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Presentation

Insmed Incorporated misses on earnings expectations. Reported EPS is $-1.28 EPS, expectations were $-1.13. Insmed Incorporated isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, and welcome to the Insmed Incorporated Fourth Quarter and Full Year 2023 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] And finally, I would like to advise all participants this call is being recorded. Thank you. I’d now like to welcome Bryan Dunn, Head of Investor Relations to begin the conference. Bryan, over to you.

Bryan Dunn: Thank you, Gavin. Good day, everyone, and welcome to today’s conference call to discuss Insmed’s fourth quarter 2023 financial results and provide a business update. I’m joined today by Will Lewis, Chair and Chief Executive Officer; and Sara Bonstein, 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 for more information concerning the risk factors that could affect the company.

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.

Will Lewis: Thank you, Bryan. Good morning, everyone. I’m pleased to be speaking with you today at the start of what I believe will be a uniquely transformational year for Insmed. In just the next few months, we expect meaningful data readouts and other relevant updates from across our late-stage portfolio, the results of which could fundamentally change the trajectory for our company and the patients we serve. We have been carefully preparing for this moment for a long time and we are ready for it. It is said that great drugs tend to announce themselves early. ARIKAYCE, brensocatib, TPIP have been showing us compelling signs of their potential from the earliest data points coming out of their respective programs, and I couldn’t be more excited to see what they will show us next.

If they are successful, we believe that they collectively represent more than $8 billion in peak sales potential, a staggering opportunity for any company but especially one our size. In fact, we believe that any one of these assets, even without the other two could form the basis of a successful biotech company. I have never been more confident in the future of Insmed than I am today. But before I get to the future, let me spend just a moment on our fourth quarter performance. ARIKAYCE sales in the quarter once again set a new record and caused us to exceed our increased guidance range for 2023. Importantly, this result reflects not only the continued strong demand for ARIKAYCE, but also the effectiveness of our sales personnel and infrastructure in the U.S., Japan and Europe.

As I continue to see our commercial team outperform expectations, it gives me greater confidence in the ability to realize the commercial potential of brensocatib. These same colleagues will be leading that launch if the ASPEN results are positive, and they will be able to leverage many of the same call points and relationships that they have already spent years building with ARIKAYCE. As you will hear more about in a moment from Sara in the fourth quarter, we used our at the market equity offering program, or ATM, to essentially keep our cash balance flat compared to the prior quarter. This was important strategically because it further resources the company as we near the important clinical readouts ahead, leaving us with more than three quarters of $1 billion on hand as we enter 2024.

Let me start with an update on ARIKAYCE. We continue to be excited about the strong results shown in our Phase 3 ARISE trial in patients with newly diagnosed or recurrent NTM MAC lung disease who have not started antibiotics, which readout last year. More detailed results from this trial are now expected to be presented at the ATS conference in May, which we anticipate will reinforce the excitement that was generated with the top line data set. As I have mentioned previously, we have been engaging with the team of experts at the FDA who review patient reported outcome tools used in clinical trials. After having received encouraging written feedback late in 2023, we expect to meet with them in the coming months to glean any additional feedback and guidance that they may have before finalizing the statistical plan for our Phase 3 confirmatory ENCORE study.

We will provide you with additional updates once that work is complete. Only after all of that feedback is received and incorporated into our plans would we be in a position to approach the FDA about whether there could be an accelerated approval pathway under Subpart H using the ARISE data to expand the ARIKAYCE label to include all patients with NTM MAC lung disease. As we have said before, we believe that the most likely outcome of these discussions is that our ongoing ENCORE trial will be required for filing. I’m happy to report that the ENCORE trial itself is progressing as planned. The Data Safety Monitoring Committee held its third safety review meeting in November and recommended that the trial continue unaltered. There are no interim reviews for either efficacy or futility in this study’s protocol, so this represents the most positive outcome possible.

Importantly, enrollment in ENCORE remains strong. We continue to expect top line results in 2025. Next, let me give you an update on brensocatib. The highly anticipated ASPEN readout continues to progress as we had hoped and remains on track to readout in the latter half of the second quarter. Last month, I laid out the different scenarios that would result in us moving forward with regulatory filings for brensocatib and bronchiectasis. Let’s take a moment to review those again. If either dose achieves an adjusted p value of less than 0.01 on the primary endpoint of reducing the rate of pulmonary exacerbations, that would be a very clear win. And if either dose achieves an adjusted p value of less than 0.05, we expect to also move forward with a filing.

None of that has changed, but let me offer an additional point of clarity on how we will measure success for this trial. We have heard from payors, KOLs and patients alike that achieving a reduction in the rate of pulmonary exacerbations of around 15% would make brensocatib an attractive treatment option for patients with bronchiectasis. So, particularly in a situation where the reported p value is higher than 0.01 but less than 0.05, we would ideally like to see a treatment effect of at least 15%. If the magnitude of the effect is at that level or higher, then I think we have a drug that is not only approvable, but also potentially one that will drive rapid uptake in a market with no approved treatments. As a reminder, we have said that we believe this drug has a peak sales potential of greater than $5 billion, presuming ASPEN is a clear success.

And that is just for the two indications that we are currently pursuing bronchiectasis and CRS without nasal polyps and just in the geographies where we currently operate. In fact, the closer we get to a readout, the more confident and excited we feel. We continue to hear anecdotal reports from sites across the world of patients in the trial doing better with fewer exacerbations and sputum that is thinner and lesser in volume compared to before starting the trial. Of course, we have to acknowledge that the investigators who are providing us these updates remain blinded, just as we are to which patients are on brensocatib and which are taking a placebo, but even so, we believe it is an encouraging sign. We also have been closely monitoring exacerbation rates by region, country, and even individual trial site throughout the course of the trial’s conduct.

So we know that events are occurring at rates that are in line with our expectations and consistent with the treatment effects that the study has been designed to demonstrate. We have also now been through five independent safety monitoring meetings, all of which have resulted in no safety concerns and unanimous recommendations to continue the trial without any alterations. All of these indicators add to our enthusiasm for ASPEN’s readout. Indeed, if one simply walks the halls at Insmed, it is difficult not to notice an almost palpable excitement amongst our colleagues that seems to grow each day as we get closer to the release of the ASPEN data. We all look forward with great anticipation to sharing the top line results in the latter part of the second quarter.

Now, just a quick update on our TPIP program. Last quarter, we provided some details on the blended blinded data we have been generating from our two ongoing Phase 2 studies of TPIP in patients with PAH and PH-ILD. At that time, we disclosed that eight of the first 10 patients in our PH-ILD safety study were able to titrate up to the highest dose in the study, or 640 micrograms once daily by the week five visit. That study is now fully enrolled with 39 patients, and we expect the top line results in the second quarter ahead of the ASPEN readout. Also, on our last quarterly call, we shared that 83% of the first 24 patients in our PAH study had successfully titrated up to 640 micrograms by week five, and of the 22 patients who had completed the 16-week study, we saw a 21.5% average reduction in pulmonary vascular resistance, or PVR.

This includes all patients those who received TPIP and those who received a placebo in a trial that is randomized two to one. If you look at the 64% of those patients whose PVR decreased during the study, the PVR reduction was 47% on average, with several of them achieving reductions greater than 65% and approaching a range that would be considered normal for PVR. These were encouraging results, albeit blinded and in a relatively small number of patients. When the data for this PAH study is unblinded next year, we would view any PVR reduction above 30% as a clear best-in-class result, and one that is potentially achievable in our view given the blinded results we have seen to this point. I also want to announce today for your planning purposes that it is our intention to share updated blinded data from approximately 40 patients in the PAH study at the time we released the top line results from the PH-ILD study, which we expect will be in the second quarter before the ASPEN data.

