Good day, ladies and gentlemen, and welcome to the Insmed First Quarter 2018 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 is being recorded. I would now like to introduce your host for today's conference, Mr. Blaine Davis, Head of Investor Relations. You may begin.

Thank you, Bruce. Good morning. And welcome to today's conference to discuss our First Quarter 2018 Financial Results. Joining me on today's call are members of the Insmed executive management team, including Will Lewis, President and CEO; Paolo Tombesi, Chief Financial Officer; and Roger Adsett, Chief Commercial Officer. For today's call, we will start with a general corporate update, followed by Roger, who will discuss the continued progression of our commercial activities, Paolo well then briefly review the first quarter financials. And then followed by our prepared remarks, we'll open the call for 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 now turn the call over to Will.

Thank you, Blaine. Good morning, everyone. And thank you for joining us. We kicked off 2018 with the momentum, drive, and ambition, which are key characteristics of the team here. We're excited about our prospects for the year and our efforts throughout the first quarter are moving us closer to our goal of building a sustainable biopharmaceutical company. We remain optimistic that we will secure approval and launch our lead drug, Amikacin Liposome Inhalation Suspension, or ALIS for adult patients with treatment refractory nontuberculous mycobacteria, or NTM lung disease caused by mycobacterium avium complex, or MAC. ALIS has the potential to be the first ever approved inhaled therapy to treat this disease. We accomplished an important milestone in this process with the filing of our NDA with the U.S. Food and Drug Administration at the end of the first quarter. I'll dive further into the impact this will have on timing for a potential approval and launch shortly. I would like to take a moment to acknowledge the team for their efforts in accomplishing this goal on time with the highest quality. To remind you, the disease we're fighting is a rare and progressive pulmonary infection associated with irreversible lung damage and declining lung function. We estimate that as many as 30% of NTM MAC patients fail treatment when using the off label antibiotic regimen that is the current standard of care, and we are aiming to offer an important treatment to address these circumstances. The file with our NDA was based on the full six month data from our INS-212 study. Recall that this study evaluated ALIS plus guideline-based therapy, or GBT, versus GBT alone, with the primary endpoint of culture conversion by month six. We achieved that primary endpoint unequivocally with a p-value of less than 0.0001. Results…

Thanks, Will, and good morning, everyone. Let me spend just a few minutes providing you with an update on our precommercial efforts today. We deployed our therapeutic specialist team at the end of March. They have already made solid progress in expanding our Healthcare Professionals Awareness of the disease. In the first five weeks, our therapeutic specialists were in the field, conducting disease education. We've engaged with about half of our tier 1 targets. As a reminder, we're targeting just under 6000 physicians. We are pleased that the experience validates the targeting work we conducted using the Symphony databases. While it's early, our engagements with our targeted physicians have been well received and they welcome the discussion to learn more about NTM lung disease. We continue to gather insights of our engagements with the healthcare professionals, and we'll use that information to further enhance our preparation for the commercial launch. We're also actively engaging with payers through our key account director team to gather further insights about their view on NTM. Thus far those discussions have been productive and today, we believe that payers are supportive of our efforts in the disease state and recognize the importance of access to a potential new product in the disease state with no currently approved therapies. They've also been hard at work in the build out of our patient support services that will allow for an efficient process by which a script that is generated and a patient receives that product. In addition, we have on-boarded our Era Cares team of 10 patient support specialists, who will play a critical role in ensuring the entire patient experience as positive as it can be. We've an excellent set of partners, who work with us through this process, and we are well on our way to making the necessary investments to support patient access ALIS. And one final area of focus is the build of our commercial inventory for launch. Thus far that process has gone smoothly, and we continue to invest in the production of commercial batch quantities which we will continue to build through the second quarter and beyond, so we can have a solid inventory of drug and device supply at the time of launch. With an expected three year dating, we expect to build sufficient safety stock in preparation for our U.S. launch. Collectively having each of these critical elements on-boarded and operational this early will go a long way towards ensuring we have a great launch when we were able to secure approval. I'm excited about where we are as a commercial organization. This is the first great team, and we're looking forward to the activities of the coming months will bring us closer to the potential commercial launch of ALIS later this year. And with that, let me turn the call over to Paolo to review the financials of the quarter.

