Insmed Inc (INSM) 2022 Q3 法說會逐字稿

Good morning, and afternoon and evening. My name is Darius. I will be your conference operator today. At this time, I would like to welcome everyone to the Insmed Third Quarter 2022 Financial Results Call. (Operator Instructions) I now have the pleasure of handing over to host, Eleanor Barisser from Investor Relations. You may begin your conference.

Thank you, Darius. Good morning, and welcome to today's conference call to discuss our third quarter financial results for 2022 and to 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. Insmed's business is currently comprised of 4 pillars: ARIKAYCE, brensocatib, TPIP and Translational Medicine. 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, and good morning, everyone. The third quarter of 2022 marked a major turning point for Insmed as we advanced revenue growth, clinical trial enrollment and secured meaningful financing. With approximately $1.3 billion in capital, we are now fully resourced to realize numerous clinical trial readouts from each of our 4 strategic pillars. Specifically, data from the frontline NTM program, brensocatib and bronchiectasis, Phase II data from TPIP in addition to anticipated IND filings and preclinical and clinical data from our fourth pillar. Collectively, we believe these readouts will transform our company.

Before providing detailed updates on our 4 pillars, I want to take a moment to discuss the recent financing. As I said last week, when we announced the transactions, we have never been in a stronger position as a company. The strategic rationale of the financing was to raise needed capital to achieve our ambitious objectives to mitigate some of the macroeconomic and geopolitical risks that continue to weigh on the markets and to protect ourselves strategically as we advance our 4 pillars. This financing does not change our underlying strategy in any way. Rather, it places us in an enviable position against the backdrop of one of the more difficult market environments in recent history.

Our aim was to catapult us past these concerns and place us in a strong financial position in the future when we have what we hope will be positive results from each of our 4 pillars. We feel very good about the future of this company and the meaningful catalyst this financing will support and that should be the takeaway message of these transactions. We look forward to updating you on our progress from here.

Turning back to this quarter's performance. Sara will cover revenue in more detail, but the key takeaway is that our third quarter global revenue results were strong. We saw continued ARIKAYCE growth in the U.S. and despite COVID and foreign exchange headwinds in Japan, the region still meaningfully contributed to global revenues.

Turning to Europe. We recently secured a favorable reimbursement approval for ARIKAYCE and England. With this decision, ARIKAYCE will now be commercially launched in all parts of the U.K. as well as in Germany, the Netherlands, Italy and Belgium. I remain very pleased with the performance of the commercial team globally, even as preparations are already underway for additional potential launches, including ARIKAYCE for frontline NTM and brensocatib for bronchiectasis if approved.

Now let me provide more detail on the clinical development activities within each of our 4 pillars. Starting with the ARIKAYCE frontline clinical program, which consists of ARISE and ENCORE, 2 global trials running in parallel. We believe results from these trials, if favorable, will support full FDA and select international approvals of ARIKAYCE for newly diagnosed MAC NTM patients. And the U.S. and Japan, our 2 largest geographies, the number of newly diagnosed patients with MAC NTM is approximately 115,000 and 145,000, respectively. While we work to refine those who are appropriate for immediate treatment, should we secure frontline approval by any calculation, the expansion into frontline would represent a multifold increase in our current addressable market.

Screening is now complete in the ARISE trial, and I am pleased to report that enrollment is nearly complete. We anticipate the last patient will be enrolled in ARISE in the next 2 weeks, which is slightly ahead of schedule.

Let me provide some commentary on what you could expect from the ARISE trial results. We anticipate sharing a range of data from ARISE over the course of next year. To remind you, our goal with the ARISE data is first to demonstrate that the PRO is valid and responsive. We anticipate these data by the end of the first half of 2023.

Next, we will examine the entire data set comparing the treatment and non-treatment arms using the PRO as well as culture conversion and other important measures. We anticipate sharing these data in the second half of 2023. With the ARISE enrollment essentially complete, we anticipate the pace of enrollment in ENCORE to accelerate with early signs suggesting this will be the case. We remain on track to complete enrollment in the ENCORE trial before the end of 2023 and look forward to updating you on the pace of enrollment as we move forward.

Additionally, with the ARISE data, we hope to have a clear understanding of the likely performance of ENCORE. Should adjustments be necessary to Encore, we will have the time and opportunity to do so before the data readout, increasing our likelihood of success in this registrational study. We look forward to updating you on our progress in the frontline program.

I'll now turn to our second pillar, brensocatib, an oral DPP1 inhibitor that we believe has enormous potential to treat an array of neutrophil-mediated diseases, thereby representing a potential pipeline in a product. If successful, we believe brensocatib could be a groundbreaking addition to the anti-inflammatory treatment landscape. We are working to build a platform around this first in mechanism approach and have settled initially upon 4 separate indications to pursue clinically, bronchiectasis, cystic fibrosis or CF, chronic rhinosinusitis without nasal polyps or CRS and hidradenitis suppurativa or HS.

