Insmed Inc (INSM) 2022 Q2 法說會逐字稿

Good morning. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the Insmed Second Quarter 2022 Financial Results Conference Call. (Operator Instructions)

I would now like to turn the conference over to Eleanor Barisser, Investor Relations. Please go ahead.

Thank you, Dennis. Good morning, and welcome to today's conference call to discuss our second quarter financial results for 2022 and provide a business update. 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 materially from the results discussed in the forward-looking statements. Please refer to our filings with the Securities and Exchange Commission, 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. The information on today's call is not intended for promotional purposes and it is not sufficient for prescribing decisions.

Joining me on today's call are members of the Insmed executive management team, including Will Lewis, Chair and Chief Executive Officer; and Sara Bonstein, Chief Financial Officer. Let me now turn the call over to Will Lewis for prepared remarks. Upon completion of those remarks, we will open the call up for your questions.

Thank you, Eleanor. Good morning, everyone. Insmed finished the second quarter of 2022 in a stronger position than ever before as we continue to execute effectively across the 4 pillars of our business. Our global commercial operations are advancing, evidenced by the tremendous second quarter sales of ARIKAYCE. The second quarter marked our highest active number of patients on therapy since launch. Building on this success, we are advancing a robust pipeline that we expect will deliver transformative improvements to patients' lives and create significant shareholder value. On the clinical development side, our ability to attract patients into our clinical trials has been strong, and all of our clinical programs are continuing to tract in line with our expectations.

Let me briefly touch on the progress we have made across our business. Starting with the first pillar, ARIKAYCE, our marketed product for the treatment of refractory MAC lung disease, on a global level, we are extremely excited to see an increase in demand for our product in the first half of the year in all 3 markets we serve. As a result of this strong demand, we are reiterating our anticipated revenue growth of at least 30% in 2022. We are particularly excited about this performance in light of the significant foreign exchange headwinds we have experienced.

Let me touch upon our recent progress in each market. In the U.S., the second quarter marked the most successful quarter we've seen since ARIKAYCE launch. During the quarter, we saw higher demand, which we attribute to new patient starts and favorable duration of use and continuation rates, in addition to an increase in patients going back to in-person visits with their physicians. We also saw an increase in retreatments, which we believe may be a key driver to future growth.

In Japan, we saw an exceptionally strong revenue performance in the second quarter, driven by strong continuation rate and underlying demand. Now 1 year into the launch in Japan, we remain extremely excited about the opportunity and importance of this market to the overall ARIKAYCE franchise. Finally, in Europe, we are approaching finalization of pricing decisions in England, Italy and France. We look forward to updating you on this progress in the coming quarters.

Recall that the global market for refractory MAC is sizable with an estimated addressable population of 12,000 to 17,000 patients in the U.S., 15,000 to 18,000 patients in Japan and approximately 1,400 patients in Europe. As you know, ARIKAYCE is also being explored in a frontline clinical trial program, which we believe will support full FDA and select international approvals of ARIKAYCE for newly diagnosed NTM patients.

As a reminder, the frontline program consists of the ARISE and ENCORE trials. The pace of enrollment has been strong, and we plan to complete screening in ARISE before the end of this month, allowing all future recruitment efforts to focus on the ENCORE trial. We reiterate our guidance that ARISE will be fully enrolled by the end of this year, and we remain on track to share a range of data from the ARISE trial over the course of 2023.

The expansion into the frontline setting would open the door to a much larger opportunity in our 2 largest markets, the U.S. and Japan. We estimate there are approximately 95,000 to 115,000 diagnosed NTM patients in the U.S. and 125,000 to 145,000 diagnosed NTM patients in Japan. Pending approval, we anticipate that the frontline indication could represent a multifold increase to the size of the refractory market alone.

Our second pillar is brensocatib, a small molecule oral once-a-day reversible inhibitor of DPP1 that we are using to treat a range of neutrophil-mediated diseases, which involve the release of active neutrophil serine proteases, or NSPs. We believe that by inhibiting the activation of NSPs, brensocatib could be a key component in interrupting the inflammatory process, potentially impacting a range of inflammatory conditions. In this way, we see a clear pathway for brensocatib to become a novel addition to the anti-inflammatory class of therapies. We are currently pursuing 4 separate indications with brensocatib and we'll continue to evaluate additional disease areas.

