Title

Presentation

Insmed Incorporated misses on earnings expectations. Reported EPS is $-1.26941 EPS, expectations were $-1.21.

Operator: Thank you for standing by. My name is Jeannie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Insmed’s Third Quarter 2024 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] Thank you. I would now like to turn the conference over to Bryan Dunn, Head of Investor Relations. You may begin.

Bryan Dunn: Thank you, Jeannie. Good day, everyone, and welcome to today’s conference call to discuss Insmed’s third quarter 2024 financial results and provide a business update. I am joined today by Will Lewis, Chair and Chief Executive Officer; Sara Bonstein, Chief Financial Officer, who will each provide prepared remarks, after which they will be joined by Martina Flammer, Chief Medical Officer, for the Q&A session. 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 we will discuss on today’s call is meant 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 for prepared remarks.

Will Lewis: Thank you, Bryan, and welcome everyone. The announcement of the positive ASPEN data earlier this year marked the start of a new era for Insmed, one that will be defined by our ability to execute on the many opportunities we have in front of us. Our performance this quarter demonstrated the level of execution. That level of execution sets us up for this exciting new chapter of Insmed’s story. The opportunities before us are significant not only in terms of their potential impact on patients and our company, but also in terms of their sheer quantity. I’m proud to say that our team across the organization have continued to show a remarkable ability to deliver simultaneously on all of them. For example, in the third quarter, our commercial team once again delivered double digit year-over-year sales growth for ARIKAYCE across all of our regions.

At the same time, the U.S. team was also working to build out its infrastructure by nearly tripling its sales force in preparation for the expected launch of brensocatib in the middle of 2025. Similarly, our clinical development team remains on track to file the NDA for brensocatib in the U.S. this quarter, while at the same time they have been driving increased enrolment rates across our ongoing clinical trials and working to present and publish data from the ASPEN trial. Today I intend to highlight the progress we have made across multiple ongoing initiatives at Insmed and why this progress should add to confidence in our ability to execute on the tremendous opportunities ahead. Let’s begin with brensocatib. Earlier this month at the American College of Chest Physicians Annual Meeting in Boston, we presented subpopulation data from 19 prespecified categories from the ASPEN trial based on baseline patient demographics, comorbidities and disease severity measures.

Within those 19 categories existed dozens of subgroups, which emphasizes how robust and comprehensive this data presentation was. In a population that is known to be very heterogeneous it was remarkable how broadly beneficial treatment what – with brensocatib was observed to be across these various subgroupings, which is similar to what we had observed in the Phase 2 WILLOW trial. We continue to expect to file the NDA for brensocatib in the fourth quarter of this year. Presuming that filing is accepted, we would expect to announce the acceptance along with the expected timelines for a decision by the FDA in the first quarter of 2025. Moving to our U.S. commercial launch preparations, I’m pleased to report that all 120 new U.S. based sales reps have been trained and are currently deployed in the field, bringing our total sales reps to 184.

These additional sales territories have been constructed based on claims data showing us where the diagnosed patients are being treated. Our intention is to have broad sales representation from day one, not just in the academic centers and centers of excellence, but also in the community pulmonologist offices where many of these patients receive care. In fact, the U.S. sales force is intentionally sized to enable Insmed to call on every pulmonologist in the United States. We believe that these early investments will position brensocatib for a strong, successful launch in bronchiectasis pending FDA approval. Let me also provide an update on the two additional indications we are currently pursuing with brensocatib: chronic rhinosinusitis without nasal polyps and hidradenitis suppurativa.

The Phase 2 BiRCh study in CRS without nasal polyps has been rapidly bringing new sites online in Europe and in the U.S. and is now more than 40% enrolled, with many more patients currently in screening. We continue to anticipate top line results by the end of 2025. Our Phase 2 HS study is also steadily progressing on schedule toward its first site being open before the end of this year. The study, which will be called CDER, is expected to enroll approximately 204 subjects randomized one to one to one to receive brensocatib 10 milligrams, brensocatib 40 milligrams or matching placebo once per day. The primary endpoint in the study will be percent change from baseline in total abscess and inflammatory nodule count measured at week 16. The study is then expected to continue until week 52 with those randomized to the brensocatib arms continuing to receive that same dose.

Those who are randomized to the placebo arm would join one of the brensocatib arms at week 16 based on randomization, which would also have occurred at baseline on a blinded basis. As we have signaled in the past, the study will include an interim futility analysis conducted by an independent data monitoring board, which will examine data from approximately half of the patient population once they reach week 16. This will allow us to stop the study early if the data does not look promising. If the recommendation from that interim analysis is to continue the study, we will remain blinded to the data that is reviewed by the monitoring board. There is no interim efficacy analysis built into the trial design, so there is no potential for early stoppage due to overwhelming efficacy.

If the study continues to completion, we would read out the top line results after all patients reach week 16. We expect more details for this trial to become available on clinicaltrials.gov before the end of this year and we look forward to providing updates as the trial progresses. Now turning to ARIKAYCE, which posted its seventh consecutive quarter of double digit year-over-year revenue growth in the third quarter of 2024. We have become accustomed to seeing this level of growth from ARIKAYCE, but when you remember that ARIKAYCE is now in its seventh year post-launch, it makes the achievement all the more unique and impressive. In addition to strong commercial execution, we are also making great strides clinically. Last quarter we stated our intention to stop screening new patients for the Phase 2 ENCORE study by the end of the third quarter.

Thanks to very strong recruitment, we were able to close the screening of new patients a little ahead of that schedule. While we won’t know the exact enrollment number until all patients have finished the six to eight week screening process, I’m pleased to report that we have already randomized more patients than the trial’s target enrollment of 400 participants. Importantly, this level of enrollment will mean that the study is powered at well over 90% for both the patient reported outcome primary endpoint for U.S. regulators as well as for the durable culture conversion primary endpoint for the Japanese health authorities. We plan to meet with the FDA this quarter to discuss the possibility of an accelerated filing under subpart H using the successful Phase 3 ARISE trial data.

