Q2 2023 Insmed Inc Earnings Call
Thank you for standing by my name is <unk> and I'll be your conference operator today at this time I would like to welcome everyone to the <unk> second quarter 2023 financial results Conference call. All participants have been placed on mute to prevent any background noise. After this.
Speaker remarks, there will be a question and answer session if you'd like to ask a question. During this time simply by Star followed by the number one on your telephone keypad, if you'd like to withdraw your question Press Star one again, thank you.
Now I would like to turn the call over to Brian Dunne Executive Director Investor Relations. Please go ahead.
Thank you Enrique and good day, everyone and welcome to today's conference call to discuss Internet second quarter 2023 financial results and provide a business update.
I'm joined today by will Lewis Chairman, Chief Executive Officer, and Sarah Bornstein, Chief Financial Officer, who will each provide prepared remarks before we open it up for your questions.
Before we start please note that today's call will include forward looking statements based on our current expectations. These statements represent our judgment as of today and inherently involve risks and uncertainties that may cause actual results to differ materially from the results discussed please refer to our filings with the Securities and Exchange Commission, which are available at Www Dot SEC Dot Gov.
And on our website for more information concerning the risk factors that could affect the company.
As a reminder, the information on today's call is for the benefit of the investment community. It is not intended for promotional purposes and it is not sufficient for prescribing decisions.
I will now turn the call over to will Lewis for prepared remarks.
Thank you, Brian and good morning, everyone.
What an incredibly exciting moment we are in.
From a commercial perspective in the second quarter of 2023, we achieved the highest quarterly sales in our history up 18% compared to an already strong first quarter. As a result of this outperformance we are raising our revenue guidance for the year, making what was the best case scenario under our previous range of expectations.
<unk> now the midpoint of our current guidance clearly the commercial engine that intimate is really humming and I want to thank the customer facing part of our organization throughout the world for their extraordinary efforts, which led us to this result.
We're successful with clinical trials and approvals. These same colleagues will one day be the team to launch <unk> and our other pipeline assets, which increases my confidence in the company's future as a profitable and sustainable commercial organization.
I mentioned Aspen is the culmination of this period of catalysts because it will undoubtedly marks a huge milestone in the history of this company, but Aspen is by no means the end of our meaningful R&D updates. Let me give you a taste of what I mean and please keep in mind that this list will not be exhaustive.
In 2024, we anticipate a steady stream of updates from our gene therapy program, including first patient data in DMD and an additional one to two IND filings for other gene therapy programs, including <unk> disease in parallel we believe we will have accomplished the production of complete capsid using algae.
Potentially validating our <unk> manufacturing platform.
Then moving into 2025, we expect our first IND submission from our D. Immunized by design platform and potentially the successful scale up to full commercial manufacturing of proteins using algae.
We also expect to file an IND for <unk> ataxia, telangiectasia, which is related to our recent acquisition, but I will tell you more about in a moment.
All of these data catalysts would be in addition to potential top line results from several other studies from our first three pillars, which could significantly derisk large commercial opportunities for intimate if they are successful.
One of those is our ongoing study of T. P. I P in patients with pulmonary arterial hypertension.
There is a study, which we plan to initiate before the end of this year for our second indication using <unk> in patients with chronic rhinosinusitis without nasal polyps.
Much like Bronchiectasis Crs without nasal polyps is an area of high unmet need with few or no treatment options and very large numbers of affected patients the timing for top line readouts from each of these studies will ultimately be determined by their respective pace of enrollment.
All of that is to say that the next year as exciting as it is is only the beginning for internet and we can't wait to deliberate.
It will all start next month with the release of top line results from our arise study of <unk> in patients with newly diagnosed or recurrent Mac lung infection, who have not started antibiotics.
Poke about this dataset at length last quarter, but as a reminder, the goal of this data readout is to validate a patient reported outcome tool, which will be used as the primary endpoint in the registration enabling encore trial.
I'm often asked what good would look like in this dataset from my perspective. The ideal outcome would include three key elements first we will of course want to see that the medicine demonstrates a safe and well tolerated profile for use in this patient population.
Second ideal data will clearly show that we have a CRO that works without the need for a significant amount of modification. This would give us confidence that the bureau can be relied upon to predict when patients are feeling a meaningful improvement in their symptoms and can therefore be used as the primary endpoint measure in encore.
And third we would want to see at least a trend towards CRO and culture conversion superiority for the air case arm compared to the control arm.
The CRO and culture conversion trends would ideally be at levels, which gives us a clear path to achieve a statistically significant outcome in the encore study to be more specific on culture conversion. If we can achieve a placebo adjusted improvement in the conversion rates and the 10% to 20% range and a rise and or if we see meaningful improvements in time to convert.
And the Rk's arm of the trial, we believe that would be very encouraging.
If arise checks all of those boxes than I would consider it an extremely positive result, one which would significantly add to our confidence in the air case opportunity and the broader Mac lung disease indication, which is three to five times larger than the current refractory indication in which even on its own we believe would greatly strengthened our financial position by adding a.
Potentially significant source of revenue growth as we move toward financial sustainability.
As a reminder, we will host a conference call to discuss the data once the rise topline results are shared.
While we are discussing the <unk> development program, let me give you an update on oncor as well enrollment in the trial has remained strong and we continue to expect to enroll 250 patients by the end of this year.
Following the arise data, we will quickly have another data set to share. This time from Archer <unk> inhalation powder or TPI P program, which we currently are studying in pulmonary hypertension associated with interstitial lung disease ph ILD and pulmonary arterial hypertension ph.
We continue to expect to share blinded dose titration data from our phase II PIH in ph ILD studies in the second half of 2023 with the phase II ph ILD topline readout expected to follow in the first half of 2024.
In my opinion TPI P is probably in Smiths, most underappreciated pipeline asset.
Given that <unk> is a well known and well used medicine for patients with ph and ph ILD, we already know quite a lot about its profile.
First we know that administering higher doses of <unk> results in a dose dependent improvement in patient response second we know that <unk> has a relatively short half life, which requires patients to inhaled doses of it four or more times per day in an attempt to maximize the dose delivery.
This results in spikes and troughs of drug exposure throughout the day and leaves patients unable to maintain the drug's effect during a full night of sleep.