The first of these is bronchiectasis. Our Phase III ASPEN trial is on track to complete enrollment in the first quarter of 2023. Our confidence in our time lines has grown, and as a result, we have turned our internal attention and resources to commercial readiness. As part of this process, we have generated a more specific estimate of the addressable patient population at the time of potential launch of brensocatib. We currently forecast approximately 1 million addressable patients at bronch, an enormous market opportunity for an indication with no approved therapies. An approval in this indication would represent a major advancement for patients in specialized respiratory medicines.

I'm also pleased to announce that for our second indication, cystic fibrosis. We have completed enrollment of the CFTR modulator arm of the Phase II PK/PD study, and we anticipate having top line data later this year. For our newly announced indications, we anticipate moving brensocatib into clinical development for chronic rhinosinusitis without nasal polyps or CRS by the middle of 2023, followed thereafter hidradenitis suppurativa, or HS. Taking a step back, there are 26 million patients with CRS without nasal polyps in the U.S. alone. With no approved therapies to treat CRS without nasal polyps, this presents another extremely attractive market opportunity for brensocatib.

Our initial focus will be on the most severe patients, where we believe on an annual basis, we can target several hundred thousand patients globally. With HS, we plan to target the moderate to severe patient population, which represents approximately 100,000 patients in the U.S. Currently, there is one approved product on the market for HS, HUMIRA, an injectable biologic with significant side effect considerations. As a once-a-day pill, brensocatib could be an important therapy for patients.

Turning our attention to our third pillar, TPIP, which is the dry powder formulation of treprostinil palmitil for the treatment of pulmonary hypertension, our Phase II trial in PH-ILD and Phase IIb trial in PAH are currently underway and sites are continuing to open in line with expectations. Once we have clarity on enrollment rates for each trial, we expect to share specific timing for top line data. At a high level, we currently anticipate having data in PH-ILD first, which could be as early as before the end of next year, followed thereafter by data in PAH.

For an update on the PAH Phase IIa study, this study has a novel design, which in a practical setting proves extremely difficult to recruit. Nonetheless, we did manage to recruit and successfully treat 1 patient in this challenging study setting. While data from a single patient is not predictive, we are encouraged by a trend and improvement in various cardiac measures during the 24-hour period. Importantly, the patient also completed the 16-week extension period and was successfully titrated to a dose of 320 micrograms. We did not observe any safety concerns with TPIP.

Finally, our fourth pillar is translational medicine, encompassing the important work emerging from our research department. We are making progress in a range of disease areas, harnessing gene therapy, protein engineering and novel manufacturing, all of which work together as a platform of capabilities that we anticipate will yield 1 to 2 INDs per year for the next several years. We expect to host a comprehensive commercial and research day, at which time we will provide an in-depth look across our 4 pillars, including details on addressable markets, additional indications, promising technologies and anticipated data time lines.

As you can appreciate, we have made significant progress and performed very well across our 4 pillars, building on our strong start to 2022. We continue to execute effectively across our operations and underpinning the work supporting our 4 pillars is a disciplined approach to cash management.

Let me now turn the call over to Sara for further comments about our financial profile during the second quarter.

Thank you, Will, and Good morning, everyone. Earlier today, we issued a press release with our detailed second quarter financial results, all of which fall in line with our internal expectations. We ended the second quarter in a position of financial strength that we believe will continue to support the 4 pillars of our business. Let me highlight a few of those results for you now.

As reported this morning, we ended the quarter with $564.6 million in cash and cash equivalents and marketable securities. Consistent with our earlier guidance, we anticipate this cash position will support our current ongoing programs into 2024. Our dedicated focus on cash preservation resulted in consistent cash burn levels in the first and second quarters of this year. In addition, we were pleased to show consistent burn levels in the first half of 2022 when compared to the first half of 2021.

Total net revenue for ARIKAYCE was $65.2 million for the second quarter of 2022, showing a 44% increase versus the second quarter of 2021. We are extremely encouraged by this performance, especially considering the headwinds related to the exchange rates in both Japan and Europe. On a regional basis, net revenue in the second quarter was $47.2 million in the U.S., $15.8 million in Japan and $2.2 million in Europe and rest of world. Specifically in the U.S., we saw a 13% increase over prior year second quarter performance, showing continued overall growth in our largest market.