Starting with bronchiectasis. The encouraging pace of enrollment in our Phase III ASPEN trial continues, giving us confidence in our estimate of completing enrollment before the end of the first quarter of next year. With this target in mind, we are excited to share our expectation of top line data from the ASPEN trial in the second quarter of 2024.

In addition, I am pleased to report that the third meeting of the Data Safety and Monitoring Board or DSMB, occurred earlier this week where it was determined that the ASPEN study should continue as planned. If brensocatib is approved by regulatory authorities for use in treating bronchiectasis, we plan to target approximately 1 million bronchiectasis patients at large in 3 key geographies, the U.S., Europe and Japan. Though bronchiectasis is a broader opportunity than NTM, the synergies between these indications are significant, and we expect to benefit from the overlap in call points and be able to leverage much of the commercial infrastructure between these indications.

Let me now turn to the second potential indication for brensocatib, cystic fibrosis. The Phase II PK/PD study is advancing as planned, and we remain on track to have top line data by the end of this year for both patients on CFTR modulators and those not on CFTR modulators. Recall that CF represents another sizable market opportunity with an estimated 70,000 total diagnosed patients worldwide and nothing approved to treat reduction of exacerbations in this population.

As previously shared, we have identified 2 indications for further clinical development, CRS and HS. Importantly, like NTM and bronchiectasis, CRS is another condition where there is nothing approved for treatment. We plan to start a Phase II study in CRS in the middle of 2023. BHS will follow thereafter. We are pacing these studies mindfully in order to balance their potential against the cash burn increase they would represent while we await results from the ASPEN study. We believe the enormity of the unmet medical need that could be addressed by brensocatib cannot be overstated. Additional indications could add potentially millions of patients to the addressable market for this program.

Our third pillar is TPIP, a treprostinil prodrug in Phase II development for pulmonary hypertension associated with interstitial lung disease or PH-ILD, and pulmonary arterial hypertension, or PAH. Both studies are enrolling patients and continuing to open sites. We anticipate both trials will accelerate their pace of enrollment as we enter 2023.

I'll now turn to our fourth pillar, translational medicine. The work we are doing in this pillar will become increasingly important to Insmed's long-term strategic vision as it reflects compounds and technology platforms with the potential to have a profound impact on patients in the rare disease space. From this pillar, we intend to generate, on average, 1 to 2 INDs per year for the next several years. This pillar includes a world-class gene therapy group in addition to novel methods of manufacturing that, if successful, we expect would lower the cost to produce gene therapies multifold.

In addition, we are making progress using artificial intelligence and advanced capabilities in protein engineering to attempt to deimmunize the actual AAV capsids used to dose patients with gene therapy, potentially enabling us to redose patients. Collectively, these technologies, if successful, could transform the gene therapy landscape and we believe result in safer and more effective therapies at significantly reduced costs.

Finally, unrelated to gene therapy, we also have ongoing efforts pursuing specific deimmunized therapeutic proteins where patients would benefit from redosing. We are planning a research day where we will delve into more details with you. We are finalizing a date for that to take place in the first half of next year. We look forward to sharing more on the teams and technologies behind these efforts over the coming months. Across all 4 pillars and around the world where we operate, Insmed is advancing like never before. We believe we are making great progress in achieving our ambition to build one of the next great biotechnology companies. Let me now turn the call over to Sara for her commentary.

Thank you, Will, and good morning, everyone. As an outcome of our financing activities last week, we are in the strongest cash position in the company's history. We are very encouraged by the interest and commitment from high-quality health care investors and partners, and their support reflects their collective confidence in the future of Insmed.

As a result, we now have the ability to fully realize value across our 4 pillars past meaningful clinical readouts. Earlier today, we issued a press release with our detailed third quarter financial results, all of which are alliance with our internal expectations. Let me walk through a few of those results for you now. As reported this morning, we ended the third quarter with $513.3 million in cash and cash equivalents and marketable securities. Subsequently, following the completion of our financing last week, we more than doubled our cash position, resulting in a pro forma balance of approximately $1.3 billion in cash and cash equivalents and marketable securities. We have and plan to continue to manage this strong balance sheet with a sharp focus on cash preservation while mindfully investing in our pipeline. We expect that our runway will support meaningful shareholder value-creating opportunities across all of our programs.

