Good day, ladies and gentlemen, and welcome to the Insmed fourth quarter 2017 financial results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Blaine Davis, Head of Investor Relations. Sir, you may begin.

Thank you. Good morning, everyone, and welcome to today's conference call to discuss our fourth quarter and full-year 2017 results. Joining me on today's call are members of the Insmed executive management team including Will Lewis, Insmed President and Chief Executive Officer; Paolo Tombesi, Chief Financial Officer; and Roger Adsett, Chief Commercial Officer. For today's call, Will is going to start with a general corporate update. Roger will then discuss the progression of our commercial activities and Paolo will then briefly review the fourth quarter and full-year financials, as well our 2018 financial guidance. Following our prepared remarks, we'll go to your questions. Before we start, let me remind you that today's call will include forward-looking statements based on current expectations. Such statements represent our judgment as of today and may involve risks and uncertainties that may cause actual results to differ from the results discussed in the forward-looking statements. Please refer to our filings with the SEC, which are available through the SEC's website at www.sec.gov, or from our website for information concerning the risk factors that could affect the company. With that, let me turn the call over to Will.

Thank you, Blaine. Good morning, everyone. Thank you for joining us. We have made tremendous progress over the past year and we kicked off 2018 with that same momentum. We believe 2018 will be the year we secure approval and launch our lead drug, potentially the first-ever approved inhaled therapy to treat severe refractory NTM lung disease. This is a keystone element of our effort to build a global biopharmaceutical company focused on serious rare diseases. The transformative event during 2017 that advanced the mission was the positive topline results we achieved in our Phase III INS 212 study. This was followed in January with additional positive interim data from the INS 212 and INS 312 extension studies. INS 212 and INS 312 are evaluating the impact of amikacin liposome inhalation suspension, or ALIS, on adult patients with severe refractory nontuberculous, or NTM, lung disease caused by Mycobacterium avium complex, or MAC. Let me start with the disease we're fighting. To remind you, NTM lung disease is a rare and progressive pulmonary infection associated with irreversible lung damage and declining lung function. This disease typically affects an older population and is associated with an increased mortality rate. Strikingly, the five-year mortality rate for NTM MAC can be as high as 33% and could actually be much higher for those patients who fall into the category we will target first, the severe refractory patients. In this regard, we have set out to address a challenging and significant unmet need in this globally prevalent disease. Recall that our INS 212 study is evaluating ALIS plus guideline-based therapy, or GBT, versus GBT alone. As we announced in September, based on topline results, we met the primary endpoint of culture conversion. The addition of ALIS to GPD led to culture conversion by a 20%…

Good morning, everyone. Let me spend just a few minutes providing you with an update on the buildout of our precommercial organization as we move towards a potential product launch in late 2018. First, we have completed the hiring of our therapeutic specialists, our field team. We are thrilled with the talented individuals we have attracted to Insmed, all of whom are excited to be a part of Insmed and are looking forward to bringing solutions to patients with NTM once approved by the FDA. This is an experienced and accomplished team drawn from premier orphan, pulmonary or infectious disease biotech companies. The average individual within this team has 16 years of industry experience, four-and-a-half years of rare disease experience, has launched five products and has won three President's Clubs. Perhaps, most importantly, this team is passionate about helping patients who suffer with rare diseases. They came to Insmed to make a difference and I'm very pleased with the talent we have attracted to be a part of our launch. Right now, this team is hard at work training on all aspects of NTM lung disease. We plan to deploy this team to the field to enhance our disease awareness campaign in mid-March. The therapeutic specialists will begin meeting with targeted physicians across the country to educate and enhance the awareness of NTM lung disease. I'm proud that Insmed is investing in this educational effort as there is a clear need to enhance education of NTM. I'm also looking forward to learning more from the frontlines of the treating community and how they respond to our educational efforts. We've also completed our key account director team and I'm equally pleased with the quality of our KAD team. The typical KAD has 13 years of national and regional account experience, seven…

