Insmed Incorporated

Hello and welcome to the Internet Third Quarter 2021 Financial Results. My name is Katie and I'll be coordinating your call today. If you'd like to ask a question during the presentation, you may do so by pressing star 1 on your telephone keypad. I'll now hand over to your host, Eleanor Brassiere, to begin. Please go ahead.

Thank you, Katie. Good morning and welcome to today's conference call to discuss our Third Quarter 2021 Financial Results and provide a business update. Before we start, let me remind you that today's call will include forward-looking statements based on current expectations. Such statements represent our judgment as of today and may involve risks and uncertainties that may cause actual results to differ materially from the results discussed in the forward-looking statements. please refer to our filings with the Securities and Exchange Commission, which are available through the SEC's website at www.sec.gov or from our website for information concerning the risk factors that could affect the company. The information on today's call is not intended for promotional purposes and not sufficient for prescribing decisions. Joining me on today's call are members of the Innsmouth Executive Management Team, including Will Lewis, Chair and Chief Executive Officer, Dr. Martina Flammer, Chief Medical Officer, Roger Asset, Chief Operating Officer, and Sarah Bonstein, Chief Financial Officer. Let me now turn the call over to Will Lewis for prepared remarks. Upon completion of those remarks, we will open the call up for your questions.

Thank you, Eleanor. Good morning, everyone. We are pleased to share our third quarter results with you today. I want to start my comments by saying that Insumet has seen remarkable growth and accomplishment during the time of the pandemic. This growth has ushered in a new framework for Insumet. We are currently advancing four strategic pillars. The first is Aircase, our marketed product for the treatment of refractory MTM, which is now approved in three major territories around the world. the U.S., Europe, and Japan. Notably, the Japan launch kicked off in July. We are very pleased with the progress to date, and we believe there is tremendous opportunity to help patients in this region. When we think about the overlap of NTM and bronchiectasis call points, our commercial operations in the U.S., Europe, and Japan are preparing us well in advance for the potential launch of Brenzocantib, should that product candidate achieve regulatory approval. Aracase is also being explored in a frontline clinical trial program in patients with NPM lung disease, which will allow us to take advantage of our commercial footprint. The second pillar is brenzocatib, our DPP-1 inhibitor currently in the Phase III Aspen trial for the treatment of bronchiectasis. In addition to Aspen, we continue to work toward advancing brenzocatib in a Phase II trial in cystic fibrosis. Beyond these two initial indications, our team has identified additional opportunities where Brenzocat may have utility by way of the DPP-1 inhibition pathway. And we look forward to having more to say about the progress we are making in these potential additional indications early next year. Our third pillar is TPIP, a tryprosinol prodrug, which we are advancing through clinical development for the potential treatment of pulmonary arterial hypertension, or PAH, and pulmonary hypertension associated with interstitial lung disease, or PHILD. Finally, our efforts in translational medicine. This pillar is focused on identifying the next set of critical candidates to enter our pipeline, with a sharp focus on disruptive technologies in the rare disease landscape that could yield a high degree of impact for underserved patients. We see these investments now as a key to developing a future pipeline that we hope will quickly follow behind the anticipated success of the first three pillars. We believe that within each of these pillars is enormous potential that could catalyze the next phase of growth for Insmed, We expect to share more on each of these pillars early next year. Finally, let me briefly address the ongoing pandemic. Throughout the second quarter, we saw promising signs of a return to growth. Early in the third quarter, these signs of growth were muted by the impact of the Delta variant around the world. We continue to see the temporary negative impact of COVID surges when they occur, but believe we have the means to return to growth once they have abated. even in the endemic phase of this virus. One consequence of this persistence of the virus is that we have made the decision to require all U.S. employees of Insmed to get vaccinated starting in mid-December. No doubt this will result in some employees choosing to leave their employment with Insmed. While this is regrettable, we believe this requirement is the best way to protect physicians, patients, caregivers, and employees, and to play our part to help bring this pandemic under control. We are at an exciting and pivotal moment in Insmed's growth trajectory. The next 12 months will be an extremely important execution period as Insmed continues to perform across our commercial operations, clinical trial work, and research efforts. I believe we have the patient focus, collective drive, infrastructure, and strong capital position to help us reach our goals. With that, I'll turn the call over to Sarah to walk through our financial results.

