Insmed Incorporated (NASDAQ:INSM) Q4 2023 Earnings Call Transcript
Insmed Incorporated (NASDAQ:INSM) Q4 2023 Earnings Call Transcript February 22, 2024
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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