Thanks, Roger. And good morning, everyone. Thank you for joining us today. I will spend the next few minutes reviewing the fourth quarter and full-year 2017 financial results. I will then discuss our 2018 financial guidance. This morning, we reported a net loss of $65.4 million or $0.85 per share compared with a net loss of $68.4 million or $1.10 per share for the fourth quarter of 2016. Research and development expenses were $33.9 million for the quarter compared to $54.9 million in the fourth quarter of 2016. The decrease was primarily due to one-time $30 million upfront payment related to INS 1007 in October 2016, partially offset by increasing expenses associated with the development of INS 1007 and higher compensation and related expenses due to an increase in headcount as compared to the prior year. Third quarter G&A expenses were $31.4 million versus $12.2 million in 2016. The increase was mainly due to higher expenses related to our precommercial planning activities for ALIS, a one-time payment to reduce the royalty owed to PARI Pharma and higher compensation and related expenses due to an increase in headcounts as compared to the prior-year periods. Total GAAP operating expenses for the quarter were $65.4 million and $188.9 million for the full year of 2017. As you would expect, we anticipate that our expenses will rise as we remain focused on completing our NDA filing, the building of our commercial manufacturing and corporate infrastructure and other activities in support of a potential product launch at the end of this year. We ended 2017 with $381.2 million in cash and cash equivalents and $55 million in debt. These figures do not reflect the net proceeds of $435.8 million received through the successful public offering of $450 million of 1.75% senior convertible notes we completed…

Thanks, Paolo. 2017 was a pivotal year for us. We made impressive progress in advancing an important new treatment option with the potential to address a serious unmet medical need. While we have a lot to accomplish this year, I have full confidence in the Insmed team and our ability to deliver. As always, I'd like to thank the team for their continued hard work and dedication. We are here to make a difference in the lives of patients by securing approval for the first inhaled drug specifically indicated to treat NTM lung disease and the attainment of this goal is now in sight. I also want to thank the patients and physicians for their continued involvement in our clinical program. Now, let's open the line and take your questions. Operator, can we have the first question please?

[Operator Instructions]. Our first question comes from the line of Joseph Schwartz with Leerink Partners. Your line is now open.

Joe, we can't hear you.

Sorry about that. I was muted. Congratulations on all the progress. From your discussions with payers, do you have a sense of how much they are likely to require patients to use GBT before advancing to ALIS given GBT is not FDA approved, doesn't seem to work well and has some toxicities.

Yeah, I'm going to ask Roger to respond to that.

Hi, Joe. Yeah, thank you for the question. So, we continue to conduct our pricing research and engage with payers. And I think that it's fair to say that we'll see a spectrum of responses, but generally we expect that the restrictions for access to ALIS will rely primarily on a confirmed diagnosis of NTM and that there's been appropriate therapy has prescribed. I don't think it was a – in my mind – they are not telling us that there will be a verified step through of guideline-based therapy, but then an appropriate specialist has diagnosed and is recommending the treatment with ALIS.

Okay. And then, as far as the FDA goes, it seems like a little bit of a paradox that GBT is now FDA approved, but at some time you'll need to address its failure in patients. So, how is your field force able to handle this issue?

Yeah. I think, obviously, they won't be talking about it until the drug is approved. In the meantime, it will be all about disease state awareness. With regard to the label, specifically, I think our approach to this – because we are sensitive to the awareness of this being an off-label cocktail that has been used to date. And now, of course, with the data that shows that it, in some circumstances, is not particularly effective, it makes it even more challenging, I think. So, what we're going to target is a dialog that explores the use of phrase like medically-appropriate therapy. What that does is it allows the FDA to signal that they would like to see other therapy used in advance of using ALIS and that the discretion for the selection of that therapy and how it's used will be in the hands of the prescribing physician. So, I think that's probably where we'll end up, but certainly that will be our proposal.

Okay, that's helpful. Thanks. And then, could you just talk about the medical exception process and is there anything that you can do to help physicians and their patients navigate this requirement and get on treatment efficiently.

Yeah. I'm going to ask Roger to respond to that.