Thank you, Will. Good morning, everyone. Earlier today, we issued our detailed third quarter financial results in a press release. Overall, our financial results were aligned with our internal expectations. Let me highlight just a few of those results for you now. As reported this morning, we entered the third quarter with $847 million in cash and cash equivalents. We anticipate this cash position will support data readouts from the error case front line program the Phase III trial of brezocaptive and brachyetsis, as well as Phase II results for TPIP. For the third quarter 2021, total net revenue for Aircase was $46.8 million, demonstrating resilience and steady performance of the franchise in the face of the Delta variant. Our growth to net in the U.S. for the third quarter 2021 were approximately 12%. As previously disclosed, We anticipate our growth to net for our U.S. business to be in the mid-teens for the full year 2021. Cost of product revenues for the third quarter was $10.2 million, or 22% of revenues, which was in line with our cost of product revenues in the third quarter 2020. Let me now turn to our GAAP operating expenses. For the third quarter of 2021, research and development expenses were $70.3 million, and SG&A expenses were $60.3 million. As previously disclosed, our research and development expenses are expected to grow as we continue to support our development pipeline and invest in our research capabilities. In closing, INSMINT ended the third quarter in a strong capital position. underscored by the ongoing commitment to a responsible use of cash. With that, I'll now turn the call over to Martina for an update on our pipeline. Martina? Thank you, Sarah, and good morning, everyone. INSMIT made important progress across our clinical development programs in the third quarter. In addition to our ongoing clinical research, our medical affairs efforts continue to serve a key purpose at INSMIT. I'd like to highlight a few examples of the range of data INFMED presented at medical congresses during the third quarter. At ID Week 2021, we shared data demonstrating that in Japan, hospitalization rates were higher for COPD patients with NTM lung disease compared to COPD patients who do not have NTM, underscoring the importance of appropriate management of patients who present with this comorbidity. These results build on similar data we have previously presented regarding increased hospitalizations and mortality among COPD patients who also had NTM in the U.S. Highlights, the global need to treat NTM patients with this comorbid condition. At the CHESS annual meeting, we were pleased to share data from the COPD Foundation, U.S. Bronchiectasis, and NTM Research Registry. demonstrating that approximately one-third of patients who were treated for NTM and were later identified as refractory had differences in clinical characteristics, such as lower body mass index and reduced lung function, compared to patients who were not refractory. These findings suggest that an understanding of the differences in clinical characteristics in patients may help identify and treat refractory NTM patients at earlier time points. Finally, we were pleased to share pharmacokinetics and pharmacodynamics data from our face-to-wool study of Prensipacid at the European Respiratory Society International Congress. These results demonstrated that patients treated with Prensipacid were more likely to have sputum neutrophil out-of-state levels below the limit of quantification at the end of treatment compared to patients treated with placebo. In addition, higher systemic exposure to PranzoCathet was associated with achieving sputum neutrophil LSH levels below the limit of quantification. In our ASPEN trial, we hope to establish a correlation between reduction in neutrophil LSH levels and the occurrence of pulmonary exacerbation. Let's now turn to our clinical development program. Phase III ASPEN trial of PranzoCathet in patients with bronchiectasis and our Arise and Encore studies for Ericase as a frontline treatment for patients with neck lung disease, patient enrollment continues to track in line with our expectations. Let me expand on our progress with Brenzocaptive. We're pleased to convey that the European Medicines Agency's Pediatric Committee has approved the Brenzocaptive Pediatric Investigational Plan for the treatment of patients with non-cystic fibrosis bronchiectasis. which means that we now have alignment for our pediatric study plan across the FDA, EMA, and PMDA. Importantly, our Aspen trial will now include 40 adolescent patients between 12 to less than 18 years of age, which will fulfill the pediatric study requirements to support marketing applications in this patient population in the U.S., Europe, and Japan. We look forward to providing updates on our progress. Our prensopathic clinical development work also continues for the Phase II pharmacodynamics and pharmacodynamic study in cystic fibrosis, and we are on track to release results next year. In parallel, we have identified opportunities that we believe will support prensopathic expansion to additional neutrophil-mediated indication, where there is a clear and strong scientific rationale to support the mechanism of action. In line with our mission, we believe we can deliver the greatest value by focusing on serious diseases that affect smaller patient populations where there is a clear gap in the current treatment landscape. We anticipate updating you in our work in additional indications early next year. Let's now turn to TPIP, which we believe may be able to harness the full potential of the prosonoid pathway. starting with our Phase IIa study in patients with PH. Recall that this study is designed to measure the impact of single doses of TPIP on pulmonary vascular resistance, or PBR, over 24 hours. We hope to see PBR reduction that is extended well beyond that, which is currently available with tryprospinil. As a reminder, we're using a low dose for this study. for our Phase IIb study, we would expect the duration of PVR reduction to be even longer, given that we're using an up titration approach, which we anticipate will translate to clinical benefit. COVID-19 has prevented enrollment challenges for the Phase IIa trial, as we are looking for patients to volunteer in the ICU setting at a time when there are surges in the Delta variant. Nonetheless, we have multiple study sites open and have identified several patients, and we remain hopeful to have data from a small number of patients from this study by the end of the year. In parallel to the Phase IIa, we're working to initiate a Phase IIb study, which will measure the impact of TPIP on PBR and six-minute walk distance over a 16-week period in patients with PH. The Phase IIb study will also utilize an uptitration approach to each patient's maximum tolerated dose. Consistent with our expectations, we remain on track to initiate sites by the end of the year. We also anticipate initiating early next year a Phase II study evaluating TPIP for the treatment of pulmonary hypertension associated with interstitial lung disease, or PHILD. Let me close out my remarks by addressing the importance of our fourth pillar, translational medicine. We have identified promising clinical candidates from our internal research effort as well as business development activities to extend our pipeline of clinical programs aimed at treating serious and rare diseases. As our late-stage product candidates advance to potential commercialization, our approach is to identify at an early stage the next set of candidates to enter our pipeline. We adhere to important criteria in this search, starting with the patient experience, which is of the utmost importance at Internet. With a line of sight to a potential high degree of impact on the course of disease, Of note, our translational medicine capabilities are not limited to pulmonary therapeutic areas. We look forward to sharing updates from our translational medicine efforts early next year. With that, let me turn the call over to Roger to discuss some key operational updates.

