over 100000 patients compared to somewhere in the 12000 range now and in Japan, that's almost 150000 patients compared to <unk>.
Words of 18000 right now so while it will hopefully prevent some of the early diagnosed patients from becoming refractory one of the noteworthy conclusions from convert is that even when you are able to effectively treat these patients. They frequently return in one of the sad anecdotes <unk> heard from a KOL is once a.
<unk> comes in with Mac MTM.
To their clinic, they never leave meaning they're on and off with different treatments over time. So I think we could enter a world where the addressable population gets much larger and as those patients fight off new infections overtime, they would return to occur.
Acute settings of use of Erra case.
The treatment of those infections.
Thank you.
The next question comes from Joseph Schwartz from SBB Securities. Joseph Please go ahead.
Hi, Andrew dialing in for Joe I think they were taking a question.
Two questions on <unk>.
First.
Thanks.
<unk> will be evaluated and then tailored based on the benefits Michelle and her life.
The two Prs global analyzed separately. So my question is is there the possibility of combining elements from the 2015 P&L savings for respiratory symptoms Institute demonstrate benefit or would you just be.
Picking line and tailoring, our PR from the one that.
You bet.
And then the second question is I know you provided baseline characteristics for Aspen and Willow today curious if you will make with on campus.
Patients in our lives available platelet quite with that our next quarter. Thank you.
On the question about the <unk> those are distinct so the data points from each will not be sort of hand picked and melded into kind of a new CRO. If you will.
They are intended to be viewed differently as instruments that will be interesting to see if both are clear signs of benefit or only one.
Of course, we only need to have one.
Way this gives us two shots on goal with two separate <unk>.
<unk>.
Which we think has.
A benefit to the trial design and provide some additional opportunity for interpretation.
But once we have that data, we'll share it and I'm sure there'll be some interesting and hopefully clear conclusions from it the baseline data on arise to be honest.
We haven't even considered that as something to share I think we'll take that one offline and talk to the clinical team and see where we are and what we know.
Obviously, the Aspen study I think why the baseline characteristics needed to be shared so early is such a massive trial in terms of size.
And Willow was so clearly a success.
Both statistically significant and in terms of its publication in the New England Journal that one would think that if you could have baseline characteristics similar to that.
In that trial, where we saw a 40% reduction in pulmonary exacerbations and given the way Aspen is powered that should provide encouragement that the likelihood is we could see a benefit assuming that the populations behave the same that there'd be no reason to think they would.
So this is incredibly encouraging data from our point of view.
The next question comes from the line of Jason <unk> from Bank of America, Jason. Please go ahead.
Perfect. Thank you so much for taking my question and congrats on the quarter.
One if I may on Aspen looking at the baseline characteristics apart from maybe the number of participants with asthma every category seems fairly in line is there anything in here that would necessarily explain the blended rate you observed.
Last quarter that I think it was $1 one two to 1.15, which was.
Lower than the placebo rate in Willow at 137, basically is the placebo rate in Aspen likely to be in line with Willow.
Yes, so I think thats one of the implications of the baseline characteristics.
As Martina has pointed out to us with some degree of enthusiasm with more than three exacerbations in the prior 12 months those levels at that are comparable to willow and knowing that we have.
Two exacerbations in the prior 12 months.
At the levels that we saw in Willow. Those those are really the key you need to have enough events to give that medicine the opportunity to show its benefits and so we have every reason to be encouraged to think that that will result in the.
The same kind of performance of the medicine in it.
In Aspen that we saw at Willow.
And hopefully because we've stratified for the hyper exacerbating patients we won't get the concentration that we got in Willow that raises the question of whether we have hit a dose plateau.
We're not in the Willow study.
I want to remind you that success and Aspen means either one of the doses work.
If either one of them works that will be what we take forward that gives us the opportunity for approval of the first medicine in a population of over $1 billion addressable patients at launch it's a huge opportunity.
It unlocks and validates the potential of DPP one.
Gotcha.
The next question comes from is a vehicle from Evercore.
Please go ahead.
Hi, Thanks for taking my question.
Listen I had was.
With regards to the upcoming arise readout with time, you'll have them up.
Hi, <unk>.
The.
Improvements in any of the casino, but that can obviously can take that yeah.
One two.
I will talk that you are seeing the separation on a blend up on the basis of different groups that are you that there is enough time or is that still kind of a question.
I think until we unblinded data, we're never going to CPUC, but the fact of matter is that it is a very encouraging sign to see that separation. It's also consistent with our commercial experience in the field, where we know what happens to these patients when they start to take our drug, albeit in the refractory setting.
