Insmed Incorporated (NASDAQ:INSM)
Lazard Capital Markets Healthcare Conference Call
November 13, 2012 10:30 ET
Will Lewis - President and Chief Executive Officer
James Cole - Lazard Capital Markets
James Cole - Lazard Capital Markets
Good morning. I am (James Cole) part of the biotech team here at Lazard Capital Markets. Up next we have Insmed, a late-stage biopharmaceutical company focused on developing inhaled therapeutics for serious diseases of the lung. We are fortunate this morning to have Will Lewis, President and CEO of Insmed here to provide a corporate update of the company and its clinical development programs.
Will, I'll turn it over to you.
Will Lewis - President and Chief Executive Officer
Thanks very much. And thank you to Lazard for inviting us here today to speak. Let me see if I can get this to work. There we go. So, a Safe Harbor statement, I just want to draw everyone's attention to it. Any forward-looking statements should be taken in the context of our 10-K and other filings were risk factors are clearly disclosed.
So, Insmed is a company that is focused on orphan diseases, serious diseases of the lung, and in particular, infections in two primary areas. One is cystic fibrosis patients who have pseudomonas aeruginosa, chronic lung infection and the other that we are focusing on initially is non-tuberculous mycobacterial lung disease. These two markets combined are worth well in excess of $1 billion. They are orphan diseases. One of the diseases I like orphan diseases is because you can go after them commercially with very small, but dedicated sales forces and fortunately for both of these, we have a common calling point, so we can get quite a bit of leverage off of that effort.
As we have just announced recently, this deck has not been updated to reflect it. We have in excess of $90 million on our balance sheet. So, we are well-capitalized through the balance of most of 2014 to pursue these indications. The compound we have Arikace is a liposomally encapsulated aminoglycoside antibiotic. The aminoglycoside class is very effective at treating gram-negative infections and the advantage that it brings are several fold, and let me just take a moment to go through those.
By using the liposome around the antibiotic, we achieved several things. First of all, prolonged lung residence time, the aminoglycoside itself typically wouldn’t administer and will bond to the outside, where the biofilm surrounding the infection and that prevents the antibiotic from getting to the site of infection and doing its work. By putting it inside of a liposome, which is comprised primarily of DPPC and cholesterol, it is now neutrally charged and it has the ability to penetrate that biofilm. This is something we have shown in vivo to be the case. That gets it to the site of infection. Lytic factors within the biofilm then cause the liposome itself to lyse and release the antibiotic at the site of infection. So, we are getting greater efficacy and we are able to achieve for the first time in this area, the potential of once a day dosing.
Beyond that, we are able to go up into macrophages, and this is particularly important for our second indication, non-tuberculous mycobacterial lung disease. The liposome is preferentially taken up into the macrophage, where the NTM resides. We’ll come to spend more time on this particular disease indication, but NTM is a disease where there is currently no approved treatment, and for which, because it exists inside the macrophage, it is very difficult for antibiotics to reach and be effective.
Historically, aminoglycosides have been a choice for treating very resistant infections. One of the difficulties is that, because of nephrotoxicity and autotoxicity, they have not been able to be used in the doses needed to make them efficacious by encapsulating them again in a liposome and having them in an inhaled form, we are able to minimize the systemic exposure of the antibiotic and thereby eliminate the toxicities that have been historically associated with this treatment modality.
Our technology is the combination of both the actual encapsulation of the liposome and a state-of-the-art nebulizer. This is a portable device that's no bigger than my hand. It is battery-operated and it is easily carried around. This is made by PARI. We have an exclusive arrangement with them, which gives us 15 years after first commercial sale of exclusivity. There is great technology within this device itself in combination with our drug, which means that we have – as we have just disclosed in our most recent earnings announcement, intellectual property protection that now extends through August of 2028.
So, this morning, we announced very – news that we are very excited about and that is that we have reached our target in women for our pivotal Phase 3 study currently ongoing in Europe and Canada and that is 300 patients. And this study is looking at cystic fibrosis patients that have pseudomonas aeruginosa chronic infections, is a head to head study against the leading compound in the market, which is tobramycin. Inhaled tobramycin is marketed by Novartis, and it is a $300 million a year compound. We are looking for non-inferiority relative to Novartis’ drug, but we believe we have based on our Phase 2 data quite a good chance at doing better than that. But it is important to understand that all we need for approval is non-inferiority relative to Tobi. With more than 300 patients now enrolled in this study we have quite a robust data set.
When you talk about cystic fibrosis and pseudomonas aeruginosa chronic infections you are talking about a life threatening disease. These patients do not typically live past the age of 38 years old. The reason they succumb is quite often pseudomonas infection. You are looking at lung degradation of 1% to 3% per year. So, this is a death sentence. And these patients are typically on about 3 hours of therapy a day. The best in class treatment today is tobramycin, it’s administered twice a day 20 minutes at each administration. And we will come back to this because one of the key advantages that our technology enables is for the first time potentially once a day dosing. There is no other drug on the market or in development that is once a day dosing for CF pseudomonas infection and that is a material issue for both clinicians and patients.