And finally, we know that there is already a large and rapidly growing market for <unk> in these indications.
<unk> is a prodrug, which gets converted slowly and steadily to <unk> once inside the loans if successful <unk> could allow patients to cut their dosing schedule down to once a day, while maintaining a steady treatment effect throughout the day and even while they sleep.
Beyond that we believe the Tpa IP has the potential to safely deliver <unk> at significantly larger quantities than even the highest approved dose of the currently available inhaled <unk> products.
We believe that these higher daily doses could result in enhanced efficacy.
Now you might say that blinded dose titration data from a study that is still ongoing is not likely to be very meaningful and normally I would agree with you. However, TP IP could be an exception given that what we already know about <unk> and how it is currently dosed.
For context, the highest FDA approved maintenance doses <unk> DPI is 64 micrograms four tons per day totaling 256 micrograms being delivered to the lung each day.
Our phase II studies are designed to titrate up to 640 micrograms once per day that is nearly a 60% higher daily amount of Coprostanol being delivered when you exclude the weight of the 16 carbon chain of our molecule.
This blinded data will show us whether that can be done in a safe and tolerable manner.
If this blended data show that we can successfully titrate patients up to 640 micrograms per day I would argue given the history of the mechanism than it is a very encouraging early signs of the potential for TPI.
To provide greater benefits for these patients.
Besides that point about efficacy, we're also watching with great interest some of the key efficacy signals from those studies such as reduction in pulmonary vascular resistance granted the patient numbers are small and the data is still blinded at this point, but what we see so far is very encouraging.
We look forward to sharing more about the blinded efficacy signals, we've seen with you in the future apart from the dose titration data.
The next exciting clinical data readout, we expect will come from our early stage research engine for our fourth pillar, which we unveiled at our recent R&D day in the first half of 2024, we anticipate releasing biopsy data for at least one patient from our Duchenne muscular dystrophy gene therapy program. This will be our first look at human data using interest.
Equal dosing, which we believe could lead to enhanced safety and efficacy for these patients based on the preclinical work that we showed you in may and have continued to produce since that time.
Importantly, this data readout for DMD if successful could also serve as an important point of validation for our gene therapy platform more broadly, which would add to our confidence and the additional <unk> that I mentioned earlier.
I want to conclude with the clinical development program I'm. The most enthusiastic about at the company our Aspen trial of <unk> in non CF Bronchiectasis. This is clearly the single most important trial running right now at Insulet and I remain as confident as ever in this likelihood for success.
It's been top line readout in the second quarter of next year will be the most impactful event in the company's history, and we can't wait for it.
I can tell you that we arent the only ones excited about this program.
Just two weeks ago at the World Bronchiectasis Conference in New York City, One Kols said to us. They believe this data set next year will change everything and will be the most exciting time in the history of bronchiectasis for that patient community, we agree 100%.
Before I turn it over to Sarah for some remarks on the quarter's financials I want to briefly touch on another important development with development within our early stage research, which we could not yet discussed at our R&D event in.
In June we completed the acquisition of a privately held company out of Cambridge in the United Kingdom called address the of Therapeutics.
Addressing his focus has been in the area of synthetic rescue which could open up the possibility of addressing diseases, which have been untreatable in the past even with gene therapies.
Through the application of advanced Crisper screens combined with human genetics addressed is identifying novel targets across a broad range of diseases.
Then select the best modality to these targets based on the intended patient population, we had small molecules oligonucleotides, such as Acos and SA RNA or gene therapy.
The first indication will be ataxia telangiectasia, a devastating condition that is often fatal by the second or third decade of life and currently has nothing approved to treat it.
Though addressed here is a relatively lean company in terms of head count that have made tremendous strides in terms of establishing themselves with patient advocacy groups and moving their work forward on behalf of that community. We expect to have an IND filed for this indication in 2025.
This acquisition would make sense just for the technology is being brought into intimate alone. But in addition to that we also welcomed some of the brightest and most impressive scientists and colleagues you will find anywhere in the world, including Professor Sir Steve Jackson from the University of Cambridge, Who's past work and the DNA damage.
Aerospace led to what we know today as Lynn <unk>, the world's first synthetic lethal medicine, which is now a blockbuster medication benefiting thousands of cancer patients around the world.
As good as the people that address the our history has shown that combining companies only works well when cultures align.
I am pleased to say that we couldnt have asked for a better fit what we have found with addressed here is not just a group of great scientists, but kindred spirits with the culture of <unk> Smith.
There will undoubtedly be much more to share about addressed it in the future for now we are excited by the developments coming from this team's work and the early interactions and plans for collaboration between the address the a team and our other researchers at sites in New Hampshire, New Jersey, and San Diego.
We look forward to updating you on the cutting edge work being done and giving you a chance to meet some of the incredible people behind it.
Importantly, this acquisition changes nothing about our previous commitment to keep the investment in our fourth pillar activities to less than 20% of our overall spending.
Furthermore, as we look to the future our estimates for the revenue production flowing from our first two pillars will more than cover the anticipated cash needs of the early stage programs. We are currently contemplating putting intimate on a path to financial sustainability, even as we bring multiple new medicines through clinical development to the market for the benefit of <unk>.
<unk> around the world.
I'll now turn the call over to Sarah to walk through our second quarter financials.
Thank you will and good morning, everyone I.
I am pleased to share some of the details of <unk> financial performance for the second quarter of 2023.
We ended the quarter with approximately $918 million in cash cash equivalents and marketable securities.
System with what we told you on our last quarterly call. This represents a significantly lower cash burn in the second quarter compared to the first quarter of the year.
We continue to believe that our current cash on hand positions us to be able to read out all of our expected clinical update.
Aspen and results in the second quarter of 2024, leaving a meaningful amount of cash remaining on the balance sheet at that time.
Now turning to our commercial performance in the second quarter of 2023.
Total net revenue for aerospace was $77 $2 million, reflecting 18% growth year over year.
This represents the strongest quarter for aerospace sales since its launch.
On a regional basis net revenue was $57 $7 million in the U S $15 $6 million in Japan, and $4 million in Europe and rest of world.
Notably each of these regions posted meaningful sequential growth compared to the first quarter.