Thanks, Roger. And good morning to everyone. Thank you for joining us today. I will spend the next few minutes reviewing the first quarter 2018 financial results. This morning, we reported a net loss of $68.5 million or $0.89 per share compared with a net loss of $37.4 million or $0.60 per share for the first quarter of 2017. Research and development expenses were $30.1 million for the first quarter of 2018 compared to $22.3 million in the first quarter of 2017. The increase was mainly due to an increase in external manufacturer expenses from an increase in ALIS production-related activities and higher compensation and related expenses to an increase in headcount as compared to the first quarter of 2017. First quarter G&A expenses were $32.7 million versus $13.7 million for the first quarter of 2017. The increase was due primarily to higher investment related to our pre-commercial planning activities for ALIS, many of which Roger highlighted in his remarks and higher compensation and related expenses due to an increase in headcount as compared to prior year period. Cash-based operating expenses for the quarter were $56.3 million. A reconciliation of our GAAP operating expenses to our cash-based operating expenses is included in our press release, which is available in the Investor Relations section of our website. As you would expect, we anticipate our expenses will continue to rise as our efforts remain on the building of our commercial and corporate infrastructure as well as inventory and other activities in support of a potential product launch at the end of this year. Capital expenditures in the first quarter of 2018 were $5.4 million, primarily related to the build out of long-term ALIS production capacity at one of our third party manufacturing facilities. As a result, our total cash-based operating expenses and…

Thanks, Paolo. Clearly, we carried the strong momentum of 2017 into the first quarter of this year. We continue to make impressive progress in advancing an important new treatment option with the potential to address a serious unmet medical need. We are excited about the many milestones ahead of us, and we, at Insmed, remain confident in our ability to execute as a team. At close, I'd like to thank everyone for their continued hard work and dedication. I also want to thank the patients and the physicians' for their continued involvement in our clinical program. We've been excited to see a positive response from physicians, who are looking to make a meaningful difference in the lives of patients. Now let's open the line and take your questions. Operator, can we take the first question, please?

[Operator Instructions] And our first question comes from the line of Matthew Harrison from Morgan Stanley. Your line is open.

This is Ishmael Asante for Matthew. Thank you for taking our questions. We have a couple on expenses in Japan. First, can you talk about how you think about commercial expenses in the second half of '18 and if it should peak by the second quarter '18? Also, how should we think about manufacturing expenses on inventory build on Japan? What remaining steps need to be completed for filing, and how much commercial spend/activities are going on there? Thank you.

So I'll just start, and then turn over to Paolo. But we're not going to go into detail breakouts beyond the guidance that we've already provided for our cash consumption. And I think the way to characterize Japan, is to say that we are going to be looking to put the ball control for that in the hands of the general manager that we hope to announce very shortly. We've had a number of very impressive candidates that we've been looking at, and I think, we're more close to be able to announce that in the not-too-distant future. And given the importance of that part of the world being owned by a team with local knowledge, we really want that person onboard before starting to set up guidelines, and direction on, on what's going to happen. What I will tell you is, having just come from Japan, it is an extremely interesting opportunity for us. I was excited about it before I went. Having just come back from JRS, Japanese Respiratory Society meeting, I am even more so. It is very clear that disease awareness about NTM in Japan, is extremely high, and that our ability to provide a potential product for that disease is going to be very well received by the community over there. As I mentioned during the remarks, there are more patients in Japan, with refractory NTM MAC than they are in the U.S. So this is a very significant opportunity for us, and we're going to resource it appropriately. I don't think we have any other details on guidance. Do we Paolo?

No.

Okay. So I think that's - unfortunately, I can't be more specific in response to your detailed questions with regard to Japan spend. You did ask about inventory build, as Roger mentioned, we are resourcing that very substantially as well. That investment is expensed because we're still in the developmental stage. That's an important aspect to have 3-year dating, or at least we anticipate having that. So anything we build now will be a nice safety stock at the time of launch and anything beyond that, we'll be able to use over the course of the coming years during the launch time frame. So hopefully, that's helpful.

That was helpful. Thank you.

And our next question comes from the line of Martin Auster from Credit Suisse. Your line is open.

Hi. This is Tiago on for Marty. Thanks for taking the question. So perhaps, if you could just talk a little bit about some of the key learning’s that you have had from physicians' interactions thus far, especially as it relates to disease awareness. And perhaps what are some of the key focus points for your physicians' interactions that you expect to have at ATS? Thanks.

Yes, I'm going to actually turn that one over to Roger.