One thing I will draw your attention to in regards to the 300 patient enrollment target that we hit and announced this morning is that it took us about six months. When Novartis and Gilead enrolled their trails, they took roughly 12 months each. They obviously have somewhat greater resource capability than we do. I think the fact that we had such rapid uptake in the clinical enrolment of our trial speaks to the interest of both patients and clinicians in this treatment. So, where the challenge is right now with the treatments that are out there? There is no drug that is on the market today that has a label that permits treatment of patients who begin with the baseline FEV above the 75%. This is a measure of forced expiratory volume of 75% of your – what should be your appropriate level. And in our case, we actually have shown in our Phase 2 data efficacy both above and below that 75% cut off.
Importantly the resistance profile that sometimes attends to these drugs, in our Phase 2 data again published, we have shown that whether the patient is pretreated or not and again these are small numbers we hope to tease this out in greater detail. In our Phase 3 study, we still have efficacy and there are published papers that look at aminoglycosides and the cascade that leads to drug resistance one of the big challenges of any infective space that show that our drug which is liposomal amikacin does not – is not – resistance is not induced by the same factors that cause that in tobramycin.
So, let’s talk about the data. This is where we really have our greatest strength. What you see here on this slide is a comparison of what I mentioned before the best in class drug, which is tobramycin inhaled against Cayston, which is a Gilead’s drug. Cayston is a three times a day dosed drug that was recently introduced. And the blue line here represents Cayston and the red line represents tobramycin. The typical treatment for CF pseudomonas patient is 28 days of treatment, then 28 days off, then 28 days on, 28 days off. This cycle of on, off treatment is repeated. The purpose of that treatment modality is to prevent the growth of resistance to the antibiotic that is being used. In this case what you see is the primary efficacy end-point for Gilead’s drug was at the end of 28 days. So, at the end of the first treatment using the drug and what you see on the left there is FEV1% predicted relative change from baseline, and at 28 days what Gilead showed was a change of roughly 7.8% at a 95% competence interval year, which was statistically significantly superior to Tobi, which was just above baseline.
More importantly on this slide what you see is that despite the fact that this drug is on, off, on, off over a three treatment cycle you are below baseline. So, back to this concept of 1% to 3% loss of lung function year-over-year, on best-in-class therapy today, you are still seeing your forced expiratory volume measure decline over a three cycle treatment and this is the best that’s available. What got people excited about our data in Phase 2 was the fact that not only do you see a potent response while on treatment this is our drug versus placebo and you look at the end of 28 days specifically significant improvement from base line in FEV1. This measure is right around 9%, but for the first time during the off-treatment cycle you are seeing sustained benefit at a statistically significant level.
So, you actually end up at the same level after 56 days, so 28 days on-drug 28 days off-drug at the conclusion of that timeframe, you still see what you would expect in the placebo which is degradation of FEV. But under our treatment even during the off-treatment cycle you are still seeing benefit so this generates the question what happens over time. And we are happy to say that when we looked at this over 504 days, this is our extension study where patients remain it’s open label 560 milligrams once a day treated for 28 days and then again a departure from normal treatment off-treatment for 56 days so these patients get 28 days of drug once a day and then no treatment for 56 days. And that cycle is repeated here for a period of 504 days. As a conclusion of that you’re seeing an improvement in role of FEV1 versus baseline at a statistically highly statistically significant level. So, this kind of data has never been seen before. This is our Phase 2 data. This is why we’re very excited to be bringing our Phase 3 data in the middle of next year to the market where we are going head-to-head against the best in class treatment that is out there.
Again for approval all we have to show is non-inferiority. My suspicion is that if you look at – if you peel back to where Tobi was, in the earlier slide and you understand that these patients are getting a lot of Tobi and still degrading over time. If we see data like this I think we are very likely to be able to show something trending a little bit better than the non-inferiority. So, this is the overview of the Phase 3 study as we call it the CLEAR-108 study it’s now fully enrolled and we only needed about 260 patients to demonstrate non-inferiority at our redeployed margin with an 80% power and we expect top line results by the middle of next year as I said this study is now fully enrolled. And we’re very excited to be brining this data into market. The primary end point here is relative change in FEV1 at week 24. So, let’s take a moment to think about that week 24 is after a three full cycles of treatments and the measurement comes at the end of the off-treatment cycle, very important if you remember again that we’re seeing benefit in the off-treatment cycle one would expect that that would be where you would see the greatest delta between ourselves and other treatments.