In addition, we have submitted our proposed protocol amendment for the open-label extension of the PAH study to the FDA and other regulatory authorities. This amendment once implemented would allow investigators to continue to increase the dose of TPIP from a current max of 640 micrograms once daily up to 1,280 micrograms once daily, presuming it continues to be well tolerated. More than 90% of those who have completed the study so far have opted to join the open-label extension, which is another encouraging sign in our view. Now, before I turn it over to Sara, I want to once again highlight the unique position in which Insmed finds itself. We have spent years meticulously and deliberately constructing a company that would have multiple clinical programs with meaningful readouts over a short time window.

With the positive top line ARISE data in September 2023 and the TPIP data in PH-ILD and the ASPEN top line readout expected to come in quick succession in the second quarter of this year. We hope to complete this long-term vision and establish Insmed as a company with three compelling product profiles, which may be capable of generating greater than $8 billion in aggregate peak sales. If we are successful, I believe Insmed will undergo the type of transformation that one rarely sees in the biotech industry and we are now just months away from finding out. I want to be clear that the data we have observed so far across all three of our mid to late stage programs, from the reports of the independent committees that monitor safety findings to the data generated in previous positive trials, to the detailed blinded data we continuously analyze, to the positive anecdotes we hear from investigators involved in our studies only increases our confidence in the potential for a successful outcome for each of them.

I couldn’t be more pleased or more excited with where things currently stand. I’ll now turn the call over to Sara to walk through our financials for the quarter.

Sara Bonstein: Thank you, Will, and good morning, everyone. Earlier today, we issued a press release detailing our financial results for the fourth quarter and full year 2023. I would like to highlight some details of those results for you now. I am pleased to share that our year-end 2023 cash position of approximately $780 million remains relatively unchanged from our Q3 cash position, as we were able to offset the majority of our burn this quarter with proceeds under our ATM. The uses of our ATM this quarter reflects the significant investor interest that has been building recently. I am proud that our stock increased 23% during the fourth quarter while we were utilizing this program. While we have substantial capacity under our new ATM in the near-term, we do not plan to utilize it proactively.

Having spoken with many of you recently, I know that there are concerns that we may choose to do a large equity raise prior to our upcoming data readouts. I want to be as clear as I can be on this point. Given our strong cash position, we do not currently anticipate the need for a significant equity raise prior to the ASPEN readout. Instead, at the appropriate time, we intend to evaluate all possible options for balance sheet augmentation and choose those options that would be most beneficial to our shareholders, patients and other stakeholders. We see the sale of equity as simply one of the many tools available to us and it is by no means our preferred avenue for raising capital nor do we see a need to take action in the near-term. Looking at our expected cash burn in the coming year, let me remind you that our burn in the first quarter of every year is normally higher than our usual cadence due to the payment timing of annual employee incentive bonuses.

Importantly, our current cash balance provides us with more than enough capital to support our operations through the expected timing of the ASPEN top line results and beyond, leaving us with significant optionality on the other side of that readout. Let me now turn to our commercial performance. Last month at an Investor Conference, we disclosed that our global net revenues for 2023 were $305.2 million, representing 24% year-over-year growth and exceeding the top end of our guidance range for the year. This result is even more impressive when you recall that this range had already been raised earlier in the year due to the strong performance of ARIKAYCE, which had outpaced our internal expectations. On a regional basis, net revenue for 2023 was $224.2 million in the U.S., up 21% compared to the prior year.

This growth was fueled by the strong execution of our teams to continually identify new eligible patients who may benefit from ARIKAYCE treatment, making 2023 the highest year of new patient starts that we’ve ever had. In Japan, 2023 revenues were $65.7 million, representing 16% growth over 2022. As we had expected and highlighted for you previously, the pace of sales growth in Japan increased significantly in the second half of the year, going from 8% year-over-year growth in the first half to 23% year-over-year growth in the second half of 2023, despite a planned 9% price decrease that was implemented this past June. I want to acknowledge, the strong new leadership team we put in place in Japan in early 2023, which led to such a remarkable outcome this year.

The quality and effectiveness of their leadership gives me continued confidence in the growth trajectory for ARIKAYCE in Japan in 2024 and beyond. In Europe and the rest of world, net revenues in 2023 came in at $15.3 million, the strongest result of any year-to-date for that region with growth being driven primarily by Germany and the UK. The performance in 2023 continues to support our view that ARIKAYCE remains in a growth phase globally. Today, we are reiterating our full year 2024 global revenue guidance range we gave last month of $340 million to $360 million. As you think about the quarterly cadence for our sales this year, I will remind you about the deductible and copay resets for Medicare patients in the U.S., which typically lead to a sequential drop in sales in the first quarter compared to the fourth quarter.

In addition, the timing for when hospital budgets reset in Japan commonly lead to lower first quarter sales in that region as well. Historically, the first quarter has contributed a little over a fifth of each year’s total sales. We believe that these same dynamics will impact the first quarter of 2024. Despite this expected seasonal pressure, trends coming out of 2023 were very positive and we believe set us up well for another strong year of performance in 2024. Let me now turn to a few additional financial items. In 2023, our gross to nets in the U.S. were 15.4%, which is consistent with both our mid-teen guidance range and our historical performance. In 2024, we expect gross to nets will settle in the mid to high teen range due to marginal impacts resulting from the implementation of certain provisions of the Inflation Reduction Act.

As in prior years, we expect the gross to nets in the first quarter of the year to be a bit higher before coming back down in the remaining quarters of the year. Cost of product revenues for 2023 was $65.6 million, or 21.5% of revenue, which remains consistent with our past performance. Turning to our GAAP operating expenses. For full year 2023, research and development expenses were $571 million and SG&A expenses were $344.5 million, reflecting non-cash charges related to asset acquisition in 2023, as well as continued investment in both our early and mid to late stage pipelines and launch readiness activities for brensocatib. In closing, I believe Insmed is in a very strong financial position with over three quarters of a billion dollars on its balance sheet and multiple near term clinical catalysts on the horizon.

We look forward to using the resources we have to deliver on the great potential that lies ahead. Now, I’d like to open the call to questions. Operator, can we take our first question, please?

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Operator: [Operator Instructions] Your first question comes from line of Jessica Fye from J.P. Morgan. Your line is open.

Nick Lenard: Hi. This is Nick on for Jess. Thanks for taking our questions. Two from us. First, you mentioned this in the prepared remarks, but I was hoping if you could provide some additional details and maybe timelines around when you expect to have the final stat plans for ENCORE agreed upon with the FDA. And what your latest thinking is around potentially needing or not needing to make any changes to PRO based on any initial feedback.

Will Lewis: So that’s a pretty straightforward one. I mean, we’re in dialogue with FDA, as soon as they are able to meet with us in person, talk through the remaining elements of the PRO to their satisfaction, we’ll give that guidance out. This is one of those things where we don’t have control over the clock. It’s sort of the ball in their court. And I would just reemphasize our interactions with them to date have been very positive. Perhaps, I can go into an example of a detail for how this might unfold. One of the questions that’s contained within the PRO asks about the color of the sputum and from the PRO group that is inside the FDA, right? This is a separate group within FDA. They have been contemplating whether that is really a relevant question in the context of a patient reported outcome.

So whether they keep that question or advise us not to keep that question, it makes no difference in the way we analyze what we need to do or how we’re executing. And indeed, the ARISE data works both ways. We’ve run it both ways, so we’re not concerned about it, but it is the kind of detail that we need to run to ground before we can finalize the statistical analysis plan and therefore communicate what ENCORE needs to look like. But I just would tell you, we’re going exactly as we expected in terms of timeline and progress dialogue with FDA. I would expect this will happen in the coming months and we will communicate it as soon as it’s available. And that would give us the opportunity, once that’s locked down, to then return to FDA, the review division and say, do you think ARISE is adequate for us to file and secure earlier approval in the all MAC NTM indication.

My hope is that they would be willing to engage there. But again, our base case is assuming that we would need ENCORE for full approval.

Nick Lenard: Great. And then maybe taking a step back and thinking about brenso beyond bronchiectasis, this is not to overlook ASPEN, obviously, but how are you thinking about the level of neutrophil mediation involved in the pathology of CRS without nasal polyps and HS relative to bronchiectasis, in terms of it being a driver of each disease?