Roger? Thank you, Martina, and good morning, everyone. From an operational perspective, its med made important progress during the third quarter. Our case now has a commercial presence in three major territories, the U.S., Europe, and Japan. While the COVID-19 pandemic continues to shift and we see regional differences among and within each of these territories, we believe there is untapped opportunity to be found in each of these markets over the long term. Let me begin with our U.S. business, which has shown steady performance in the dynamic COVID environment. While we did see some effective Delta surges throughout the third quarter, primarily in parts of the country that have the highest NTM patient concentrations, we believe we have passed the peak of the Delta variant and anticipate growth will return once COVID stabilizes. While it is difficult to predict with any precision when COVID will subside, we believe we have the right tools to drive growth when it does, as we continue to see opportunities around the country in regions where there is less of a COVID impact. We believe the keys to growth include NTM patients feeling comfortable returning to in-person doctor visits, the ability of our targeted pulmonologists and infectious disease specialists to turn their attention away from managing the COVID pandemic and opening up their practices for in-person visits to facilitate diagnoses of refractory NTM lung disease. Let's now turn to our international commercial efforts, which we expect will continue to add to the global Our Case revenue profile. beginning with Europe, where we continue to pursue our case reimbursement on a country-by-country basis. Recall that we previously achieved list price parity and reimbursement with the U.S. in Germany and the Netherlands. In the U.K., we have previously achieved list price parity with the U.S., and we are pleased to report that in September, we achieved reimbursement in Wales, which is now the first U.K. nation to reimburse our case. This is a very encouraging milestone as it followed a rigorous assessment of our case's place and value in this market. As a reminder, in addition to our reimbursed markets, the ATU program in France has been extended. Recall that Europe follows a central approval process followed by country-level reimbursement and subsequent launch. We anticipate the reimbursement environment will become more favorable as the impact from COVID subsides. As a reminder, we anticipate Europe will represent the smallest revenue contribution of the three regions where our case is commercially available. Near term, we are turning our efforts to securing reimbursement in Ireland, additional countries in the UK, Italy, Belgium, and France. We look forward to keeping you updated on our progress. I'll now turn to our efforts in Japan. We launched in late July, so it's early in the launch, but we are extremely excited about our initial progress and the market opportunity in Japan, which, according to available literature, represents the largest diagnosed refractory NTM population of the markets that InzMed is pursuing. Let me now expand on a few early positive signs we are seeing in Japan. First, initial uptake of new patient starts has been strong, even in the face of COVID. Through the first couple of months of launch, The number of patients initiated on ARICase is lower in Japan than what we saw in the US at the same time point, but the ramp is similar, which is an encouraging early trend. We have also received positive anecdotal feedback from physicians with respect to the tolerability and the safety profile of ARICase for their patients. It's important to clarify a few nuances of the Japanese market. First, we are currently seeing the majority of patients in the hospital setting during the first week of therapy for the purpose of starting ARICase treatment. which is not unusual for this market and something we've also seen in the PAH market in Japan. We anticipate that the hospital setting will yield beneficial patient management and retention results by allowing doctors to give patients the best attention and care, fully understand the side effect profile, and educate patients on what to expect from their therapy. Patients will also be thoroughly trained on how to successfully administer ARICase using the nebulizer. An important note, As a consequence of initiating therapy in hospital, the initial revenue for a Japanese patient starting on ARICASE is for a seven-day pack rather than a 28-day pack, which a patient would receive when initiating therapy in the U.S. or Europe. For the first year after approval in Japan, doctors are restricted to prescribing no more than two weeks of therapy at a time, which is standard for all new drugs in Japan. We are extremely proud of the ongoing work of our therapeutic specialists in this market. we are tracking well ahead of our internal expectations in the number of Tier 1 targeted hospitals and total hospitals that have adopted the Lumira device. While less than one-third of our therapeutic specialist visits were in-person during the third quarter, Japan lifted the state of emergency at the beginning of October. Currently, about 70% of the Japanese population are fully vaccinated, which we think bodes well for COVID becoming endemic opening up more beds in the hospital for initiation of our case treatment, NTM patients visiting their doctors, and our sales team having more in-person access to physicians. We are very excited about the progress in this important market. Early indications are that we have a very strong launch and expect Japanese revenues to build over time. I look forward to updating you on future developments as we work to deliver our case to patients. Let me close out my remarks by acknowledging the strength of our technical operations at Innsmed. We remain on solid footing as it relates to production and inventory of our commercial product. With respect to our pipeline, we continue to manufacture adequate amounts of clinical supply product to support our ongoing trials. In summary, Innsmed continued to make important advancements in the third quarter. With the first quarter of the Japanese launch under our belts, in our case now launching at three strategic markets on three continents, we will continue to benefit from a strong commercial position. Looking ahead, our existing commercial operations are laying the groundwork for potential Brenzo captive commercialization, given the overlap of NTM and Broad Key Exorcist call points. I'm extremely proud of the team's hard work that helped us achieve these milestones and look forward to keeping you updated on our future progress. And I'd now like to turn the call back to Will. Thank you, Roger. In closing, I believe Insumet is approaching the next wave of transformation as we work to become a leading biotechnology company. The entire Insumet team is unified around a collective goal to deliver life-changing medicines for traditionally underserved patients. I thank the entire Insumet team for their continued dedication, passion, focus, and commitment to this unwavering goal. I would also like to thank the patients and caregivers who participate in our studies. On behalf of the intimate team, we extend our gratitude to you for driving us in everything we do. With that, I'd like to open the call to questions. Operator, can we take the first question, please?