Let me briefly touch on Japan, an important market for ARIKAYCE. Our Japan launch has been very effective, which is reflected by strong second quarter sales despite foreign exchange headwinds. In the second quarter, we did benefit from onetime inventory builds in anticipation of the 2-week dispensing limit being listed, which we previously mentioned. We do not expect this increase in future quarters. Guided by a highly effective commercial strategy, we continue to be optimistic about the trajectory of the entire ARIKAYCE franchise, and we are pleased to reiterate our guidance of at least 30% revenue growth on a global basis this year.

Let me now touch on a few financial highlights from the quarter. Our gross to nets in the U.S. for the second quarter of 2022 were approximately 14%, which is aligned with our guidance of mid-teens throughout 2022 as well as consistent with prior years. Cost of product revenues for the second quarter of 2022 was $16.4 million or 25% of revenue, which, on a percentage basis, is also consistent with prior periods.

Turning to our GAAP operating expenses. In the second quarter of 2022, research and development expenses were $88.5 million and SG&A expenses were $60 million. These expense levels reflect the continued support of our 4 pillars, including our ongoing clinical trials in our pipeline and the commercial infrastructure for ARIKAYCE in our 3 key geographies.

In closing, we are extremely pleased with our performance in the second quarter, which builds on our strong start to 2022. Our position of financial strength allows us to support the ongoing execution across our commercial business, clinical pipeline and early-stage research.

I'll now turn the call back to Will for closing remarks.

Thank you, Sara. I am more excited than ever about the future of Insmed. Our priority is to continue executing on our strategy and working tirelessly to bring innovative therapies to patients with serious and rare diseases. Before we move on to questions, I'd like to take a moment to extend a thank you to the entire Insmed team for all of their hard work as well as the patients and caregivers who participate in our studies. They all play a critical role in our success.

With that, I'd like to open the call to questions. Operator, can we take the first question, please?

Yes. (Operator Instructions) And the first question is from the line of Jessica Fye with J.P. Morgan.

It's Nick, and congrats on the quarter. 2 questions from us. First, the previous guidance for ARISE was to kind of share top line data in the first half of '23. But it looks like you're going to be sharing that -- like sharing data throughout 2023. Is that not to say that we won't get top line in the first half of '23? And just a follow-up after that.

Yes. So the ARISE study, its primary objective is to validate the underlying PRO. And without going into too much of the arcana, I would just say that we need to know that the PRO is working. And the way you test that is through what are called measures of sensitivity and responsivity. And we try to dialogue a little bit about this in the queue so that people could understand.

So in the first half of the year, we expect to get the answer to those questions is the PRO sensitive and responsive in terms of showing a change in patients who are on these various therapies. Once that is completed and in hand, we can then assess one arm versus the other. So the simplest way to think about this is the most important data from the PRO working point of view will be in the first half of the year. Those will be the sensitivity and responsivity measures.

And then the sort of comparator what you would think of, I suppose, is top line results traditionally will be in the second half, and that will be one arm versus the other using those effective measures, assuming they've been validated in the first half, and that will also include culture conversion.

Okay. Great. And then the second one, can you just elaborate on the favorable trends you saw on cardiac measures over the first 24 hours in that 1 PAH patient in the Phase IIa trial, is the PVR lowering effect within that range of 6-plus hours that you're thinking about? And kind of are you using trends because of the small sample size or because of the strength of signal?

Yes. So the challenge of this study, I could -- we could spend the balance of the Q&A period to discuss. And we only have one patient. So our internal view on this is we have to be very cautious about how we represent what we've seen with this patient. That's why we've been sort of generic in our description that things have gone well with this patient. I think what I would leave you with, without going into the specific details of the patient's performance was that this was a positive experience. We saw what we were hoping to see for the most part. And I think the area where that has caused us to sort of hold back is, there are idiosyncrasies related to each patients, the way the measures are taken in the ICU setting and other aspects that don't suggest difficulties with the drug or its performance, but make it difficult to draw conclusions, I think, from this patient.

The most important thing that you should take away from this study is that this patient wanted to continue for 16 weeks on the drug and wishes to continue beyond the 16 weeks on the drug and was titrated successfully without safety issues up to 320 micrograms on a once-a-day treatment. All of that we consider to be extraordinarily positive. And I'll remind you that Tyvaso's max dose in their label after titration is 54 micrograms. So we got this patient to 320, consistent with what we were able to do in Phase I and that bodes extremely well for temporal measurements that we expect to be able to produce from the Phase II programs. While IIa is still technically open, we know how difficult it's been to find the one patient. If there are additional patients that come in, certainly share the data from that. But right now, in my mind is very focused on encouraging investigators put their place any PAH patients they have in either a Phase II PH-ILD study or the Phase IIb PAH study.