As we have previously mentioned, we feel the most likely pathway to a potential label expansion for ARIKAYCE will require the full data set from the ongoing ENCORE trial, which remains on schedule to read out in the first quarter of 2026. Finally, let me provide an update on TPIP. Last quarter I was excited to report that enrollment in our Phase 2 study of patients with PAH had accelerated and that we had passed 75% of the target enrollment as of that date. Today, I’m equally pleased to share that this momentum has continued. As of last week, we had enrolled more than 90% of the target for this trial, keeping us firmly on track to report the top line results in the second half of 2025. In PH-ILD, we expect to present the full results from our Phase 2 study, which had a top line readout in May of this year in early 2025 at the Pulmonary Vascular Research Institute’s 2025 Annual World Congress in Rio de Janeiro.

We look forward to sharing those details then. We’re also working to optimize the manufacturing of TPIP so that higher doses can be delivered using the same quantity of dry powder as lower doses. This improved delivery, which would allow patients to take doses up to 640 micrograms in a single capsule, is how we expect TPIP to be offered in the commercial setting, presuming clinical and regulatory success. We are doing this work now so that our Phase 3 program can be conducted using that same commercial ready product, which would be required for a potential future NDA filing. We remain on track to kick off that Phase 3 program for TPIP and patients with PH-ILD using these optimized doses in the second half of 2025. In summary, I couldn’t be more pleased with where we are as an organization.

I am proud of how we have been able to maintain and strengthen Insmed’s culture during an unprecedented period of growth for the company. Last week we announced that we were ranked as the number one employer in Science’s annual top survey of – survey of Top Employers for the fourth consecutive year. The only other company in the history of this survey to have earned this honor at least four years in a row was Genentech. This external recognition validates what I see every day, which is that even as we transform as an organization, we remain grounded in our core values. The consistent progress that I have seen to date across the company, both operationally and culturally, only adds to my confidence in the future of Insmed. For most companies in our field, any one of the opportunities in our late-stage pipeline, from the potential ARIKAYCE label expansion to the potential launch of a product representing a promising new mechanism of action like brensocatib, to the chance to develop a potentially paradigm shifting medicine like TPIP would represent the single most exciting opportunity at the organization.

At Insmed, we not only find ourselves in the rare position to execute on all three of these programs at once, but I’m also proud to say that we are three for three so far, with each program having already demonstrated meaningful clinical success. We take the responsibility to deliver these therapies to patients very seriously and we are committed to following through on these promises. I’ll now turn it over to Sara, who will walk us through this quarter’s financial results.

Sara Bonstein: Thank you, Will, and good morning everyone. I want to start with a few words about the strength of our financial position. When I last spoke to you in August, Insmed was in a very secure position financially. I am happy to share that today we are in an even better position due to the deliberate steps taken in the past quarter to strengthen our balance sheet. These actions include calling our 2025 convertible debt opportunistically utilizing our aftermarket equity offering program and restructuring our existing term loan. Let me provide you some details on each of these activities. As discussed on last quarter’s earnings call in August we called our $225 million convertible notes, which were set to mature in 2025 and issued approximately 5.7 million shares of stock to noteholders which simultaneously lowered our ongoing interest expense burden while also improving our debt to equity ratio.

Additionally, in the third quarter we utilized our ATM to raise approximately $371 million in net proceeds at an average sales price of $75.64 per share. As a reminder, during our most recent follow on offering in May, the sale price was $51.50 per share. Finally, as announced this morning, we were able to successfully restructure our $350 million term loan with Pharmakon. As a reminder, the loan previously carried a variable interest rate based on the SOFR rate plus 7.75%, which normally put our actual rate paid in the low to mid teens and was set to mature in 2027. Under the terms of the restructured agreement, Pharmakon will provide us an additional $150 million in proceeds to be received in the fourth quarter. Importantly, the interest rate on the full principal amount was lowered to a fixed single digit rate of 9.6%.

In addition, the maturity for the loan was pushed out to 2029, which is important because we anticipate that our cash inflows from operations during the latter part of the decade would easily support repayment of the loan balance. As a result of these actions, our cost of capital is being reduced while our cash runway is being lengthened. As of the end of the third quarter, we had approximately $1.5 billion of cash, cash equivalents and marketable securities on our balance sheet, which represents an increase of approximately $221 million since the end of the second quarter. As a reminder, the current quarter’s cash balance does not reflect the additional $150 million of proceeds from the Pharmakon term loan previously discussed and will be reflected in the fourth quarter’s financial statements.

Net of cash inflows related to the ATM as well as the impact of stock option exercises, our underlying cash burn in the third quarter was approximately $166 million, which as expected was somewhat higher than recent quarters. A portion of this increase is related to the $12.5 million cash milestone payment made to AstraZeneca this quarter, which resulted from the announcement of our intention to file for the approval of brensocatib for the treatment of patients with bronchiectasis. The remainder of the increase is due to higher headcount and other expenses related to ongoing preparations for the potential launch of brensocatib. As a result, we expect our underlying cash burn to increase compared to historical levels between now and the time that brenso begins contributing revenue, assuming regulatory approval and commercialization.

Before I move on, I would like to address the subject of profitability, as I appreciate this is an important topic for many of our shareholders. We do not yet have sufficient cash on hand to fund our business until it becomes profitable on its own, but we continue to be mindful of reaching our ambition of becoming a self-sustaining biotech company. Given our progress this quarter, we are now in a position in which we could be patient and flexible as we think about our future financing needs. I will now walk you through the highlights of our commercial performance in the third quarter of 2024. Global net revenues this quarter was $93.4 million reflecting 18% year-over-year growth compared to the third quarter of 2023. This represents the highest quarterly sales for ARIKAYCE in its history and the second quarter in a row in which we have set a new record for global sales.

