Susan Mesco - Head, Investor Relations Will Lewis - President and CEO Andy Drechsler - Chief Financial Officer.

Matt Roden - UBS Joseph Schwartz - Leerink Partners Ritu Baral - Cowen.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to today’s call of Insmed Second Quarter 2015 Financial Results Call. At this time, all participants are in a listen-only mode. Later, we will have a question-and-answer session, and instructions will follow at that time.

[Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference call, Susan Mesco, Head of Investor Relations. Ma’am, you may begin..

Thank you, Marcus. And welcome to our second quarter conference call. Before we start, let me remind you that today’s call will include forward-looking statements based on current expectations.

Such statements represents our judgment as of today and may involve risks and uncertainties that may cause actual results to differ from the results that’s discussed in the forward-looking statements.

Please refer to our filings with the SEC, which are available from the SEC or our website for information concerning the risk factors that could affect the company. Joining me on today’s call are Will Lewis, President and Chief Executive Officer; and Andy Drechsler, Chief Financial Officer. At this time, let me pass the call over to Will..

filing our IND and starting a phase 1 study of INS1009, as well as our research efforts more broadly. INS1009 is our nebulized treprostinil prodrug that we plan to develop for the treatment of pulmonary arterial hypertension or PAH.

Our IND enabling activities are advancing according to plan and we are well-positioned to complete our submission and begin our phase 1 study later this year.

Encouraging data from an animal model designed to evaluate cough reflex were presented at the ATS Conference in May, in which INS1009 showed a superior side effect profile compared to treprostinil. Investigators also presented rat and dog models, demonstrating the potential for once daily dosing.

In addition, so far the preliminary information from the inhalation toxicology studies of INS1009, have been favorable and supportive of our IND submissions.

While these are early data, we continue to be encouraged by the promise of INS1009, as a compound with the potential for improved dosing and an improved side effect profile, which would be a needed and welcome addition for patients with PAH.

In parallel to INS1009, our research team is evaluating other formulations of treprostinil for using a metered dose inhaler, as well as a specific formulation for subcutaneous dosing with the goal of reducing site pain. We will share more information on these and several other research projects once we have a sufficient body of preclinical data.

Finally, with respect to our fifth goal, we continued to actively evaluate assets to add to our pipeline. We are being aggressive but we are also disciplined.

We will continue submitting term sheets where there is a strong strategic fit, but while completing a transaction is certainly an ambition for 2015, all of the elements need to be present in order for us to fall through on the transaction.

I know this is an environment where the broader markets are incredibly supportive of many deals but I remain committed to the notion of only doing a deal where the logic is self-evident, the price is right and the ability to deliver value is within reach. Unless everything aligns to our satisfaction, we are willing to miss on achieving this goal.

I know our shareholders’ support our discipline in this regard. With that, I will turn the call to Andy for his financial update.

Andy?.

Thanks, Will. Good morning, everyone. As Will just discussed, we have made notable progress across all areas of the business. On the financial front, the second quarter started with a very successful secondary offering that generated $223 million of new capital to support the advancement of ARIKAYCE and INS1009.

These funds will also provide us with resources to execute other strategic growth initiatives. We were gratified by the overwhelming market response and the high-caliber investors who participated in the offering.

We look forward to developing our relationship with our investors and delivering on our objectives to ensure they are awarded for their investments and trust. We now employ over 115 people in the United States and Europe. In addition to our investment in human resources, we continue to invest in manufacturing as part of our pre-commercial preparation.

To that end, we have been working with Therapure, our manufacturing partner of Toronto where we produce ARIKAYCE had a 200 liter scale.

This is a significant advancement over our current production at the 50 liter scale In addition, this is the state-of-the-art automated facility, so we believe we will be able to reduce turnaround times and increase the throughput. In fact, a few weeks ago, we successfully produced our first engineering batch at Therapure.

We have a series of additional activities to complete in the coming months and we remain on track that two fully functioning sources of ARIKAYCE supply by the end of this year. Turning now to our quarterly results.

This morning we reported a net loss of $28.6 million, or $0.47 per share, compared with a net loss of $23.2 million, or $0.59 per share, for the second quarter of 2014. For the second quarter, research and development expenses increased to $18.2 million from $14.9 million in the prior year.

