Good day, ladies and gentlemen, and welcome to the Q4 2012 Insmed Incorporated Earnings Conference Call hosted by Anne Marie Fields, VP of LHA. My name is Annette, and I'm your conference coordinator today. [Operator Instructions] I'd like to advise all parties that this call is being recorded for replay purposes. And now I'd like to hand the call over to Anne Marie. Over to you, Anne Marie. Thank you.

Thank you, Annette. Good morning. This is Anne Marie Fields with LHA. Thank you all for participating in today's call. Joining me from Insmed are Will Lewis, President and Chief Executive Officer; and Andy Drechsler, Chief Financial Officer. Earlier this morning, Insmed announced financial results for the fourth quarter and year ended December 31, 2012. If you have not received this news release or if you would like to be added in the company's distribution list, please call LHA in New York at (212) 838-3777 and speak with Carolyn Curran [ph]. Insmed also this morning, filed its annual report on Form 10-K for the year ended December 31, 2012, with the Securities and Exchange Commission. Before we begin, I would like to caution that comments made during this conference call by management will contain forward-looking statements that involve risks and uncertainties regarding the operations and future results of Insmed. Please review the company's filings with the SEC including, without limitation, the company's Form 10-K filed this morning, which identifies specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements and which contains other important information about the company. Furthermore, the contents of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, March 18, 2013. Insmed undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. So with that said, I would like to turn the call over to Will Lewis. Will?

Thanks, Anne Marie. Good morning, everyone, and thanks for joining us. 2012 was an important transition year for Insmed, during which we achieved a number of critical milestones necessary to delivering important new therapies to address pressing patient needs in orphan lung diseases. Since I came on board last September, we have been building on the more than 10 years of clinical development and financial investment accomplished by my predecessors. We will continue to drive these efforts forward, upgrading and implementing improvements for every aspect of the company's operations as we accelerate Insmed's transformation toward commercialization in 2013. This year, we expect to have the final elements of clinical data that will allow us to seek regulatory approval for our lead indications for ARIKACE, and we are building the commercial foundation to enable a successful launch. Let me start by highlighting 4 key updates that illustrate our momentum towards becoming a commercial organization. First, today we announced that Matt Pauls will be joining Insmed on April 1 as Chief Commercial Officer. Matt joins us from Shire, where he was most recently Senior Vice President, Head of Global Commercial Operations, Shire Regenerative Medicine. In this role, he led the global commercial function of a business unit with a staff of approximately 300, including a 200-person U.S. sales team with $250 million in sales. Matt has successfully launched and built several global product portfolios, making him ideally suited to lead our commercial efforts. Importantly, Matt's intense focus on patient needs fits perfectly with our company philosophy and vision. Second, as reported in our 10-K this morning, we received the interim results of our 9-month dog toxicity study and have submitted an unaudited interim report to the U.S. Food and Drug Administration, stating that the macrophage response was similar to that seen in…

Thanks, Will. Good morning, everyone, and again, thank you for joining us. I'm happy to be joining you following my first few months as CFO of Insmed. I was delighted to join Will and the team and was drawn by the opportunity to help take a late-stage asset with compelling Phase II data and transition it through to commercialization. Let me begin with a brief review of our financial results, starting with the fourth quarter. But first, please note that we filed our 10-K earlier this morning. I would refer you to the detailed discussions of our business, risk factors and financial disclosures contained therein, as well as other important information. With that said, for the fourth quarter of 2012, we posted a net loss attributable to common stockholders of $15.5 million or $0.49 per share. This compares with a net loss of $8.2 million or $0.33 per share for the fourth quarter of 2011. The fourth quarter results also reflect an increase in net loss over the third quarter of 2012. The overall increase in net loss is reflective of our increased clinical and manufacturing activities. Specifically, research and development expense increased to $12.2 million from $6.8 million in the prior year quarter and $5.5 million in the third quarter of 2012. The increase in R&D expenses is directly attributable to our active clinical development programs for ARIKACE in CF patients with Pseudomonas lung infections and in NTM patients. Despite the increased level of R&D activities, general and administrative expense for the fourth quarter of 2012 was $3.6 million, which is consistent with the $3.5 million we recognized a year ago and the $3.8 million we recognized in the third quarter of 2012. Now moving to our full year financials. For 2012, we posted a net loss attributable to…

Thanks, Andy. In closing, we are pleased with the advances we've made. We have an exciting year ahead, which will be characterized by the expected receipt of data from 2 pivotal trials that, in turn, will support our continued progress towards filing for CF and NTM in Europe, Canada and the U.S. 2013 is a pivotal year not only for Insmed, but more importantly, for patients as we move closer to bringing a more effective, less burdensome treatment option to those who suffer with these debilitating lung infections. Let me close by repeating a line that many of you have heard me state since my arrival, we believe we are well on our way to achieving our goal of commercializing ARIKACE in 2 indications, in 2 geographies, in 2 years. While we're waiting for our first question, let me just mention that Andy will be giving a corporate presentation at the Roth Capital Partners Investment Conference in Laguna Niguel, California, tomorrow at 9:30 a.m. local time. We hope you're able to participate either in person or via webcast, which is available on our website at www.insmed.com. Operator, we will now open the call up to your questions.

[Operator Instructions] Your first question comes from the line of Joseph Schwartz from Leerink Swann.

I wanted to ask, first, if you could give us an update on when we should expect some clarity on whether ARIKACE may qualify under the GAIN Act for NTM?

So we're going to file for -- good morning, Joe, and thanks for the question. We're going to file for QIDP designation under the GAIN Act for NTM, and we would expect to hear the response from that by sort of midyear. But we, and certainly, our intention is to move that forward.

Okay, great. Good luck on that.

Thanks.