Will Lewis: Yes. So that’s exactly why we’ve chosen these two as our second and third indications to pursue. They are neutrophil driven diseases, particularly when we talk about something like CRS without nasal polyps versus CRS with nasal polyps. CRS without nasal polyps has nothing approved to treat it. Right now, the patients we’re targeting within that population are those that are undergoing, quite often repeat surgeries. So the threshold here for unmet medical need is quite high, and the ability of this product to influence the inflammatory cascade by mediating that neutrophil driven inflammation looks pretty good. There aren’t great models in the animal world for CRS without nasal polyps, which is why we really need this BiRCh trial to read out.

And we will be interpreting the ASPEN data with exactly that in mind. How much impact do we think we’re having? That magnitude should carry forward into other neutrophil mediated diseases, like CRS without nasal polyps and hidradenitis suppurativa, or HS. HS will kick off a Phase 2 trial by the end of this year, presuming that ASPEN is good and that we don’t learn anything that might mitigate that. Perhaps, a final point of detail on the HS study, we intend to structure it right now in a way where we will look as we go through the study to see that we are seeing some kind of response in Phase 2. And indeed, if that is not a cascade that is resulting in benefit to patients, we would look to shut that study down early. But I think we’re going to be in a good spot with regard to all three of these, because they are neutrophil driven diseases.

Sara Bonstein: And I would just add one thing just to remind folks that bronchiectasis is obviously a very significant market opportunity. CRS is also a very significant market opportunity. 26 million patients diagnosed with CRS without nasal polyps in the U.S. alone. While we will obviously target the more severe ends of that, it’s a very significant TAM and ability to influence patients.

Nick Lenard: Great. Thank you.

Operator: Your next question comes from the line of Jennifer Kim with Cantor Fitzgerald. Your line is open.

Jennifer Kim: Hi, thanks for taking my questions. Maybe to start with brensocatib, I know you’ve said that exacerbation rates are occurring in line with expectations. I think you’ve suggested before that it’s reasonable to expect that rate to tick up as we move further away from COVID. So I’m just wondering, can you remind us what else is embedded in your expectations for these patients given the timing of enrollment and follow-up? And is there more recent literature that sort of covers the natural history of exacerbations in the 2022 and 2023 timing? Thanks.

Will Lewis: Sure. So just to remind everybody, I think it was a little over a year ago that we gave the only guidance we had on the blended blinded rate of exacerbations going on in the study. And that was 1.12 to 1.15. And what we were trying to do there is give you a snapshot with a bulk of the study having been engaged and many patients having completed as to what that rate looks like. And what was exciting to us at that time is that that paralleled what we saw in the WILLOW study, which as you all know was very successful. So it looked as though the behavior of this population was very similar to the WILLOW population. We also released the baseline characteristics, which were almost identical between the two studies. So once again, when we think about the strategy behind the study design, it was to replicate what we saw in Phase 2.

Add nothing new, change as little as possible, so that all we’re really doing is scaling up what we knew was a successful Phase 2 study. As we reflect on influences on rates of exacerbation, seasonality, things like COVID, et cetera, I would just share that when we did the small study using brenso and CF patients, we didn’t see any influence there as a result of the COVID or other seasonal impacts. We didn’t see any impact on the Arise study, it’s a different population, but it’s similarly a respiratory condition. And so for those reasons, we feel good about the backdrop of what a large study can collect and how these things are not likely or expected to be an influence. The vast majority of the patients we have recruited and have been in this study were recruited at a time after the restrictions had been lifted for COVID.

And those that were recruited during the time of COVID restriction had to have two or more documented exacerbations to get into the study. So what does that mean? It means that the key to this study being successful is having enough events in evidence so that our drug can show its impact. And indeed, the blended blinded rate, our examination at the site, country, and regional level, all of these things are consistent with our expectations that we’re seeing enough events and that we should be able to witness the impact of the drugs treatment.

Jennifer Kim: Okay. And maybe one question on ARIKAYCE. The ATS Conference presentation in May, I think before you’ve said that the efficacy is pretty consistent across the individual symptoms. So is there anything new in the detailed data that you would highlight to.

Will Lewis: Well, I would – without sort of jumping the gun here, I would just encourage you to take a close look at ATS. I think we’re going to have a number of different data sets that are out there that are trying to do a more refined look, if you will, at what came out of ARISE, and indeed some other earlier stage work that we’re doing to try to illustrate the ways in which you can lean even more heavily on the results of ARISE, the results of WILLOW, and the promise of TPIP. What’s great about ATS is that all three of those potential compounds or actual compounds, can be featured and discussed among a peer set. And I know from last year, when we had that experience at ERS and other conferences, it’s really quite something to be there and be the subject of discussion among each of those different key opinion leader communities, all of whom are saying to us, your drugs represent first or best-in-class treatments for these populations.

Jennifer Kim: Okay, that’s helpful. Thanks, again.

Operator: Your next question comes from line of Tiago Fauth from Wells Fargo. Your line is open.

Tiago Fauth: Hey, thanks for taking a question. Just two quick ones for me. So, on TPIP, I just want to recap, what are we actually going to get in Q2? I know it’s mostly a safety focus for the PH-ILD patient readout, but I’m wondering when we’re going to get more detailed PK/PD data, maybe efficacy, and what else could we see? Feels like a lot of investors are seeing tip it more as a show me story. And then just on the frontline, ARIKAYCE opportunities still get some skepticism there based on either ease of use or standard of care or even cost. But again, assuming you can replicate data similar to ARISE, how would that play out commercially? Thank you.

Will Lewis: Yes, sure. So on the TPIP front, I mean, I think everything we’ve seen there on a blended blinded basis suggests that this is a best-in-class therapy. I share the observation that there are many who are not, I don’t know, if the right phrase is giving us credit for that asset. I think that’s a miss. Very bluntly, I think if you look at the profile that that drug represents, just looking at the responders in the PH study that we’ve provided so far suggests pretty profound impacts that are best-in-class in this disease state. So it’s a small number of patients, it’s early, we need to see more data. But if it continues to point in that direction, and we’ve tried to be very specific today, north of a 30% PVR reduction, when we unblind the PH study next year, we would consider to be best-in-class.

We remember sotatercept, which was acquired after Phase 2 and showing 33.4% reduction at its highest dose in PVR. And among the responders in our study so far, we’re seeing 47% reduction. Even if it drifts down, that still is a very compelling profile for a drug that nobody currently is giving us a lot of credit for. And I think that one is – that’s the reason I refer to it as the sleeper within the company. We will be providing at the time of the PH-ILD top line results, both the data about the PH-ILD study, which is a safety study, and I’ll talk about those data in a second, but also data from 40 patients in the PAH study to update you on what that blended, blinded data looks like. And does it continue to look as strong as it has been?

And as I say, even if it drifts down a little bit, I think it’s going to be incredibly compelling. On the PH-ILD front, it is – can we get patients to the max dose? And we know that more than 80% have already gotten there so far. And can they get there without experiencing the negative side effects that are so common in this class of therapy. There are a number of other sort of smaller points, we’ll get those data out as soon as we can. But I think we’ve enumerated it in our slide deck on our website as well, if you want to go through to each of the itemized points. Your second question, which was on NTM and the ARISE data and the commercial potential there, let me just put it to you this way. We know from what’s going on in this marketplace and the challenges of treating NTM patients, this is an incredibly difficult disease to treat and to treat effectively.

When we looked at our CONVERT data, we saw a 33% conversion rate in patients who were refractory and that was a remarkable accomplishment in the mind of everybody in this disease state. ARISE showed that after six months we were able to convert 80% of the patients. So I don’t know how much better the data could be than it was in ARISE in terms of ultimately accomplishing the goal of converting patients who have positive sputum. So I think if anything, what you’re going to see is a natural shift to want to treat these patients earlier with ARIKAYCE because you have the chance to eradicate them in six months, up to 80% of the patients. That alone will drive and already has driven the dialogue among KOLs to the need to treat early and with ARIKAYCE.