In the third quarter of 2022, total net revenue for ARIKAYCE was $67.7 million, demonstrating the strongest quarter of sales since ARIKAYCE launch. Notably, total net revenue in the third quarter showed a 45% increase versus the third quarter of 2021. On a regional basis, net revenue in the third quarter was $49.5 million in the U.S., $14.5 million in Japan and $3.7 million in Europe and rest of world. Specifically, in the U.S., we saw a 29% increase over prior year's third quarter performance showing continued overall growth in our largest market. In fact, this is our largest year-over-year percentage revenue growth since launch.

The U.S. market for ARIKAYCE has almost fully recovered from COVID in terms of our ability to achieve in-person office visits. We anticipate patients will continue to return to in-person doctor visits and this, along with heightened physician suspicion or respiratory disease could yield greater identification of appropriate patients who may have delayed their treatment during COVID.

Finally, we continue to see a trend in patients restarting their therapy. In Japan, we saw meaningful contribution, representing more than 20% of our overall global ARIKAYCE revenue. This is an extremely encouraging number and a base from which we believe we can continue to grow. While we faced 2 headwinds in Japan in the third quarter, COVID restrictions and the impact of foreign exchange rates, we remain very pleased with the fundamental performance from this market and look forward to building on this strong foundation.

We continue to anticipate a more modest revenue contribution from Europe relative to the U.S. and Japan, and our commercial operations are scaled to reflect this. Importantly, Europe continues to be a key territory for clinical trial work, thought leadership engagement and medical affairs activities. With a demonstrated track record of success and a favorable growth profile, we believe there is opportunity for further ARIKAYCE growth globally.

We have clearly exceeded our revenue guidance of more than 30% for 2022, and we look forward to ending this year in this position of strength. Although the uncertainties of COVID and foreign exchange rates had a meaningful impact on the year, we are hopeful that these headwinds will be less prominent in 2023. Let me now touch on some additional financial highlights from the quarter.

In the third quarter of 2022, our gross to net in the U.S. were approximately 11%, which is in line with our guidance of mid-teens throughout 2022 and consistent with gross to nets in prior years. Cost of product revenues for the third quarter of 2022 was $13.5 million or 20% of revenue on a percentage basis.

Turning to our GAAP operating expenses. In the third quarter of 2022, research and development expenses were $99.9 million and SG&A expenses were $75.6 million, reflecting the support of our ongoing clinical trials and the commercial infrastructure for ARIKAYCE.

In closing, Insmed's tremendous balance sheet strength provides us with ample runway at a crucial time as we continue exact across all of our pillars. I'll now turn the call back to Will for closing remarks.

Thank you, Sara. Insmed has a vision to become one of the next great biotechnology companies. This is an ambitious goal. Hopefully, from today's call, you can see how we have deliberately established the pieces to bring about this achievement. This quarter, we made another important step forward on this path, and we are now positioned and resourced as never before, supported by a team that is motivated to do the right thing to bring medicines to patients with serious and rare diseases.

I would like to thank the patients who participate in our studies, the caregivers and families who support them, the Insmed team and those who have sponsored us financially. This is a significant vote of trust and belief in our ambitious vision, and we are excited to deliver on this for all of you.

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

(Operator Instructions) The first question comes from Jessica Fye from JPMorgan.

This is Nick on for Jessica. On the quarter, quickly, understanding that there was some stocking last quarter in Japan, given the 2-week dispensing limit lift in 2Q as well as FX headwinds and some COVID impacts, can you just talk to us a bit about how you're thinking about growth in the region in 4Q and 2023? Should we be thinking about COVID more as a waning headwind and FX is more of a gaining headwind on this front?

Thanks for the question. Actually, I think it's really hard to answer that with any great clarity because of the uncertainty that surround both of those variables. What I will say is that the performance out of Japan at a fundamental level, the ability to have the product have impact on patients and the perception of physicians about its utility is really strong. The ability to deliver the product is constrained by COVID as it surges and ebbs and flows. Clearly, it's on -- at the moment, the downslope, but it still takes some time to regain access to physicians and hospitals. As you know, they set aside beds for potential patient surges, those sorts of things. So that has to all clear out.

And as far as FX goes, I don't think anyone would have expected us to be at 147 to the dollar wherever we are today, and it could get worse before it gets better. We just don't know. And that makes it very difficult to sort of forecast with any accuracy or confidence what's going to happen in Japan. I will just reemphasize that the fundamentals of that market are strong, and we expect growth to come from Japan as we enter 2023.

And then one last one. Have you decided in the Phase II PK/PD trial coming up at the end of the year, have you decided to dose up to the 65 milligram dose? And in particular, with the data coming, are you expecting any similar or different results between, striking similar or different results between the 2 arms seeing those who are on background CFTR modulators?