Based on this strong performance to date and our continued confidence in ore cases growth trajectory for the remainder of the year. Today, we are raising our full year 2023 revenue guidance range to $295 million to $305 million compared to the previous range of $2 $85 million to $300 million.
This new range reflects year over year sales growth for the company in excess of 20%.
In the U S aerospace delivered an exceptional quarter and the best in its history up 22% compared to the prior year second quarter and up 18% compared to the first quarter of this year.
This quarter's results further support our belief that Eric cases still in a growth phase <unk>.
Sequential growth in the U S. In the second quarter was driven primarily by the exceptional execution of our sales force, which is delivering the highest level of engagement since prior to the COVID-19 pandemic.
In Japan Aerospace grew 19% this quarter compared to the first quarter of 2023, despite the 9% price decrease which went into effect in June and which I discussed on our last call.
This improvement in performance, although anticipated began even earlier than we expected and again speaks to the potential for growth in Japan now that cover restrictions have loosened and our access to physicians has become to normalize.
In fact, our engagement with health care providers in Japan has roughly doubled compared to just one quarter ago, which highlights the great work being done by our new commercial leadership in Japan as well as our dedicated sales colleagues in that region. We continue to believe that Erik Keith can produce solid growth in the second half of the year under these.
Conditions.
Finally, Europe saw a 33% sequential growth this quarter, driven primarily by our targeted patient identification efforts in both Germany and the UK.
Let me now turn to a few additional financial items.
In the second quarter of 2023, our gross to net in the U S were approximately 14%, which is consistent with our expectations for the second quarter. We continue to expect our gross to net to be in the mid teen range for the full year in line with historical performance.
Cost of product revenues for the second quarter, 2023 was $16 $6 million or 21, 5% of revenues, which is comparable with the past several quarters on a percentage basis.
Turning to our GAAP operating expenses.
In the second quarter of 2023 research and development expenses were $197 million and SG&A expenses were $84 $4 million, reflecting continued investment in both our early and mid to late stage pipeline as well as launch readiness activities for <unk>.
Excluding noncash charges related to acquisitions R&D expenses this quarter were comparable with R&D spending in the first quarter of this year R&D expenses. This quarter included a non cash charge of $76 $5 million.
Related to the acquisition of addressed yet therapeutics in June , which will mentioned a few moments ago.
In closing <unk> continues to deliver on its promises with strong commercial execution and a cash position that can support its business through the exciting period of data Readouts ahead.
I'll now turn the call back to well for closing remarks.
Thank you Sarah before we move to Q&A I want to mention a couple of other recent updates that continue to make me proud to be a part of this company. We are an organization made up of people driven by a singular purpose to deliver life changing treatments for patients in need and I see that pace passion and the people around me every single day.
We recently learned that for the third year in a row intimate has been designated as a great place to work in the U S, reflecting our exceptional workplace culture I am enormously proud that 97% of our employees said that this is a great place to work our highest rating yet.
I also want to draw your attention to the first ever World MTM awareness day being held tomorrow.
This effort being led by the incredible people at MTM info and research teams to educate and support physicians patients and caregivers who are impacted by this disease. This is expected to be an annual event and we are honored to be a part of it.
As we strive to do the right thing for our patients. We are also mindful of our broader commitments to those around US. We recently released our first ever responsibility report, which you can find on our website. The report which will be updated annually details the commitments and actions we undertake as an organization to act responsibly in everything we do.
From serving patients and our employees to supporting our communities and natural environment.
Okay comes from right to borrow from T. D. Cohen <unk>. Please go ahead.
Hi, guys. This is daniel on for too.
So my first question is on the <unk> the for the frontline program.
Are you thinking of an M C. I D for your fatigue and cough measures for the P. R O.
And is there a delta on these that you're looking for and then a quick follow up.
I'm not sure I understood. The question are we looking for a <unk> on the on the Bureau.
Ah minimum clinically important difference on the P. R O like what are you thinking in terms of the scale and the Delta that's desirable that you're looking for I.
I see well you know the truth of the arise program is that it is designed to answered that exact question right. Because no Bureau has ever been developed for N. T. M. There really is no frame of reference. So if you think about what is the goal of the study is to both establish that the piro work.
By showing that it can measure changes in how patients feel and also the degree of change needed to capture a patient feeling better. So if you think about it this way we're using two measures in parallel one as a general measure that says today I feel better or more specifically over the last 70.
<unk> I feel good worse, you know much better those kinds of very simple definitions that one that that scale that we use is about five rungs on it from best worse.
So a patient has to improve on that one step in order for us to conclude that he clinically meaningful change has taken place and that patients condition that is established by the F. D. A will.
We then use the more detailed quality of life bronchiectasis questionnaire and the fatigue piro to determine.
A numeric change on those scales.
So if there is a one step change on the overall symptom score within correlate that to the number of change the the value change on each of the pillows. That's how we established what constitutes a clinically meaningful change on the pier Oz. Once we know that then we can determine whether or not we've seen that degree of chain.
<unk> in this study I know that's a lot of complexity in a lot of detail, but I'm, hoping to really get to the heart of the question, which is how will we know that this is working how do we quantify how it works and and what information we intend to share with you. So I hope is that responsive to your question.
Yes. It is thank you for taking that and then a quick follow up on the Teacup program can you give a little more granularity on the data points that you'll be reporting and what's your hoping to see it just started setting expectations there.
Yeah. So what we're doing right now is obviously, we have some ability to observed in the earliest patients blinded blended data and I think we look at the same kinds of measures that that others look at four other products that are on the market. There's a good frame of reference out there for what constitute.
<unk> an impressive change in in certain metrics things like pulmonary vascular resistance. These are measures that don't idiosyncratically change and very sick patients typically so if we're seeing a significant change on those measures we consider that encouraging but we don't know is of course, which arm there is.
I'll, just remind you that N P. H I L. D patients are randomised three to one on the drug treatment plus.
Placebo and in the P. H program, it's two to one so there's a good number of patients that are on drug in all likelihood even with early patient numbers.
We look at these blended blinded details we see some encouraging signs we think within them and so as we amass more data and gain greater conviction that these are not sort of one offs. I think we will look to share some of that potentially with the market. We think T. P. I P is an incredibly.