Yes, great. Thanks for the question. I think, as a reminder, we've had about 5 weeks of our therapeutic specialists out in the field and they've engaged with about half of our Tier 1 targets. And so we've taken some encouragement, I think, from those early interactions. We're calling on about 6,000 physicians in total. So maybe the most encouraging thing for me is that the physicians we're calling on, have these NTM lung patients, right. So one of the things in a very successful rare disease launch is to be able to find these patients and make sure that they are available for treatment. That's something that we've validated with these efforts that, that the physicians we're calling on, have a strong interest in NTM lung disease and have the patience in their practice that they're actively treating. And they still support the number of patients and that's very consistent with what we're seeing from the epidemiological data that we've shared with you previously. And so that's encouraging validation of what we think the size of the patient opportunity is and they also reported substantial portion of those patients that are not responding very well to the guideline-based therapy. So I think all of those things are particularly encouraging for us. The educational resources are very well received. So our therapeutic specialists have access to the physicians, they're welcome to come into the office, talk about the disease awareness that really validates our decision to make the investment to educate the healthcare professional community about the disease and they particularly welcome because they now finally have some materials that they can provide to the patients about the disease where they had -- really didn't have anything before. So I think they will continue to learn from the experience we have with the therapeutic specialists. We're all very encouraged by the early experience, and we continue to invest in digital disease awareness capabilities. We're seeing strong performance across our digital channels, and we continue to see active engagement both from the healthcare professional side of things, but also, from the patient side in interacting with our digital efforts.

And I'll just add on the ATS one. I think we're seeing a lot of enthusiasm from physicians on -- in regard to NTM. One of my favorite recent anecdotes is, when I started at this company a little over 5.5 years ago and I went to the European Respiratory Society meeting and there was an NTM session being held, there were about 20 people in the room. At last year's session, it was standing room only with 1,000 people, physicians waiting to hear the oral presentation on NTM. So I think its harbinger of what's to come. Oftentimes when you see whether it's PAH or IPF, a disease that has a drug that may soon be arriving that is going to have an impact on the disease state. It becomes the topic of discussion and into this circumstance, we have found our very strong Phase III results set against the unfortunate failures in the non-CF bronchiectasis arena where the Phase III trials from both [indiscernible] and Aradigm Grifols did not meet their statistical significance endpoints, and were not approved. So this is the hot topic, I think it's fair to say and that means ATS is going to be talking an awful lot about it and from the physicians we've interacted with, there is just a lot of enthusiasm for the potential approval of this product and its impact on this disease.

Great. Thanks for taking the question.

And our next question comes from the line of Adam Walsh from Stifel. Your line is now open.

Good morning, guys. And thanks for taking my questions. I've got a couple here. I guess, given the possibility that FDA could grant ALIS either a narrow label in the refractory patient population or I guess, in theory, perhaps a broader label that would include front-line treatment or naive patients. How are you planning internally for those potential two scenarios from a manufacturing and commercial standpoint? And then just a quick follow-up here, some clients have mentioned that prior filings for drug device combos have had a lower rate of first pass approval than simple drugs filings, given that ALIS is a drug device combo, what are your thoughts there? Thanks.

Sure, I'll take a quick stab. The preparation on the CMC side is pretty simple, just make as much as we can so that we're ready for whatever the circumstance may be and the reason for that is simple. One, we want to get into the habit of having that full commercial production running constantly, and there are always adventures along that journey, but having said that we're doing very well in that regard. I think we're going to have plenty of supply at the time of launch, and with what we anticipate to be 3-year labeling, it really is not linked in any way to whatever label we may or may not get in our discussion. I will just mention because you brought this label concept and what's going to happen, I think you put your finger on what AdCom is going to be all about. It's difficult and a little premature to be speculating on content or discussion, but I view AdCom as a discussion of the label, not so much a debate about the approvability and I think, that's an important distinction from perhaps a more recent AdComs in other context because our Phase III primary endpoint was so definitively surpassed. And I think, also, I'll just remind you we're filing under Subpart H where if you hit your primary endpoint and that's agreed upon, that's what you need to do to secure a Subpart H approval. So I think this is going to be a discussion of label, not of approval. Drug device combos we've heard this as they can be more challenging in some regards. I think, here where we have an advantage is that this is a device that has already been approved by the FDA and most recently, at the end of last year. So this is not a similar looking device that they will want to take another fresh look at. They just took a fresh look at it in the fall with the approval of a drug from Sunovion. So from that point of view, I think we are belt and suspenders prepared, and that will continue to be the case. We're going to continue investing in preparation, et cetera. I don't know, Roger, if you want to talk a little bit about the commercial preparation for whatever the outcome may be.