Yes. So as to the second question, that's really why we broke it out that way. We want to see if there's any distinction between them. I don't know that there is a reason to expect there to be. But of course, that market is segmented by those who are able to benefit from CFTR modulators and those who are not. And so we want to just kind of have a look at that. Importantly, there's nothing approved to treat exacerbations and CF patients regardless of the background therapy. So this is another green filled opportunity for us with this drug.

In terms of where we're going to go with doses, we have to look at the data first, and then we'll be able to give you some guidance on that. But we expect to have the data in hand by the end of the year to know what that's going to look like.

Our next question comes from Jeff Hung from Morgan Stanley.

You reiterated ARIKAYCE guidance today. Can you just talk about the thinking for not raising guidance since it implies that you could have a 13% sequential decline in 4Q and still make your guidance? Like what factors should we think about in 4Q in any of the geographies that could lead to more modest outcome for fourth quarter? Like is it mainly FX? Or are there any other things to consider?

Yes. No, I think, look, the market is in an uncertain place at the moment. Having said that, I think each of our quarters this year, we've done a nice job in terms of performance. I expect the ARIKAYCE brand globally to continue to grow, whether that will be contributed to more or less from Japan, given the headwinds we just referred to, et cetera. We're very clear about on the call today, the U.S. is almost back to where it was pre-COVID.

So there are a lot of positives behind this brand. But the landscape before us, and this happened to also in form thinking about the financing is just very uncertain. And so I think we want to be cautious as we move forward. What we are focused on now is how we continue to grow this as we leave this year and enter next year, and I think that picture is a good one. I think the question of whether it will grow is not really what's in my mind. It's more a question of to what degree. And so that's where the uncertainties weigh in on our thinking and caution as to watch word of the day.

And Jeff, if I can just add on to that real quick. If you held FX constant from the January rates when we obviously came up with our guidance, the impact of that is over $10 million on what an annual basis would be for revenue. So the fact that we've been able to continue to meet and exceed our guidance and be able to hold our guidance despite those headwinds. We're really -- we feel really confident in ARIKAYCE and what it's been able to produce and when it has the ability to produce in the future.

And if I can ask another one for ARISE and ENCORE. You said that the PRO is more for the FDA than physicians, I believe. Has the agency indicated that a trend for one arm beating the other will be sufficient? Or have they given more specificity of what they would like to see?

So the first thing we have to do is validate the PRO and that will happen in the first half of next year. Assuming that, that goes as planned, and the PRO is both responsive and tracks patients behaviors, then we'll be able to make a commentary on what is clinically meaningful in terms of a change within the use of that PRO. Once we've identified that, we'll be able to compare the 2 arms and make obviously statements about the degree to which our drug has provided that benefit to patients.

I'd say today, we feel pretty good about -- while it's all blinded still, and we can't see individual data, but the overall blended blinded data suggests to us that there is something going on within the trial. We know from our commercial experience that the use of the drug has certain benefits anecdotally from patients. We've been doing this for several years now. And that's consistent with what we're seeing in the blended data. So my expectation is that we will see that this PRO is able to track change and my expectation is that, that will be in favor of the ARIKAYCE arm.

To what degree, it's hard to say, but I'm happy with what we're seeing so far. FDA has not pre-specified what threshold we need to clear. That's part of the reason for the ARISE trial is to sort of explore what the PRO may be able to track. And so that will be subject to some dialogue.

The next question comes from Andrea Tan from Goldman Sachs.

On the first one, maybe with respect to the recent financing deals, I understand being opportunistic in this market. So just wondering if you could talk more particularly on the decision to monetize ARIKAYCE and brenso royalties?

Sure. So the strategy there was to sort of look for ways to bring on capital in quantity, so we could message that we are going to catapult past all these geopolitical and macroeconomic dislocations that may be operating in the market for some time. We wanted to do that not using exclusively permanent capital. And so we looked at a wide variety of different approaches we could take. And we settled on a combination of royalty and the term loan. The royalty is very small, as you know, less than 5% on ARIKAYCE and less than 1 point -- 75 basis points on brenso, and that's assuming that it gets approved and moves forward.

My expectation is that this will not be something that weighs on either product for very long. As you think about the repayment of this, it is a capped royalty and that is probably the most important point to take away. This is a repayment of the royalty over a period of time. And once it's done, it goes away for good. So one of the things that was entering under our mind is to make sure that we don't burden either of these assets for any extended period of time so that they continue to have a real strategic value.

And then just a follow-up to the prior question on ARISE and ENCORE. Just can you remind us the nature of the changes you would be considering? Or you could make pending the PRO finding?