Valuable asset and we base it on the precedence of what has happened in this space with programs that have been able to demonstrate impact on some of these parameters hemodynamic parameter of pulmonary vascular resistance for example at the upper end in this entire space as <unk>.
At its highest dose it's a reduction of about 33 per cent on pulmonary vascular resistance on average and at the lower end I think I can't remember the product, but it's down as low as 14 per cent reduction so seeing something in that range would be and we are directly competitive with those and if we were to be able to see something above that range I think that that would be <unk>.
Bridging it's early we have to continue to amass data, but as we do so and we see these data we will be thinking of ways to be transparent about what is getting us excited with with the the market. We're aware of the precedents out there about sharing data early we do not intend to put out data and runs to.
Typical hypotheticals on it we would just sheer raw data if we were to do anything and then I would leave it to the to the market to make his own judgements about the potential promise of this program, but I can tell you today, although it's early in their low patient numbers, what we're seeing is incredibly exciting.
Thank you that was helpful.
Next question please operator.
Your next question comes from Judah Fromer from Credit Suisse. Judah. Please go ahead.
Yeah, Hi, guys congrats on the corner and thanks for taking the questions. Maybe he has gone back to your your ideal arise scenario well you know in the event that you validated P. R O, but you don't see what you'd like to cultural conversion you know how do you see the program moving forward from from that perspective, and and is is the <unk>.
Opposite possible that you'd see the cultural conversion, but <unk>.
Yeah to be totally transparent first of all I think that's the heart of the question for arise like.
The the we're trying to convey in this quarter in the last quarter is look success with this program is is clear and simple [laughter] as complexity increases it just it it affords us the opportunity to make changes for encore, but we're just gonna have to walk people through that if that's necessary so I'm as anxious.
Does anyone to see these data I think on both measures. The pirro, let's remember is designed to inform us what we <unk> can learn about these <unk> and their replicability in this setting no one's ever used them before in the frontline setting we have some data.
From the refractory setting that we think guides us and of course, we have five years of commercial experience. So we think we know how patients symptoms change, but these are gonna be quantifications of those patience and and we're gonna learn a lot from this study I'm convinced of it success is a a <unk>.
That shows that patients get better and homerun successes as appear Oh that shows that patients on our drug get better than those on the control arm.
Culture conversion I think it's really too measures. It's overall culture conversion relative between the two arms and time to culture conversion Ah both of which are trends, we typically seen positive in favor of ARIKAYCE in the past in other settings. So I think there's a lot of variables here and I'm, hoping that will have a clear.
Answer for you in in about a month's time.
Okay, and just a quick one on on the refractory setting and it's been probably a couple of years now we've been talking about hangup demand or underdiagnosis for refractory Mac patients as as we've gone through with Covid. It sounds like things are normalizing globally are are you seeing evidence of that under diagnosis or or a <unk>.
Demand and they're refractory patients.
I don't I don't know how to characterize it. It's just clear that we're not in Covid era anymore. We're we're back in growth mode, and I think everybody feels really good about where things are right now with the refractory patient populations really around the world.
You know our expectation and that's why we raise guidance today is that that's gonna continue that that momentum will will carry into Q3 and Q4 I am finally relieved to not have the unexpected happening in the quarter for this commercial opportunity you know that the team has done incredible work during one of the most challenging.
[noise] times, we're past that now and we're now back into an era, where it feels not only normal, but but there's opportunity there.
Thanks.
From Guggenheim.
Oh. Please go ahead.
Great. Thanks for taking the questions maybe just a couple of appreciate all the insight around arise.
An investor in a couple of questions that have come up and I just want to get your thoughts that I know you've given.
Sales.
Or ARIKAYCE plus friends, though I'm wondering if you have any thoughts if you could.
Just kind of give you a perspective on ARIKAYCE alone, especially just the refractory setting.
If the frontline opportunity.
You know come about what do you see as the sorrow longer term growth opportunity just in our factory Mac and then do you see any risk taker.
The county approval if the frontline.
Online do not read out.
Thank you.
Yeah. Thanks for the question I think we haven't given guidance on on Max peak sales on refractory alone I will just observe that we remain in a gross mode. There we see patients in the field that will benefit from this medicine that are appropriately on label and.
That's our focus I think what you've seen in the last couple of quarters is that those patients are interested in receiving treatment and and so we're gonna continue to chase down that opportunity and I think you're gonna see that growth continue into next year.
When we talk about accelerated approval and the probability of success based on arise arise as a learning study that powered for statistical significance, but it's powered for us to learn how to ensure that encore is a success and I think we have a lot of levers to pull once we see the data in terms of what we're going to need to do to.
<unk> ensure encores success I don't see a lot of risk to the refractory market in a world, where some part or or some aspect of arise goes sideways because we still have encore before we have to answer ultimately to the success or failure of the trial in the U S and Japan and I'll remind you that there are <unk>.
<unk> primary and points for each of those regions U S as piro, Japan as culture conversion.
And that is that we have now five years of experience on the market as a commercial product without any major issues and indeed, we've had full approvals in Europe , and Japan with very successful launches in those regions and a lot of patience helped and I think that collection of data does bear on their.
<unk> of the viability of this product to help patients who are just a little earlier in their development of the disease.
I would just also add an remind folks at the inclusion of the in the international treatment guidelines with a strong recommendation for years of ARIKAYCE in the refractory setting.
Okay. Thank you.
Your next question comes from Jennifer Keene Cantor Fitzgerald, Jennifer. Please go ahead.
Hey, good morning, Thanks for taking my questions and congrats on the corner I have two questions here. The first post Adrastea acquisition I'm wondering what is your appetite or protection.
Potential need for further P. D and then coming back to arise I'm. Just curious is the sizing of encore determined by.
Culture conversion rates alone and so if it gets to the lower end of that 10 to 20 per cent culture permission, what with the potential impact on enrollment <unk> artsy fall below that but the improvement in time to conversion, it's meaningful what potential adjustments. So that you have would you have room to make.
Yeah. Thanks on the address to your front Super excited about that acquisition I think what you see with this acquisition is in many ways. The completion of a what we refer to as our fourth pillar in terms of the components needed for a truly robust.