In the U.S. net revenue was $66.9 million, up 13% compared to the prior year period. This growth was driven by continued strength in new patient starts reflecting the volume driven growth we continue to see for ARIKAYCE. In Japan, net revenue was $21 million up 31% compared to the prior year period. This performance was driven by higher new patient starts and a strong treatment continuation rate amongst existing patients. In Europe and the rest of world, net revenue was $5.6 million up 45% compared to prior year period driven primarily by continued strength in Germany and the UK. Importantly, this quarter’s performance keeps us on track to achieve our full year 2024 global revenue guidance of $340 million to $360 million. Let me now turn to a few additional financial items.

Our U.S. gross-to-nets this quarter were 14.2%, which was consistent with our expectations. We continue to anticipate that gross-to-nets will settle in the mid- to high-teens for full year 2024. Cost of product revenues for the third quarter of 2024 was $21.2 million or 22.7% of revenues which is consistent with our historical performance. Research and development expenses in the third quarter were $150.8 million and SG&A expenses were $118.9 million reflecting continued investment in our early and mid- to late-stage pipelines, as well as investments in bronchiectasis commercial readiness initiatives. In closing, Insmed currently finds itself in a unique position of strength both financially and operationally. We produced record setting revenue in the third quarter keeping us on track to deliver on our full year guidance.

Additionally, we have approximately $1.5 billion of cash, cash equivalents and marketable securities on our balance sheet, which allows us to comfortably fund our operations as we enter this transformational period ahead. One in which we anticipate the launch of bronchiectasis, as well as additional, meaningful mid- to late-stage data readouts from across our portfolio. We would now like to open the call to your questions. Jeannie, may we take the first question please?

Operator: Thank you. [Operator Instructions] Your first question comes from the line of Joe Schwartz with Leerink Partners. Please go ahead.

Joe Schwartz: Hi. Thanks so much and congrats on the progress. I was wondering first if you could talk some more about the expanded sales force in terms of how effective it can be in launching bronchiectasis based on its size and focus, as well as how much the disease state awareness activities can help you prepare for launch and whether you’ve looked at analyst estimates for bronchiectasis sales early on and is there anything we should keep in mind as we model the ramp?

Will Lewis: So, thanks for the question, Joe. I mean, I think I would tell you I have had the pleasure of spending some time with the people that we brought on board and they have two general dimensions that I think are worth noting. The first is they are a very experienced group of people. They have done multiple launches. We’ve got a lot of multiple President’s Club winners in this group. I always like to remind folks that we had more than 7,000 résumés for 120 positions. So, it just speaks to the volume of interest that existed for these roles. So, we really got the best of the best. And I would tell you, hand on heart, I think I would match this sales force against any in the industry and feel like we’re going to come out ahead.

The second point about these people is that they are an excellent cultural fit. To a person they are focused on patient – patients and delivering for those patients. And that’s an incredibly important part of our culture as you know. As we think about the actual launch itself and what this empowers us to do, as I mentioned, we literally have the ability to call on every pulmonologist in the United with this kind of capacity. And importantly, as we think about what they’re doing right now, because as we said as of October 1, they are in the field, fully trained, both calling about ARIKAYCE, but also doing disease state awareness about bronchiectasis. And that is a model that may ring familiar to you because it is the exact same approach we took when we launched ARIKAYCE.

ARIKAYCE, as you’ll remember, the Street had us at doing about 40 million to 60 million in the first year and we ended up doing more than 130 million. And that’s an indication of what this kind of early-stage education and relationship building can provide by way of uptake of medicine when the medicine is clearly of benefit to patients. So, I couldn’t be more excited about the group we’ve assembled. And yes, I think you’re going to see really first-in-class – best-in-class performance.

Joe Schwartz: Okay, thanks. And then does the aforementioned expected price range for brenso refer to the 10 milligram dose, the 25 milligram dose or both? I am just wondering how you are thinking about whether it makes sense to use flat or graduated pricing? For example, do payers appreciate the added value that the 25 milligram dose provides?

Will Lewis: So, we haven’t made any decisions on pricing yet. It’s going to be a long time before we do. But I would tell you that we think the objective here in all our clinical studies is to understand what the medicine can do and that forms the basis of the value proposition. I do want to come back to your comment earlier about what we might expect in the first year. I don’t know Sara, if you want to take that one.

Sara Bonstein: Sure. So, Joe, thanks for the question. Specifically on the analysts’ expectations and while we obviously haven’t provided near term guidance for brensocatib, what we have said is we believe brensocatib and non-cystic fibrosis bronchiectasis alone is a $5 billion plus peak sales operating opportunity. So, a tremendous opportunity from a value creating perspective as well as impact on patient. What I would point you to is some analogs in the industry. We study a lot of precedent here in Insmed and so if you look at some of the first-in-class, best-in-class launches in the respiratory space like Dupixent, Fasenra, Tezspire [indiscernible] you see in their first two quarters of launch they put up high double-digit millions in revenue and then if you kind of carry that forward in their next four quarters of launch, it’s about $500 million to $600 million.

I think the best with Dupi was about $700 million. So very significant revenue numbers. And you know while I can’t comment on specifically what the shape of the brensoc curve will look like, these are best-in-class launches and you know I think analogs that any company would strive to even come close to.

Joe Schwartz: Thanks for all the helpful caller.

Operator: Your next question comes from the line of Jessica Fye with JPMorgan. Please go ahead.

Jessica Fye: Hey guys, good morning. Thanks for taking my questions. I wanted to ask on TPIP. For PH-ILD, can you talk a little bit more about what needs to happen between now and the commencement of that Phase 3 trial in the back half of next year? Is it that manufacturing work you referenced? And if so, can you expand a little bit on what specifically is happening there? And then can you also talk about how you think about the enrollment timing for the Phase 3 in PH-ILD? Should we use the increased trial enrollment as a guide? Does the increased awareness with Tyvaso’s strong launch in that setting help you, or is it a headwind to enrollment to have an approved drug in the space? So, like, would you look to enroll may be in the ex-U.S. as a result of that? Just trying to kind of understand from what it’s going to take to kick that study off? And then how to think about enrollment once it does start?