Of course. If you'd like to ask a question, please press star followed by one on your telephone keypad now. We take our first question from Jennifer Kim from Cantor Fitzgerald. Jennifer, please go ahead.

Hey, thanks, guys. Congrats on the quarter, and thanks so much for taking the questions. I have a few here, maybe to start with just commercial color and error case. Could you elaborate more on the positive trends in Japan? I think you mentioned that the ramp is somewhat similar to the U. S. I'm wondering if you can give some updated color around around the timing of that you know when we should see um that wrap up more uh and then second related to commercial performance in the u.s you said that the peak of the delta impact has passed so to what extent do you think delta muted u.s growth in this quarter i'm just trying to get an idea of what we could see in the future and then going into um your pipeline. You mentioned your next clinical candidate will be in the pulmonary therapeutic areas. I apologize if I missed this, but was this an internal or external candidate? And then also, is the idea here to be somewhat complementary to, I guess, TPIP, or how are you thinking about how that fits into the pipeline? Thanks so much.

Sure. Thank you for the question, Jennifer. And I'll ask Roger to comment on Japan and U.S., Great. Thanks, Will. So from a Japanese perspective, you did hear correctly. So we're really encouraged by the early trends that we're seeing in Japan. And just to reiterate, we launched at the end of July, so it's still early days. But what we're seeing is initiation of our case patients in the hospital. We think that that's going to be very beneficial as far as training the patients on the device, on the tolerability, and managing the side effects, which we know can be significant in the first week and having the best medical care to help coach the patient through that I think is going to be beneficial for the long term. And while the uptake has been incredibly strong, the number of patients that we have in Japan versus the U.S. is a little lower, but the ramp is following the same trajectory as we've seen or is highly correlated with the trajectory we saw in the U.S., We'll continue to monitor it because it is still early, but we think it's a very encouraging sign. With regards to the U.S. and the impact that we saw COVID have in the third quarter, as we had mentioned, I think in the second quarter, we had really seen some encouraging signs. We had seen our prescriptions ramp up month over month, and we were really pleased heading into the summer. And then Delta variant came out of nowhere and really impacted primarily in the states where we had high NTM concentrations. So think about the Gulf states, warmer weather, close to the water. And so that really impacted the ability for physicians to treat NTM patients or NTM patients to seek care. On the other hand, we did see some really strong performance in areas where we didn't have such an impact from COVID, where we had potentially higher vaccination rates, for example, and we saw some growth in those regions. So we still see that regional variability. We really believe that once we get on the other side of COVID, and nobody can predict when another variant is going to hit or when we might see that spike. But at some point, we believe we'll hit that endemic phase. And we think that we're really poised for growth based on some of the refinements we've been making to our messaging, our targeting, and patients returning to seek care and physicians turning their attention away from COVID and to some of these more chronic diseases. We know NTF is progressive, and as patients return to seeking care for a lot of these chronic diseases, I think we're well-positioned to return to growth in the U.S. And I'll just add to that, you know, if you want a snapshot of how bad Delta was, just take a look at the CDC infection rate over the last year or two. It's quite striking the rapidity of the surge caused by Delta. And if you then go further to understand that that was concentrated in areas with heavy NTM patient populations, you know, I hope I can say that that's about as bad as it can get. But it was certainly something that came on abruptly and severely, and I'm glad we're past the peak. And I just have to give a shout-out to our therapeutic specialists and our outward-facing components of our commercial team, everything from the folks that are helping patients in how to use the medicine effectively and the education efforts that are helping these physicians improve deal with these patient populations at a time when they are absolutely called away to deal with the ICU being overwhelmed by COVID patients. It is really bad and tough on the front lines. We all hear about it. But we heard a startling statistic the other day that there was a number of these cutting-edge hospitals that are really short-staffed in the midst of all this. So not only is the physician distracted, is COVID causing them to work and focus in the ICU, but their ability to lean on their own staff is limited. And so I think it's really been an extraordinary accomplishment to have the steady performance that we've seen, particularly during this difficult Delta variant. Your third question was about our next clinical candidate. And I want to be clear, I think you said that it was pulmonary. It's actually not. And that was one of the points of distinction we want to make for our translational medicine efforts. Our translational medicine effort is really made up of a collection of personnel and technologies that are really quite exciting they're cutting edge i think we're going to be really excited to share more detail about that early next year and one of the reasons we're socializing it with you now is that you can be mindful of those products not just coming forward in the form of of one or two but this really represents an engine this is the future of instrument This is the next generation of programs that will follow behind the first three pillars, where we have a tremendous amount of enthusiasm. And I think the commercial potential that flows from being so impactful on patients is self-evident. But we also note that companies that have been wildly successful with their early products sometimes hit air pockets where they don't have the answer to the question of what's next. We now have that answer, too. And so we're extremely excited about it, and we'll have more to say about that in detail early next year.

Great. That's super helpful, and thanks for the clarification around your pipeline. Congrats, everyone.

We take our next question from Anita Shanth from Beringberg Capital Markets. Anita, please go ahead.