Tiago Fauth: Understood. Thank you very much.

Operator: Your next question comes to line of Andrea Tan of Goldman Sachs. Your line is open.

Andrea Tan: Good morning. Thank you for taking my questions. Well, just one question here. In the PR, there is this note that the Japanese regulatory agency has this desire to see 12 months of treatment exposure and durable culture conversion. Just wondering if you have a sense if the FDA will have similar requirements and I asked this in the context of this potential path to accelerated approval for frontline that you mentioned?

Will Lewis: Yes. So the FDA and the PMDA have different requirements. This is true going back to when they first started examining the drug and its impact. In Japan, the PMDA is very specific. They want to see culture conversion. In the U.S., the FDA has been equally specific. They want to see impact on PRO. It’s not that they won’t look at culture conversion. And indeed, our conditional approval for refractory MAC was granted because of the profound impact we saw on culture conversion. But they want for – to meet their own mandate of clinical effect as they perceive it. There needs to be an impact on the patient reported outcome. That’s why this tool is so important to get right from the FDA’s perspective. When we look at the landscape of how people evaluate this drug, whether it’s the European or the Japanese regulatory authorities, the key opinion leaders, the market access world or indeed patients themselves, they are all centered on culture conversion.

It is the FDA in isolation that really wants to focus on the PRO. So the direct answer to your question is, while FDA will always be looking at the totality of the data, the thing that they are looking to have evidence of is impact on the PRO. And that’s why ARISE presents us the opportunity to approach them about a Subpart H approval, because we did see a consistent improvement on the PRO in the ARISE results. And so on the basis of that, we think it’s reasonable to go to them and say, given that we’ve had this positive impact on the PRO, would you be willing to permit us to review, to file and secure earlier approval. Also, knowing that ENCORE as a study is already enrolled and largely spoken for. So they don’t have to worry about us not following through, which is a common concern at FDA.

So I think for all those reasons, it’s a legitimate ask. I think there’s a strong argument to be made there. But I also want to reiterate that our guidance right now is that the full ENCORE data set will be needed for approval. And if we get an opportunity to go earlier and the FDA is clear on that, then we will take advantage of it.

Andrea Tan: Got it. And then just on your peak sales estimates for brenso of the $5 billion plus. Just curious if you could walk us through the assumptions that get you to that $5 billion and how much of that is driven by bronchiectasis versus CRS without nasal polyps.

Will Lewis: Yes. So we haven’t gone into greater detail on that front, but I think the key drivers here, and I know a lot of you who are thinking about modeling, want to look at each of these. So price. When we think about the price here, we’ve talked about specialty asthma products like FASENRA, which is about $40,000 a year. We’ve referred to that historically as very likely a floor in price, assuming that the target product profile is consistent with what we saw in WILLOW. When we think about the addressable market, we’re talking about 1 million diagnosed patients at the time of launch. These are patients that would meet the criteria that we think would be suitable for effective treatment. Based on the results of the WILLOW and subsequently assuming success the ASPEN trial.

So that’s a very interesting addressable population out of the gate. There’s an opportunity to explore building beyond that, but we’re going to start with that as a point of guidance. And then penetration rate, I think for a first in disease drug with a novel mechanism and a very low treatment burden, like a once a day pill, it doesn’t really get much better than that. And given the safety we’ve seen to date, which is very compelling in WILLOW and is at least that good in ASPEN to date, as it was in WILLOW, we think that the penetration rate being very healthy is something you can rely on in your modeling efforts. I know some people have modeled it quite conservatively, but we think we’re going to have a very effective penetration rate.

We’ll get more specific about that as we move forward. And I want to take this moment to highlight that shortly after the data, we’re going to put out the top line data within a week, we intend to have a commercial day, if you will, a virtual commercial day, where we will walk you through each of the assumption sets for each of our three late stage programs or pillars. That would be ARIKAYCE frontline and Brensocatib and bronchiectasis, and how we’re thinking about it in CRS and HS and TPIP for both PAH and PH-ILD. So that people can update their financial modelings consistent with the data that we will have released by then, which will include new data on PH-ILD and PAH, and obviously the data from ASPEN. Where I’m trying to go with all of this is, I think the vast majority of the investment community right now is sort of in a holding period as they wait for the ASPEN data.

But very shortly after that data comes out, and presuming it’s positive, there’s going to need to be another rerating of this company, in my opinion, because the financial modeling that has been undertaken to date, I would put in the very conservative category. There are some people that do not give us any credit for TPIP in terms of revenue generation. There are folks who are modeling ASPEN and bronchiectasis incredibly conservatively, in my opinion. And on the other side of successful data, I think it’s going to be important to rapidly readjust that lens and see these three pillars for what their potential really represents. And to put numbers behind that, we think ARIKAYCE, all MAC NTM, that’s $1 billion plus product. We think TPIP between PAH and PH-ILD is a $2 billion peak sales product.

And we think brenso and bronchiectasis and CRS without nasal polyps alone is north of $5 billion in peak sales. So there’s a lot to model here, a lot to understand, and we’re going to walk you through it within days of the top line ASPEN results.

Andrea Tan: Great. Thanks, Will.

Operator: Your next question comes from the line of Jason Schwartz – sorry, Joseph Schwartz of Leerink Partners. Your line is open.

Joseph Schwartz: Great. Thanks for all the updates. So I have a couple questions on bronchiectasis. The first is, since the lower blended blinded rate of pulmonary exacerbations in ASPEN could reflect both treatment effect as well as some placebo effect, which we’ve seen in other bronchiectasis trials, including WILLOW. I was wondering what factors you think could drive placebo response the most in this setting, and whether you’re able to do anything to control for this. We’ve heard that things like better adherence to airway clearance and just reversion to the mean can occur in these trials. I’m wondering if you think, are these the biggest factors to consider or are there other things that could drive placebo effect more. And are you able to do anything to minimize that impact?

Will Lewis: Yes. So when we look at the particular aspect of exacerbation rates in the study, there are several important things to remember. The first is, how do you define an exacerbation, and how do you let patients into the trial using that definition? I want to remind everyone, our definition of an exacerbation is very strict. There not only has to be an exacerbation declared by the patient and the physician, but the physician then has to document a change in treatment, including either prescribing an antibiotic or admitting the patient to the hospital. So that treatment response makes that a very substantive event that they are trying to address. That exacerbation or event is then adjudicated by a third party. So there are several layers of protection to ensure that what we’re seeing are real events.

In the past, in other studies where the definition hasn’t been as strict, there’s been a little bit of shift around the number of events and where they’ve fallen. So we use this definition in WILLOW. It’s why we saw a clear, statistical significant impact on both doses, on the measure of that study. And I think it’s why we have such confidence going into this one. As we think about assumptions, the observed rates in most trials are right around 1.35 or so. We saw 1.37 in WILLOW, we had assumed 1.2 more conservatively, and for ASPEN, we kept that assumption at 1.2. So the powering of this study is very healthy relative to observed rates. Where the placebo rates have been lower in other studies, it is almost entirely driven by the fact that patients were recruited in areas that the placebo rates drop, because they are receiving better medical care.

There’s one study in particular where up to 30% of the patients that were recruited came from Russia or Eastern Europe, where it is commonly the case that by having patients from those areas, simply including them in a clinical trial where they get better medical care, results in a drop of the actual placebo rate. I’ll remind you that WILLOW had about a 13% recruitment from Eastern Europe. No patients from Russia and ASPEN has less than 10% from Eastern Europe, and no patients from Russia. So the probability of having those kinds of influences or aberrations in our study is extremely low. And for that reason, we feel like the study is well powered. We have seen the right level of blended blinded events that we want to. If this drug has a treatment effect as it did in Phase 2, we will be able to capture it in Phase 3.

Joseph Schwartz: Thanks, Will. That’s very helpful. And it kind of leads nicely into my next question, which was actually on the antibiotic prescribing behavior in particular, given I think there’s some different propensity to use antibiotics in different regions around the world and even within countries such as ours, I’m just wondering if that could be a potentially confounding issue at all. Have you looked at WILLOW in that sense, and are you able to do anything to control for that kind of behavior?