Absolutely. So, thanks for the question. And, yeah, this is going to be an important part of our launch efforts as we are launching off-cycle from a Medicare perspective and we'll be relying heavily on a medical exception process. I think the most important thing we can do because, obviously, we cannot do any kinds of the paperwork for physicians – that all has to come out of that office, the prescribing physician. What we can do is emphasize the activities that are ongoing currently. So, raising the awareness of NTM, talking about the impact of this disease on the patient and, ultimately, that comes down to how motivated the physician is then to secure approval for the therapy. It comes down to sharing that information. Obviously, the clinical data that we have around ALIS and helping with directing the appropriate forms that need to be filled out for specific plans through that medical exception process is where we'll be focused.

And I think there's some precedence out there, right? There are other drugs that have launched off-cycle that give us some comfort that this can be accomplished in an appropriate way. IPF is a good example, right? Both Ofev and Esbriet launched off-cycle. I also think that expectation setting is really key here. Just explaining and getting the physician to understand the delays and frustrations associated with this, so that they can convey that's what their patient can expect in the early days, will go a long way toward not having patients frustrated or disappointed by the process, which is, of course, the goal of the first encounter with the drug.

Thanks a lot.

You bet.

Our next question comes from the line of Adam Walsh with Stifel. Your line is now open.

Hi, guys. It's Neil Carnahan on for Adam. In your INS 212 study, you guys had an impressive culture conversion durability. Has the FDA updated you on what they're looking for to support full approval? And if not, do you guys have any thoughts on what they may be looking for?

Thanks for the question, Neil. Actually, there hasn't been any further discussion about that. I will say that our discussion to date really centered on the need for some evidence of durability. It wasn't a specific threshold. I think everyone that has seen the data is at least as struck, if not more so, by the inadequacy of guideline-based therapy, which sets a pretty shockingly low bar. As of now, we don't have any patients who have culture converted durably on guideline-based therapy. So, what constitutes improvement from there isn't, obviously, very much. To be north of 60% right now makes me pretty comfortable. I don't think that we're concerned about this threshold. And one of the reasons we shared the data was it seemed so overwhelmingly positive to us that it's something that you all would want to be aware of. And we'll provide guidance, if we get any, from FDA on what constitutes a threshold, but we just haven't had that discussion at that level of detail. And, frankly, I don't anticipate it. I think they're going to be looking for evidence of durability rather than a specific line in the sand.

Right. Thank you, guys.

Thank you. Our next question comes from Ritu Baral with Cowen and Company. Your line is now open.

Hi, guys. Thanks for taking the question. Now that the field force is hired, how are you looking at how they're distributed geographically and also how you're targeting the docs? What number of docs are they planning to target? What is the profile of those docs? Are they tiered? Are you thinking of the market in terms of X percent of the patients at centers of excellence, x percent in community? How should we think about that?

I'm going to ask Roger to respond to that after I welcome you back, Ritu. Good to hear your voice.

Hi, Ritu. So, it's Roger. And you had a great question. We've deployed our sales force using the Symphony medical claims database. And so, we've been able to identify physicians who are treating NTM patients currently. And then, we've also – we've talked about the fact that we've deployed machine-learning against that database to understand where there may be these NTM likely patients. And we think that we've – with 93% confidence, there's about two undiagnosed NTM likely patients currently in the system for every one that's currently diagnosed and being treated. So, we've deployed our sales team. We have 72 therapeutic specialists. Around those clusters of physicians, there is geographic concentration around the coast and the southeast and up the Atlantic seaboard. And so, we've focused our efforts there. They primarily would be calling on pulmonologists and infectious diseases specialists, and there is actually interesting regional variances as to which specialist takes the lead in treating those NTM patients currently. And, for example, in Florida, we see a heavy pulmonologist influence. In Southern California, it seems to be more infectious disease. So, we've hired accordingly. We think that we've got approximately 80 to 90 target physicians for every current therapeutic specialist based on the current activity that we see with the interest in current treatment of NTM patients. We've also built in a flexibility to address the NTM likely patients, so that we can also go and do some work around education and trying to unearth those patients and getting an appropriate diagnosis for those patients. So quite a lot of work has been on the patient finding and we feel very confident that we've got the team focused on the right area and the right physicians.

Do you have those physicians broken up by tiers at this point in order of importance with the calls?