Your next question is from the line of Jeff Hung with Morgan Stanley.

Even after a strong quarter, you reiterated the 30% growth guidance, which you can meet even if quarterly sales slightly declines from 2Q, how should we think about the seasonal dynamics for the rest of the year? And are there any headwinds that we should keep in mind? And then I have a follow-up.

The COVID experience, I even hate didn't woken anymore, but it has taught us a degree of humility and caution about everything that goes on. I have to just leave everyone with one thought. This is the best quarter that this company has had since I've been in the CEO for 10 years. Every part of this company is delivering. And so what you see on the commercial side is mirrored by performance within the clinical trial and operational aspects, all the way down to our research group. I could not be happier about where we are. When I think about where do we go in the second half of the year, I come into the second half of the year with a tremendous sense of momentum but awareness that there are puts and takes around the world in different areas.

And maybe I'll ask Sara to comment on a couple of those and things that she see.

Yes, sure. Happy to, and thanks for the question, Jeff. So as you all see in just the foreign exchange rate headwinds this time last year versus today, 25% change in the Yen, about a 15% change in the Euro. So some significant headwinds as we think about foreign exchange. And so we were really excited and encouraged to be able to reiterate our least 30% revenue growth on a global basis despite these headwinds. So that's sort of the first point that I think is important to make. The second point, as Will mentioned, the COVID has its peaks and valleys. I think we see some -- if you just read in the news, some -- COVID in Japan, for instance. Despite that, we were able to put up a very significant quarter, $15.8 million in Japan, which essentially matched our revenue in Japan in all of 2021. So really encouraged by the momentum and where we're going, cautiously optimistic about just sort of the nature of our organization, at least a 30% reiteration on revenue guidance we're really proud of.

Great. And then if I can just clarify, are you deprioritizing additional patients in the TPIP Phase IIa? Otherwise, I guess do you still expect to share more data this year? And I guess based on that first patient, how many more patients do you think you would need to present a robust or robust enough set of data?

Yes, we've always built on IIa, if we could get a half a dozen patients that would probably represent an interesting cohort. I think that's going to be extremely challenging. We've been at this now, as you all know, for quite a while. And really what ended up happening here is, we had been giving guidance early on from a very well-meaning key opinion leader who felt that he alone at his site could enroll all of the needed patients and that it would be something that he could accomplish.

What we've discovered is the one patient we got actually wasn't even from his site. And once we try to put into practice the challenging aspect of the study, which is a 24-hour right heart catheterization. That's never been done to best of my knowledge, nothing even close to it in fact. What we've encountered in most hospitals that are doing investigations in this arena is that they've gone out perhaps a few hours, but never more than, say, 6. So this is a huge ask of patients, and it makes the treating physicians cautious.

The selection of the patient is highly specific. The consequence of all of that is it's just very difficult to find someone to volunteer to get a right heart catheter for 24 hours in the ICU, whether or not COVID is even surging. And so that teaches us that we probably have bigger eyes than we should have based on the guidance of that one physician.

And where do we go from here? We know that the one patient that was successfully treated in that program, showed us what we wanted to see and has given us a lot of confidence given the 16-week exposure and the successful up-titration to 320 micrograms. If we get no more patients in this study, I'm not going to lose sleep over it. To remind everybody, the whole idea of this study was to give a quick snapshot on the performance of the drug, and this has been anything but quick, and we accept that. But the promise of the drug remains. And certainly, there's nothing from the one patient in the IIa study that gives me pause, on the contrary, I'm quite encouraged by what we have seen. And I would tell you that I think the next right hurdle to look for is the data that comes out from the PH-ILD study, which, as we said, could be before the end of next year, that's going to be a 16-week study in a controlled environment and longitudinal data.

So I'm excited about what that will show to be really clear, it's the right heart catheter procedure that is the hurdle here. We do not anticipate onerous challenges in recruiting patients for either of the Phase II programs that I've described. And so our attention really turns to them where any eligible PAH patient could come in and get treated.

Your next question is from the line of Andrea Tan with Goldman Sachs.

Sara, just one for you in terms of quantifying the magnitude of the inventory build that you mentioned you saw in Japan?