Will Lewis: Yes. So, once again, what we want to do with these studies is have enough patience and enough variety that it controls for any idiosyncratic aberration that may come from small patient numbers or responses. Happily in WILLOW, I’ll give you an example, probably the most important antibiotics that we kept a close eye on is the use of macrolides, because they have some anti inflammatory effect associated with them. Interestingly, in that study, we did not see a difference between those who were given that or were not given that. And so in Phase 3, we kept that just as it was. And those patients are going to end up being equally distributed across the different arms of the study, and we didn’t see an influence from it.

But if it were to be there, the larger numbers and the distribution across the study should protect us from any aberrations that might hypothetically flow from that. I want to be clear, though, we didn’t see any distinction in Phase 2, but because of exactly what you’re talking about, we looked at it very carefully. So we feel good about the design of Phase 3, because it has tried to compensate for all of these different influences that in some cases have been in evidence in prior Phase 3 studies that have failed.

Joseph Schwartz: Great. Very helpful. Thanks, again.

Operator: Your next question comes from the line of Ritu Baral from TD Cowen. Your line is open.

Ritu Baral: Good morning. Thanks for taking the question. Well, I just had some questions on the ASPEN statistical analysis plan. And then my second question was just some clarification on ARISE versus ENCORE. For stats, it sounds like you guys now are splitting the alpha between the 10 milligram and the 25 milligram dose versus any sort of hierarchical analysis. Is that correct? And then could you describe further the type of analysis that you’re going to be using and how it plays into what you said about. I think you had previously said that the study was powered down to show an effect size of low 20s reduction. I’m just wondering if that – when you said that that was alluding to a p value of 0.01 or that 0.01 to 0.05 range that you mentioned today.

Will Lewis: Yes. So the whole thing to understand is, better than most in the Arcana of statistics, is how do you control for multiplicity? And what we’ve done in our statistical analysis plan, at least as we conceive of it right now, and we’ll finalize the details with FDA as we approach the final data set reveal is to use what’s called the truncated Hochberg analysis, where you basically preserve some alpha to look at each of the different dosages independent of one another. So if 10 wins, then we can go to 25 and we can look at secondary endpoints in both. If 10 fails, we can still look at 25 and still preserve alpha to look at secondary endpoints underneath 25. Not all statistical analysis approaches permit that, this is one that has been used commonly, it’s with precedent.

So we don’t anticipate it being controversial, but that’s how we’re thinking about the control for multiplicity and the ability to look at both the primary endpoint for each of the doses and preserve some residual alpha for the secondary endpoints. And so when we talk about being able to detect an effect into the low 20s, it contemplates that approach. So hopefully that’s responsive to the question.

Ritu Baral: Got it. And you are testing that 10 milligram first before the 25?

Will Lewis: Yes. I think, however, you want to think about it, the 10 or the 25, they get equal amounts of support for whether or not you clear that initial hurdle. And then some residual alpha is preserved for secondary endpoints under each of those doses.

Ritu Baral: Got it. Which of the secondary endpoints have you decided to reserve alpha for?

Will Lewis: Well, you reserve alpha for effectively all of them, and then you go hierarchically through the secondary endpoints to see whether or not you clear them.

Ritu Baral: Got it. Okay. And then the meeting that you will be having on frontline ARIKAYCE, will that solely be on ARISE or are there any questions on ENCORE QLB or statistical analysis plan? Anything around ENCORE left to nail down at that meeting? And it sounds like you’re waiting to do an in-person meeting versus the usual Zoom or questions they like to do over paper.

Will Lewis: Yes. So to be clear, there are two groups that we are dealing with at FDA. The first is the PRO group, that’s a specialized group at FDA that looks at the creation and elements that are necessary for an appropriate patient reported outcome tool to be used. That’s where the first dialogue has been happening. We’ve had written exchange with them. It’s been very encouraging. We’ve sent them the information they want. There’s always an exchange and request for additional analysis, when that stuff goes through, they then review it. We then have an in-person meeting to run to ground any final remaining questions or points they have. And at the conclusion of that in-person meeting, we should have their blessing that this PRO is suitable for use in ENCORE.

At that moment, once we have that PRO sort of finalized for ENCORE, then we can turn around and go to the review division and say, based on the ARISE data and the fact that this PRO is suitable in ENCORE and therefore in ARISE, is it reasonable to pursue a Subpart H pathway for earlier approval for all MAC NTM. And so that’s the cascade that’s going to unfold here. So the specific question is, are we going to be talking about ENCORE or ARISE with the PRO division? We’re really going to be talking about the PRO and whether it is where it needs to be from their point of view. Once that’s constructed, then we will use that PRO as they have blessed it, to frame out the final elements of the statistical analysis plan for ENCORE. And then in parallel, we would go to FDA’s review division and ask about whether ARISE is adequate under Subpart H for an earlier approval.

But to be clear, things that are discussed with the PRO group are more like, what is the minimally important difference in treatment effect that they want to see used in the PRO? We’ve proposed a level based on what we shared with you last fall. The FDA could go above that. They could go below it. For us, it doesn’t matter, because the drug works in all settings, at all levels. That was the real breakthrough moment of the PRO last fall. So whatever the FDA sets it at, we’re going to be fine. It’s just – it really is up to them, what they feel is the appropriate threshold.

Ritu Baral: Understood. Thanks for taking the questions.

Operator: Your next question comes from the line of Vamil Divan from Guggenheim Securities. Your line is open.

Vamil Divan: Great. Thanks for taking my questions. Maybe one, just follow up on brenso and then one ARIKAYCE on the guidance. So on brenso, obviously there’s a longer trial with ASPEN than it was in WILLOW. Question we’ve gotten a few times from investors, just sort of the safety side of things and how long have patients, at this point, any patient has been treated with brenso? And is there anything you’re particularly concerned about as you look at a 12-month trial as opposed to what you saw in six months. And then in terms of the guidance, I know you give it more on a global level, but I’m just curious, especially on the Japan side, where we have a little bit less visibility, if you can maybe comment on the trends you’re seeing there or maybe just broadly speaking to your growth expectations in Japan relative to what you’re expecting in the U.S. for 2024. Thanks.

Will Lewis: Sure. So when we think about the time of exposure in the ASPEN study versus the WILLOW study, I would tell you that should help us dramatically, because if you think about the Kaplan-Meier curve, it was separating and continued to trend apart at the different doses versus placebo, and that was within a six month timeframe. And actually, quite strikingly, remember that this drug takes about two to four weeks to get to full pharmacodynamic effect. So we really were looking at about five months of treatment effect in the WILLOW study, and to see that dramatic of an impact was unbelievably encouraging. So going out a year should help as we look for the events to take place and patients to improve. I will just share that we have had some patients in open-label extension and through a special dispensation that have been on the drug, I can think of one that’s been on the drug for more than three years at this point.

And the Data Safety Monitoring Board has met repeatedly. And as we’ve said publicly, the safety profile we see in ASPEN is at least as good as what we’ve seen in WILLOW. We’re obviously blinded, but in terms of number of events and what we’re seeing, it looks really good. And the WILLOW study was striking in that we had a higher dropout rate in placebo than we did in the treatment arms. So I think the drug is looking quite safe. We have to obviously examine the data in detail, but that is a really positive point. And it goes to the heart of why we have regulatory confidence here. Because if we see what we saw in WILLOW, we know that the FDA and other regulatory authorities start with safety, is the drug safe? And then they look at efficacy.

In our world, we obviously tend to do it the other way. We say, how effective is the drug and then is the safety tolerable? For the FDA, the do no harm mandate really is, can patients take this drug safely? And there we have a real advantage, because so far, the safety profile has looked really encouraging. So I think the time element will help us in ASPEN, and I think the safety is looking very good. As we turn to the global guidance with regard to revenue for this year for ARIKAYCE, I would characterize both Japan and the U.S. as in a very good growth mode. I think we feel very encouraged coming out of 2023, that 2024 as a year will do very well. I would highlight the caveats that Sara mentioned in her remarks that the first quarter is always a little challenging for a variety of reasons, but the trend that we’ve seen year-over-year is that the year produces impressive growth results.