Sure. So when we look at this, the first thing we want to see is, as mentioned, is the PRO responsive. For example, as we look at the different components of the PRO cough, sputum expectoration fatigue, do we see changes in those measures? Are those changes themselves at a level that is clinically meaningful enough of a change? And then is that change associated with an overall feeling of betterment, so well-being. And if we see change and it's associated with feeling -- patients feeling better, then we know we've got a winner. And on that particular measure, let's say, it's cough, cough improves dramatically and it makes patients feel better to cost less. We can track all of that, and it's better in the ARIKAYCE arm, that's obviously something we want to make sure we are emphasizing in the ENCORE study. It may be that at the conclusion of ARISE, we don't need to make a single change.

I think the beauty of the design, if I can suggest it, is that we have the ability to make change should we come across unexpected outcomes. And such an unexpected outcome might be that cough is perhaps less dramatically impacted and something else is more dramatically impacted. And at that point, we could reconsider the statistical analysis plan to favor the measure of that particular impact greater.

The next question comes from Ritu Baral from Cowen.

This is (inaudible) on for Ritu. I wanted to sort of understand if the Phase IIa TPIP PAH study, is it shut down? And do you have a PVR reduction goal at 16 weeks given what you saw from the single patient that you reported previously?

Yes. So we did shut down the TPIP study, I think, back in August, somewhere around that time frame. But that was just an ongoing struggle. Again, nothing related to the product. This had everything to do with the difficulty of trying to find a volunteer who is very sick with PAH to undergo a 24-hour right heart catheterization. To get someone to submit to that became much more challenging than I think the original KOLs who designed the study thought it was going to. And so we were only able to find one volunteer who is willing to do it. And at some point, we just said we should be focusing on recruiting for the Phase IIb and Phase II PH-ILD and PAH studies directly, which are more traditional designs should not encounter these kinds of delays because we're not asking them to undergo this onerous procedure.

To put a footnote on that, I don't think anyone has ever done a (inaudible) study that's lasted more than about 4 hours. So it was really quite a big ask. And I think we just missed that one based on the guidance we've gotten from KOLs.

Having said that, we did manage to get 1 patient to volunteer. They did titrate up to 320 micrograms with a once-a-day administration, and that is a significant achievement. We did see some important and positive trends in the performance of this patient. We've had a lot of reflection on whether or not it makes sense to put that data out because of the variability that surrounds these patients, while favorable, probably doesn't make sense to put it out there and suggest that this is going to be the performance of every patient. But I would just tell you, we walk away very, very good, feeling very, very good about the potential of TPIP, the enthusiasm we have for these Phase II trials and the fact that we can get somebody to 320 micrograms.

I'll just remind you, [Tavezo's] max dose after titration in their label is 54 micrograms. So we are well above what they are able to achieve. It's not exactly apples-to-apples because they dose multiple times a day, but we are achieving our objective of getting more drug into the patient slowly released over time. And over a 16-week time frame, that's a beneficial impact for sure.

And a quick follow-up on the TPIP programs. Based on enrollment trends, should we expect data in 2024 from the other 2 TPIP studies that are ongoing?

So we haven't given specific guidance on the 2 studies and when they are likely to read out. My ambition is that the PH-ILD study will read out before the ASPEN data. And I think that's a reasonable thing to assume. We'll have more guidance on it once we get further into next year, that will be one of the updates we'll be providing on where we're going with those 2 studies.

But PH studies, this is a competitive space, unlike all the other indications we're pursuing, this actually does have products that are approved to treat it. But there's a lot of enthusiasm from physicians. And so I think we're going to have some success in enrolling this. But we'll see what that pace looks like.

And one last quick question. You had sort of spoken about your launch plans in the EU previously. And I just kind of wanted to know which territories were next. You listed a few that you had already completed talks in or at least or advanced in. But what is the ongoing progress and time line of other countries being added...

Yes, in the category of any day, I mean important territories that remain are France. France is sort of notoriously unpredictable. As you may be aware, we've had a compassionate use program there under a particular program that they have for early access to drugs. It's been very successful in treating patients, but it introduces uncertainty about when they will make their final decision, what that decision will look like with regard to reimbursement rates, et cetera. So there's more to be learned there. I would hope that will be in the not-too-distant future.

But the trend we have so far in the territories where we do have approval is quite positive. I think we found a good solution in Germany. I think we have a very strong position in the U.K. And as you know, we got early access in the Netherlands under a special program, the first of its kind. So there's some positives there.

Overall, the addressable market in Europe right now is roughly 1,400 refractory patients. So it is not a large market opportunity. Patients are just diagnosed and treated differently in that region. Nonetheless, we think as we move through these approvals, it does 2 things.