Those patients do see symptomatic benefit and we do know what those changes are and over the last several years as we've been out in the field.
We've seen that take place.
And I think that is also what informs our confidence that the six month treatment and one month off should be adequate to extract.
Both.
Quality of life Bronchiectasis.
<unk> promised fatigue benefit.
That we can interpret.
So did you do any beta testing of your.
Of your arise you know kind of.
They're all measures.
And kind of real world setting in patients present, many of that so.
The way the <unk> gets developed.
It is in conjunction with a specific group at FDA you have to do.
Engagement with physicians to the FDA in patients and a third party controlled way, where you identify the questions that we will.
Manifest.
The symptoms that are most importance to the patients and once you have done that and we use qol B and promised fatigue. Then you can bring those questionnaires formed with the Fda's blessing and so in a sense. The beta test you are talking about is arise and if arise worse than we know it will work in encore.
I don't know Martina if you want to add any comment on that yeah, maybe one comment to what we already completed and before I.
Started in the qualitative sport right is this concept elicitation or cognitive interviews with patient I'd tell you are these the relevance symptoms that were using in the in the in the CRO are these the ones that are most bothersome to them and then we have done for both for the Q b as well as for the pit.
<unk> and we shared that already with the FDA sort of qualitative work that is already done and now with the right team to quantitative work.
<unk> completed that is what will lead us to the validation when do we know that this is the right PMO that is responsible for this patient population.
But what Youre, saying is just what you would see clinically through your Eric his experiences you said Tim it.
It looks like a few improvements within six months.
Yes.
Okay, and then just a point of clarification for culture conversion are you going to be using that sort of rigorous definition you used.
And.
<unk> three <unk>.
Buddy for the refractory setting.
Yes, it will be the same as what the cost of conversion patients.
You mean negative cultures between me at months two is the first time, you will see the patient actually convert.
It's considered a converter.
Okay can you can you just review the definition of a.
Converter.
What's the requirement.
Yes, so patients basically to have two negative cultures.
To be considered converters.
Okay.
Okay.
No.
Our next question today comes from the line of Jeffrey Hung from Morgan Stanley Jaffe. Please go ahead.
Hi, This is Michael Rehaut on for Jeff hung Thank you for taking my questions.
More generally could you just give us.
Regulatory concerns led the U S to prioritize the euro versus Japan to focus on culture conversion and then as a follow up with sensitivity for the two prs are still uncertain as their rationale where the use of culture conversion versus <unk> could be two different intent to treat population maybe like stratified by.
A symptom severity. Thanks, so much.
Yes, so I think generally the way I would say the regulatory environment.
As for our current studies that are underway.
At the simplest level, Japan values culture conversion as the primary basis for evaluating the efficacy of a drug in this bacterial infection in the U S. The FDA is a requirement that a patient needs to feel function or survive better or longer in order for them to be able to establish the efficacy.
A drug and that is their mandate, it's very specific to FDA and so that is why we were given conditional approval on the basis of culture conversion. The refractory population, but we have full approval in Europe and Japan for.
The refractory population as we go forward in.
This data I think.
Basically Japan will look for culture conversion once again in the U S will be guided by the Bureau, I do think it's relevant to consider that when the original examination of Erra case for this population was conducted there was no data other than our refractory phase III study to inform.
What would happen if this drug was used in a broad population of experiencing this disease I think everybody in every regulatory authority views. This as a case study of success. This is a very successful drug that has been taken up by physicians.
And at very good rates and was utilized very effectively without a lot of safety concerns emerging or unknowns, appearing on the horizon post the use in this landscape of patients that is incredibly favorable versus the unknown at the time of <unk>.
Its original approval. So they entered the dialogue and analysis of this data with that very positive backdrop in mind.
I don't think there is.
Likely going to be a conclusion that one region has a different subpopulation in another.
Don't think Thats an area, we were anywhere near when we were talking to these regulatory authorities I think it's pretty clear cut.
Zamin Asian, but we'll look at the data, we'll see what we find.
And we will certainly be b.
Having that dialogue with the regulatory authorities over time.
Yeah.
That's super helpful. Thanks, so much.
Yeah.
A Q&A session comes to an end and I'll now hand back to when Lewis to continue.
Thanks, everyone for joining us and we hope to see you or have you join US next Monday March may eight at eight a M in New York City.
That brings us to the end of our call and thank you for joining you can now disconnect.
AIDS at eight a M in New York City.