Hi, good morning. I have a couple of questions around the study with TPIP, the 24-hour study with the 30-day follow-up. Just wanted to know how you were coming up with the enrollment for that, considering it's a small patient population. And also, if you could talk about the opportunity and timeline for the renzo-cative in the pediatric population.

I'll ask Martina to address that.

Yeah. So for Phase IIa, this is our study where we're monitoring patients over 24 hours. We call this a single-dose, low-dose study, and with several sites open and who identified patients already for this study. Also, for context, if you have a right heart cath, That is usually a procedure that would take an hour and a half, maybe two hours. We are doing this over a 24-hour period, and that's why we talked to you about the ICU necessity for such a study, and that is where it is right now challenging. Nevertheless, we do believe that we will have the data from a handful of patients by the end of this year. So I think your second question was about the pediatric program for friends who are captive. Pediatric programs are of high interest to regulatory authorities, and that is true across the globe. And what is really important is that we have an achieved, aligned program. In many cases, the different regulators require different study designs, sometimes causing you to have actually two or three different studies. So the importance for us to be able to have 40 patients that are included in Aspen is First of all, important from an effective operationalization, but it also gives us the opportunity to have this data available early when, in many cases, you have pediatric reports that are coming out quite later than your initial prenatal program.

Okay, thank you, Magna. And just one more question on the ARIC-A's adoption. now that you're able to sort of see its pattern in Japan and also with several countries in Europe coming on board, when are you likely to resume giving guidance

Sure, Anita. Thanks for the question. So we rescinded guidance, you know, in the beginning of the pandemic, as you saw many companies do. We understand and appreciate that the investment community would look for us to provide guidance. At this point, at some point in 2022, we will look to provide a level of forward-looking guidance.

Okay. Thank you. Yep.

Our next question comes from Joseph Schwartz from SVB Lyric. Please go ahead.

Hi, I'm Julie Daly in for Joe. Thank you for taking our questions. First question, I guess, are you satisfied that you pulled out all the stops in terms of employing creative initiatives to diagnose and onboard patients remotely in a world where COVID seems like it's going to be endemic for the foreseeable future?

So I'll ask Roger to address that. Yeah, thanks. We continue to look for innovative ways to help patients be diagnosed and treated in a remote setting. We see sort of the ebbs and flows of patients taking telemedicine. One of the unique challenges is to be able to actually collect a sputum remotely from a patient and have them then be diagnosed with refractory MAC based on a positive culture. We are implementing several initiatives, including sponsoring a program to facilitate remote capturing of sputum and sending it off to central labs for testing to facilitate that diagnosis. And we can deploy that regionally as we see these spikes go up and down for COVID. So I think we'll continue to innovate. We'll continue to look for new ways to facilitate that and encourage patients to continue to seek care for their NTM and to talk to their doctors. I think generally we see across the universe of chronic diseases, a lot of patients are delaying care. for even things such as cancers and hypertension, et cetera. And so it's important that we work with our patient groups and with our patients to encourage them to continue to seek care, and we'll look for innovative ways to continue to do that. You know, the other thing I would add to that is I want you to understand, and this is a really important point, the patients are there. The physicians are there. We know that there are pools that we have not yet reached. And, again, a shout-out to the creativity that's been brought to bear by the commercial team. out of necessity in this very, very difficult environment, the most difficult period of which is this recent Delta variant that we've seen play out. And as you heard in Roger's earlier comments, one of the most exciting things that I've seen in this last quarter is that the impact of some of these creative approaches has been evident. In those areas where Delta was not as prevalent, we did see response to these creative approaches, and I think that that deserves a lot of recognition and credit for our commercial team, and it bodes well for the future when the collective you know, United States is beyond this Delta variant, then I think all those efforts and creativity can be brought to bear. And the evidence from that will be clear. And that's why we have conviction today that even during the endemic phase going forward, we will see growth.

Okay, great. Thank you for that. And then, I guess, what are your latest thoughts on the size of the European and Japanese markets? So, for example, do you have a better estimate on the number of addressable patients in Germany and Netherlands now that you're in those countries? Are there reasons to believe that there could be more addressable patients than originally anticipated?

Roger, you want to take that? Yeah, sure. Thanks. Thanks. I think as we've previously commented, we see Europe as probably the smallest opportunity from a diagnosed refractory MAC patient population. Having said that, we do believe that there's probably a significant amount of undiagnosed MAC patients, and that's one of the efforts that we'll be pursuing as we get able to launch across Europe. We do think that as Patients will be returning to their physician's offices in Europe as the same dynamic plays out there as it has in the U.S. with impacts of patients postponing care and not being able to enter the clinics to interact with their physicians. But over time, we do think that we'll be able to increase the diagnosis in Europe, and we believe that there's probably a higher number of refractory MAC patients in Europe than what the medical literature indicates. In Japan, we think that it is the largest diagnosed refractory MAG population, larger than the U.S. There's a few reasons for that. We think that the medical screening, the annual physicals that Japanese patients undergo includes a lung scan, and so they are able to pick up MGM a little earlier than they do in the U.S. And we think that the early signs of the launch and the interest we've had from KOLs, the interest we've had from patients, In our case, the launch validates the assumption that we have in the medical literature that we've seen that this is a substantial market, and the uptake we've seen so far is very promising, and we look forward to updating further on that as we go.