To be in the sixth year of a drugs launch and be looking at double-digit growth is really quite unique and rare and a testament to the strength of our commercial team. And for that reason, I’m very encouraged by where we are and what I think we’re going to see this year from ARIKAYCE in the U.S. and Japan in particular, but also in Europe. Europe’s coming off a smaller base. It’s always been a smaller revenue generating region, but I think the work that’s going on there is really best-in-class. And I think that’s important as we think about the opportunity to expand our commercial capabilities to respond to the opportunity, if ASPEN is good, to launch bronchiectasis, because it’ll be launching in each of the three regions, to remind everybody, our current guidance is that we would launch in the U.S. in the middle of 2025, and in the first half of 2026, we would first launch in Europe and then Japan.

So these are going to be rapid succession of launches and we’re not that far away from it. I mean, think of it this way. Two years from now, we’ll be underway in probably two of the regions and well on our way to the third.

Vamil Divan: Okay. Thanks. Thank you very much.

Operator: Your next question comes from the line of Jeff Hung of Morgan Stanley. Your line is open.

Jeff Hung: Thanks for taking my questions. For brensocatib, you mentioned that one dose achieving a p value less than 0.1 would be a clear win. What happens if the 10 milligram dose is statistically significant, but the 25 milligram doesn’t show a Statsig benefit? How would you think through that scenario? And then for the early stage pipeline, any progress updates on INS1201? What would you like to see in the muscle biopsy and biomarker data in the coming months? Thanks.

Will Lewis: Yes. So on the question of the Statssig and the different doses, I’m really glad you asked that. We get this a lot. It doesn’t matter to us whether it’s 10 or 25 milligrams. If either dose gets below that 0.01 threshold, it’s a clear win. We have an approvable drug in our judgment, and the FDA will embrace that wholeheartedly as will the treatment community. If the 10 milligram dose hits and 25 doesn’t, it doesn’t necessarily have any negative impact on the data that we have. What we’re trying to examine is, is there evidence that one of these doses successfully treats these patients in a safe and effective way? And if we see that data at 10 milligrams, but we don’t see it at 25, there’s plenty of precedent out there for drugs that work at one dose but don’t work at a higher dose, and that’s perfectly acceptable.

We don’t have to see a dose response curve that continues in a linear fashion up and to the right from 10 on the way through to the higher doses we’ve studied. And so I think, again, victory here. We brought 10 and 25 forward so that we would have two shots on goal. But if both of them work, we may only bring one dose forward. In fact, we’re very likely to only bring one dose forward. If only one of them works that’s fine. That’s the one we’re going to bring forward. Whether it’s 10 or 25 and the other dose behaves differently, it does not matter. What matters is whether one of them can clear the threshold and be safe. And trends right now suggest that will be the case.

Jeff Hung: Great. Thanks.

Will Lewis: And then the question was on the earlier stage pipeline, and let me just say, I think we continue to make very good progress there across a number of different fronts. We haven’t spent a lot of time talking about that because there’s this phenomenon going on at the company where really, the ASPEN data is overshadowing everything else that’s going on, both at ARIKAYCE and in TPIP, and then, of course, cascading down to the fourth pillar. But I will tell you that we’re going to have a lot to say about the fourth pillar in the second half of this year and the early part of next year, because the progress we are making there is very encouraging. And I think we’re going to have multiple INDs filed. And once that happens, we will announce that. And once those INDs have been filed, we’ll try to frame out timing expectations for data release.

Jeff Hung: Thanks.

Operator: Your next question comes from the line of Liisa Bayko of Evercore. Your line is open.

Liisa Bayko: Hi, I just wanted to understand, first of all the ASPEN endpoint statistics a little bit more, and then a question about PH-ILD. And just for the statistics, so just to clarify, Will, if you hit less than let’s go with 0.01 for now, is this — in this Hochberg procedure, are you able to then recycle alpha down to the other secondary endpoints? Is this, whatever is left over as you subtract whatever p value you’ve got for one of the doses from the, let’s say, 0.01 and then you apply that to the secondaries? Or how does that actually work?

Will Lewis: Yes. So my understanding, and again, we’re getting into the arcana of statistics, which I’d have to go back to graduate school to remember the details. Happily, more capable people than me are on this, so if I get this wrong, we will circle back and clarify this. But my understanding is that we do recycle alpha as we go through this procedure, as we currently contemplate it. And it is our expectation that this is not in any way considered controversial from the point of view of the FDA. So that our approach here is very plain vanilla, if you will, and that recycling of alpha can be utilized in the other endpoint measures.

Liisa Bayko: And are you allocating equal alpha between the two doses, or are they — are you favoring one over the other?

Will Lewis: We’re not favoring one over the other. The way the procedure goes is you begin with one dose and you proceed through to the other dose and then to the secondaries. But if you clear the first, like, let’s just say it’s 10 milligrams and that hits, and then you go to 25 milligrams and that hits, and then you’re looking at your secondaries. In a world where 10 milligrams hits, but 25 does not hit, you do have alpha preserved. Set aside a priori for the examination of the secondary endpoints under 10. So that there could be a scenario, as was contemplated earlier, where one dose hits, the other doesn’t. But we could still claim secondary endpoint benefit under the dose that does hit, and that’s the intention behind using this procedure. That’s how we’ll control for multiplicity.

Liisa Bayko: Got it. And one of the doses doesn’t hit like it’s well above 0.05. It doesn’t have any impact on the other dose just to clarify, you still can go down all those analyses.

Will Lewis: That’s correct.

Liisa Bayko: Okay. Okay. For PH-ILD, I’m just trying to understand, because you’ve given a lot of information so far, like what additional data are we going to get at the — I mean you’ve talked about 80% of patients are already at the max dose. I know you’re not going to give any efficacy. Can you explain why we won’t get efficacy right now? When we might see it? And then I guess what new role we get in June that we don’t already know now for PH-ILD?

Will Lewis: Yes. So I think what we’re trying to, first thing, we’re going to do is we’re going to unblind and we’re going to know who’s on drug and who isn’t. And sometimes results are unexpected, right? So I suppose that is one issue that we’ll be showing. But we’re also going to be looking at PK and exploratory efficacy data, it’s not going to be available at the time of the top line announcement, but we’ll get it out there as quickly as we can. And my expectation is that when we look at what is it, the primary endpoint is safety and tolerability and oxygenation, and then as we go through secondary endpoints are the PK data. We are going to be looking at exploratory efficacy endpoints of improvement in exercise capacity or six-minute walk, improvement in biomarkers of cardiac stress, so NT-proBNP improvement in lung function and pulmonary vascular volume and improvement in quality of life.

Now those exploratory efficacy endpoints won’t be available at the time of the top line. It just takes longer to process all of that. And because this is a study that we’ve featured, we do need to put out for 8-K purposes what the results of the study are, which are a safety examination. I do think it’s very important to understand that because we know this is a prostanoids and we know how it works and that there is a dose response curve already established, being able to show the safety and tolerability of higher doses achieved is really at the core of the value, because once you know you can get up higher in those doses, you would expect to see the benefit flow in the different patient populations. So I think if we can show we’re getting patients to max tolerated dose on the drug, not placebo, and that the AE profile that’s presented is benign, then you’ve really achieved your goal.

When we think about these two populations, I want to make one other point. PH-ILD and PAH patients are different. PH-ILD patients tend to be more sick, more severe, and so you would expect that to be noisier than PAH and you would see that in other studies that are precedent to this. But having said that, the fact that we’ve gotten more than 80% of the patients to achieve a max tolerated dose of 640 micrograms is already in and of itself remarkable. Now, we’ll reveal whether or not those patients are all on drug or placebo in drug and what the mix is. And I think that will be interesting data.