Will Lewis: Yes, sure. So, thanks for the questions. I think the first thing I would say about TPIP is it’s probably the most underappreciated asset in our portfolio. I am really excited about what I think this drug already has shown and what I think it will show when we look at the Phase 2 data in PAH next year. We do intend to move forward into Phase 3 for PH-ILD. We have a lot of the work for that already ongoing. The second half of next year as a target for kicking that off is really driven by, both the preparation for wanting that trial to go particularly well, wanting to ensure that our dialogue with FDA clarifies the approval pathway for Phase 3, i.e., one versus two Phase 3 studies. Our expectation is we’ll only need one, but we have to confirm that.

And then I would say finally, and most importantly, the work being done in manufacturing, which is sort of being done in parallel to all this. Specifically, what we want is to make this very easy for patients. And so regardless of how much drug they intend to or need to take, we’d like it to be one capsule. And so, if you’re going to go up as high as 640 micrograms, remember that that’s a really high dose relative to what people are able to get to now. To be able to do that also with a single capsule makes it supremely easy to take and just smooths the utilization of the drug. So that’s the thought there. And it is the merger of all of those different forces that is shaping the launch timing for the drug. We think about enrollment. We are always frustrated in the PAH – PH space generally because these are difficult trials to enroll.

These patients are very sick. In a sense, we are in a little bit better position when we start PH-ILD and when we look at PAH in Phase 3 as well, because the competitive landscape of other trials will have decreased in its density by that time. So, I couldn’t be more excited about this. I am really excited to see the PAH data in the second half of next year and also to kick off the ILD Phase 3. Hopefully that answers your question.

Jessica Fye: Thank you.

Operator: Your next question comes from the line of Vamil Divan with Guggenheim Securities. Please go ahead.

Unidentified Analyst: Hi, this is James [ph] today for Vamil. So, we’ve been receiving some investor questions this morning around the general financial position with the Pharmakon term loan amended and it seems that you raised some additional money through the ATM. So, I was wondering maybe you could talk more generally about your financial position now and your plans going forward as you prepare for the brenso launch next year. Thanks.

Will Lewis: Yes, you bet. I am going to turn over to Sara in a minute, but I just open up by telling you I could not be happier about the breadth and depth of the strength of our balance sheet improvement this last quarter. We are now in a very strong financial position to take on the breadth of opportunities this company has and we happen to be hitting on all cylinders both in terms of commercial clinical development and preparation for next commercial launch. This resourcing is going to be helpful to that cause. But Sara, maybe you want to talk about it.

Sara Bonstein: Yes, absolutely. Really appreciate the question. Just on the onset, Insmed is in the strongest financial position it’s ever been since I’ve been at the company and probably since the company’s history. And could not be more proud of the achievements of everyone part of the Insmed family and all the support that we continue to get from all of our partners, shareholders, note holders, debt holders. A couple of comments specifically on the actions that we took. Specifically on the ATM, that is an opportunistic tool that pretty much every biotech company has that is not at a profitable level. We use that in a small amount. It was about 2% of our overall market cap over the period of time. But I think the most important piece there is the focus on dilution and being sensitive to dilution for shareholders.

And as we think about the raise that we did earlier this year and the utilization of the ATM, the ATM average price was almost a 50% premium to our last, to our last raise. So, we were very cognizant of dilution, pricing, as well as during the time of trading on the ATM, our stock price actually went up. So, we were very careful on that. On the Pharmakon restructure, couldn’t be more pleased that Pharmakon was willing to put additional moneys and to push out the payment. A couple of, I think, really important pieces there. By being able to get a fixed interest rate and being able to lower it into single digits, our interest burden on the company essentially remains the same. And we have additional capital now and we will now have the benefit of having the brenso launched and need to pay back that principal amount towards the latter part of the decade.

So, could not be more pleased with where we are financially. And we are now in a position where we want to be able to resource appropriately the brensocatib launch. This is a once in a sort of a lifetime type of launch that we have the opportunity to be part of. And the capital that we now have on our balance sheet will allow us to appropriately resource that program. Thank you.

Unidentified Analyst: Great. Thank you.

Operator: Your next question comes from the line of Ritu Baral with TD Cowen. Please go ahead.

Unidentified Analyst: Hi everyone, this is Nicole [ph] on the line for Ritu. Thank you so much for taking my question. So, I was hoping to get some initial or additional color on labeling language that you expect for brensocatib. Do you think it’s going to be more broad with just treatment of bronchiectasis or do you think there might be some more specific language about the reduction of exacerbations? And then a quick second follow-up question is, are you planning on including adolescents in the labeling as well? Thank you.

Will Lewis: So, I am going to actually ask Martina to take that on first.

Martina Flammer: Yes, hi, Nicole [ph]. So yes, we do expect a broad label language and that would be for bronchiectasis. We also will ask for adolescent patients. They have been part of the trial. It depends on what the FDA’s judgment will be on that. But we expect a broad label language. And usually, the label language doesn’t specify your inclusion or exclusion criteria, it speaks to the indication.

Will Lewis: Yes, the only comment I would add to that is that, of course, there is different audiences we have to impress. One of them is the FDA, the other is market access. Market access is the one that’s going to be a little bit more focused on whether or not the patient has had two or more exacerbations consistent with our label. So, while the FDA label language will probably be broad, the market access, at least initial interaction is probably going to be a little more focused around those two prior exacerbations. And we’re hoping to accomplish that through attestation. But that will, of course, come closer to the time of launch.

Unidentified Analyst: Thank you.

Operator: Your next question comes from the line of Nicole Germino with Truist Securities. Please go ahead.

