Blaine Davis - Vice President and Head of Investor Relations William Lewis - President and Chief Executive Officer Paolo Tombesi - Chief Financial Officer Roger Adsett - Chief Commercial Officer.

Ishmael Asante - Morgan Stanley Joseph Schwartz - Leerink Partners Liisa Bayko - JMP Securities LLC Robert Crystal - Goldman Sachs Adam Walsh - Stifel, Nicolaus & Company.

Good day, ladies and gentlemen, and welcome to the Insmed Second Quarter 2018 Financial Results Conference Call. At this time, all phone participants are in a listen-only mode. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to introduce your host for today's conference, Mr.

Blaine Davis, Head of Investor Relations. Sir, please go ahead..

Thank you, Liz. Good morning, and welcome to today's conference call to discuss our second quarter 2018 financial results. Before we start, let me remind you that today's call will include forward-looking statements based on current expectations.

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

Please refer to our filings with the SEC, which are available through the SEC's website at www.sec.gov or from our website for information concerning the risk factors that could affect the Company.

Joining me on today's call are members of the Insmed Executive Management Team, including Will Lewis, Insmed's President and Chief Executive Officer; Paolo Tombesi, Chief Financial Officer; and Roger Adsett, Chief Commercial Officer.

For today's call, Will plans provide a corporate update and Roger will give an update on the progression of our commercial activities. And then Paolo will briefly review the second quarter financials. At this time, let me turn the call over to Will..

Thank you, Blaine. Good morning, everyone, and thank you for joining us. It's a very busy and exciting time for the Company. We are on the cusp of what will be a pivotal moment for Insmed in our efforts to build a sustainable biopharmaceutical company.

In the second quarter, we accomplished a major milestone with the FDA's acceptance for filing of our new drug application for Amikacin Liposome Inhalation Suspension or ALIS and granting of our request for priority review. This application was submitted under FDA provisions for accelerated approval.

We have studied ALIS for the treatment of adult patients with treatment refractory Nontuberculous Mycobacterial or NTM lung disease caused by Mycobacterium Avium Complex or MAC who have failed previous therapy.

As we previously announced, we are meeting with the Antimicrobial Drugs Advisory Committee of the Food and Drug Administration next Tuesday to review our NDA and the robust data we believe we've compiled in our clinical studies.

As I'm sure you can appreciate, we are eagerly and diligently preparing for this meeting, which will consider the work we have done over more than 10 years to develop ALIS.

While our work is still ongoing, I want to take this moment to congratulate the team at Insmed for their efforts in reaching this milestone and bringing us one step closer to making ALIS available to patients suffering from NTM lung disease caused by MAC, who currently have nothing approved for their condition.

ALIS has the potential to be the first ever approved inhaled therapy to treat patients with this disease and could address a significant unmet need within the NTM community. We look forward to continuing our dialog with the FDA and sharing any outcomes with you as events unfold.

Our NDA was based on the initial results from our ongoing Phase III INS-212 study evaluating ALIS plus guideline-based therapy or GBT versus GBT alone. To remind you, the global INS-212 study met its primary endpoint of culture conversion by month six with statistical significance and a p-value less than 0.0001.

Based on these results, the addition of ALIS to GBT eliminated evidence of NTM lung disease caused by MAC in sputum by month six in 29% of patients compared to 9% of patients on GBT alone. We believe that our study also demonstrated an acceptable safety profile, where safety results were in line with those seen with other inhaled antibiotics.

We remain confident in the impact of treatment with ALIS that we observed in our Phase III study, and we are optimistic about the potential approval and launch of ALIS. Let me also remind you of the unmet need surrounding the disease we're fighting.

NTM lung disease is a rare and progressive pulmonary infection associated with irreversible lung damage and declining lung function. We estimate that as many as 10,000 to 15,000 of NTM MAC patients in the U.S. fail treatment, when using the off-label antibiotic regimen that is the current standard of care.

This disease typically affects an older population and is associated with an increased mortality rate, particularly for those patients who failed the off-label treatments currently used. This high mortality rate is further complicated by multiple co-morbidities in these patients.