The increase was primarily due to the advancement of our global Phase III CONVERT study of ARIKAYCE and NTM lung disease. Second quarter G&A expenses were $9.7 million, versus $7.9 million in the prior year. The increase was driven primarily by non-cash stock-based compensation expense.

We also saw an increase in cost associated with establishing our global tax structure as well as other free commercial activities, such as our European based NTM Disease Awareness campaign. With the $223 million equity offering completed in April, we ended the second quarter in a strong financial position with $335 million of cash.

This gives us a substantial runway well past 2016. With regard to cash guidance, in the first half of the year our cash operating expenses were approximately $46 million, which was at the low end of our previously guided range of $46 million to $56 million.

Looking ahead to the second half of 2015, we expect cash operating expenses to increase and to be in the range of $50 million to $60 million. This increase in cash operating expenses reflects spending for the global Phase III CONVERT study, additional manufacturing activities, and the continued build out of our infrastructure.

With that, I will turn the call back to Will..

Thank you, Andy, for that overview. In closing, 2015 is the year of the deliverable for Insmed, as we focus our five corporate objectives. We’ve made great strive throughout a very busy first half of the year and I hope the accomplishments we shared with you today underscore the breadth of talent we have assembled at Insmed.

We expect the balance of 2015 to be an equally productive time, as we continue to advance our strategy. We are well capitalized to do so, and we have added significant experienced personnel to ensure we accomplish these objectives. I am pleased with our progress.

We will hold ourselves accountable for each objective on behalf of patients and our shareholders after all the patients are waiting. At this time, we will turn the call over for Q&A.

Operator?.

[Operator Instructions] Our first question comes from the line of Matt Roden from UBS. Please proceed with your question..

Hi, guys. Good morning. Thanks very much for taking the questions and congrats on the progress. First question is on the MAA in Europe.

And specifically on the 120-day questions, should we assume that if it’s taking sort of several months to address the question, just trying to understand what’s behind that? Is it that there is a lot of heavy lifting involved with responding to the various issues? Or is it just the matter of waiting up the requisite amount of time that you need to include the updated data that you talked about from the long-term follow-up in the manufacturing? Just trying to understand what’s in that? And then I guess related and follow-on question would be, if there is a material increase in the amount of information to review, could that actually increase the review time post after you resubmit the questions to the agency?.

Thanks, Matt. Yes, the reason for the time is pretty straightforward. We want to include the CSRs from the 112 study, including the one-year follow-up data, which is fairly recent, as well as the CSR from the 110 open-label extension study, which is only just completed.

So both of those need to be finalized as well as the final data from our PV batch runs at LCR. Those are the things that are rate limiting steps in terms of response. I do not anticipate that they represent bolus of data that is going to require more time for response..

Okay. And then my understanding of the process then is the post 120-days questions. There is about 90 days to follow to get to a CHMP decision.

So should we assume that it’s going to be sometime around March or April? Is that what we’re tracking to proceed to CHMP opinion?.

It’s always hard to know how this process is going to go because there is the clock start and stop sequence that surrounds back and forth in terms of questions.

The way I like to think of it is once we’ve responded to the 120-day questions, they will provide for themselves a preliminary assessment reported Day 150 and then they will communicate to us by Day 180, which is obviously 60 days or two months after our response to the 120-day questions.

At Day 180, we feel as we have always said that that’s the time we really understand what their position is and what their thoughts are. So I would anticipate that the earliest we would know anything further would be with the Day 180 response..

Okay. Great. And then you mentioned in the press release increased expenses related to the establishment of an improved tax structure. I am intrigued by that.

Can you elaborate on the current status of the IP domicile and if there is anything further to add on the tax side?.

I will have Andy answer that..

Hi, Matt. Good morning. During the second quarter we’ve been planning to do this for a while. We actually executed the transfer of the IP in all ex-US rights to Ireland.

We also have operating subsidiaries setup in several different countries throughout Europe, and this is really just the first step of what will be many steps to make sure we take advantage and optimize our overall global tax structure..

Great. Thanks very much. If you allow me I will get back in the queue. Thanks very much..

Sure..

And our next question comes from the line of Joseph Schwartz from Leerink Partners. Please proceed with your question..

Thank you for the detailed update and operational excellence again this quarter. I was wondering how -- if you could talk a little bit more about how you are looking and focusing on balancing quality versus experience in the CONVERT study, things like patient selectivity, site training and conduct.