Nicole Germino: Good morning. Thanks for taking my question. Excuse me. We’re getting questions around CRS without nasal polyps and potentially, and it could potentially be as big as bronchiectasis, given the potential benefit and steroid non-flounders patients requiring surgery. Sorry. So how many of those patients are seeking additional therapies beyond standard of care or getting repeat surgeries? And can you help us understand how big this opportunity is and how could it – how big could it be and will be focused towards anti-broadly or anti-surgical specialists? It seems like a very small focus, but wanted to get your thoughts.

A – Will Lewis: Yes. So I appreciate the question. I think you are right to perceive CRS without nasal polyps as a very, very substantial opportunity. Just to remind everybody, this is a patient population in the U.S. alone that numbers more than 26 million people currently without anything approved to treat it. Now, when we approach a disease state of that magnitude, we look for the sickest patients and we look for our medicine to have the most material impact on them. And in that group we sort of focus on, for our initial foray. We’ve talked about how that is an incidence rate of about 400,000 patients a year, so not a prevalence but an incidence. That’s that number of patients coming in that are broadly defined as being eligible for surgery or having had repeat surgeries at a severity point that would justify the use of this medicine.

It may get bigger than that, but I would just start there to sort of understand the broad opportunity that this market would represent. And next year, we’re going to have a very clear understanding of whether our drug is going to be impactful on these patients with the readout of the Phase 2 study. So I think this is – you’re going to hear a lot more about this indication once we know our ability to impact it and we understand the profile of patients within the study and the nuances of what the medicine does. Remember that we’re testing both 10 milligrams and 40 milligrams in this study. So that’s also a distinction from what we did in bronchiectasis where we had 10 milligrams and 25 milligrams. Overall, super excited about that program and a lot more to come in terms of specificity.

Nicole Germino: And one – thanks so much. And one quick follow-up, for brensocatib and bronchiectasis, can you confirm if both doses are going to be filed or how – what can you share?

Will Lewis: Yes. So our intention is to file the data from both doses. As we’ve talked about before, there’s some very interesting details in the 25 milligram secondary endpoints that we find and other KOLs have found particularly compelling. But the ultimate decision about which dose to be selected or both doses to be selected is in the hands of the FDA based on the data that they will review. So we want to provide them all that data. The good news is both doses work, both are compelling. So whatever the FDA’s conclusion is will be in a position to launch commercially and we’ll have more information on that once we’ve heard from FDA.

Nicole Germino: Great. Thank you so much.

Operator: Your next question comes from the line of Jason Zemansky with Bank of America. Please go ahead.

Jason Zemansky: Good morning, everyone. Congratulations on the quarter and the progress. Appreciate you taking our questions. Thanks for the color on BiRCh. Curious, what are you looking for in terms of efficacy at least from the sinus total symptom score on the top line, to be encouraged about its activity in CRS and then maybe how translatable are these results to other non-pulmonary indications in your view?

Will Lewis: Yes. So I’m going to ask Martina to address that.

Martina Flammer: Yes. Hi Jason. So what we’re looking for in CRS is that we’re detecting a difference of 1.34 to 1.55. It depends on what treatment effect that we’re seeing. But we are 80% powered to show that if it’s on that 1.34 point difference and we do that for an alpha level of 0.05. So what you – if you compare that to the only other treatment really that is right now approved for that and that is the enhanced spray, nasal spray, which is basically a Fluticasone. Based on that they have shown a difference of 1.4 to 1.9 and that was depending on whether these patients had used steroids in addition or not. So I think we’re well in that range.

Jason Zemansky: Got it. I appreciate you haven’t shared some of your broader strategies here, but assuming that there is efficacy in both CRS and HS, I mean what makes an ideal I&I condition to pursue for brenso?

Martina Flammer: Yes. So I think it’s – those are two distinct diseases, both CRS without nasal polyps as well as HS. And we have to see what we see in both of those indications. The reason we’re testing for the 10 milligram and to the 40 milligram dose that in this – both of these diseases in a way we may see that there is an additional benefit coming from a higher dose. Reason being that in for example, HS, there is net formation and can, when we push down NSPs even further, impact that net formation. And the same is true for CRS. Both of them are related to the intensity of neutrophil inflammation.

Will Lewis: And the only thing I would add to that is of course, this relates to brensocatib and what we’re learning from it. If we take a step back, we think about DPP1 inhibition and its ability to impact neutrophil-mediated diseases. What has been unlocked with the ASPEN study and the WILLOW study, and hopefully with BIRCH and CEDAR is this realization that there is broader applicability of this mechanism. So to that end, after the WILLOW study, we initiated some extensive work in our research labs and that has been able to produce hundreds of additional DPP1 candidates that we have now refined down to a smaller number and which we intend to bring into the clinic as second generation DPP1s, you’ll be hearing more about this in the coming years.

But let me just highlight that, one of the indications that we’re giving consideration to is rheumatoid arthritis. Another one is COPD patients. These would be novel DPP1s that would go through development process. But with our understanding at the beginning that the mechanism is effective in these target populations, each additional clinical study we complete, we learn more about this mechanism. And I think you are correct to assume that there will be potential applicability of it to many more diseases and that’s why this library of DPP1s is being developed, each which will be hopefully more specifically targeted to the unique features of the disease we’re pursuing.

Jason Zemansky: Got it. Thank you, Martina and Will for the color.

Operator: Your next question comes from the line of Jennifer Kim with Cantor. Please go ahead.

Jennifer Kim: Hi, thanks for taking that question. I have one on brenso. Can you remind us what’s left for filing and what your confidence is in getting priority review? And then somewhat related, sir, you’ve pointed to other launches and seeing high-double digit millions in the first two quarters. I think if I look at dupi in the first full quarter of launch, it was something like high 20s. And based on the timing of filing, this being a new drug, it looks to me like this could be more of a July or August launch. Is that something people should also factor into their models? Thanks.