Acknowledging what remains an unmet need in a rare life-threatening disease for which there is currently no approved treatment available, FDA has granted ALIS orphan drug designation, QIDP status and breakthrough therapy designation, along with our request for priority review. We believe ALIS has significant potential to address this need.

The reception from treating physicians and key opinion leaders continues to be positive around the potential of ALIS to improve patient outcomes.

This quarter we shared more detailed data at the American Thoracic Society International Conference or ATS and physicians have repeatedly expressed excitement around our data and the desire to have an approved treatment specifically for this patient population.

We will continue to provide new data from both 212 and 312 as more results become available. We anticipate the studies to be completed and topline data available in late 2018 or early 2019.

We will also continue to keep you abreast of our progress on the regulatory front, both following the AdCom meetings and the upcoming September 28 PDUFA Action Date. As we look ahead to late September, pre-commercial activities remain underway to support a potential launch later this year as planned.

And you will hear more about that from our Chief Commercial Officer, Roger Adsett in a few moments. As we prepare for U.S. launch, we're also expanding our global footprint. We are actively building our infrastructure in Japan to support a potential future launch in this region, where the prevalence of NTM lung disease is relatively high.

In support of that effort, this quarter we welcomed Leo Lee to our Board of Directors. His depth of experience in commercial leadership roles in Japan and the Asia Pacific region with Merck Serono, Allergan will be invaluable.

Additionally, I am pleased to announce Yuji Orihara has joined the Insmed team as General Manager, Insmed of the Asia-Pacific region to advance our efforts toward potential commercialization of ALIS in Japan and beyond. Yuji joins us from Gilead, where he was most recently the President of Gilead, Japan.

We also remain focused on the regulatory pathway in Europe and the potential we see for ALIS in this market. Our compassionate use program in France under the ATU continues to receive request for the use of ALIS in the sickest patients, and we have heard some wonderful outcomes as a result of the use of ALIS.

Clearly, our focus this year is on our transition to becoming a commercially-focused organization as we strive to bring this important drug to patients around the world, suffering from an intractable disease.

Let me pause here and turn it over to Roger now for an update on our commercial activities, followed by Paolo, who will review our second quarter financials.

Roger?.

Thanks, Will, and good morning, everyone. Let me start by providing a brief update on our field activities to-date. We continue to receive positive feedback from our team of 72 therapeutic specialists that we deployed in early April. The team has been hard at work, executing our disease awareness campaigns and meeting with our key physician targets.

The Symphony data we use to target our field efforts has been extremely accurate. The patients are there and we are meeting with the physicians who are treating them.

We also have gained confidence through field intelligence that the data supporting a refractory NTM patient population of approximately 10,000 to 15,000 patients at launch has been validated. In addition, let me remind you that we expect growth in the prevalence of this disease to be approximately 8% per year.

We continue to engage with payers and generally anticipate support from that community. We continue to expect that during the first six months, we will be relying primarily on the medical exception process to secure reimbursement for ALIS.

Once ALIS is reviewed and added to our plan, we expect that there will be a prior authorization process associated with the proven coverage of ALIS.

The research we have done with physicians who treat patients with NTM lung disease, in the case that they are willing to invest the time and provide the support to secure the medical exception, we'll process the prior authorization. Patient access to ALIS is a top priority for our company.

We've established an extensive support network of both in-house and field-based personnel to support patient access. While any new product launch has hurdles to overcome at launch, we believe that we have made the right investments and hired the right people to support our efforts to bring this product to market successfully.

We have very positive momentum heading into the second half of this year and we're all very excited about the potential launch of ALIS in the fourth quarter of this year. With that, I'll hand over the call to Paolo for the financial review.

Paolo?.

Thanks, Roger, and good morning, everyone. Thank you for joining us today. I will spend the next few minutes reviewing the second quarter 2018 financial result. This morning, we reported a net loss of $76.4 million or $1 per share, compared with a net loss of $44.7 million or $0.72 per share for the second quarter of 2017.