Yes, absolutely. So as you might expect, we are contemplating both outcomes and in the case that we do get that broader label. I think we've got -- I know we've done some specific research with physicians and the value of ALIS, I think, our physicians see a very high value to the product. The highest value initially that they see in the place for therapy initially is overwhelmingly within that refracted population that we studied. Nonetheless, I think given the profile and given the unmet need and the disease state, if there was a broader label, I think you would see physicians intent to prescribe to a broader population will come through whether or not nearly as strong as a refractory population. But to consider that and to prepare for that as well, so we are making as much ALIS as we can. We're also engaging on our pricing research, thinking about the different label scenarios and what that would mean for appropriate pricing of the product and the value that the product would convey in both scenarios, and we're also engaging with payers. And as we talk to them about the value of the product and the unmet need and the disease state, we contemplate to them what a prior authorization, for example might look like under a narrow label versus a more broad label. So we are preparing for both scenarios. I think the good news from my perspective is we feel very confident in both scenarios that we will have a strong opportunity given the value that ALIS provides to the patients and the receptiveness of the physicians to the therapy.

And I'll just add one other thought on the interaction with the regulatory authorities. Of course, our enthusiasm as we approach AdCom is supported by the fact that we have every regulatory designation the FDA offers. Breakthrough therapy designation, QIDP orphan as we mentioned, we expect priority review, Subpart H accelerated approval, we've got them all, and we enter into this AdCom with the discussions with that wind in our sales.

Thanks for the color. And see you at ATS.

Look forward to it.

And our next question comes from the line of Joseph Schwartz from Leerink Partners. Your line is open.

Thanks very much. So you mentioned that payers appear supportive and recognize the importance of patient access to ALIS. Does this differ according to whether a payer is focused on a Medicare plan versus a commercial plan and I know you've mentioned the significance of launching off cycle for Medicare previously. So you know how does these -- how does the feedback so far jive with some of that early thinking? Thanks.

Great. So it's Roger. Let me just say that we've recently conducted an advisory board with the payers, and we did this with a number of large plans, pharmacy directors, medical directors from several key accounts, and I was really encouraged with the feedback from the advisers. I think that they recognize the unmet need in this disease state. They recognize the need to educate about NTM, not just the accounts and actually, their membership and their management, but also, the physicians are very supportive of the efforts we're currently conducting in educating the physician community around NTM. I think, overall, we see the recognition that this is a fairly small population in the grand scheme of things. These patients are already in their system. So we've previously shared data where they know that these patients are expensive. They're consuming a lot of resources and the available therapies are not particularly effective for these patients. So my conclusion is that payers really see a clear place for ALIS in that right patient population. And we talked about the Medicare off-cycle phenomenon, and I think that, that's something that still exists. However, I do believe that in engaging with the Medicare payers, they see this is as a very strong option that will be very difficult for them to deny access to the appropriate patient and a medical appeals process that we think we're going to be deploying will be put into place and supporting with that patient support system over the first few months of launch. However, I do think that there's a possibility that we will see some off-cycle ads in Medicare plans, and I do think that that's something that is maybe a little more encouraging than I initially contemplated when we were laying out our plans. From a commercial perspective, it really is, we'll see some, I think, a possibility of some really ads in the commercial plans as well. They also recognize the value. I think the difference there will be just the kinds of plans of the commercial are selling through to their customers. There may be some issues where they won't add new therapies or cover new therapies for a period of time. But overall, I would say, a very consistent feedback on the need for ALIS, the recognition of the clinical trial results, the validation of the endpoint as the appropriate endpoint. And as long as the appropriate patient population is identified for the product, I think we will have -- eventually those patients will get access. It's a matter of when, not if.

Great. Thanks for the added information.

[Operator Instructions] And our next question comes from the line of Ritu Baral from Cowen. Your line is now open.

Hi, guys. Thanks for taking the question. Maybe back to the AdCom, beyond the label, the broad label, well what are some of the other things that you guys are preparing for? I know there's been some discussion amongst in the investment community about how FDA may perceive the functional data, the six minute walk and any sort of tells from recent applications on how they might look at aminoglycoside safety?