Will Lewis: So the determination of priority review is made by the FDA in their first written response to us. Typically that is that arrives by day 74, so they have their verbal communication around day 60 and then there’s a written response that comes on day 74. It’s important to understand that until we have that written response in hand, we won’t know for sure anything, right, you always want to have it in writing from FDA. Well, we expect that we will and we are on track to file this quarter. So if you do quick math, just take it from the end of the quarter to make it easy and add 74 days. That gives you some sense of when in the first quarter will have greater understanding. Obviously, once we have that in hand, we will share it with you and that will hopefully indicate that we have been granted priority review.

Nothing is for certain, but our fingers are crossed for that. And that would put the timing somewhere around the middle of the year for launch, assuming everything goes as expected. If we don’t get priority review, it will be toward the end of the year. Either way, we are going to be ready. And I couldn’t be more excited about the – where we are positioned and how everything is going.

Martina Flammer: Yes. And then Jennifer, specifically on the question of timing as well, just kind of walked you through on the different scenarios from a timing perspective, the analogs that I shared, I won’t get into sort of the details on this call around the first quarter of each of those, was it a full three months? Was it two months? But I do think that’s something that as folks are building their models, they need to be thoughtful as they’re thinking about revenues for 2025 versus 2026 for brenso what that curve looks like.

Jennifer Kim: Okay. That’s helpful. If I could sneak a quick one for ARIKAYCE, I know you said you’ve already reached target enrollment of 400 patients. Can you give any color on how many patients are left in that six to eight-week screening period? Thanks again.

Will Lewis: So the honest answer to that is I don’t know off the top of my head, but I know that it’s going to supplement in addition to the 400. I’m just going to ask Martina, she may know. She probably does.

Martina Flammer: Yes. So we have about an additional 40 to 45 patients that are in the screening period. And as it takes about six to eight weeks for the culture to come through. But I think we’re highly confident that we will see that in this quarter.

Will Lewis: And how many of those would normally…

Martina Flammer: And the screen – so normally in the screen failure from these patients, we would expect to be another 15 to 20 randomized.

Will Lewis: Perfect. There you go.

Operator: Your next question comes from the line of Liisa Bayko with Evercore ISI. Please go ahead.

Unidentified Analyst: Hi, this is [indiscernible] on for Liisa. I have two questions on ARIKAYCE. So in Japan there seems to be no growth in revenue this quarter over last quarter. So how should we think of future growth in this territory? And my second question is, you’re meeting with FDA this quarter to discuss the possibility of an accelerated approval to expand the label for ARIKAYCE in frontline. This year Japan did not consider arise data for label expansion enough because of the shorter duration of treatment. So including like other reason of that it did not include Japanese patients. So where do you see the possibility that FDA might agree to accelerated approval? Those are my questions. Thank you.

Will Lewis: Sure. So I’ll take the second question first and ask Sara to take the first one. With regard to the probability of getting accelerated approval, I think we’ve been pretty consistent over the years just saying that we think this is a long shot, but it’s an appropriate long shot to take because the data was compelling. There are certainly other divisions within FDA that have found data that is in this sort of realm of clear and compelling, plus the background history here of the success of the drug, its full approval in Europe and Japan. There’s a lot of reasons to believe that what we have really should be enough. But FDA has very strict rules and each division interprets them differently. So I think we think this is probably a low probability of success.

But we do think it’s a prudent dialogue to have. And of course if we manage to get it, we would be super excited. We are ready to pivot to a launch earlier than expected if the accelerated approval comes our way. So I want to be clear about that. But we’re not expecting that this is the highest probability outcome. In fact, I’d say it’s low, I’d say it’s less than 25%. So look, it’s hard to put the odds on. You’re right, Japan did say no. We didn’t have any Japanese patients. That always makes it difficult for them to want to approve in an early setting. But I do think it could be indicative of the way the FDA sees it as well just in terms of the overall dataset.

Sara Bonstein: And then specifically on the Japan performance for the quarter, listen, I couldn’t be more pleased with the performance in Japan. $21 million this quarter. And if you think about that from a year-over-year perspective, that was over 30% growth. So was very pleased with the performance. If you look at the specific dynamics between Q2 and Q3 and we don’t usually get into this level of detail, but I’m happy to share it. There was a new warehouse open in Japan with some old inventory. We needed to work down some of that inventory in Q3. So there was some favorable inventory dynamics that we mentioned in Q2. So there is some lumpiness just in general, but the fundamentals of the Japanese business continue to hum and the continuation rate is really great there. The new patient starts are really great there and couldn’t be more pleased by the team’s performance.

Unidentified Analyst: Thank you.

Operator: Your next question comes from the line of Jeff Hung with Morgan Stanley. Please go ahead.

Jeff Hung: Thanks for taking my questions. Just to clarify, can you just talk about the $150 million from Pharmakon in 4Q given the cash that you have, is that mainly for the brenso launch? And then can you talk about your current thinking on the TPIP Phase 3 study and PH-ILD, like the endpoints and any aspects of the Phase 2 results that influence how you’ve been thinking about the design? Thanks.

Will Lewis: Do you want to take the question on Pharmakon?

Sara Bonstein: Sure. The $150 million that we will receive from Pharmakon, that will be reflected in our Q4 financials. That’s not reflected in the approximate $1.5 billion that we have on the balance sheet today. We don’t specifically say, what money is specifically earmarked for which programs, of course we have that latitude. But as we ramp up and focus on shareholder value, brensocatib is top of that list and we are now resourced to ensure that we are fully able to appropriately resource brensocatib.

Will Lewis: I’m sorry, your first question was on the design of the PH-ILD study?

Jeff Hung: Yes. I was just curious, any aspects of the Phase 2 results that influence how you’ve been thinking about the design of the Phase 3 study and the endpoints that you might be using?