One, it lays the groundwork for some commercial contribution from that region to the overall global revenue. And 2, it permits us to begin the process of educating physicians and engaging with them for the ultimate launch of brensocatib and bronchiectasis, which is quite prevalent in Europe. So we're looking forward to where this -- where we go from here, and we'll take their contribution in the next year now that we have some of these approvals in hand.

The next question comes from Judah Frommer from Credit Suisse.

Congrats on the progress, guys. First, just on Q3 ARIKAYCE sales, I think it's fair to say that it came in maybe a little better than internal expectations. Can you parse out whether that was U.S. versus Japan and maybe put your finger on what the benefits were in either one?

Yes. I think just quickly, what I would say is the U.S. continues to perform as it exits the COVID overpressure. Japan has struggled with the 2 headwinds it's facing, but the fundamentals in the Japanese market are very strong. So we can't do anything about FX. And as Sara quantified, it's quite a meaningful impact. And we can't really do anything about COVID, except wait for it to clear. And we've seen in the U.S. as a precedent that it takes some time for that to clear out and for everything to return back to normal. But when it does, the market reopens and we return to growth.

So I'm particularly excited about what we're seeing in the U.S. The only constraint that I'm observing in the U.S., which was captured in a recent note is the idea that physicians have pretty backed up calendars. And so there are a lot of physicians who have a number of patients that are just going to be waiting to get an appointment. It's hard to get access to a position in the post-COVID world, particularly with a respiratory condition. So I think that limits the degree to which we have a bolus of patients. Instead, it's probably more of a slope of additional patients over time, at least that's my expectation. But it's a solid queue. And I think we'll probably see the same thing in other regions around the world. But that's probably the best color I can give you on U.S. and Japan.

And then just following up on the U.S., I guess, as the asset matures and it's been on the market for a couple of years here, anything you're seeing in terms of real-world use, whether it's maintenance dosing or retreatment or potentially even off-label use in first line that you're hearing about anecdotally that might be surprising to you? Or is everything kind of progressing as anticipated at launch?

I think the most interesting development this year was the arrival in a steady fashion of the retreatment of patients. So what's clear is that if you've had a good experience with ARIKAYCE and you get reinfected, as unfortunately, is going to be the case for many of these patients, the instinct is to go back to that treatment because it was successful before. We know from our Phase III trial that that's a good instinct to follow. The drug is very effective at keeping patients culture negative. And if they get reinfected, it is inevitably a new infection, not an old infection reappearing. So that's an encouraging piece of information for patients to understand that they're getting retreated. They're probably not going after the old infection.

And to see that over at a fairly steady pace over the last several quarters, tells us it's real, and it's probably not going to go away. So that's one trend that I would highlight for attention and I think a positive one for us as we go forward. Beyond that, I don't think there's anything else I would comment on. I want to be really clear, we have no information nor do we speak to folks about off-label treatment. I am aware that there's a lot of appetite to want to use this and they obsess this market because of the data that came out in the American Thoracic Society a couple of years ago, showing it's very effective in treating that. But to get something advanced there on the regulatory front would require a separate PRO and a separate trial and that hurdle is one I don't think we want to surmount.

So trends for the appropriate patients continue to be positive. I think we continue to see growth on the horizon, and I'm just really happy in the post-COVID world how much things have snapped back to the way they were before COVID. And I think that bodes well for the future.

The next question comes from Joseph Schwartz from SVB Securities.

So on a fundamental basis in Japan, have you seen any benefit from the co-pay changes, which I believe started to take place in June? What do prescription dynamics look like for patients there now with respect to the drug and the device, given I think, some changes to the policy may have occurred. Is there any way to quantify what you've been seeing there for us?

Yes. So the challenge there, Joe, is with the other headwinds operating, in particular, the COVID one, it makes it difficult to sort of tease out exactly what impact that may have had. I think as time goes forward, we'll get a clearer picture on that. But it certainly gives the opportunity for patients to take a longer prescription from their physician. But in the current environment, it's just too hard to discern that. I'm sorry, I don't have better information for you on that at this moment.

Okay. That's understood. And then on brensocatib, given ASPEN is such a large study, and it's good to see us closing in on full enrollment. We were wondering if you can tell us about any things you've been doing to ensure that the right sites and patients are enrolled and how you've been monitoring conduct there? Do you have any insight into how the trial has been going on a blinded basis? Also, I was curious how much or exacerbations generally influenced by seasonality in bronchiectasis? Have you seen any signs of that in WILLOW and/or ASPEN on a blinded basis?

Yes. So the conduct of the ASPEN study, I would say, is going exactly as we would have hoped and expected. We know on a blinded blended basis, we look at this down to the country level on a weekly basis, the rate, blended rate of exacerbations in the trial. And I think the most important thing to take away is that this trial looks behaviorally very much like WILLOW did. And that is a point of comfort for us.