Research and development expenses were $35.7 million for the quarter compared to $26.9 million in the second quarter of 2017. The increase was primarily due to the manufacturing of our commercial inventory for ALIS in support of the potential product launch in the fourth quarter as well as the ongoing Phase II Willow study for INS1007.

Second quarter G&A expenses were $37.2 million versus $16.6 million in 2017. The increase was due mainly to higher expenses related to our pre-commercial planning activities for ALIS and higher compensation and related expenses due to an increase in headcount as compared to the prior-year period.

We ended this quarter with $634 million in cash and cash equivalent. Our cash-based operating expenses for the quarter were at $65.3 million. Our cash-based operating expenses, including capital and other investments, were $129 million for the first half of the year.

A reconciliation of our GAAP operating expenses to our cash-based operating expenses is included in our press release, which is available in the Investor Relations section of our website. The lower-than-expected spend for the first half of the year was primarily associated with the phasing of our investments.

We had been planning for the possibility of an earlier launch than fourth quarter and as a result, phased our investments accordingly. If FDA grants accelerated approval by the PDUFA date, we expect the product launch to take place in early fourth quarter. We continue to plan for success with a focus on our key areas of investment.

Turning now to financial guidance for the second half of 2018. We expect that cash-based operating expenses, capital and other investments will be within the range of $150 million to $170 million for the second half of 2018.

The increase in our expenses is primarily associated with the ramp-up of our spend in preparation for the potential launch of ALIS. With that, I will turn it back to Will..

Thanks, Paolo. As I said earlier, we are at a point of transformation for Insmed in our drive to bring the first ever treatment to patients with NTM lung disease, who are currently suffering in the absence of any approved and effective therapy. I would like to recognize and thank the team for their continued hard work and dedication.

It is rare for a company to build a product in their own lab, develop it through all clinical trial requirements, secure approval and then launch it globally. We believe we are on the cusp of receiving accelerated approval and launching in the U.S. later this year, but it is only the beginning.

We have assembled an exceptional team and their collective talents have been brought to accomplish this task.

From the arrival earlier this year of our commercial therapeutic specialists to our key account director team, who will support market access to our Era Cares team, who are diligently laying the groundwork that will provide patients the support they need to navigate their very personal journey with our therapy if approved.

All of these people and the many others at our headquarters and around the world that support them are aligned and striving to deliver on the promise of a new therapy to treat NTM.

Next week we will, I am sure, have a fulsome discussion about the serious nature of this disease and the potential of our drug to alter the approach currently taken to treat patients. I also want to thank the patients and physicians we serve for their continued involvement in our clinical program.

We are here to make a difference in the lives of patients and their families. And with the AdCom meeting days away, we continue to advance closer to our goal. With that, I'd like to turn the call over to Blaine to explain how we will handle questions today.

Blaine?.

Thanks, Will. Before we take your questions, I'd like to highlight that because of the proximity of the FDA Advisory Committee meeting for ALIS taking place next Tuesday, we will not be taking any questions about the meeting itself or speculating around possible outcomes for the meeting and I'm sure you can all appreciate.

That said, we're happy to take any other questions that you may have. And operator, can we please open the line for the first question..

[Operator Instructions] Our first question comes from the line of Matthew Harrison with Morgan Stanley. Your line is now open..

This is Ishmael on for Matthew. Thank you for taking our questions.

My first question is, how do you think about the use of ALIS and maintenance dosing in terms of how long you would expect the drug to be used, and do you have any update on the conversion of patients who are unconverted in the CONVERT study, but were able to convert with longer duration treatment. That's my first question. Thank you..

So the question deals with – if I understand it correctly, the duration of therapy, and if we have any new data to share in that regard, and how we think about that. What I'll do is ask Roger to speak to the guidelines and what they directed in a moment.

But in regards to new data, we're not putting out any new data today that speaks to the continued use other than to just reiterate that that data on an interim basis is available and what it shows is, and this was released in January, that the longer you stay taking ALIS along with guideline-based therapy, the more likely you are to culture convert.

So that's a really important aspect of the 312 study. Those patients who do not convert in the first six months continue on ALIS and we saw them continue to culture convert.