We do. We have about – I'd neglected to mention and you did ask this. So, I think we've got a little bit over 5,000 physician targets. They account for about 70% of the current diagnosed NTM patients and we have tiered those physicians by their activity. And, obviously, the higher focus will be on the physicians that have the higher count initially. But we also see that there are some physicians out there with a handful of patients that, of course, is not unusual in rare diseases and we want to make sure that we cover those physicians as well.

Those patients, especially the diagnosed patients, are they hanging out and being treated at centers of excellence? If so, how many are there? Or are they really in the community right now?

It varies. I think that there are some centers of excellence. There's a handful of centers of excellence where they've bee referred. Tyler and National Jewish and Oregon. I mean, there's a number of centers of excellence that take referrals. Importantly, those patients then, once they're treated, they get referred back to their home physicians, if you will. But we also see that, within regions, there are physicians who have taken a special interest in NTM and those are the ones that have more than a handful of patients and then they get the referral even within a pulmonary practice. There may be a pulmonologist who is taking that active interest in NTM patients and gets all of those patients referred to them through that practice. So, I would say, the centers of excellence do incredible work with these difficult-to-treat patients, get them where they need to be, then refer them back to the physicians who actually got them into those centers of excellence for ongoing management in many cases.

Got it. And a quick follow-up. Can you give us a little more detail about the patient hub that you mentioned you're setting up? Is this going to handle reimbursement assistance and the exception process as well as distribution? Do you have any plans for like a copay assist as part of that as well?

Yeah. It's a great question. So, within our system, we're building in-case managers to help direct interaction with the patients. We're planning to put out support – reimbursement support into the field. So, those will be field based, customer-facing positions. And we're also working on how we're going to directly assist patients and that will be within the commercial arena. So, commercially insured patients, we can give direct copay assistance too. Medicare, currently, we cannot provide direct financial assistance. And in the rare disease space, a lot of times, you'll see patients relying on charitable foundations to help offset the cost of therapy for them.

Got it. Thanks for taking all the questions.

Absolutely.

Thank you. Our next question comes from Liisa Bayko with JMP Securities. Your line is now open.

Hi. Thanks for taking the question. I've been curious about what you think sort of some of the key points of discussion at a potential AdCom. I'm just wondering if that would really be necessary. It seems that you're, obviously, fairly confident the data are very supportive of approval at this point. So, do you think you really need an AdCom? And if so, what would be, you think, the key points of discussion?

Yeah. It's a good question. Thanks, Lisa. And one we get a lot. I think the FDA's practice, in many cases, when it's first in disease, as this is, they like to have an AdCom. And I think there probably – I'm speculating – that they may be wanting to accomplish. But, first, it's not just the review of a drug in the opinion of the best treaters out there that they put on the panel, but also to educate the broader community because once a company like ours comes in and actually secures the first approval for a disease state, it's not uncommon to see other companies trying to come up with the same space. And so, providing guidance to the community as to what would constitute acceptable thresholds for safety and approval is, I think, they would you as very important and valuable. I think in our specific case, the questions will center around the usual cross-examination of both safety and efficacy data. And one of the questions I speculate they may ask is what is the appropriate label, given that this is, at its core, an antibiotic treating a gram-negative infection. And while we have targeted the most severe, the most sick patient population within the spectrum of pulmonary NTM, there are patients in other portions of it and the data reveals that guideline-based therapy is sort of inadequate in treating many of these patients. So, it may be that they want to explore with treating physicians how to craft the label. And they could ask a question, for example, is the data adequate for safety and efficacy establishing for severe refractory or a different type of definition as a not a question. And be seen that happen in other divisions within FDA. Again, this is all speculation, but it's the best that we can put together. And I think the base of the answer to the question is first in disease, first approved drug, they are going to want to just make this a – take this is a moment to educate the community.

Are you implying like a potentially broader definition?

Well, we've seen that happen in other divisions within the FDA. I don't know that they would do that here. Our base case assumption is that it will be for severe refractory NTM. But, again, as pointed out earlier by Adam, the ability to identify prior therapy is a little bit challenged because it's all off label. So, I think that create some nuance into how you craft the label. And that would alone be a basis for an AdCom and exploring how to craft it.