We cross examine it a bunch of different ways. But right now, it looks a lot like WILLOW did. And that's important because WILLOW was big enough and it studied the right endpoints, which are the same ones we're going to be setting in Phase III. So we know what to look for and what good looks like within the trial on a blinded basis. We do see variability across the globe, as we would expect. If you look at recent meta studies that have been done, you see a lot of variability in respiratory trials. The key lessons from prior bronchiectasis studies is that you have to have enough events in your trial to make sure that your drug, whatever it is, has the opportunity to perform. We have that in our trial. So we feel very good about the event rate, what we're seeing on a blended basis, again, being consistent with WILLOW, all signs point to things are going as planned, and importantly, that we have the right patients in the study. And that's why we -- as we've always said, we prioritize quality first speed second and budget third when it comes to the execution of this trial.

This is a landmark trial. And I think the fact that it's a single study is another advantage. It reduces the variability of 2 different studies at 2 different times and all of that implies and we've seen that in bronchiectasis previously. That's a really good advantage for us. I would say that as a landmark trial, it has to stand the test of time and that is front and center in our minds as we go about executing this trial. We have just come from CHEST conference. We've come from the Infectious Disease Week conference. This is the talk of those conferences. It's a very exciting time in the space because this is a very significant indication with nothing approved to treat it. And this drug is on the horizon of being able to reveal its data and potentially be the first ever approved therapy in this space.

The next question comes from Liisa Bayko from Evercore ISI.

First off, can you talk about the rollout of data for ARISE, how are we to interpret kind of any changes you make on the study or lack of changes? And how do we interpret what kind of is like good data from the ARISE study?

Yes. It's a fair question. I think the first thing we need to do is quantify -- and let me just go into a little bit more detail here. When you think about a PRO and you're looking at a particular measure, there's sort of an assumed level of change within the measure that would represent something that's clinically meaningful. Take for example, cough, as I mentioned before.

Using the bronchiectasis questionnaire in the setting of bronchiectasis, this QOL-B instrument that we have tailored for NTM, one would normally expect around an 8-step change to be clinically meaningful in the setting of bronchiectasis. It's not clear yet what would be considered clinically meaningful in NTM, but what I can tell you is that on a blended blinded basis, we're already seeing changes in these measures in excess of that threshold. So that is a very encouraging sign to know that we are seeing change in the patients and that, that is being captured by this instrument.

We don't know which arm they're in. We don't know any more detail than that. But to clear that hurdle and to know that we're seeing change and it's being tracked is an important accomplishment, I think, already.

What constitutes success pretty simple in my mind, top line results, our arm needs to beat the other arm. And we'll know that in the second half of next year once the PRO is validated. And we'll note across several different measures, not just the PRO, but also culture conversion and also other measures beyond that, that are secondary and exploratory.

So we'll have a range of data that should really spell out what is happening to patients on our combination of therapy versus the alternative. And what does that result in in terms of their symptoms, how it makes them feel as well as the impact on the presence or absence of the infection itself.

Historically, we've seen very good data on culture conversion, both overall levels and time to culture conversion. Those are important because they also inform the Japanese approval for frontline. And I think they will be very impactful on the U.S. consideration as well.

I just -- maybe take a side moment here to remind everybody, when this drug was first conditionally approved in the U.S. for refractory, there was very little information, both about the disease and the impact of the drug. Today, we sit in a very different place. This drug has been on the market for 3 years in the U.S. without any major issues or concerns. It has now been fully approved in Europe and fully approved in Japan without any restrictions and that is a very different clinical picture and data set, which the FDA will be evaluating when they think about whether it's suitable for frontline use.

So yes, this trial is going to be important, but it doesn't sit in isolation. It sits in the context of the broader experience of the drug, and this is considered widely, I think, at the FDA to be a case study of success in the approval of a noble antibiotic for the treatment of a disease that had nothing approved previously.

And then just a question about the debt. You had some convertible notes as well, and you have this now new debt instrument. Can you talk about like how important is having a positive study in bronchiectasis for brensocatib? Is that like key to kind of being able to address this debt. Maybe you can just talk about in the -- like in the, let's say, unfortunate circumstance of that trial doesn't work out, like do you still have the wherewithal do you think to address the debt is something.

I do. And we plan the alternative scenarios -- yes. No, we plan the alternative scenarios all the time. We feel very good about our balance sheet and the capital structure we've taken on. When I think about what is going to be happening over the course of about the next 1.5 years, there is going to be a flywheel of clinical data readout that is positive, and that starts with ARISE, it starts with really the CF data at the end of this year, the ARISE data next year, PH-ILD results, obviously, ASPEN results.