Liisa Bayko: Great. Thank you.

Operator: Your next question comes from the line of Stephen Willey from Stifel. Your line is open.

Stephen Willey: Yes. Thanks for sneaking me and just one on TPIP. And I guess, just curious if you can kind of speak to the pace of enrollment that you’re seeing into the PAH trial and whether or not these are all U.S. based sites. I guess I’m just trying to get a sense of kind of how you’re thinking about the potential availability of sotatercept within the next month or two and whether or not that might impact enrollment kinetics just given, I think eligibility criteria for this trial requires at least 90 days of stable background therapy. Thanks.

Will Lewis: Yes. So the majority of the — well, the enrollment continues to go well. I would say it’s picked up a little bit in the aftermath of the blended blinded data release. People are really paying attention to this. As you point out, it’s a competitive market. There are other people that are out there trying to run trials, but we’re talking about a handful of patients. So I don’t think the introduction of sotatercept is going to have a profound impact on the available patient population. And we are not just in the U.S., nor are we heavily reliant in the U.S. In fact, many of the patients are coming from abroad because there is an approved drug for the treatment of PH-ILD and PAH in the US. So from that perspective, being able to go to places like Europe has proven to be very beneficial to us. And I would expect that to continue.

Stephen Willey: Great. Thanks.

Operator: Your next question comes from the line of Leiyang Wang from Barclays. Your line is open.

Leiyang Wang: Hey, thanks for taking my question. So I have two, one on CRS without polyps and HS. Do you have any insight into the level overlap between bronchiectasis patients and these other diseases? And two, so in 2023, you were relatively active on the BD front, but most of this was non-cash using equities. How are you thinking about BD going forward? And do you expect to continue to utilize stock as a method for transacting?

Will Lewis: Yes. So on the first one, we don’t have a lot of data that we’ve shared on the overlap between CRS and HS and bronchiectasis patients. We can look to include that, perhaps as we turn our attention to what we refer to as this commercial day that will be in the immediate aftermath of the top line ASPEN results. So that it’s elucidated where the patients are and where they are that they overlap. Probably, the most important point to remember and highlight is the overlap between bronchiectasis and NTM, because that is quite substantial, and it lays the groundwork for why we’re going to be able to leverage the existing commercial infrastructure on a global basis. All of the thought leadership in NTM sits as part of the thought leadership of bronchiectasis, and vice versa.

And so that provides a real opportunity for us to leverage the excellent work the commercial and medical teams have done over the past years. On the BD front, yes, we did do a number of transactions. They sit under what we call the fourth pillar. The logic behind this is, we believe the success of the first three, presuming that we actually will be able to pull this off and have 100% hit rate. But if these first three work as we expect them to, then they will provide more than ample capital for us to feed this pipeline that we have developed internally. This now represents more than 30 different pre-IND compounds running in parallel. It is less than 20% of our overall spend, and it will remain there for the time being. But that is a very robust set of opportunities.

We’ve just reviewed them in thorough fashion, and I can say many of them look incredibly promising as they enter their pre-IND final moments. And so we expect to be talking about them, particularly in detail next year, including with data. And so from that point of view, I don’t think there’s a need for us to do much in the way of BD. We will continue to look. We are always opportunistic, but we have some best-in-class leadership in terms of the scientists we’ve recruited. And the work that they’re doing is really exceptional and incredibly promising. So I think we’re going to have a very robust pipeline from which to choose. And one of the trends that you will see evolve in the next year or two is that it’s quite likely we won’t be able to bring all of these forward.

We may be out-licensing some of them. We may be looking to partner some of them. There’ll be a new dimension of Insmed’s business development, which relates to co-development and out-licensing just as much as it does to looking to bring additional programs on board.

Leiyang Wang: Great. Thank you.

Operator: Your next question comes from the line of Andy Chen of Wolfe Research. Your line is open.

Andy Chen: Thank you for taking the question. Congrats on the progress. Just wondering, so, brenso in HS, obviously there’s a PH-17 component. There’s a neutrophil component. I’m just wondering if you can talk about your mechanism versus IL-17. Like why does neutrophil math — like why this interfering with neutrophil maturation and recruitment, why does that matter more? I’m just wondering if there’s a mechanistic reason that it’s going to be better than IL-17 antibodies out there. And I have a follow-up after that.

Will Lewis: Yes. No, I appreciate that question. I think at the heart of HS, there aren’t great animal models, once again, to be able to inform how this drug may be able to perform in this setting. It’s one of the reasons that the trial design will include a sort of early examination of effect, so that we know whether or not this is going to be productive. But I want to be clear. We believe that it will be and it is not our intention to displace those other approaches. I would say that we feel pretty comfortable with this space. As you may know, I was on the SPAC that was involved in the MoonLake merger and acquisition, so I’ve been around HS for a while. I think this is a very interesting opportunity. I think it’s enormous.

And I also think that the need for additional therapies to complement those that are already effective is going to continue to be the case. This will be a combination market, and this represents a very different approach than the ones you’re enumerating, which I have a lot of confidence in. I think they’re going to do very well. But I think some of the effect sometimes wanes. The opportunity to come in with a once a day pill that could be contributory and improve these patients would be a very meaningful impact on patient outcomes, and that’s why we’re pursuing it. This is a neutrophil driven disease, and from that point of view, inactivating DPP1 and preventing the release of that inflammatory cascade of NSPs we think is going to be directly on point and potentially result in patient benefit.

Andy Chen: Right. And a follow-up on your early stage assets, so I noticed on your slide, it’s IND filing. It’s singular. So it looks like it’s going to be one single asset coming forward in 2024, but like I’m just wondering if you can provide a bit more color on is it going to be a new technology, or is it going to be validated, existing technology on the market? And are you leaning towards a hot areas that everyone is going toward, or is it going to be like more blank spaces that’s less competitive?

Will Lewis: Yes. So let me just frame out that we sort of think of this in four different categories, right? We have our San Diego operation, we have our New Hampshire operation, our New Jersey operation, and our Cambridge, England operation. Cambridge, England is driven largely by synthetic rescue as the underlying modality. San Diego is driven by gene therapy. New Hampshire is de-immunization of therapeutic proteins and viral capsids. And New Jersey sort of sits as a connecting tissue, if you will to these others involved in additional compounds and some of our own original research. As we look at each of those, I am expecting progress and IND filings to come from all of them. The timing of that has not been specified to any great degree.

But what I will tell you is it is multiple INDs that we expect to have. Certainly in 2025, the timing is going to be very close, whether it’s 2024 or 2025 in terms of single and multiple. But right now things are looking very encouraging, and I have a lot of faith in the teams. I think you’re going to see, just by way of example, in 2024 and 2025 IND filings for Stargardt disease using gene therapy, ALS using gene therapy, DMD using gene therapy, to name just the first three that we expect to go forward. And the details around the IND filings are more about supplementing what has already been done. So if there’s one message I can leave you with, it’s that the preclinical work that provides encouragement as to therapeutic benefit is already done.

We already know what we think is going to happen when we put these into humans. And the effects we’re talking about here are, we believe going to be profound. And from that perspective, it is a very exciting new chapter of Insmed’s research and development operation. I expect the work that’s coming out of Cambridge, New Hampshire and New Jersey to be equally impressive and impactful. And I think 2025 and 2026 are going to be very exciting years where we’re talking about a range of products that are in the clinic, producing data, on some of the most intractable diseases that are out there. And Insmed is going to be there at the forefront with what we believe are going to be game changing therapies.

Andy Chen: Thank you.

Operator: Your next question comes from the line of Graig Suvannavejh from Mizuho Securities. Your line is open.

Unidentified Analyst: Hi, this is Jerry on for Graig. Thanks for taking our questions. Maybe starting first with brenso on the stat plan, if the p value in the ASPEN trial does come under the 0.05 mark, but the reduction in pulmonary exacerbations does not reach the level of what you expect, how would you view the data in that context? And I have one more follow-up.