Engine that will be able to produce multiple I N DS strategically what we have done at Internet and I think will always look at other opportunities I don't feel the need to do anything more necessarily to get to a state where where where we have an inadequate <unk>.
<unk>, we have that now uhm, we will always look can be opportunistic I wanna be clear about that but I feel very good about what is inside our fourth pillar. We now have capabilities that are second to none in terms of I N D production that.
We'll have a major impact on patients and in an accelerated fashion, what do I mean by that these technologies, we've acquire the strategy behind them, it's not just that they're novel and interesting and exciting they are but they also allow us in my mind to introduce productivity to the biotechnology equation.
We are looking for ways to get drugs on the market faster that are more impactful to patients and that ambition directs us towards therapies and therapeutic approaches like gene therapy, and synthetic rescue and be immunized by design that allow us to design an advanced <unk>.
Programmes that with a successful phase one too program clinical trial can apply for conditional approval. That's really what we're trying to do here. So there's a world where many of these programs that while they seem early today could get to commercial relevance in a shorter period of time for the <unk>.
Near benefit of patients by demonstrating a significant impact in phase one two trials. So that's the reason why we built the fourth pillar. It is the answer to the question of what's coming next and Internet and it is now in a place where it will answer that question for many years to come with multiple ind's and I would draw.
He was attention and wants to learn more to the recording of our research day back in May on.
The arise study in particular with regard to cultural conversion and how we think about that informing the oncor study, we're gonna learn from arise.
On many different fronts will learn about culture conversion will learn about the bureau, and the information we collect from that will inform the ultimate size, we decide for encore. It may be that it's adequate as it is it may need to be increased I don't lose sleep over any of those two outcomes to me the important point is.
<unk> must succeed one theme you've heard from us over and over again is you find out what you think is inadequate powering and then you had a few bit more patients because you must win with the trial. That's the theory behind the <unk> <unk>.
Bronchiectasis study, it's why it's 1700 patients we want to give our drugs the best chance to demonstrate their impact and will bring that same theory to our ultimate sizing of encore.
Okay. That's helpful. Thanks.
Your next question comes from Liam Link from Berkeley Slam. Please go ahead.
And congrats on quarter. Thanks for taking my question have one on the pier I'll read out. So there was a recent article there came out Chester talked about doing up hero and this response and at T M back and basically.
They gave stomach baseline and both D. Two drug and also a three drug regiment and patience kind of responded with a round of seven to eight point improvement so with that kind of can you talk about how this plays into your thinking in terms of expectations.
On arise.
And also any thoughts on the two and three drug regiment as well and I'll have a follow up for an air case.
Sure. So I don't I'm, not I have to confess I'm not familiar with the the detailed details of that article, but what I can tell you is that the let me think about the piro that we're using the quality of life Bronchiectasis Piro that piro in the setting of bronchiectasis, it has been established or or belief.
<unk> that an eight point intra patient change.
Constitutes a clinically meaningful improvement so as a frame of reference and eight point change on a scale of 100 is considered clinically meaningful for bronchiectasis using the queue will be <unk> that may or may not be relevant to N. T M and one of the things we're going to answer with a rise is what <unk>.
Change do you need to see that to constitute a clinically meaningful improvement. So that's what arises gonna answer and then we're gonna see what improvement we actually saw in each of the arms. So we we don't have that question today, and and I'm not familiar with that article, but I suspect that that is making reference to the bronchiectasis experience.
<unk> and and applying that to N T M in suggesting that that may be what is needed that would not be uncomfortable to us in any way, but with no more than a month and certainly share with you our learnings.
The second part was on ARIKAYCE, so for ARIKAYCE with in terms of extra rest grow with that I guess more specifically in Japan with the one time price discount happening. This past quarter can you characterized volume growth that you see over there.
And do you think any of the volume growth could have been because the price discount. It's known that's gonna happen. So payors in Japan, where people, who buy ARIKAYCE in Japan would kind of hold off.
<unk> there was a price discount so do you see any stocking effect.
In essence.
Yeah I appreciate that question, we don't think that's the origin of what's going on in Japan, I want to remind everybody. We've had some additional leadership capabilities brought to bear in Japan as part of team and Smith, we're super excited about them. This builds on an already strong team and allows us to get ready for what's to come both in terms of.
<unk> and hopefully if all the trials are successful in regulatory approvals cleared the launch of what would be the first ever drug for bronchiectasis. So we needed that horsepower for what's coming this most recent quarter did include the price discount it wasn't that substantial so I don't think it would have caused.
A massive change in behavior of far greater significance was the lifting of the restrictions due to COVID-19, it's hard for people to remember, but it but it's actually in Japan. It wasn't until may that they lifted all restrictions on COVID-19 that open up access to physicians and our activity vol.
Our outreach has increased significantly since that time and I would attribute the early signs of of success that we're seeing in Japan to a combination of of that the energy flowing from the leadership changes coupled with the lifting of restrictions in that territory and that's why we've said all along that we take.
The second half of this year is really when Japan's gonna Gonna do its best it looks like it started early and were Super encouraged by that hopefully will will continue to see that as we go forward.
Thank you.
Your next question comes from Jason's Umansky from Bank of America changed Sir. Please go ahead.
Coupla on the pipeline if we may we certainly agree with your comments regarding <unk> potential, but that being said the landscape or <unk>. Okay. Child is changing there's been uptake of Ah DPI formulation. There's another D. P. I waiting in the wings and of course, there's the potential launch of so tired or Sept, as you mentioned, which could be disease motto.
Fine.
Someone who is talking to a strategic that is in this space shared with us that from their perspective, <unk> could be a category killer.
The reason they say that is because a once a day <unk> formulation that covers patients all day and all night at higher doses than what can be achieved with any of the formulations, you're referencing right now would be best in class.
So what we see for this product is this becomes the cornerstone oppressed annoyed therapy. This is vigo to product for anyone who is reaching for a process annoyed to treat a P. A H P. A child. The patient. This is where you go and in that World I think products like <unk> <unk>.
Edible encouraging as they are a new a new mechanism of action I see this is something that <unk> may well pair with to produce even better results for patience. As you know this is a combination therapy market at least in the P. H type one patients and and were encouraged to think that we can be.