Sure. Thanks for the question. So we haven't quantified it, but you can view it as a handful of weeks. And that is something we anticipated, something that we had forecasted for internally and something that you see traditionally in Japan around these 2 weeks left.

Okay. And then just wondering if you might be able to characterize what your current Medicare exposure is for ARIKAYCE. And then if you have any thoughts on what it might look like for brensocatib?

Yes. So on the former, it's about 50%, a little bit 55% for ARIKAYCE as of right now, the last time I looked at it. Brensocatib, we don't know the answer to that yet. But certainly for both of these, and I don't know if this is why you're touching on it, from our perspective, the legislation that's being proposed that would cap the out-of-pocket costs on Part D, that would be a very significant positive for us from my perspective.

Your next question is from the line of (inaudible) with Cowen.

I'm on for Ritu. I had a question regarding the brensocatib study. What is the ongoing event rate versus your expectations?

So we haven't disclosed what the actual event rate is on a blended basis. What I have said repeatedly is that we are tracking that on a weekly basis at the regional and even a more specific level. The goal here is to ensure that we're seeing events that would match our expectations. And I can tell you, we are -- we're very happy with what we're seeing, recognizing that we're totally blinded to this study, the elements that make up a successful study are one where we see enough events that our medicine would be able to demonstrate an effect and that is what we're seeing. So I feel extremely good about where we are with brensocatib. I feel extremely good about where we are with ARIKAYCE. All of our studies and the performance, albeit on a blinded basis looks very good.

And one quick follow-up regarding the CRS study, can you give us some more detail on the design of the study? How many patients are the endpoint you're pursuing and potentially what the approvable endpoint for the study would be?

Yes. So that's something we're still looking at. I think we've got a pretty solid handle around the design and the sizing of it, et cetera. What I would say about that is it's probably best handled at the Research and Commercial Day. We'll go into that design in detail and importantly, the logic behind what we're going to be looking at. I will just reiterate that we're focused on the more severe end of the spectrum of CRS without nasal polyps, that several hundred thousand patients on a global basis a year, that's incident population, not prevalence. So that is a very, very substantial opportunity. Nothing approved to treat that condition and every reason to believe that the neutrophil-driven inflammatory cascade could be mitigated with DPP1 inhibition. And that gives us a great deal of confidence that this could be successful. I can't emphasize how significant that additional population would be, and that's one of the reasons why we're really spending a lot of time on the design to make sure that we're looking at different phenotypes of patients coming into the study, which will kick off in the first half of next year.

(Operator Instructions) Your next question is from the line of Judah Frommer with Credit Suisse.

Congrats on the quarter. Just was hoping for a little more color on the retreatment you're seeing with ARIKAYCE, where is that information coming from? Is it tracking scripts? Is it talking to docs? And kind of what's the message that you're getting? And then separately, can you just remind us of the script dynamics you're anticipating in Japan as you come off the 2-week dispensing limit and how that could impact the trajectory of scripts?

Yes. So we haven't given a lot of detail around the more menu ship elements that are driving things. I would just say overall, things are very positive with respect to retreatment, specifically, there are a number of ways we look at that. And what I can say is that we've seen a definitive trend there. So we're comfortable talking about it. And I think that bodes extremely well.

We've now been on the market long enough and in a post-COVID world environment at least in areas for long enough to be able to identify patients coming back in that we believe are being retreated for a new infection. And that is regrettable for the patients because they're obviously getting the infection again, but it's encouraging for us that they feel comfortable returning to ARIKAYCE for treatment and the physician is thinking the same way.

It is consistent with what we saw in Phase III, where we were successfully able to eradicate the evidence of the infection and keep it that way for a long period of time. But ultimately, because these pathogens are ubiquitous in the environment, these patients have susceptibility. They do get reinfected with new infections, and that's where ARIKAYCE can play a meaningful role in the retreatment of patients, and we are now seeing that trend.

With respect to script trends in Japan, because of the 2-week change, I'd just say, what that really represents is the opportunity for patients to get a larger prescription amount of drug that were restricted to 2 weeks as every new drug is for the first calendar year. With the lift of that restriction, they can get up to 3 months. They have to get a handset every month anyway. So they're probably -- you're not going to see a dramatic inflection around that, but you'll see some longer prescription fills, albeit recognizing the patient comes back once a month for the new handset anyway.