Okay, great. And then if I could just squeeze one more in. How close are you to wrapping up Alive, given that you started it in late 2020, and this is a seven-month study? Just wondering if you have any line of sight.

Yeah, so we haven't given specific guidance on enrollment timelines for any of our trials, just out of respect for the unknowns surrounding COVID. And I have to say, the Delta variant, I think, probably showed us that that was a wise instinct to follow. We will provide some direction once we get to a place where we see steady growth. performance that we think allows us to interpolate and do so reliably for the benefit of our shareholders. And we would expect that that'll be sometime in the earlier part of next year. But at this time, I don't have any further guidance other than to say that these trials are all tracking our internal expectations. And so we feel good about where we are.

Okay, great. Thank you very much.

We take our next question from Jeff Hung from Morgan Stanley. Please go ahead, Jeff.

Thanks for taking the questions. For error case, you indicated we're past the peak of Delta variant. Can you talk about any changes you're seeing or hearing on physician offices reopening, patients returning to in-office visits, and then customer engagement by your therapeutic specialist and person in the field? And how do these dynamics impact your confidence in growth for the remainder of the year? And then have a follow-up.

Roger, you want to take that one? Yeah, sure. I think so as we think about the Delta variant and as we're tracking the CDC data, we certainly see the cases are going down. And what we hear anecdotally from our field force is that patients or physicians are able to turn their attention back into their private practices, take patient visits. And so we do see more inpatient interactions, in-person interactions from our sales force with physicians. We think that that's really important. as we're able to get to a return to growth. And in addition, as we've said previously, where we had not had the impact of COVID, we actually saw growth in those regions where the impact was lessened. So as we see those returns, those dynamic returns, particularly in those high NTM concentration markets, we think that bodes well for our return to growth and getting those patients back into the office and treated. As Will mentioned, these patients, they're out there. We know that they're out there, and it's a matter of them returning to the office, the physician having time and capacity to treat them, and we believe that that bodes well for our case in the long term.

Great. And then in Japan, how has the two-week limitation of prescriptions and patients returning to physicians to get refills, how has that been relative to your pre-launch expectations, and are the proportion of patients getting refills above, below, or in line with your expectations? Thanks.

Thank you. So we actually don't have specific refill information on Japan at this point, but I will say that this is the common – rule across Japan is that you're restricted to the two-week limitation within the first year. So Japanese patients and physicians are very attuned and accustomed to this. As we had mentioned, the majority of patients are starting in a hospital setting. So they go in for between four and seven days in the hospital to initiate therapy. And so what they start off with is a seven-day pack rather than two seven-day packs or 14 days. Once that it's discharged from the hospital, they will then receive from the pharmacy another pack and the equipment to take home with them. We haven't seen, based on the results we're seeing, it appears that these patients are continuing therapy. The anecdotal response from reports from physicians are the patients are actually tolerating the product really well, and we think that bodes really well for continuation of therapy longer term as the treatment progresses. And we don't anticipate that the two-week limitation is going to be an issue for these patients or for the physicians. And just a reminder, it's the first year since approval, so we were approved in June, and so we'll see that limitation lifted at that point, assuming that there's no untoward side effects. And to date, we haven't seen anything there to be of concern.

Thank you.

Our next question comes from Stephen Wiley from Stifel. Stephen, please go ahead.

Yeah, good morning. Thanks for taking the questions. So maybe just to follow up on that last point, I know in the, I think it was in the phase three error case relapse refractory trial, you guys characterized the early discontinuity around 30%. Based upon your comments regarding Japan, I'm just wondering if you can kind of frame what that early attrition rate might look like relative to that U.S. trial statistic or the Phase III trial statistics. And then also just wondering, just given the reduced number of inpatient or, I guess, in-office visits in the U.S. that have happened here over the course of the last 12 to 18 months, have you seen that number increase? trend up, just given that there's, I guess, less patient hand-holding during the initiation of therapy.

Roger, you want to take this?

Yeah, sure. We actually haven't broken down the discontinuation rates from Japan at this point. It's still pretty early, as I said. We've got about two months of launch under our belt, so we don't have an adequate sample breaking down the discontinuation, other than the anecdotal reports, which are that the from the physicians and from our team in Japan that the hospitalization, which is designed to help patients get through that first week and to manage the side effects and ensure they continue on therapy, has been well-received, and physicians and patients are happy there. So we can update going forward what we're seeing there. but at this point it's too early to share any specific statistics on discontinuation rate. As you mentioned, in the clinical trial we saw about a 30% discontinuation rate, and we'll see what kind of impact the specific care that these patients are receiving in the hospital setting will have on their continuation rates. Regarding the patient visits, so the data we have in collecting on patient visits, is a lagging indicator, so it takes a while for that to get reported. So we don't have good information at this point as to what patient visits to the pulmonologist and IDs are looking like, so I can't share any sort of forward-looking data there. We did see an impact on, clearly during COVID, we did see patient visits decline, and we're anticipating that as As the COVID pandemic becomes more endemic and patients are able to return to offices and physicians are able to open their offices again, then we'll see those trend up. But we don't have an immediate data source that gives us that real-time sort of information.

So you don't have any information that suggests a correlation between inpatient visits and then what that early discontinuation statistic looks like?

I'm sorry, the question is, is the correlation between inpatient visits and discontinuation?