The process annoyed of choice. It is very important for people to understand that are a dry powder formulation is fundamentally different than every other dry powder out. There. This is not just <unk> and a dry powder. The 16 carbon chain formulation is the key to unlocking the full pretense.
<unk> of the underlying drug because what happens is that 16 carbon chain means it the molecule is a nurse when you inhale it that's particularly relevant for ph L. D patients because it means and we demonstrated this and repeated animal studies under the excellent work of of our scientists <unk> Chapman does the cough.
Is reduced substantially this is a major issue for ph I, all the patience and a reason why many of them cannot tolerate <unk>. So we see ourselves going there very successfully we see ourselves going into P. A H as the process annoyed of choice and very likely being paired with some of the other molecules.
You made reference to in the end the key metrics that drive improvement in these patients and they'd get people excited about potential disease modification are looking at things like sustained improvement in pulmonary vascular resistance and when you see reductions as as was seen with <unk> that get up as.
And then I believe the update regarding the D. S. M. B's May review of Aspen is this new any additional color you can provide here and you know how does that factor into your optimism over next year's read out yeah.
Yeah, I mean, I think you know everytime a D. S M B meets and nothing happens. It's it's a reason to to get encouraged I think what is most important about this study is that it continues to behave exactly as we expected and wanted it too we aren't seeing anything changing within the broad analysis and metrics that we watch.
<unk> and we do so in a detailed fashion. This is a very substantial study it's more than 50 per cent larger than every other study that's ever been done previously so the volume of data. We're gonna generate from this study is is very significant why is that relevant cause it turns to address any of the outlier effects that can sometimes cause headaches.
Just to remind everybody our phase two study, which was statistically significant at both doses on the primary endpoint was 80 per cent powered to show a 40 per cent treatment effect.
Phase three study is 90 per cent power to show a 30 per cent treatment effect. So we have more power in this study to show a more modest impact and you know the.
Studies behaving in the based on characteristics of the patients are are almost identical. There's every reason to believe that this study will look just exactly a successful as willow did and that will unlock the first ever potentially approve therapy for bronchiectasis. It will validate the mechanism of action of D. P. P. One inhibition as a neutrophil mediated.
Disease agent and that unlocks a series of additional therapeutic area possible indications, including the next one we're gonna be launching here shortly which is the phase two study for chronic rhinosinusitis with out nasal polyps just a footnote for people we <unk>.
Anticipate at the launch assuming everything goes well for bronchiectasis, we could be addressing as many as a million patients up to 450000 in the U S and the balance in Europe and Japan.
Crs without nasal polyps the population in the U S is $26 million.
And there are no approved therapies for this indication and we do not intend to address all 26 million I want to be very clear about that we're going to go to the severe end of the spectrum those who are scheduled for or eligible for surgery or who have already had repeat surgeries to fix this condition, we think because it's Ah Ah neutrophil driven can.
Mission that the D. P. P. One will be very effective and that opens a second very substantial opportunity in that trial will be underway by the end of this year. So there's a lot going on in the bronchiectasis pardon me the <unk> World a D. P. P. One the D S M b, giving a.
A another clean Bill of health continues to build on the safety track record of this a molecule and that is encouraging for not only bronchiectasis, but all the other disease conditions were examining whereas maybe potentially applicable.
Alright, thanks for the color.
Your next question comes from Stephen Wiley with Stifel. Please go ahead Steven.
Yeah. Good morning, Thanks for taking my questions and congrats on the corner.
Maybe just a couple of a Raj related question. So I guess the first is.
Yeah I'm just curious how you think about current efforts to characterize disease severity of the a T. M. Mac beyond just the the presence or absence of Cavitary disease and I guess.
Where you would expect a rise patients kind of based upon the baseline characteristics that you've seen as far to sit on that proposed spectrum of either lower versus Irish.
Yeah. So I think the way I would describe it is these patients have to be diagnosed with Mac and they have to be symptomatic right. So that there's there's an instinct to treat these patients on the part of the physicians and this is a definition you know broadly that I'm describing that we arrived at in close consultation with the physician the norstar of the company is.
Always how can we benefit the patient so let's describe the patient with the Kols understand where they think treatment is needed.
And then and then go there the interesting thing about our trial design here for Verizon Encore, we actually didn't propose to the F. D. A that we go after these broader patient populations. They proposed it to us for validation of the drug in the refractory market right. You remember we were conditionally approved for <unk>.
<unk> the F D. A directed us to go after frontline for full approval of both refractory and that brought her indication at the end of the effort here when arising encore done if they're successful as we hope there will be we will have a drug that is a valid for the treatment of.
Oh that shows improvement you have to have cultural conversion is nice, but it's not controlling and and that's why we're so keen to see the results of the upcoming study.
Okay, and then I guess, it's the second question is.
How how tightly correlated do you think the culture conversion data between irritation placebo.
Yeah, So I want to be clear of the culture conversion is measured separately from the <unk>. The the correlation between those two measures is not something the F. D. A is looking for I'm sure. If we see it it's it's a nice to have but it certainly isn't something that's necessary uhm when we're talking about culture conversion between irritation placebo in the measurement of time.
<unk>, we're thinking about it through too abroad.
Lenses, one is time to cultural conversion and consistently with the application of our drug in sick patients we've seen patients convert faster on our drug and we've seen more of them convert than in any control arm that we've been we've been looking at are studying we would expect that to continue here. We expect a range of 10 to 20 per cent.
Improvement in our armed versus the control arm. The one month off drug you know we also although we won't be measuring it here.
For purposes of of this <unk>.
Report, but we've also seen much more durable results from our drug and we saw that very very distinctly and they're refractory Senate. So we would expect that that will carry forward here if that weighs on at all it would only be that that one month off we don't have any concerns about a waning effect in that 30 day off time for.
Shame when when the the measurement is taken.
Okay, Great I should take the rashes.
Your next question comes from <unk> from me sooner. Please go ahead.
Hi, Good morning. This is Richard on for Greg Congrats on the corner, Great <unk>, Alright, and guidance. So two questions for me and consistent with a theme here on the P. R O for our Fries I know that the company had talked about the eight <unk> change on the.
C O L for bronchiectasis, but any expectations for the fatigue Bureau, and then I'll follow up.