So I think the guidance that we have in terms of clinical data in response to that question is a positive indication that you would want to continue on therapy beyond the initial six months. But maybe Roger can comment on what we've seen from the guidelines and where we think that might go..

Yes. Thanks, Will. So I think it's appropriate to look at the guidelines as really the only indicator as to how physicians actually think about the disease and treating at this point. And this is, obviously, a tough disease to treat. And guidelines recommend that you initiate therapy and check for culture conversion at six months.

If they've not yet culture converted, then you continue therapy and then check again might be around the 12-month period. And once you've achieved culture conversion, you have to persist with therapy to ensure that you've really knocked out the bug.

So it's culture conversion plus another 12 months to ensure that you've got maintaining that culture conversion. I think that's probably the best information we have right now as to help physicians think about the disease..

And one of the – I'll just add is a close there, that one of the noteworthy data points that came out of our 212 study, which really, I think, drives home the point of the difficulty of the disease, is that the median time on background therapy coming into the study for patients was over four years.

So the practice of these physicians is to put them on therapy and as one key opinion leader said, once they come into their clinic, they never leave. So I think what's exciting about our therapy is it portends the possible introduction of something that may actually permit patients to go off therapy at some point.

We'll obviously be looking at the potential continued use of the therapy in the long-term in the future because we think maintenance therapy to prevent re-infection maybe an important element that we'll want to look at. But for now, I think the data all points to positive in terms of the impact of the therapy you may be able to have..

That context is very helpful for my second question. Can you talk about how you think about the trajectory of ALIS for the first few months, especially within the context of the first six-month medical acceptance process and potential other timelines and as it relates to the CMS and the need for a permanent [J-Code]. Thank you..

Sure. I'll turn that one over to Roger..

Thank you. So, I would say that we – as I mentioned in my comments that we continue to be very encouraged by the interactions we are having with payers. We think that broadly this group will be supportive of ALIS.

But as you mentioned, at least in the first several months, first six to 12 months, I think we'll be relying heavily on that medical exception process. The good news is that the physicians are willing to put in the time and the effort to go through that prior authorization process or that medical exception process is what they report to us.

And we're building the infrastructure to support those patients and to support patient access. I think it will be fairly difficult, particularly within that Medicare population, for a plan to deny coverage to the appropriate patient, appropriate on-label patient.

And commercial plans could take a little bit longer and they're able to block new medications for a period of time, but we're having a lot of success with our key account director team and our MSL team and engaging with the payers, educating them on the disease and the unmet need there.

So it's not a matter for me, it's not a matter of if, it's a matter of when these patients will get this product reimbursed..

Wonderful. Thank you. Congratulations on the progress..

Thank you..

Our next question comes from Joseph Schwartz with Leerink Partners. Your line is now open..

Thank you. Best wishes on a successful patent next week..

Thank you for that..

Do you expect the medical exception process to result in any patient warehousing and an inflection point after coverage becomes more systematic or do you think that the uptake trajectory will be more linear?.

I'll turn that one over to Roger..

Thanks for the question. It's a good thought. So I expect it to be more gradual and linear rather than an accumulation of patients from a warehousing perspective.

I do think that Medicare process actually has a pretty well defined process to go through the medical exceptions with some timelines associated with the decision points, so I don't see those accumulating. It could potentially happen within the commercial group, I suspect or I understand.

But I don't see it as a accumulation or a hoarding of patients waiting for a formulary add for example or coverage decision add. I think that will continue to work our way through that process and as they come.

Even when the decision is made to cover the product for a plan more broadly, we anticipate that there will be a prior authorization process associated with that coverage anyway. So I think that hopefully it won't be too burdensome of a process and we don't expect it to be.

But the physician will still need to fill out the paperwork to prove that this is the appropriate patient for ALIS going forward..

And then at ATS, we saw some data showing that adverse events dropped off after the first month of treatment.

How much coaching was required to achieve that kind of a profile and how are you set up in the real world with nursing and any other support in order to ensure that patients can adhere and benefit the most from treatment?.

Thanks for the question, Joe. I think to accomplish what we did in 212, certainly we tried to take what we learned in 112, the Phase II study and apply it as a part of our briefing and webinars that we distributed to treating physicians around the world.