Yes, I'm just wondering if there's fewer in-office visits from patients, specifically during that first 30 days of initiating therapy, whether or not that reduced time in a physician's office, which we've seen from COVID here over the last 12 to 18 months, has impacted that discontinuation statistic during the first 30 days of therapy.

I get it. Okay. So I think what's more important than the visits to the physician offices is actually our patient, our Ericare's trainers that visit the patients to introduce them to the device, to train them on the device on how to successfully initiate therapy with Ericace and what to expect from therapy. And so we do see that as the in-person training varies, so we do remote and we do in-person, and the patient is absolutely entitled to choose in which manner they want to receive that training. I think we see slightly better results when we have the in-person training, but the virtual training is also effective in introducing the patient. We just see, as we're able to get to in-person and spend a significant amount of time with patients in their homes and talking and introducing the therapy, that that has a beneficial impact on patients tolerating and continuing on therapy.

Okay. And then just lastly, I think Martina had mentioned that she was hopeful regarding the availability of phase 2A TPIP data before the end of the year. Is there a minimal threshold of patient numbers that we should be thinking about in terms of

um you need to enroll in order for us uh to get that data before you're at so i you know i want to just highlight that it's not particularly uh critical to me that it be done by date x versus y our guidance has been that we would hope to produce it by the end of the year we absolutely intend to follow through on that but the one caveat there is the delta variant the icu bed uh occupancy What we're asking somebody to do is to go into an ICU room that is filled with COVID patients and stay there for 24 hours with a right heart cath. And as Martina said, that's a procedure that normally lasts an hour and a half. So it's an enormous ask. And these volunteers... are hard to come by. Having said that, the centers and the KOLs that are around this are very excited about this medicine's potential and are looking very actively to try to identify such patients, and they have. We are aware of several patients that are available. They need to meet the screening criteria. They need to find comfort in coming into the ICU. And if that happens, then we should be able to produce data very quickly, because this is, after all, 24 hours of exposure, after which we'll have the data effectively immediately. So I think it's not logistically challenging to produce the data once the patients are past the volunteer point and have qualified. And for that reason, we have conviction that we'll be able to produce data. I think the only other thing I would introduce here is we want to make sure that the data is consistent. and that we don't see any variability that would cause us to want to see more data to further validate. Let's be clear that the preclinical animal models around TPIP were very definitive. and this drug, the actual moiety is very well known, and there's excellent human experience with it. So there aren't a lot of variables here in my mind that would introduce a delay that would be meaningful, and we think we can get the data. We think it's going to be really important, and we're looking forward to sharing it with you as soon as we get it in proper form.

Great. That's helpful. Thanks for taking the questions.

We have a question from Lisa Baker from Evercore ISI. Lisa, please go ahead.

Hi. A couple questions from me. First of all, I missed the gross to net for the quarter. Did you say exactly what that was? Yes, it was 12%, Lisa. Thank you. Okay. Any update on COVID, meaning your effort there, not Eric Case and influence?

So the information from the trial that Professor Chalmers ran was, obviously, the top line was released last August, July? July. July. So that's been out. There hasn't been anything further that has come since then. I'm just looking to Martina to see if there's any additional information. I don't think so. No. No? OK.

TPIP. Can you just? maybe further explain, like, what are you looking for in this data? You know, I know you're only going to have a couple of patients. Are you going to continue to enroll a full amount? And what really is the actual underlying purpose? And is it gating for kind of the next steps? What are you going to glean from this that would be informative?

Yeah, so first of all, it's not gating in any way for the other Phase II programs. The purpose of this trial is to identify what happens to pulmonary vascular resistance when patients are given a start dose of our TPIP. What do we think is going to happen here? Well, if we look at proprosinol and Tivezo and what they do, previous studies have demonstrated about an hour and a half of PBR reduction in those studies. The duration of that PBR reduction extends a little bit as doses go up, And so one of the important distinctions here is in our TPIP study, we're going to start at a fairly low dose, perhaps somewhere around 100 micrograms. Just to put that into context, tibazo after titration in its label is guided to a maximal dose of 54 micrograms. So even though we're starting at what we consider to be a low dose, it's actually higher than the What do we think that's going to show? We think it's going to show a PBR reduction that we hope will last significantly longer than the hour and a half that you see with Tyveso. How much longer? We don't know. That's really what the study is going to reveal. But you can just conceptually follow that if we are able to extend the duration of pulmonary vascular resistance reduction, for multiple hours beyond the hour and a half, then you're effectively creating a steady state of vasodilation. And all of the downstream benefits that flow from that would be realized. And in the animal model, that resulted in disease modification. And that's the histologic change that was so profound. And it's why we say we think with this formulation, we'll be able to unlock the full potential of prostanoid therapy.