How is the screen failure rate and baseline characteristics been trending in line with your aims for the study in order to replicate the strong results in the TARGET study?.

Sure. So appreciate the question. I think the right way to respond to that is to say that we are being very selective in terms of where we’re going for sites, as an example, but by no means to draw a new attention to it. We’re not in Russia.

I think there were as an example of the balance between quality and productivity or just the decision taken, and that’s probably not something we want to be doing. However, we are in other places around the world.

And I think the central theme behind the selection of sites is, is there a sufficient number of patients there? Is there a clinician interest in participating and do they have experience in executing these kinds of trials? When we talk about quality, truly that last point is the most important.

So that’s where we spend our time with our visits, which we have done for these sites to ensure that that quality is there.

Is that answered your question?.

Yes. That’s definitely encouraging and helps. I think also I would be interested in hearing a little bit more about the market development work that you’re doing in terms of this non-branded campaign that you’re rolling out of the press conference.

Do you expect at some point soon to start to be able to or to be able to start -- actually identifying potential candidates for therapy, similar to what other companies have done before approval in order to build a database of folks that could go on to the drug at launch?.

It’s my view that that’s the cornerstone of best practice for launches and absolutely that is an important element of our work in the course of the next -- really starting the second half of this year. So we’re getting a jump on it, I think, a little earlier than most.

But my hope is the byproduct of that will have a commanding knowledge of where the NTM patients are in many areas of the world at the time of commercial launch..

Okay. Great. Thanks for taking my questions..

And our next question comes from the line of Ritu Baral from Cowen. Please proceed with your question..

Hi. Thanks for taking my question. Well, first question is on the sites in CONVERT.

Where are you on site activation? Are you thinking about increasing the number of sites that you have over the original plan? And actually I wanted to follow up on Joe’s question about the screen failure rate, is it tracking with expectations or is it higher?.

Yes. So what we tried to do today is provide the metrics that we feel we have enough data on would be helpful. And in that regard, we’ve highlighted the 10 countries where we have approval, more than 50 sites that are open to enroll patients currently.

And we’re in a very steep ramp up phase where we anticipate that the number of sites open will approach a 100 by the end of September. And I think that speaks to the amount of hard work that people have been doing to get this site moving -- to get the program moving forward. I don’t know there is a lot more we can say at this time.

We’re not coming specifically on things like screen failure rates. I will say just perhaps a little bit more information. We are in a place now where probably three quarters of the sites from the U.S. are open or more. All of the sites that were significant producers in the 112 study are open and up and running.

And I think from that point of view, we’ve got the cornerstones laid for the successful and high quality trial..

Are you considering adding even more sites?.

We have identified all of the sites that I think we want to open. The one area of exception for that, of course, is always going to be opportunistic awareness that there are a number of patients in any given geography.

Probably not additional countries would be added, but we might, for example, take a site that’s open in one country and find a way to get patients to that site from another or we might look to add an additional site in the U.S., if we feel like the patients are there to justify it.

Where the country approval is already in place, it’s much easier to add additional sites. So that’s the only variable I would put there. But as far as scoping out the number of sites and where they are, that process is long completed..

Okay.

And then when your follow-up data, you mentioned the death, are there other clinical events that you have been tracking in these patients and was the event a specific portion of the 120-day questions from Europe?.

Interesting, actually it’s inappropriate to comment on specific questions from the 120-day question, much as I might want to get into that discussion. I think what I would say is, the mortality associated with this disease is significant enough that it’s the logical place to go in terms of examination. Certainly, we’re tracking everything that we can.

As you know, the 112 study was really not designed to take a robust look one-year post-drug exposure, so we’re somewhat limited with the data that we were collecting based on the original protocol..

Okay. And last question and I’ll get back in the queue as well.

What are your plans for ERS whether on a data presentation level or commercial present level?.

So, yeah, as we now entered this next phase of non-brand disease state awareness and data presentation, I think you can expect to see more press release notifications about upcoming conferences in the specifics of what will be covered at them.

And so, I guess, probably the best way to handle that is to direct you to keep your eyes out and we’ll make sure we draw attention to what our plans are for these different conferences..

And our next question comes from line -- it’s a follow-up question from the line of Matt Roden from UBS. Please proceed with your question..