Okay, interesting. And actually, your response is a perfect segue into my next question. I'm aware of some other mechanisms in development, like inhaled GM-CSF, for example. As you think about the feature landscape, is that something, you think, makes sense for your portfolio? How committed are you to NTM per se? Would you consider other mechanisms like, for example, inhaled GM-CSF or others? Maybe if you can just comment on that. And thanks for taking my questions.

I saw your note. Yes, thank you. We are, obviously, very committed to NTM on a global basis and we intend to do all we can to help patients in this space. There will be other drugs that will come along hopefully. There is a lot of room here for improvement. And I think we're excited to keep our eyes out for anything else that may come along and be complementary. When we looked at GM-CSF a while back, we paused and passed at that moment. It doesn't mean it won't go the distance. But I think our concern was relating to any growth factor raises some regulatory questions about their comfort and introducing that and the off-target intended effect. So, I think that is an issue that needs to be resolved before we see how far that will go. But my hope is that we'll go all the way. We are well aware of the program and will certainly be keeping an eye on it as we do on anything else that's in this space. And it's our hope that there will be other therapies coming along to raise additional awareness about the disease.

Great. Thanks a lot, Will.

You bet.

[Operator Instructions]. Our next question comes from the line of Martin Auster with Credit Suisse. Your line is now open.

Hi. This is Mark [ph] on for Marty. Thanks for taking my question. Perhaps, would you be able to provide a little more clarity around your consideration with the design of the ALIS maintenance therapy trial? And if you could also comment on the sample size needed and the background of the patients that you plan to enroll on that trial.

Yeah. So, I will comment on in regards to that trial sort of the general place we are in our thinking right now because it's not advanced enough to be able to say with any degree of specificity. I think maintenance therapy, just to orient everybody, is a concept that was introduced to us by one of the key opinion leaders in the space who felt that patients who culture convert would benefit from taking our drug perhaps three days a week for the rest of their lives to prevent reinfection. So, the prophylaxis and avoidance of the infection coming back. As we know from best available data, about half of the patients who are culture converted will either get reinfected or relapsed within three years of their culture conversion. So, from this perspective, having a therapy that would prevent that reinfection or relapse would be very valuable. We intend to explore the viability of that through a clinical trial which we hope to launch this year. Our current thinking is that that would be our therapy as a monotherapy and it would be potentially against placebo who are patients who have culture converted, and we would run that time for a period of years and see what the rate of reinfection is in our arm versus the non-treated arm, which is the current approach to patients. We haven't confirmed that yet, but that's our current thinking. And our hope would be that that would provide valuable insight into both the ability of our drug to prevent reinfection or relapse, but also to the benefits that would be associated with that. And as we develop that further with FDA this year, we will certainly update everybody. We are excited about that space. We think it provides a very significant lifecycle management opportunity for this company.

Great, thank you.

Sure.

Thank you. Our next question comes from Neena Garg with Robert W. Baird. Your line is now open.

Hi. Thanks for taking my question. Just wanted to go back really quickly to one of the prior questions about kind of payer discussion. So, I know you mentioned earlier that payers seem to be trending towards kind of requiring verification of prior guideline-based therapy. I'm just wondering how sensitive is that to pricing and have you kind of test the different price ranges and seen if that requirement may change? Thanks.

Roger?

Yeah, thanks for the question. Yeah, our pricing research is ongoing, as I mentioned before. And I think that what we've tested is a variety in a range of pricing. We've seen that, across the price points, that is still going to be a desire to have a prior authorization. So, again, checking that the physician is an appropriate specialist to be making that diagnosis and initiating the treatment for the patient. And I think that that's actually consistent across the price points that we are looking at. And this will be, if you think about the benchmarks on where we've been looking at from an analog perspective, this would be an expensive therapy. And it's something that the payers are interested in making sure that it gets into the hands of the appropriate patient where it can add the most value. So, I think – I don't think it's trending towards a hard verification that you've failed guideline-based therapy. I think it's more along the lines of they will be – the physician has selected the appropriate patient, has diagnosed and confirmed the diagnosis of NTM and then is using it consistently with a label. And that's what the feedback we're getting from the payers.

Okay, thanks.

Thank you. I'm showing no further questions in queue at this time.

Terrific. Thank you all for joining us on today's call.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes today's program. You may now disconnect.