And I think we are pleased with the responsiveness to that, the potential use of things like bronchodilators and other interventions, short breaks from therapy to help patients adjust to the new process of inhaling a medication. And we had some good success with that, I think.

And the result is that the safety profile as we've described is not very different from what you see with other approved and inhaled antibiotics.

In terms of what we're going to be doing in the commercial setting, if and when we get approved, I'll ask Roger to address that because he has done an awful lot of work there and we've made some real headway..

Thanks Will. So as everybody is aware, patient support is one of the key success factors for a successful launch within – in this space and we've spent a lot of time and effort into building what I think is an excellent infrastructure to support those patients.

Part of that is our Era Care’s coordinators, so our 10 Era Care’s coordinators, who will be sitting here in the home office and will be the major conduit for a patient and supporting them with their experience with ALIS. But we've also hired about 34 clinical trainers that we'll be deploying into the field.

This is a group that's – I'm so pleased with the talent profile that we have here, this is a group that's primarily made up of nurses, respiratory therapists and highly experienced in their field. And their role is to engage and onboard the patient with [ALIS] therapy.

So they'll be meeting with the patients at the location that's most convenient for the patient, training them on the device, training them on what to expect from the therapy and really generally just making sure that their onboarding experience and their experience with ALIS is going to be positive.

They will also be available for training in the offices if the physicians request that, we can train their staff and help them with what to expect from therapy as well. I think, we feel that the education and managing expectations is critical to – looking through to what they can expect from those first few months of therapy with ALIS..

Sounds good, thank you..

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

Hi, I want to get behind Joe and also say best of luck next week. I'm sure it will all go very smoothly..

Thank you..

Can you just remind us of additional data coming from the Phase III style for ALIS in general over the course of the next 12 months?.

Sure, thanks for the call Liisa and for the good wishes. We are going to have the topline results from 212 – pardon me, 312 by the end of this year or early part of next year. And as soon as that information is available, we will certainly share it..

Okay, great. Thank you. And then could you just talk about assuming approval, what can we expect in terms of increased spend on the launch for this year, the remainder of this year? That's it from me, thanks..

So we're not going to go into the specifics of how the capital will be deployed, other than to say, the guidance is $150 million to $170 million for the second half of the year. And I think what I would observe is, that's our guidance, the Principle still applies, which is just because it's budgeted, it doesn't mean it gets spent.

But I think what we have demonstrated and I think it's paying dividends enormously is that we are going to fully resource this initial launch if and when we get approval. And so I think that's where you will see this kick-up in the second half of the year..

Thank you..

You bet..

Our next question comes from Dana Flanders with Goldman Sachs. Your line is now open..

Hi, guys, this is Crystal on for Dana. Thanks for taking the questions, best of luck at the outcome. So I know you've been recently talking more about the opportunity in ALIS in M. abscessus, especially on the back and new open-label investigate responsive data.

But I also know you guys took a look at this bug in the target NTM Phase II presented in ATS 2015 and we didn't see a signal there on an absolute relative basis for culture negativity at [A-56] and 84.

So maybe can you talk about how you reconcile some of those new data with your own Phase II and sort of the nature of the open-label trial versus the placebo-controlled? And then I have one more..

Sure, I appreciate the question. So, of course, the big distinction between the two is that the focus of the investigator initiated study is M abscessus and the addition of ALIS in that context, and their study duration was six months.

As you examine the underlying pathogens that give rise to the disease, you make a distinction between AVM complex and M. abscessus almost out of the gate, with abscessus being the much more difficult to treat pathogen and requiring longer exposure and a more – and unfortunately severely toxic regimen of therapies currently used to try and tackle it.

And it's often in the abscessus patient that you hear the worst stories about the therapy doing damage to patients [indiscernible] key opinion leaders even who are at the pinnacle of their career in treating these patients will confess to having made patients permanently deaf, causing serious kidney damage etcetera in their quest to balance overcoming abscessus with the use of something like IV amikacin added to treat the patient.