So when me turn to the other disease indication again back to the beginning Insmed right now is myopically focused on two disease states with one treatment CF with Pseudomonas patients which we have just talked about and then the second indication which is NTM or non-tuberculous mycobacterial lung disease. The two pathogens were principally focused on within NTM or MAC and M. abscessus. These are the hardest ones to get. They reside within the macrophage and they are very difficult to reach. Again due to the technology that we have our liposome is preferentially taken up into the macrophage, where it is lysed and releases at the site of the infection. As of today, there are no approved treatments for this disease.
Patients that experienced it have a great deal of complications that are often immunocompromised. They often have many other complications and there is a great deal of concern at the NIH in regards to this disease because there is nothing approved and it is growing unexplainably at about 8% a year. So, we did a chat survey of this patient population. They are roughly 50,000 patients with this disease in the U.S. And just to compare that to cystic fibrosis they are roughly 30,000 patients in the U.S. with cystic fibrosis, 70,000 worldwide. So, this is disease population that is actually larger in the U.S. and in Europe potentially than cystic fibrosis and for which there is no other approved therapy. In vitro we’ve not published the date yet but we will be doing so we showed great efficacy against NTM and we’re very excited to be discussing the results of our Phase 2 study which will be out by the end of next year in NTM.
To talk a little bit more as I mentioned this is growing at 8% a year, the mean age in contrast to cystic fibrosis is around 57 years old. The average length of in-patient hospital stay as a result of the onset of this is 10 days. This is a very painful and debilitating condition. It can lead to mortality as you see in the last bullet point 40% more likely that died and those without ATM if you are over the age of 65, NTM rather. The usual cycle is almost eight antibiotic courses of therapy a year all off-label, high toxicities in these are off-label treatments. So, the need for therapy here is very real. Our ability to have an impact here is very promising and we are looking forward to releasing the data at the end of next year in our Phase 2 study. The reason it’s so challenging is because this is an intercellular infection that resides within the macrophage and it’s a very difficult to reach that. As I mentioned earlier we’ve preferentially taken up into macrophage and we have data that supports that. So, we are very excited to be able to come to these patients and have an impact on what is otherwise a very debilitating condition.
The Phase 2 study that we’ve discussed publicly is around 100 patients that we’re targeting, it is underway as we speak. We’ll be announcing when that is fully enrolled that the primarily endpoint here is change in micro-bacteria culture, so what we have to do is show a reduction and the presence of the bacteria in the sputum at the end of the treatment cycle. And there is an additional authority for patients to stay on for an additional three months. But we’re very excited about this study and we think we’re going to have a very good chance of coming to the market on the heels of this.
One interesting point we’re often asked, is there any chance that this Phase 2 study could be interrupted as a Phase 3 study, we could cut right to a registrational submission that’s of course all was the possibility the labeling of it as a Phase 2 study was consensus in dialogue with the FDA, I think given the amount of interest in the absence of therapy here that will be a question that continues to remain for discussion when we have the data and we look forward to the dialogue with the agency both in the U.S. and in Europe when that data is in hand at the end of next year.
So, I’m going to stop there. I will just mention for everyone’s benefit as we put out in our most recent earnings call, we have in excess of $90 million on the balance sheet right now, just over around 32 million, 33 million shares outstanding, very excited about the announcement that we’re fully enrolled in our Phase 3 pivotal and very excited to be announcing the addition of Andy Drechsler as CFO who is sitting here in the front just a few days on task here. We will be continuing to add to the senior management team to build our ability to project the commercial launch of this drug both in the U.S. and in Europe. I think the data will continue to be as strong as what we’ve seen in Phase 2, but time will tell and we’re looking forward to having a dialogue with all of you about that. I’d be happy to take any questions any one has?
Will, the CLEAR – Phase 3 CLEAR-108 trial is a non-inferiority trial versus Tobi, if you were to show just non-inferiority do you expect that’s going to be enough to drive patients' adoption in Arikace?
Sure. So, there are two questions that flow from this design element, which is the Phase 3 study as everyone heard the question is a non-inferiority study against the best-in-class compound, which is in Novartis it’s the front line compound. From a regulatory point of view all we need is non-inferiority, so for our approval that’s all we need we will get a drug on the market with that and we’re highly confident that we’ll be able to show that based on our historic data. In fact our historic data would suggest we maybe able to show superiority, but time will time. Do we need to have superiority in order to be commercially successful, the answer to that is no. The main driver here for patient interest is the once a day therapy and I can’t emphasize that enough. Typically when you talk about specialty pharma or drug delivery these things are changes on the margin. For a patient that takes the drug and has a regimen – a cocktail of therapies that takes three hours a day to be able to take away a meaningful part of their treatment burden everyday is quite significant both from the clinician’s point of view and from the patient’s point of view. The reason its significant is clinical in origin. What you’re seeing right now and these are Novartis’ statistics not mine is an 85% increase in resistant to tobramycin the leading therapeutics out there.