Your next question is from the line of Joseph Schwartz with SVB Securities.

I'm Joori, dialing in for Joe. First on TPIP, how representative is the 1 PAH patient in your Phase IIa trial? And when could we expect to see the data for that?

Yes. So my hope would be that we'll -- we might see other patients, but I'm not holding my breath on that one. I think as I said before, my -- mentally, I have shifted to focusing on the Phase II PH-ILD and Phase IIb PAH studies, which are each 16 weeks in length and are very traditional designs, I think they'll be much easier to enroll. I know that'll be much easier to enroll than the IIa. I think you're always going to see idiosyncrasies in individual patients, which is why it's hard to draw broad conclusions from a single patient of data.

I think the most important and universal takeaway is, if you can treat these patients with a moiety that you know results in vasodilatation, which is what TPIP will do. And you can titrate them up to higher levels than what they have previously been able to accomplish, then you are accomplishing the objective of a target product profile. You are getting these physicians what they want, which is the ability to administer more drug and you're doing it in an unbelievably convenient way once-a-day, a dry powder inhalation.

And I think what we've heard from key opinion leaders is a great deal of enthusiasm for what this represents for the treatment profile of these patients. And clearly, with Tyvaso out there trying to pave the way, looking at PH-ILD, looking at other group 3 patients, right? She's running trials in PH-COPD and PH-IPF, right? Those indications are additional.

There's nothing approved to treat them. And wherever Tyvaso goes and is successful, we will go to, and we should be more successful because of the specific PK/PD profile that this drug is producing. We saw that in Phase I. We certainly saw it in the 2a phase, the 1 patient in the IIa, and I expect to see it in the Phase II and IIb studies as well. This is an incredibly promising therapy, which is dosed once-a-day as a dry powder formulation that's going to open the doors to a significant market opportunity at a fairly low risk profile. And I think that's something that we intend to prove out by the end of next year.

Okay. And my next question is on brensocatib. I guess from the Phase II PK/PD study in CF patients, like what should we expect to see this year? And how does that read through to your Phase III ASPEN trial in non-CF bronchiectasis?

So again, the PK/PD study we're doing is to examine whether cystic fibrosis patients who metabolize drugs slightly differently as a result of complications in the GI track related to their condition, whether those patients will need to be dosed at a higher level to get the same PK/PD profile that we would see in other patients. So this is a 28-day study looking at different doses of the drug and what that PK/PD profile is.

It's not designed to be an efficacy study. Certainly, we'll be looking at biomarkers, but in that short period of time, particularly given that the drug takes about 2 to 4 weeks to get the full pharmacodynamic effect, we wouldn't expect to see major changes. But if we did, I think those would be startling positives. And so I don't expect to have a lot to say after the PK/PD program other than we know what dose we need to go to for CF patients and that allows us to go right into the CF study that could secure approval for the drug. And that's, I think, what is particularly exciting about it. If we see anything, we certainly will share it, but I would say, it's sort of upside, not expectation.

Your next question is from the line of Stephen Willey with Stifel.

Yes. Maybe just to follow-up on a couple of prior ones. So on the Phase II CF study, can you speak to the proportion of patients that are on background CFTR therapy? And I guess do you expect to see a meaningful differential between the 2 just in terms of PK and PD based on how the drugs metabolized?

Yes. So in terms of the 2, we have obviously many more patients that are being treated with CFTR modulators. And so that the Vertex drug is fairly ubiquitous for those patients that are responsive, we wanted to check, and this is a really important point. Our drug, we expect to work in all CF patients. And what we're trying to treat are the exacerbations, which these patients still experience whether they're on CFTR modulators or not.

So we have split the study to have patients both who are on background therapy and those who are not. It's a smaller number that are not on CFTR modulators. Those are harder to find because there are fewer of them, obviously. But I don't expect to see a major distinction between the 2, and that's one of the points we want to make by completing the study, which is that this would be applicable to all CF patients at the appropriate dose.

Okay. That's helpful. And then maybe just for Sara, can you speak to ARIKAYCE gross to net during the quarter, and forgive me if that was provided earlier. And then I know you characterized the inventory build in Japan as representing kind of a handful of weeks, I guess. But is there any way that you can provide just some rough quantification of that, just to get a sense of how we should be thinking about sequential growth in that geography?