Great. Thanks very much for taking the follow-up. I wanted to ask about the long-term follow-up data, the one-year follow-up data.

If I’m hearing you correctly in those two patients where you -- these sort of partial positive cultures, sounds like those patients aren’t presenting clinically as if they have NTM? I’m just trying to understand if there is evidence of reemergence of the pathophysiology or this is just a sub-clinical lab finding?.

So, it’s a lab finding. I don’t know that we can make a lot more commentary about it than that. I think, what we will try to highlight is that if the guidelines when they look to issues like we are off positive only are really doing so with an idea saying that’s certainly not as severe as a strong growth finding on agar medium.

And so from that point of view, it’s probably relevant to take note of that distinction..

Okay.

And then I guess related to that in those two patients, was there any relationship in the time it took to get them to negative in the initial conversion to the -- the reemergence of the lab finding 12 months later?.

It’s an interesting question. To be honest it’s not one that we’ve looked at in detail that I could innovate, that I could comment on. So, I don’t really have a good answer for that. We can go back and look at that and see if we can get back to folks with some more understanding of what this represents.

I will say this data is fairly hard off depresses, in terms of being check for quality and all the risk. We would have liked obviously to collect samples on all the patients but we only had it for the ‘14. But the data even if you impute culture change to the patients where we don’t have data, it’s still quite a compelling finding..

Yeah. I would agree. I guess, lastly, I would imagine you contemplated maybe developing protocols for potential re-treatment of patients in case they initially convert and then sort of remerge with the lab finding.

Is there anything to say there, I realize that it is probably pretty preliminary at this point, just curious about?.

Well, we know from this available data albeit there is a lot in NTM that the re-infection or relapse rate is around 30%. It’s hard to know whether it’s caused by the original disease, in other words, a relapse or the old infection is treated and then a new one arrives. To that end, this study is designed to answer that question.

We are going to use a molecular probe to examine the underlying pathogens, so that if a patient does go negative and then goes positive, we will know whether that new infection is a relapse or a new infection from different pathogens.

And in the case where it’s a new infection certainly, it would be a large goal given the success of the drug in the first instance to reapply in that circumstance and treat again..

Okay. Great. And then, lastly, I just want to follow back up with Andy on my prior question about the tax. So, if I look at my made in large cap comps where intellectual property is downside mile and we know that the Irish tax rate is 12.5%, but it seems to meet that on -- for U.S.

sales, maybe there is some transfer pricing and things like that, have to be taken in the consideration. But in most of these cases you see and interpreted global tax rate as reported on the income statement on a non-GAAP basis.

Certainly, sub 20% tax, so is that -- is there anything you can say? I know it’s preliminary at this point but is there anything that you can say related to those comps, things to consider, et cetera? Thanks..

Yeah, Matt. We’ve obviously looked at those comps as well. The key variable, still to be determined is pricing, right, and exactly what impact that’s going to have. But I think you are looking at it the right way and as we get closer, we will obviously give a little more input or guidance, if you will around tax rate once we get to that point..

Great. Thanks so much and congrats on the progress..

Thank you..

[Operator Instructions] Our next question is a follow-up question from the line of Ritu Baral from Cowen. Please proceed with the question..

Hi, guys. Thanks for taking the follow-up and I got cut off. So if you addressed it in the question following mine, I apologize.

Have you done any additional EU Care consulting work? Has there been any sort of new findings or new strategy as you approach potential reimbursement submissions and how much of that was done before you said, your extended excess price for the ATU?.

So, we have had payer consultations in Europe. And it is fair to say that is that once aware, the opportunity commercially for NTM is certainly more attractive and is more easily supported in the mind of the payer than that of the CF indication.

So, certainly that goes way on our thought process as it must, as we evaluate how we think about NTM in Europe and pricing. And it did enter into our thinking as we examine where we were with regard to the ATU pricing. So that’s probably about as much I can say at this stage..

Got it. Thanks for taking the follow-up..

You bet..

Ladies and gentlemen, that’s all the time today we have for questions and answers. At this time, I will now like to turn the call over to Mr. Will Lewis for closing remarks..

Thank you for your questions and participation on today’s call. We appreciate your continued interest and support and look forward to updating to you again when we report our third quarter financial results. Have a great day..

Ladies and gentlemen, thank you for attending today’s program. This does conclude today’s conference. You may now disconnect. Everyone have a great day..