Why is that therapy increasing, less than 6% of patients get more than four treatment cycles of tobramycin every year and that’s because taking a drug inhaled twice a day, 20 minutes each time is a very heavy burden. So, to be able to take them to a place for that not only getting it once a day, but the time to administer that is around 12 minutes is a significant change, and there is nobody else out there that has that. Add to that the possibility that we will improve efficacy and safety, and I think we'll have a very compelling offering.
Maybe you could share your thoughts on the market opportunity for Arikace in CF?
So, we'll be going to Europe initially for CF that will be our first market launch. I think the market will be equally as interesting over here in the U.S. We are equally focused. I think this is probably one takeaway I wanted this from to lead with. On NTM, I think that market opportunity is at least as big probably bigger than CF, and right now, there is no competition in it. We are a little bit further upfront with CF, and it’s a well-established market. So, it's very easy to see where we are going to be able to add value. But you know the CF market is currently characterizes about a $0.5 billion opportunity. The NTM market is probably certainly comfortably north of that in the US and Europe alone, and we'll start there as an orphan company, you can do that. It's easy to project into those markets, because you don’t need a very large sales force to accomplish that.
Okay, great. I don’t think you mentioned the U.S. market, the clear -- the Phase 3 CLEAR-109 trial, can you remind us what were the conditions for the FDA removing the clinical hold and when could we see that trial restart?
Sure. So, the 109 study, we have a protocol for that, that's approved. We could start that study today if we wanted. The issue we are wrestling with is what’s the best way to commercially optimize our pursuit of these market opportunities? And I can't emphasize that enough. One of the things that I really focused on since my arrival is keeping, viewing the entire Insmed opportunity through the commercial prism more than anything else. This is going to be a company that is focused on the generation of cash flow and the nearest term possible. And on the basis of that, I think we want to have as has been expressed before, the 108 data in hand prior to our approaching the FDA to decide whatever pathway for approval is the most appropriate. In the meantime, we are pursuing in the U.S. the NTM market and believe that, that dataset will be quite compelling at the end of next year.
Great. On the NTM program, have you started to think about the Phase 3 trial design, do you think it will be similar to Phase 2 and do you think the endpoints will be acceptable to the FDA?
So, let me start with the endpoints, because that’s really one of the most important issues of course that haunts most of these inhaled antibiotic studies is what is the endpoint that is valuable? So, and I will do this for each of the markets. In the CF markets for pseudomonas, you will often hear company speak to one of many metrics for efficacy. There is FEV1 or forced expiratory volume, change in FEV1 from baseline. As you have seen the data up here, we have very good data, very compelling, both in on and off treatments. So, you can comfortably check that box. People also look at change in CFUs or colony forming units that is the concentration of the actual bug, if you will, in the sputum. And we have also published it in that, which shows a greater than a 1 log reduction, 1.5 log reduction over the same treatment timeframe. We don’t go over that data just because it gets to be too much, but that date is published. So, by that metric, we also have efficacy.
If you look at time to first pulmonary exacerbation, which is another standard that people often like to visit. We have released data that shows that we are superior in that category. So, by whatever metric you want to look at, FEV1, CFU change time to first pulmonary exacerbation. In the CF population, we show very good efficacy. And in NTM, I think that dataset will continue to be compelling in our dialogue with regulators. Your specific question was what might Phase 3 look like? I am not sure how to answer that until we have had the dialogue with FDA, I think which you've heard, alluded to here and certainly has been talked about pretty extensively in the research community is there is a very real possibility that they may interpret the Phase 2 study as being adequate for registration and approval. I think we don’t need to count on that, but it certainly would accelerate our timelines dramatically and one could envision a world where we are filing and launching in two geographies, in two disease indications in the next two to three years.
So, that’s very exciting as a possibility. I think our baseline case which we continue to want to articulate and are comfortably capitalized to pursue is CF with pseudomonas in Europe, and based on the quality of that data, which will be out by the middle of next year enter a dialogue with the FDA for the most efficient path to pursue other indications. I guess, provided for one overarching theme around this I would say take a look at an Alexion type model, because that's certainly what is in the back of our heads. We have drug, we have it approved in an indication and there are multiple indications beyond that we can pursue. We have Phase 2 data in bronchiectasis, that's a 200,000 patient population. We have data that we feel very good about in NTM, that's a 50,000 patient population. And we have our Phase 3 pivotal study, which we are reporting in the middle of next year and that's a 30,000 patient population.
James Cole - Lazard Capital Markets
Thank you, Will. And I believe that's all the time we have for today.
Will Lewis - President and Chief Executive Officer
Thanks very much for your attention.
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