Will Lewis: Yes. So we’ve talked about these different scenarios. It’s one of the reasons we tried to highlight today for people before the fact, what we consider to be the smoothest path to an approved product that will be well received by market access, the regulators, the physicians, the patients. And from through that lens, that’s where we focus on that 15% threshold. Because if you talk to FDA and other regulatory authorities and physicians, they really want to see a 15% treatment effect. And we should be adequately powered at the 0.05 level to achieve that. What happens if we’re below 15%, but statistically significant at the 0.05 level. At that level, I think going down to as low as perhaps 10%, it would still make sense to file, if the safety is very good.

Remember that this is not sort of a one and done medicine, this is a lifetime medicine. Every exacerbation is like a heart attack for the lung. It does permanent damage. The ability to reduce that even marginally, we think is clinically meaningful. I do think as we get below that 15% threshold, we start to talk about or contemplate a different target product profile where price would change and probably come down, so those kinds of adjustments would be made. But I would be in a position where I would say, hand on heart, that if I’m a patient who has exacerbations, right, not everybody has, let’s say it’s between 10% and 15% reduction. Not everybody would have that reduction, right? That would be the average. If you think about the range, there might be some patients who would benefit much more dramatically on the positive side.

And given the safety profile, it could make sense to file in that context. I do want to acknowledge that we are hoping for 15% or greater, and we’re hoping for, in a very clear way less than 0.01. But if we’re between 0.01 and 0.05, and we’re above 15%, we believe we have a product that’s going to make a difference. If we’re between 10% and 15%, we’re probably adjusting how we think about the business opportunity side of it. But for patient benefit, given there’s nothing approved, I think we would still have something that would warrant approval and appropriate use in patients that are responsive.

Unidentified Analyst: Got it. That’s very helpful. And then just on the gene therapy DMD program, any updates on timing or enrollment? Thanks.

Will Lewis: Yes. So we continue to make good progress there. And I think what we’ve guided to this year is that we will do our best. It’ll be somewhere near the end of this year or the early part of next year that we’ll file the IND. There’s some work that still needs to be done to sort of get all the ducks in a row, if you will, with the FDA. And we certainly have taken a lot of learnings from watching other programs. And consequently, I think we’re in a strong position as we enter the clinic and we’ll be able to produce data that while it isn’t designed for direct comparison, people will inevitably do that. What we’ve set for a threshold for success here is a clear, superior profile to what is already out there.

That’s a point I really want to emphasize. This is not an attempt to go out and do what others have done. This is an attempt to go out and beat clearly what is already on the market. And that is the threshold we’re setting for ourselves and we have some confidence we’ll be able to beat it based on the data we’ve seen pre clinically.

Unidentified Analyst: Got you. That’s very helpful. Thanks for taking our questions.

Operator: Your next question comes from the line of Jason Zemansky of Bank of America. Your line is open.

Jason Zemansky: Thank you. Good morning. Congratulations on the progress this quarter. We appreciate you fitting us in. Two, if I may, on brenso, mostly follow-ups on your previous comments. But the first, to what extent is your peak potential forecast dependent on this sort of base case 15% reduction in exacerbations. If the levels are well above this threshold, closer to, say, WILLOW’s 25% or 36%. How does that change your outlook, especially when it comes to something like penetration? I mean, what sort of upside do you think could conceivably be here?

Will Lewis: Yes, I think it’s a great question. I think the target product profile will certainly drive the confidence that we’ll have in terms of what that penetration will be, how rapid the uptake will be, what the price will be, all that sort of thing. What we use as our assumption set is something in the WILLOW like territory. So it’s Statsig below 0.01 and a treatment effect that I would say is comfortably in the 20s and if that is where we end up, then I think we feel comfortable with the guidance that we’ve given. Could it go higher if we’re higher? I guess we’ll have to revisit that. That’s certainly a big part of the reason why we’re going to have this commercial day within a week. We’re targeting of actually putting out top line results.

I would also say that what we’ve heard from physicians, and this is perhaps a significant point to emphasize, there is a general skepticism out there that we’ve encountered from people who say no one’s really been able to conquer the bronchiectasis market. So we’re cautious and optimistic based on the success of Phase 2, because no one had really ever produced data as strong as what we saw in Phase 2. That’s why it was published in the New England Journal of Medicine. In a world where ASPEN clears that hurdle and is statistically significant at either dose below 0.01, the physicians to a person have said this drug is going to fly off the shelf. They will proactively call their patients in. They will enthusiastically embrace the use of this drug.

I think you’re going to see a very rapid uptake in the use of this drug, not only because it’s the first ever approved medicine for this condition, but because the treatment burden of a once a day pill and the safety profile suggested by WILLOW and what we’ve seen in ASPEN so far is very positive. That backdrop and the sheer appetite that we’ve seen at the different conferences in terms of medical education and responsiveness to the potential for a drug arriving to treat this disease is very significant. We had standing room only at the last several sessions where we were doing teach-ins on the medical area of bronchiectasis, very appropriately, talking about this disease state and the challenges that patients who experience this sort of vortex of inflammation, what their life is like, and how impactful a treatment could be if it were ever to be accomplished.

I think it is referred to at the ATS as the holy grail of pulmonary medicine, the last large pulmonary indication without something approved to treat it. So if we can be that first entrant, that’s a very exciting opportunity for us. And one, I think that the treating community and the physician, the patient community is going to embrace.

Jason Zemansky: Got you. And then in terms of the other endpoints, beyond reductions in PE like QLB [ph] and FEV1, in terms of the commercial opportunity, how important are these to hit on, and what’s your confidence you can get there, given the longer duration of therapy?

Will Lewis: Those are real unknowns in my mind. I think they’re nice to haves. They’re not necessary. The thing that market access the physician, the patients, the regulators are all very focused on is this exacerbation rate, the ability to impact that, because each one of those is like a heart attack for the lung. It does permanent damage, and it is a major negative for the patient. And right now, there’s nothing that can be done about it. So if we can show up and say we’re going to reduce that on average by about, say, 20%-plus, that’s a big deal. And of course, it will help some patients more and some less, but to be able to have that kind of impact over time, this is a chronic medication these patients will be on for the rest of their life, would be a major breakthrough and accomplishment. And so far, it looks like we’re on track to be able to produce that kind of a result. We’ll know here shortly.

Jason Zemansky: Got it. Thank you so much for your color.

Operator: Your next question comes from the line of Vamil Divan from Guggenheim Securities. Your line is open.

Vamil Divan: Hi, great. Thanks for taking my follow-up here. Just got a few questions this morning or during the call around the filing the $500 million filing, the ATM with Leerink. Can you maybe just I know you talked to someone a little bit at the beginning, but I think we’re getting some questions just on why that’s being announced today. And so maybe if you can just kind of restate what you said before or a little more details on exactly the rationale for announcing the standing, you’re kind of pretty clear about not looking to do any sort of big raise or equity move before ASPEN, so any clarification might just be helpful.

Will Lewis: Yes. I appreciate the question. I’ll actually ask Sara to address that.

Sara Bonstein: Sure. I’m happy to address it. So I want to be clear on a couple of points. The filing of the ATM this morning is not a capital raise. We used our ATM last year for strategic purposes. Those intentions have been met and we do not plan on proactively utilizing the ATM in the near-term. The ATM is a broader — is a complement of the broader strategy of our multiple levers, on the other side of data, it’s housekeeping. I would not — I would encourage people to not over think it. And it’s something that all companies of our size have and in place. And it’s something that we put in place an ATM three years ago, and we hadn’t used it for quite some time, so people should think about it that way. Will, I don’t know if you have more you want to add.

Will Lewis: Nope, that covers it.

Vamil Divan: Okay. Thank you.

Operator: There are no further questions at this time. So I’d like to hand the call back to Will.

Will Lewis: Perfect. Thanks, everyone, for joining us this morning and look forward to talking to you in the not too distant future about the updates on our various programs.

Operator: That does conclude our conference for today. Thank you for participating. You may now all disconnect.