Yeah, you know it's interesting that we don't have any specific guidance on the fatigue Bureau.
If you think about the way the disease progresses in in between these two P rose the quality of life bronchiectasis measures. The actual experiential condition of the patient in terms of cough and sputum production and those sorts of things and fatigue as sort of the next derivative of that as a consequence of the disease you.
Who are fatigued and so there's less data out there measuring this but nonetheless, we know that it is one of the symptoms patients experienced and we wanted to find a measure that that could could quantify it. So we don't have any guidance on what we expect to see here uhm, but we will know.
And and we'll see what the what the cards show us if arise gives us the information we need to ensure encores successful using either of these <unk>. Then we will secure we believe approval for this drug for all Mack M. T M. In the U S. So it's exciting to be all.
<unk> a month away from that answer.
Thank you for that and on clinical trials right. You have seven primary endpoint then two of them are on C. D. S. N. P. D. F that are measured at different time points from the promise scores and the broccoli.
Well, what I would say is these are two different P. R OS and what we're trying to do in a rise is learn what degree of change is needed for a patient to clinically improve using either of those <unk> and then do we see a difference given.
And so.
We'll know the answer to does either pure work hopefully in the month and if they do then we win and we have a path toward ensuring that encore is going to be a success and approval expanded in the U S. It is worth noting that culture conversion alone as the primary.
Point in Japan, they're not particularly focused on the piro and while we are very excited to see the results of the <unk>. It's also worth highlighting that needed the clinicians nor the market access world are particularly focused on the piro don't get me wrong. If we see success with the either of the <unk> I think that's gonna be very well received.
And would be something we would.
Seek to include in the label of course, but but you know the driver here is the eradication of the infection that gives rise to this condition and while the F. D. A is not a line with that as the primary endpoint, Japan is and we think it's important.
Thank you and if I could sneak in one more question about D. M. D. Right. How are you positioning your product versus you know <unk> or other programs.
Yeah I appreciate that question I can tell you as we said in May we expect this program to be the best the interests equal delivery, we think is going to improve efficacy and safety for these patients better results better transduction better outcomes overall at a lower amount of.
Drug required to be delivered and while there is still some biology to be learned about why there is such good transduction through interests equal delivery. It is very clear from the preclinical animal model work that we have done which is extensive and which we shared a lot about in may that.
We are getting excellent transduction in all kinds of muscle as well as including a cardiac and diaphragm, which which are critical <unk> you know <unk>.
Probably 90% of what is dosed in patients in I V is lost in the liver in most cases interest equal delivery avoids that unfortunate circumstance and and could be really a game changer. We think for for these patients will have our first.
Human biopsy data, we hope in the first half of next year and ideally before Aspen data and that would put us in a position where we could validate all of these believes which are generated from the preclinical data.
Great. Thank you and congrats again.
Thank you.
Our next question comes from Lisa <unk> from Evercore ISI needs. It. Please go ahead.
Lisa you are life.
Hi, there sorry about that.
I just have a couple of questions across different programs that starting with arrive how are you thinking about.
You know the the the.
<unk> <unk> <unk> <unk>.
<unk> <unk> <unk>.
One month after therapy, that's kind of a <unk> and you're looking for a leather chair such a curious about how you were thinking about that and.
So for the Pirro the one month off drug is is ideal right that when the F. D. A saw the wisdom of that that was a real win from my point of view because it allows us to give the full effect of the drug and then step away from the side effects that are associated with the delivery of the drug physicians often like.
<unk> and they create their own side effects. So checking in on patients one month after their off all drugs is key to understanding how do they feel now that the drug cocktail has had its effect.
And so I I would expect that that will be a positive for us and an important one to reflect the impact of the medicine.
When we think about culture conversion you know, we've shown durable culture conversion going out well past a year in refractory patients. So I I don't have any concerns about checking culture conversion, one month off drug or even much further beyond that in fact, I think the durability of culture conversion is going to increasingly become one of the strong selling point.
<unk> of this medicine is it continues to find us hopefully in broader patient populations.
Okay, Great and then with respect to T. P. I P to talk about much greater exposure actually touch made up to 600 micrograms can you and talk about any like is there a ceiling effect here in terms of advocacy R U.
You know.
Would you expect greater efficacy with increased dose up that high in that range are we kind of at the hotel part of that curve can you just talk to that yeah.
Yeah. So I think what we have heard from Kols is very interesting question because it gets at the heart of how we were strategically thinking about the drug when we originally designing it we were doing a combination of the ability to titrate higher well and get good good dose strength and patience in their lungs, while also mitigating the side effect profile and what we <unk>.
Heard loud and clear from the physicians is the key to having benefit to these patients is getting as much of the process annoyed into the patient as you, possibly can and they are willing and patients are willing to manage through a side effects to the greatest degree possible. So all of these trials are actually M. T D trials Max tolerated dose.
And so what we did in phase one was to establish doses as high as 640 micrograms with an M. T. D approach. That's one of the reasons why we think it'll be interesting to share that data at the end of the year. How high are we getting with these patients are they hitting side effect profiles that are preventing them from getting to 640.
And how high do they get and how does that compare to tie VISO. When we went over the data today, if we're able to get to 640 micrograms that is 60 per cent more <unk> in these patients than any other dose. It's approve right now on a daily basis. So that is a substantial increase in the amount of drug getting to these patients.
Having any effect that is positive for patients is the more drug you get into these patients the better. They do that is clearly already established away from us so our ability to get up to 640.
Are suggesting that that may indeed be happening.
Interesting, Okay, and then just a question on <unk> have you done any market research well.
Looking at kind of what kind of uptake you might see actually starting get this question, which which I love because of our skipping ahead of data, but uhm.
I I just been getting some questions because there's you know there's a lot of patience have bronchiectasis.
Does that have gotten them, there and uhm, so that'd be a lot of obviously treatment alrighty <unk> for treatment of other diseases <unk>. So just curious on the feedback spin on that.
<unk>. The question is well timed because we just came from the World Bronchiectasis meeting in New York City, and I would describe the physician community as giddy over the possibility of <unk> academies approval and bronchiectasis Uhm. We are hearing from physicians that they are intending to.
<unk>.
You know assuming that the data is good at it.