Okay, and is there a certain, like, duration that you want to see, like, you know, kind of that nadir to really inform that you have, you know, a once-a-day or twice-a-day or whatever? You know, I know you're targeting once-a-day products. Is that correct? Yeah, so one of the interesting –

Yeah, so remember that you see clinical benefit demonstrated with tibetzo with four times to seven times a day administration with that short one and a half hour PBR reduction. So we don't think we need to cover 24 hours uninterrupted, but if we were to get anything approaching that, we can assume that we will be able to show at least the clinical benefit that was seen with Tyveso, and our imagination is that it could be more. And that's what the animal model suggested. In fact, they demonstrated, because we compared our drug to Tyveso and to oral and other formulations of troprostanil and saw that we were, in fact, superior. So I think that's what's got us very excited about the potential here. And the only point I'd make is that in our phase one study, we were able to go with single-dose administration without titration north of 600 micrograms. So again, referring to timezo at 54, and I understand it's dose four times to seven times a day, so it's a little bit of apples to oranges in terms of dose levels. But it's clear we can get to much more significant dosing levels, and we believe that will be extended through titration so that we will be dosing more that should extend the duration of the PBR reduction. And if we're able to show just the baseline extension at a low dose of, say, 100 micrograms, one can imagine what that might possibly achieve through dose titration. And that, I think, is what this study is really going to unlock. It's the earliest look at the potential for all of those accomplishments, PBR reduction, duration of PBR reduction, and the imputed potential to go even further with dose titration.

Okay, great. Thank you. And then just can you give us a sense of, like, of your, you know, $47 million of revenue, you know, how much of that was XUF?

Thanks, Lisa, for the question. We are currently not breaking out our revenue by region. I anticipate that next year we would break it out based on sort of materiality thresholds, but today we only provide a global number.

Okay. And then for Japan, I was looking at the numbers. It looks like you kind of reported in the first quarter of launch, you know, over 500 patients, and then the next quarter, the second quarter of the launch was In the U.S., you know, more than 600 or approximately 650 new patients. So it's like almost looks like kind of like a double. So in terms of your comments, you were saying it looks like the trajectory is for like a double quarter of a quarter. It was something less than 500 patients for the first quarter for Japan. Is that the right way to think about it?

Roger, do you want to talk about trends in Japan, I guess? I don't know what data – this may be apples and oranges in terms of comparison. Yeah, thanks, Will. And Lisa, so without thinking about the specific patient numbers, because we didn't comment on those specific patient numbers other than the absolute number of patients in Japan is lower than what we've seen in the U.S., but at least two months into the launch – just remember, this is still early – but two months into the launch, the trajectory, so that build – is highly correlated to the U.S. build as we see the patients initiating therapy. Okay.

Okay. And Lisa, those numbers that you were quoting, are those, are you referencing U.S. patient numbers in those 500?

Yeah, I was looking back at how you guys framed it up in the first two quarters of the U.S. launch.

Understood. Yeah, we have not provided that level of detail for Japan.

Yeah, I know. You just said kind of the trajectory. It seemed like the trajectory was the same, though the initial number of patients was lower than the U.S., so I was just kind of trying to triangulate this thing.

Thank you. Yeah, understood. Thank you so much.

We take a question now from Judith Romer from Credit Suisse. Please go ahead, Judith.

Yeah, thanks for squeezing me in. Most of my questions have been answered, but just a question on whether you have any color from pulmonologists as they maybe do head back to the office. It seems like it will be one of the busier specialties as COVID does become endemic. It seems like that could slice both ways. They could be more focused on long-term respiratory symptoms tied to COVID, but you will have patients in your office, so perhaps there's an opportunity for increased diagnosis of refractory NGM-MAC. Do you have any sense for how that might play out?

Yeah, I think what we can comment on is that we have seen things snap back quickly when the phases of the pandemic have been more endemic-like, even regionally across the U.S., and we know from our marketing work that the index of suspicion of physicians is much higher now than it was pre-pandemic. and their instinct to want to treat patients is also higher. I think it is fair to characterize a higher sensitivity to respiratory disease generally, and I do think that that will result in more attention, very likely more diagnosis as people are looking for what are these conditions that they're suffering from. People want a name for what they're feeling if they have nonspecific symptoms, and that is the initial experience with NTM lung disease. and it's not dissimilar in its early stages in terms of how the patient experiences some of the symptoms than COVID. So you can imagine people starting to get some of those nonspecific symptoms and wanting to get into their pulmonologist to understand what is going on. But knowing that there is a condition that they have and that there's a treatment available, and as Martina mentioned during her medical presentation, review in terms of the literature we've been producing and the data we've been examining, there's increasing literature that is suggesting that it's important to intervene and intervene early in order to gain the maximal benefit from treatment of NTM lung disease. All of those things I think will coalesce and paint a picture that is bright for the future of identifying and treating these patients appropriately. But I think we really do need to get past the pandemic stage of this before that starts to play out.

Great. Thanks.

Great.

Our final question comes from Ritu Baril from Cohen. Ritu, please go ahead. Hi.

This is Lila . And just maybe a quick follow-up on . In terms of the coming in, you mentioned that you're starting with the low-dose cohort. Is there any potential that we could see a higher dose included in maybe one or two patients? on the ILD study that's planned to be initiated in early 2022. Is that plan that's also going to be an uptitration? Just any guidance on that would be helpful.

Sure. So I think I heard your questions right, although your line was a little muted. The ILD question about is this going to be uptitration, yes, that will be an uptitration study. And your first question

I think the first question we do work about whether we would have a higher dose included in the phase 2A studies. Now, it will be the low dose for this phase 2A study. In the phase 2B study, it will be the up titration, and so there will be a maximum toleration of the patient up to potentially 640 milligrams. All right.

Thank you. Sorry about the audio.

Thank you. We now hand the call back over to Will Lewis for closing remarks.

Thanks for joining us today. Hope everyone has a good day.

Thank you all for joining. This now concludes today's call. Please disconnect your lines.