Will Lewis: Yes. So we’re not disclosing where we are in the final design of that study yet. I think what I would say is if you think about the Phase 2 study, which was really a safety study and had less than 40 patients randomized three to one treatment to placebo, and we still saw some very compelling directional data there that suggests, improvement on time to clinical worsening improvement in six-minute walk, like there were some remarkable findings for what are essentially a handful of patients and the ability of the patients to go up in dose as high as they did, all of these things are very positive. So I think that sets us up for a lot of enthusiasm for Phase 3. But the specifics of the study we haven’t refined yet.

Jeff Hung: All right, great. Thank you.

Operator: Your next question comes from the line of Leon Wang with Barclays. Please go ahead.

Leon Wang: Hi, thanks for taking my question. I guess one on CEDAR. So as you kick off this study, you mentioned earlier about using 10 milligram and 40 milligram dose and the endpoint at 16 weeks, that’s all pretty standard for HS studies. But just want to clarify, what are you guys thinking in terms of the primary endpoint? Should we expect a high score 75, as many of the new studies are kind of in HS are kind of heading in that direction for the primary endpoint. And also second question on ARIKAYCE, though, you reiterated guidance and right now, I would say, the consensus is around the high end of that, I have 357. Can you give any pushes and pulls on what might shift your number for 2024 to be either in the top end of the guidance or maybe on the low end? Thanks.

Will Lewis: Sure. So on the CEDAR study, I want to make it really clear, this study is an exploratory study to get a proof-of-concept on the mechanism in this very difficult to treat disease setting. So we are not looking for a statistically significant result with the design of the Phase 2 study. Instead, what we’re looking for is directional information that there is a benefit through this mechanism of action in this disease state. That is a very important point, because as we know, to get a statistically significant study would require many more patients, you’d have to take conservative assumptions about everything. And we really don’t have the data to inform that design right now. What we’re looking to do is get that directional information.

It’s important to also understand that we’re including this interim analysis. So once we’re past about 100 patients or half of the study have reached 16 weeks, we’re going to take – we’re going to have a committee take a look to see if there is real efficacy that’s in evidence. And if there is, we won’t learn anything more about that. We’ll just continue to study. But if there isn’t, we’re going to shut it down, so that we know we’re not wasting precious resources. So but with that, maybe Martina, you can talk a little bit more about the specifics of the primary endpoint.

Martina Flammer: Yes. So in that context and the primary endpoint, we’re looking for a percentage change from baseline in the abscess and nodules count. That is also pretty standard, as you talked. We will also look as the secondary endpoint as the first key secondary for the high score 50 as well as for the high score 75. Both of those will be informing how we would design a Phase 3 study.

Operator: Your next question comes from the line…

Will Lewis: I’m sorry, please hold on, because there was another question there about ARIKAYCE and the range for the year. Sarah, do you want to take that?

Sara Bonstein: Yes, sure. Leon, thanks for the question. So specifically on the range, we were proud to be able to reiterate our guidance of $340 million to $360 million from a range perspective. I’ll just remind folks that we’re in our seventh year after launch. And at the midpoint of that range, it’s a 15% year-over-year growth. So still very significant growth and we were continuingly able to put up double-digit growth across each of the regions. So I couldn’t be more pleased, obviously, I can’t share the – where in that range, but we do now have the additional 120 reps in the field, they have been deployed and are in the field as of October 1 and we feel confident to be able to reiterate the $340 million to $360 million.

Operator: My apologies. Your next question comes from the line of Steve Willey with Stifel. Please go ahead.

Steve Willey: Yes, good morning. Thanks for taking the questions. Just with respect to the Phase 2 PAH disclosure, curious if we should be thinking about, I guess, the nature of the Phase 2 PH-ILD disclosure as kind of proxy for how that looks like from a communication perspective. And then just wondering if you can kind of talk a little bit about how you’re thinking about the hierarchical importance of some of the endpoints that are materializing out of that PAH trial. I would imagine given the mechanism that PBR reduction is of interest. But it’s also a small study, six-minute walk distance could be noisy. And I guess, there still doesn’t appear to be a lot of consensus around PBR reduction being a correlate for clinical outcomes. So just would be interested in your thoughts around the importance of the endpoints you’re going to see as well. Thanks.

Will Lewis: Yes. I think, one of the goals of this study is to understand that the mechanism is going to make a material difference in patients. And if we think about PAH, it is not common to see spontaneous dramatic reductions in PBR. So to see that in evidence in this patient population, certainly, we have on a blinded basis is very encouraging and it would lead us to believe that we would expect to see some significant impact when we unblind the study. You’re right. Six-minute walk is always noisy. But if we think about the PH-ILD study and the directional evidence we saw there, different disease, but nonetheless, it was positive. And I think for those reasons we’re encouraged. I think when we see other markers like NT Pro-BNP that are correlated with improvement in patients and those have directionally gone the right way, all of this suggests a positive outcome here. But maybe Martina, you can comment on how you’re going to reflect on this.

Martina Flammer: Yes. So the PDR reduction is the primary endpoint for a Phase 2 study. I think this is important to understand the hemodynamic measures is something that you do in the Phase 2 study, not necessarily something you do in Phase 3. So you do want to understand that. As well as six-minute walk, you will look also we have PK that we will be looking at as well as clinical worsening and quality of life in this patient’s populations.

Operator: Your next question comes from the line of Andrea Newkirk with Goldman Sachs. Please go ahead.

Unidentified Analyst: Hi all. This is Tolani on for Andrea. Thanks for taking our questions. Just one from us. Now that the expanded sales force is fully deployed, if you could just remind us what activities are underway with respect to both ARIKAYCE and the refractory NTM setting and also Brensocatib ahead of the launch. Thank you.