Sure. So I think, look, it is difficult and I'll just caveat that as we get closer and closer to this event, we're going to be more and more reticent to be speculating because we don't want to be seen as provoking the agency or directing the dialogue. It's their AdCom, not ours where there to be responsive and we respect that process. Having said that, I think this is not a complex submission. There's not a lot of debate about the data that is being presented. So it's why I turned to the idea that this is probably not an intense debate about approval, it's more an intense debate about labeling, and I think, in that context, we go in with a great deal of confidence, having done well on our primary endpoint, and having all those regulatory designations. The topics for discussion are always safety first and then efficacy. And on the safety front, again, as we characterized during our remarks, we continue to be very encouraged by the safety profile of this drug. It's consistent with other inhaled antibiotics. We don't see anything distinct that -- as related to aminoglycosides is to your particular point, and I think to remind everyone that we had released the data on hearing loss, we didn't see that in this study. So the consequential concern of using aminoglycosides for a sustained period of time was not in evidence here that alone is an encouraging improvement in terms of safety profile, didn't see nephrotoxicity that also was encouraging from an aminoglycoside point of view. So I think we enter into this with a pretty solid feeling on the safety side. On the efficacy side, there's the primary endpoint, which is unequivocally achieved. I think we've got the other secondary endpoints, six minute walk test, which everyone I know is well aware of, where we were able to show an improvement in six minute walk for those patients who culture converted. I think that's an important aspect because it does link the cultural conversion primary endpoints to the functional benefit in a way that is demonstrated clearly in the study in a blinded fashion and then beyond that, our time to culture conversion and patient reported outcomes in that last category, we weren't expecting to see a lot in six - the first 6 months of treatment. So I think overall, we - these will all be discussed. I'm sure there will be questions about them to understand it more fully from the point of view of folks in the treating community. But folks on the panel are going to be ID and pulmonologists and into that group, the dataset that we have, I think, will be very well received as the appropriate kind of characterization of the drug is as a safe and effective use for the treatment of refractory NTM. I hope that addresses the question?

Yes. Very helpful. And then on your most recent trip to Japan, did you have any regulatory interactions or regulatory consultant interactions, I'm wondering about what you're thinking of the regulatory timeline in Japan?

Yes, so we're putting more firemen on that until our GM is onboard. I will tell you that we are talking to regulatory consultants, we have been for a long time. Just to place Japan into context for those who may not remember, before we went through our Phase III study, we actually visited with the PMDA, and we got their endorsement of the design of the Phase III trial. We received from them a specific number of Japanese subjects that they wanted to see in the trial, and we significantly exceeded that. They wanted 25, I think we had 43, and we have also said publicly that the sub analysis of those Japanese patients was statistically significant on the primary endpoint. In fact it was -- there was a zero response rate in the guideline-based therapy arm, and I think in the mid-20% on the treatment arm with ALIS. So very strong data in Japanese subpopulation into a community where treatment of NTM is widely understood and pursued. From here, we will file for orphan status. We will file for approval as soon as we can translate the NDA into a JNDA. That process takes some time, and obviously, quality first, timing second, but having said all that, what we have seen from Japan thematically is an embrace of the rare disease products and diseases. It seems to be something that is -- that you've probably seen with some other companies, but we think this is a very favorable environment to be entering. And so that's why given the enormity of it, we're so excited and encouraged by this most recent trip.

Got it. Last quick question. Can you just briefly go over the status of -- the inspection status for GMP certification status of your manufacturing sites? Where they relatively recently inspected? And are you expecting other inspections closer to the approval date?

Yes. So what -- I mean, it is a part of the review process for the FDA to engage in potential inspection of facilities and the same with sites that are involved in the clinical trial. We don't have any specific comments on if and when that's going to take place. But I will tell you that we have certainly resource to heck out of being ready for such an eventuality, which is always anticipated what to buy companies. So I feel very good about where we are in that regard for all of our different facilities that may be the subject of their attention.

Got it. Thanks for taking my question.

Sure.

And our next question comes from the line of Liisa Bayko from JMP Securities. Your line is open.

Hi, good morning. I wanted to ask about and just follow up on some discussion you said the main you think kind of a conversation now we relate to the label. Can you may be run through sort of base case, in a worse case, best case scenarios in terms of how you think a label could play out? Thank you.

Sure. Well, I don't know if there's a best, worse and mid case. The way we think about this is, the study was designed to look at refractory NTM MAC patients. That's what the data clearly demonstrates under Subpart H, we feel we have a clear path to approval there, and that is what we are assuming we will end up with following our discussion with FDA. There has been some precedent recently in other divisions where FDA has gone beyond the refractory population and expanded the label slightly. Here I'm thinking of Soliris for myasthenia gravis, where they ask for refractory and were given a broader label. So I think it's prudent to contemplate that there could be a broader label, but it is not my expectation going in if that's where we would end up. Having said that, there's a logic to it because we're talking about the treatment of bacteria, and a bacterial infection in a refractory patient don't differ from a bacterial infection in a non-refractory patient, they just are less responsive to the guideline-based therapy regimen. So there is a logic to granting a broader label and that certainly seems to be some of the spirit in certain divisions of the FDA that has been in evidence recently. So I think it's prudent to be prepared for it. But just to be crystal clear, are something as we come out of AdCom and our approval PDUFA date within a label to treat refractory NTM MAC patients.

Thank you

Of course.

And at this time, I'm showing no further questions. I'd like to turn the call back to Will for any closing remarks.

Thanks, everyone for joining us this morning. Look forward to giving you updates on the next quarterly call and seeing many of you hopefully at ATS.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.