Looks like Willow, let's put it that way they will put all of their patients on this drug I expect the uptake to be very strong and I would say that the work. We've done you have we done market research we've done quite a bit we will continue to do more especially as we get closer and closer but.
You know our disease awareness campaign has already begun it was at the American drastic society. It was at World Bronc, It's gonna be an E. R. S. In Milan in September It's Gonna continue full force until we have unapproved drug and and it is very clear that there's an unmet medical need here that is substantial we <unk>.
Talking about co morbidities.
I <unk> the market for your earlier, we think patients that are diagnosed today with exacerbations documented.
Number <unk> up to a million between the U S Europe and Japan, So the markets, where we have commercial infrastructure. This is a million patients at launch that are on would be appropriate for immediate use of the drug.
What we are learning as time goes by is that beyond that there may be other patients in comorbid diseases like C. O P D and asthma, who are exacerbating and may indeed be bronchia caddick. There was a lot of data that was thrown around in the range is a very wide.
I won't go into the to the details I'll just say that if you consider that there are 20 million patients in the U S. C. O P D and some portion of them are also bronchia caddock and experiencing exacerbations and as if they were to get a C. T scan and and diagnosed because that is the definitive way to diagnose it Ah bronchiectasis patient.
They would be eligible for use of our drug and it would be on label it as a massive potential opportunity with this drug. So aspirin is a very exciting dataset I'm glad people are looking beyond that already I think that's appropriate our current stock price suggests to me they aren't looking too carefully beyond [laughter], but.
But when they do I think we're gonna be in a in a very different world. This is in my opinion all the caveat.
You know about data and regulatory pass approval needing to be in place. If we cleared those hurdles, which I expect that we will this is a blockbuster drug.
Thanks, Sir.
You bet.
Our next question comes from entering a tan from Goldman Sachs.
Please go ahead Andrea.
Think first please.
I'm, sorry can you speak a little bit more to the assumptions that on your opinion updated guidance.
Driven more by what you're seeing in the U S. Japan and then any updates you can provide on what you're seeing like three treatment with ARIKAYCE it'd be helpful. Thanks, So much.
Go ahead Sir.
Great. Thanks for the question. So our guidance we were very excited obviously increase our guidance. This morning increases 295 to 305 Raleigh haven't given you know break down from a regional perspective, what we saw in two two was.
Strong growth across all three of our agents and as we mentioned earlier Japan's growth happen to a little bit earlier than we had expected. So really encouraged by the performance in Japan in queue to them as we sat during the prepared remarks, we almost doubled our opportunity to interact with health care professionals this quarter versus last quarter, mainly.
Driven to due to the restrictions being you know reduced from a COVID-19 perspective, so really encouraged by that and your leadership in Japan and building our Martin U S. We are back in <unk> back into pre Covid levels are really encourage their Europe. All small again saw a very sizable.
Okay, any hidden yoga, let alone the opportunity with a broader with a three to five fault increase with the broader label and.
And then specifically on re treatments, we haven't provided specific details there we see re treatments uhm, which is wonderful I think that speaks to the need for this for this drug and and the fact that patients have successfully had a course of therapy are able to show success culture confer and.
With that this evening and thank you us in the air in the pipes and the water they get to get a new infection and wanting to come back on therapy. I think is probably one of the you know a great confidence booster. The brand is that it is successful in patients uhm have a need for it.
Thanks.
Yep Thank God.
Our next question comes from Joseph Schwartz premiering partners.
Please go ahead.
How much subjectivity is there in the definition of pulmonary exacerbations that you're using an aspirin and uhm with such a wide ranging study.
Think there's 40 countries almost 500 sites is is there anything that you can do to try to harmonize the definition and avoid you know seeing any untoward heterogeneity.
And then the second question on <unk> would be we noticed that the H inclusion criteria.
Skews lower or extends lower to include 12.
People, H 12, and up in Aspen versus 18, and up and Willow, but I also heard you say that the baseline characteristics in a blender basis are almost identical. So I was just wondering is there any.
Difference in disease characteristics or the way younger patients could handle the drug.
In Aspen or or is this not even an issue because you know if he's he's actually enrolled thank you.
Yep. So on the definition of exacerbations really important first of all we're using the same definition, we used in Willow and one of the lessons learned from the other companies that have done bronchiectasis studies, albeit their case in all cases, there were using inhaled antibiotics. So R mechanism and approach is totally different.
They have to make that judgment that this patient had a severe enough experience that they need additional clinical care. So that is a high hurdle. It's the one we used in Willow. It's the same one we are using an aspirin as we think about the global heterogeneity, which is true for for.
All studies, we're very sensitive to that we have many different ways that we watch that carefully one of these is that willow was quite a broad ranging study aspen is far more range wide ranging but we look for the same kinds of controls, including review of what constitutes an exacerbation if there's.
If there's some debate about that we can look at a country level. How many patients are being enrolled with the characteristics are of that country. We do that on a regular basis down to a weekly basis to make sure that the behavior going on is is not unexpected.
And I would say for those reasons, we feel extremely confident that the performance of the patients in the study will be not dissimilar to what was seen and Willow study. The question about lower age group. We did go a little bit younger. It's a handful of patients that are gonna be in that category I have to double check on this one Joe at me.
May well be that that was a specific regulatory request the vast majority of patients who get bronchiectasis are older and so I don't think it in any way is impact on on the trial or or what direction of my travel or as in that sort of thing and the D. S. M B.
Clearing most recently certainly supports that I I would be surprised if it was more than a handful of patients that that are below the age of 18, and I think it may be specific to a to a regulatory request, but let me get that information to get back to you to confirm.
Sarah you know off hand.
Yes that there was a pediatric requirement they will not be related to the analysis for the for the main study. So the 18 or older completed enrollment. That's that's the primary the Paediatric is obviously a regulatory requirement is as well maintained.
There you go.
Very helpful. Thanks for the color.
Yep.
Oh now trying to call back over to will Lewis chair in C O for closing remarks.
I just want to thank everyone for joining us today, it's an exciting time in and submit and we look forward to talking to you hopefully within about a month.
Have a good day.
Ladies and gentlemen that concludes today's call. Thank you for joining you may now disconnect.
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