Sure. Yes, no problem. Thanks, Stephen. So gross to net in the U.S. for the quarter was 14%. So reiterated our mid-teens guidance for the full year, again, that's consistent with last year, so no surprises there. In Japan, we had said that inventory builds a handful of weeks, you can have probably about 2 weeks-ish is probably like a close enough estimate for you. We talked a little bit about the foreign exchange rate headwinds, specifically in Japan previously. And so to put up that $15.8 million in the quarter, despite those headwinds, I think is really, really encouraging. More broadly, as you think about trends, if you look at last year, Q2 has historically always been a strong quarter for us. Q3 just seasonality, it has historically, if you look at trends, but a little bit of a lighter quarter. But again, we are really encouraged by this our best performance ever in ARIKAYCE franchise history on a global basis as well as in the U.S. with some of the momentum that Will spoke to.

Your next question is from the line of Jennifer Kim with Cantor Fitzgerald.

I have 2 here. First, on your color in terms of how ARISE will read out. I know you said that the top line is coming in the second half of '23. I'm just wondering, did anything drive that change? Or was that always how you saw the data coming out throughout the year?

That's always how we saw the data coming out when we were making reference to the arrival of data. The thing we're focused on, first and foremost, from ARISE is what it teaches us about the underlying PRO instrument itself. And so again, the measures that are important there are sensitivity and even more importantly, responsivity. And what we mean by that is, the ability for the questionnaire to documents a meaningful -- clinically meaningful change based on the patient's experience and for that change to be correlated to an overall feeling of improved well be. And those 2 components are essential for the PRO to be considered valid in the mind of the FDA.

And so that's what we'll know in the first half of next year. Does the PRO do what we think it's meant to do? And I would say that we feel good about that being the outcome. There are 2 instruments we're using. Just to remind you, one is the QOL-B and then the other is a measure of fatigue, a fatigue instrument. And so if we can capture in both of those that they are sensitive and responsive to the measurement of these patients and their feeling of well-being then we will have accomplished the primary goal of the study in our minds. And then, of course, with that validation, we can then look at the 2 arms and see which one perform better. And so we're looking forward to providing that along with culture conversion data, which is also important. The primary endpoint of the ENCORE study for Japan, whereas the PRO is the primary endpoint of the study for the U.S. So hopefully, that helps explain how that's going to unfold next year.

Yes. My second question is going back to ARIKAYCE. And you've given a lot of color on Japan, like the inventory build and FX impacts and how we should think about that? But specifically in the U.S. that, I guess, 16% quarter-over-quarter growth, is there anything there that we should keep in mind? Or is that something that you think is a fair way to think about future quarterly growth?

I mean, Sara made some comments about trends that we see with regard to seasonality that would be my only cautionary watch word there. But I have to say, coming into the second half of the year, we feel very good about where we are and where we're going. I think in the U.S., the more we see that return to in-person office visits, the more successful we have been, and in a post-COVID world or in a world where people are choosing to live with COVID in a way that allows them to still engage in day-to-day normal activities that just plays to our strength. And I just have to call out the exceptional work that our commercial team has done in this effort.

I mean if we think about what has happened over the last year, last year diagnosis rates for NTM were down 25%, 30%, and we maintained a steady revenue performance, which means we were gaining share in the midst of a corrected diagnosis rate due to COVID, where patients weren't coming in, physicians weren't able to diagnose them. As we return to normalcy, my expectation is, we could see that diagnosis rate pick up again, and that would provide some tailwinds to our efforts. We'll have to see where things go. We also saw the improvement in retreatment trends. So there's a lot to be excited about, but I think caution is the watchword. And as we approach the third quarter seasonality, we'll see which of these different trends becomes more manifest.

I think in Japan, the only thing I would call out is the presence of COVID over there is quite extensive at the moment. So we'll have to see what that results in. But if you would ask me at the beginning of the year, do I think the first or the second half of the year is going to be stronger, I would have said in the second half. As we enter the second half of the year, I continue to have conservatism and caution, but we'll see how we go from here. I mean 30% year-over-year growth with the kind of headwinds we're describing in FX. I mean, Japan is off 25% from where it was a year ago. But those are real accomplishments that I think the company feels very proud of.

This concludes the Q&A portion of today's call. I will now turn the call back to Will Lewis for any closing remarks.

Thank you all for joining our call today.

Ladies and gentlemen, thank you for joining the Insmed's second quarter 2022 financial results conference call. You may now disconnect.