And then within that, the fourth pillar will be not only revealed but we'll have both preclinical and clinical data. And I wouldn't underestimate the punch that, that fourth pillar will represent in terms of contribution to overall intrinsic value at the company. The plan here is pretty straightforward. We want all of these data points to be reading out in close enough proximity to one another that people begin to understand the scope of this company.

And if there's one idea I can leave you with, it is to abandon the notion that this is an ARIKAYCE or a brensocatib company. This is a 4-pillar company. And each of these, we have conviction are going to read out in a positive way. And if that is the case, there will be a transformation of value in our view in terms of how this company is perceived and what it represents for shareholders.

And if I could just add one other piece to that. The amount of diligence that our partners have done through the structured also gives a heightened level of confidence, I think from an external perspective on that, they wanted to put this capital to work after doing very thorough diligence on ARIKAYCE, on brenso what Insmed has to offer. Was there any blinded data offered to that group of people [out of] curiosity?

Are you speaking specifically on brensocatib leases?

Yes. Yes.

Yes. So the thorough diligence was on ARIKAYCE, thorough diligence on brensocatib. I can't speak specifically as what they have in the data room, but anything that we had, they have.

Our next question comes from Jennifer Kim from Cantor Fitzgerald.

I have 2 here. The first is with the step-up in OpEx we saw this quarter, could you give any color on what drove that and how we should think about things in the fourth quarter moving forward given the our Phase II studies planned for pillars and then bringing the fourth pillar forward? And how we should think about that going forward?

And then the second question is with the CF study for brenso. I noticed earlier this month that the actual enrollment on clinical trial, the actual enrollment was 34 patients versus 48 expected. And then it was originally designed for a 50-50 split between the CFTR and non-CFTR patients. And that doesn't seem to be the case any longer, and I was wondering if you could give any color around that.

So I'll take the second question first. The non-CFTR patients are fewer and far between, and it's harder to get a hold of them. And it was thought by the folks that we consult with on this that we didn't need a 50-50 sample split given the different populations, if you will, that are out there.

So the data we'll have will be more than adequate to give us the information we need, but it was just on the non-CFTR-modulated patients that we had, I think, some time ago, made reduced the number of patients that we're going to bring forward in that arm.

And then the other clarifying point is it was 36 to 48 patients, 48 assumed you went up to 65 dose. So the -- what we have completed is the 10, 25 and 40 milligram dose, and that's the 34 patients that you're seeing.

And then, Jennifer, on your OpEx question, yes, on your OpEx question. So what you see in our OpEx is you see continued support for all of our programs. TPIP now is underway in those Phase II programs. You're seeing those spend levels included in OpEx. You're seeing on ASPEN, ARISE, ENCORE, full investment in those, some prelaunch pre-commercialization activities for brenso. You're starting to see some of those expenses were thoughtful on what do we need to spend today versus what can we wait to spend while making sure that we're prepared for a potential launch of almost 1 million patients at launch, assuming success with ASPEN.

So we're thoughtful on our spend levels here and will continue to be thoughtful. And you could see that through our development of waiting to start CRS until middle of next year, those types of activity.

And if I could squeeze in one more question. Just on ARIKAYCE, I think before, you've talked about how Q3 seasonally is more modest versus the rest of the year. I'm just wondering, given the accelerated U.S. growth, we saw, did you experience whatever usually drives that seasonality this quarter? Or is that something that could come up in the fourth quarter?

It's always hard to know what the difference is from one quarter to the next. We just -- we sort of observed trends. The third quarter is usually impacted by people for a lack of a better way of saying, just going on vacation and traveling and they like to take holidays from their medicines during that time.

But we didn't -- I don't think we saw that in any great measure here that was above or below what our expectations were. And I don't think it bears on the fourth quarter.

We have a follow-up question from Ritu Baral from Cowen.

So going back to the CF data that's going to be reading out by year-end, is there a target level of neutrophil elastase inhibition that you're aiming for in the readout?

So there's not a specific target per se. What we're going to be looking for is the impact of the drug on NSPs is one of the measures we're going to be looking at. And not just neutrophil elastase. It's all the NSPs that we track that we have assays for in both blood and sputum. So that's going to be what we look at.

What we saw in WILLOW, which was so very encouraging, was a dose-dependent relationship to the reduction of those NSPs and then the reversal after discontinuing drug. So success here would sort of replicate some of that behavior even though it's an abbreviated time frame. It's only 28 days. Nonetheless, we're hopeful that we'll see some of those similar trends here in a dose-dependent manner.

There's no questions at this time. So just going to hand it back to the management team for final remarks.

Perfect. Thank you very much for joining us today.

This concludes today's call. Thank you for joining. You may now disconnect your lines.