Will Lewis: Sure. So the additional 120 folks bringing to the U.S. sales force to 184 were deployed October 1. They are out and detailing ARIKAYCE to the pulmonology community. But they are also doing disease state awareness about bronchiectasis. That sets us up to build those relationships and put us in a place for a best practice launch. The goal with this kind of a situation, particularly when you’re first in disease and in our case that opportunity is very significant here. We draw on the experience that we had for ARIKAYCE, which was also a first in disease launch. You want to make sure that the community understands the burden of the disease and the need for treatment and that that dialogue is established. And then if and when we’re approved in the appropriate way, we would then shift at that time to discussing about product.

Obviously, we’re not talking about that now. But they are going to also be calling on ARIKAYCE and that makes for a very natural conversation with the physicians’ offices. Many of these offices treat both patients and many of these patients have comorbidities with these two indications. So there’s a logic here that is self evident to the pulmonology community when our folks are in their offices.

Operator: Your next question comes from the line of Graig Suvannavejh with Mizuho. Please go ahead.

Graig Suvannavejh: Thanks for taking my questions. I’ve got two, please, just maybe three. The first one is just on your OpEx for the quarter, it was a bit higher than I think we were expecting. And just as we think about the rest of the year and perhaps next year, just how to think about trending. I know you’ve got trials ongoing, you just expanded the sales force. Just if you give some general thoughts around that. And then second, just on the earlier stage pipeline or efforts, just want to know in the context of all you’ve got going, that’s more late stage, the prioritization or importance of those early stage efforts. And then if you could just remind me, I might have missed it, expectations on the readout of the ENCORE study for ARIKAYCE in the first line setting. Thanks.

Will Lewis: Sure. So I’ll go take those in reverse order and leave the first one to Sara. On the readout for ENCORE, that’s expected in the early part of 2026, as we described, the enrollment there is going very well. We just need to get this last group of screened patients randomized and then we’re off and running for the length of the trial, which as you’ll recall, is 13 months from start to finish. When we think about the earlier stage efforts, the fourth pillar, as we like to refer to it, there’s a lot going on there, but there’s a lot going on at the company generally. And I know that most of the investment focus is on the mid to late stage portfolio, so we haven’t spent time on describing that in any detail.

But please do not take that for a minute to mean that things are not progressing there. Some of the preclinical data I’ve seen recently in certain disease states we’re targeting is among the most compelling I’ve ever seen in my career. I’m super excited about what these various teams are bringing forward. And again, remember the intention here is for this portion of the company to produce between one and two INDs a year that will begin in the next 12 months. And as that unfolds and the clinical data from that comes forward using several different approaches to really impactful medicines and very difficult to treat diseases, we will be very excited to share that with the investment community. And I think at that time, when it’s clinical data, that’s when the investment community is going to pay more attention to it.

But there’s a lot going on there and that continues to be – the answer to the question of what’s next behind these first three programs and also is a strong sign of what we believe is going to be a capability to produce novel medicines for the next decade or more at this company. Sara, do you want to take the first question?

Sara Bonstein: Sure. Happy to take the first question. Thanks, Graig, for the questions. We remain committed to investing in what we truly believe will drive the most shareholder value. And you saw the balance sheet augmentations that we did this quarter and that was really to kind of take the financing off the table. Our strategy on spending has remained unchanged to that point. Specifically, on the various lines SG&A, as expected, we will see an increase in comp and ben as we broaden on the new sales force and investing in the appropriate launch readiness activities to ensure that we will have a world class launch in what we believe will be a mega blockbuster product assuming regulatory approval. So you’ll continue to see that investment.

On the R&D side, we’ll continue to invest across the portfolio ARIKAYCE, brenso on the life cycle management programs and the additional indications TPIP getting ready into Phase 3, obviously the early stage research. So you will continue to see investment there also medical affairs, that’s an important – a very important area that does come through on the R&D line and that’s very important as we prepare for our launches and making sure the right education. So from an expense perspective, they’re in line with our internal projections, nothing sort of different there. And we continue to make thoughtful and meaningful investments.

Operator: And your next question comes from the line of Andy Chen with Wolfe Research. Please go ahead.

Unidentified Analyst: Hey guys, it’s [indiscernible] on the phone here for Andy. Can you comment on the competitive landscape in PHA – in PAH and PH-ILD? Who do you see as strong competitors among the existing products and also upcoming pipeline products? Thank you.

Will Lewis: Sure. So if we talk about PAH and PH-ILD, PH-ILD, obviously the only approved therapy there is a prostanoid, if we think about what we stand to offer versus that once a day, 24 hours coverage, including night time, at much higher doses than what can be achieved with what’s available, it’s a clear and compelling opportunity for physicians to improve patient treatment. Assuming that the data and the regulatory path all validate that, we feel very good about the competitive profile in the PH-ILD setting. And I think our intention for TPIP is to be the cornerstone of therapy, the prostanoid of choice, regardless of where it’s deployed. When we talk about PAH specifically, everyone is very familiar with sotatercept and the important role, it’s going to play in the treatment of these patients.

We celebrate that. We think TPIP is a perfect complement to that drug. And the combination of those two, we think could return patients to levels of normalcy in terms of PBR and other measures, potentially inviting some remodeling in the disease state. This would be, in my opinion, a breakthrough for these kinds of patients. And that’s why we think our drug, as the prostanoid of choice will change the treatment paradigm for patients with PAH and PH-ILD. Best competitive landscape with respect to other programs, obviously we saw the data from two other companies that had DPP1s. I think as we review that data, a couple of takeaways for us. First of all, we know the mechanism works. This is further validation that DPP1 is a novel mechanism that is going to have an important role to play in the treatment of broad range of neutrophil-mediated diseases.

We’re also particularly excited about the relative strength of our data to these other programs. Obviously, there are many years behind us, but we welcome the competition. It raises awareness about the disease state and it speaks to the importance that everybody sees for this mechanism in the future.

Unidentified Analyst: Got it. Got it. Thank you. Appreciate it.

Operator: And there are no further questions at this time. Thank you everyone for joining. This concludes today’s call. You may now disconnect.