And a quick follow-up in CF, in the CLEAR-108 study, what proportion of the patients do you think will be relatively, heavily TOBI experienced? I know CAYSTON is not a great comparator for ARIKACE, but in the CAYSTON study, it appeared that the patients that did best -- it appeared that the patients that did the best on CAYSTON had the most TOBI experience.

Yes. So we haven't disclosed the exact percentages, and of course, we're blinded to the totality of the data. But what I would say is that if you look at treatment practices today, the vast majority of patients are receiving, if not TOBI, some other inhaled antibiotic as a part of their treatment. Indeed, it would be very difficult for a physician to have a patient that is diagnosed with Pseudomonas and not being treated with an inhaled antibiotic. So our expectation is that we will see a significant portion of patients pretreated.

The next line of question comes from the line of Aaron Masterson from Carcorp.

[technical difficulty] moving as exciting and invigorating, and congratulations on bringing Mr. Pauls aboard. I don't want to throw any cold water on the ARIKACE thing because I know it's your primary -- our primary approach, but I have 2 questions pertaining to IPLEX, especially since you're bringing a gentleman in from Shire. Will there be a marketing agreement or a licensing agreement with Shire on the Premacure matter? And do you anticipate any licensing agreement with PCUT on ALS?

Right. So thanks for the question. On Premacure, the -- predating my arrival, there was actually already a license agreement in place for IPLEX to Premacure. Premacure is, for those who aren't aware, was recently acquired by Shire, so that license transfers to Shire. Within that license agreement, and as we disclosed in our 10-K this morning, there was already a buydown option for a portion of the royalty. We have now extended an option to them to buy down the entirety of the royalty for IPLEX. It's important to reiterate that IPLEX is not a development priority for Insmed. It is something that we chose, deliberately, to out-license, and it's certainly my hope that Shire will invest the substantial amount of resources that will be required for the complex manufacturing associated with IPLEX and to be able to move it forward for retinopathy at prematurity. They do have the option to buy down the balance of the royalty and all our obligations related thereto. So by the end of April, as we disclosed in the 10-K, we'll know whether or not Shire is going to take that option. I should just highlight, it's complete coincidence that Matt Pauls is joining us from Shire. There's no relationship between that and the Premacure IPLEX transaction. On PCUT, as soon as anything happens there by way of final definitive progress, we will announce that.

Okay. I don't say this often, but you're doing a good job.

I appreciate that very much, but it's not just me. We're building off a foundation of a lot of good work done by a lot of people that predated my arrival. And frankly, we've been able to attract top-shelf talent, which is going to help us take this thing forward. But I appreciate the comment.

Your next question comes from the line of Greg Wade from Wedbush.

I wonder if you might just give us a little more detail about the macrophage response that you referred to in the dog study.

Sure. So I mean, the specifics of what we saw in the dog tox study are consistent with what one would expect for any study of this kind, where you're having the animal respond to inhaled particulate matter. It is what we would describe as a normal response. There's nothing in the response profiles we specified in the 10-K, and in my comments earlier, that we consider concerning. So the reason we refer back to the 3-month dog tox study that was previously discussed with the FDA is I think that, that study in itself was a point of great comfort. What this represents is a longer-term exploration of that to see whether or not a consistent macrophage cascade response, which you would expect, would result in any other kind of proliferative change, and we did not see any.

And if I just might follow up, have you evaluated the opportunity to file for Breakthrough Therapy designation for ARIKACE in the NTM setting? And if so, could you give us your thoughts on that?

You bet, Greg. Thanks for the questions. The breakthrough therapy is something we're keeping a weather eye on. I would say that we want to see the data, at least the DSMB's interpretation of the data, before we would be in a position to judge whether or not there is some subset of population there where the response is strong enough to justify that consideration. We're well aware of it, and we will continue to be reflective about whether or not that's a good path forward. You highlighted an excellent point, though, more broadly, which is that in the anti-infective space generally, what we're seeing is a real engagement on the part of regulatory authorities where there is efficacy and safety to find a pathway forward to get these drugs onto the market, whether it's through breakthrough therapy, QIDP designation or, indeed, just evaluation of final data outcomes, has been seen with other products as well. There's just a real need for anti-infectives generally and any arrow in the quiver is going to be welcomed by the regulatory authorities, we believe, both here and in Europe.

There are no further questions at this time. [Operator Instructions] The next question comes from Robert Hawkins, private investor.

I'm very interested in the progress that you've made, it seems like it's a very important turnaround for the company. I'm also very interested in whether or not you might be considering filing a master file for just the liposome as part of your regulatory -- increased regulatory efforts in the near future. That seems to me to be very important to the future of Insmed.

Well, Robert, if you mean with respect to the underlying technology, it's probably worth commenting that while we don't draw a lot of attention to it, there are other projects that are ongoing within the company. I like to characterize for investors that the myopic focus of the company right now is securing the approval of ARIKACE in cystic fibrosis patients who have Pseudomonas lung infections and patients who have NTM lung infections. But this technology does have broader application, and there are certainly some other areas where we're seeing opportunities. And I would say, at this stage, we're quietly pursuing those. It would be important for people just from a capital use point of view to understand that should we continue to see progress in those areas, it would be our intention to partner those development efforts so that capital will continue to be mainly focused on the approval of ARIKACE in those first 2 orphan indications I've mentioned, CF with Pseudomonas and NTM. I hope that answers the question.

I would now like to turn the call over to Mr. Lewis for closing remarks.

Well, thank you again for your participation. We hope you come away from this call with a greater understanding of Insmed, as well with a sense for the enthusiasm and confidence we have in our continued success. As ever, we appreciate your interest in, and support of, Insmed, and we look forward to addressing you again in our first quarter financial report. Have a great day.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.