So I think, we were all expecting that there might be a good signal from the abscessus trial that they conducted, and the fact that they are seeing that in six months is the timeline that we thought would be the earliest you would start to see it.

I think they came close to flipping a third of the patients to culture negative with abscessus and that's an incredible accomplishment for that severe patient because just as an example, a patient who has CF with abscessus is really looking at the beginning of the end, that is a very, very bad piece of news, so a profound improvement, a dedicated trial and, of course, the objective measure of culture conversion.

So your – one part of your question was the placebo-controlled versus not. In the case of a lab based measure, we don't have to worry as much about the knowledge of placebo or not having an impact on trial outcome, when you're using that objective lab measure..

Got it, okay. Great, thank you.

And then maybe for maintenance therapy, can you maybe discuss a little bit of how we should be thinking about that in the context of the current AE profile for ALIS and whether you're considering testing any different dosing or dosing regimens, and if you do, whether you'd want to explore that in a smaller Phase II first or whether you consider jumping straight into a Phase III, assuming that's approved in MAC NTM?.

Yes, appreciate the question. Again I think maintenance therapy is one of the several areas that suggest themselves for immediate pursuit in the context of lifecycle management. And we think of this across several areas, so abscessus is one that, obviously, suggests itself, another is maintenance therapy.

And maintenance therapy was originally brought to us by one of the key opinion leaders, who suggested we should look at perhaps introducing the drug three times a week for patients, who have culture converted to prevent their getting re-infected because there is, at least in the best fairly high data, of re-infection from new pathogens that is associated with patients who get this disease.

So we don't have that protocol finalized yet. We have a draft, we certainly are in advanced discussions with KOLs about what that might look like and we could flip that switch immediately if we wanted to.

I think we want to see how next week plays out and get the benefit of all of the commentary from the Advisory Committee panel as well as our continued discussions with FDA, so we know what is the right way to deploy our resources as we look to lifecycle management, certainly maintenance therapy is one of the candidates, though, and we'll have more to say about that later this year..

Got it. Thanks for the question..

You bet..

We do have a question from the line of Adam Walsh with Stifel. Your line is now open..

Hey, thanks and good luck next week as well.

I have a couple of questions, I guess, the first one for Will, assuming ALIS is approved, how important do you think it is to get ALIS into the ATS guidelines? What would your expectation on timing be around something like that, and do you think it would have an impact on reimbursement and for an inflection point in terms of the uptake curve? That's the first one.

Thanks..

Thanks, Adam, appreciate the question. I mean, certainly this would represent the first ever approved therapy to treat NTM and it would be our hope that the guideline committee would give consideration to that, as they look to update those guidelines on, which they do on an ongoing basis.

I know that there's another update that has been widely anticipated for some time and so hopefully, timing here will dovetail. What that means for us in terms of the commercial context, I'd actually turn that over to Roger and ask him to comment on his perspective..

Yes. Thanks Will. Yes, I mean I think it's pretty simple. I think the addition to the guidelines substantially enhances the argument for coverage with payers. I don't think we're dependent on that. I think we can still get coverage and as I mentioned before at launch, working through the medical exception prior authorization process.

But I think it strengthens the arguments that if you have your product in the guidelines and that's what physicians are turning to as appropriate therapy, that makes it much more difficult for payers to say no to that for the appropriate patient..

Great and then just another one, I think if I remember correctly from your press release when you filed ALIS, it appeared that you were asking for ALIS, I think, following something like medical appropriate therapy or that kind of language, and I'm just wondering, Roger, if you think that physicians and payers will take a broad interpretation of what that means or might there be a difference between physicians and payers in terms of what that means?.

Adam, I'm just going to jump in and say as much as I would love to answer that question, I'm sure you can understand given the proximity of the Advisory Committee meeting and the subsequent discussions, we're going to be having about label. We're going to try and stay away from that speculation on that one, if that's okay. I hope you understand..

It’s totally fair. Thank you..

You bet. End of Q&A.

And I'm showing no further questions in queue at this time, I would like to turn the call back to Mr. Lewis for closing remarks..

Thank you. Thanks everyone for joining us and for the good wishes for next week. We look forward to talking to you soon..

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