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INSM > SEC Filings for INSM > Form 10-Q on 7-May-2013All Recent SEC Filings

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Form 10-Q for INSMED INC


7-May-2013

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q contains forward looking statements. "Forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995, are statements that are not historical facts and involve a number of risks and uncertainties. Words herein such as "may," "will," "should," "could," "would," "expects," "plans," "anticipates," "believes," "estimates," "projects," "predicts," "intends," "potential," "continues," and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) identify forward-looking statements.

Forward-looking statements include, but are not limited to: our ability to complete development of, receive regulatory approval for, and successfully commercialize ARIKACE®; our estimates of expenses and future revenues and profitability; our plans to develop and market new products and the timing of these development programs; status, timing, and the results of preclinical studies and clinical trials and preclinical and clinical data described herein; the timing of responses to information and data requests from the US Food and Drug Administration (the "FDA") and other regulatory authorities; our clinical development of product candidates; our ability to obtain and maintain regulatory approval for our product candidates; our expectation as to the timing of regulatory review and approval; our estimates regarding our capital requirements and our needs for additional financing; our estimates of the size of the potential markets for our product candidates; our selection and licensing of product candidates; our ability to attract third parties with acceptable development, regulatory and commercialization expertise; the benefits to be derived from corporate license agreements and other third party efforts, including those relating to the development and commercialization of our product candidates; the degree of protection afforded to us by our intellectual portfolio; the safety and efficacy of our product candidates; sources of revenues and anticipated revenues, including contributions from license agreements and other third party efforts for the development and commercialization of products; our ability to create an effective direct sales and marketing infrastructure for products we elect to market and sell directly; the rate and degree of market acceptance of our product candidates; the timing and amount of reimbursement for our product candidates; the success of other competing therapies that may become available; and the availability of adequate supply and manufacturing capacity and quality for our product candidates.

Forward-looking statements are based upon our current expectations and beliefs, and involve known and unknown risk, uncertainties and other factors, which may cause our actual results, performance and achievements and the timing of certain events to differ materially from the results, performance, achievements or timing discussed, projected, anticipated or indicated in any forward-looking statements. Such factors include, among others, the factors discussed in Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC on March 18, 2013. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the Securities and Exchange Commission, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

The following discussion should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and the consolidated financial statements and related notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2012.

OVERVIEW

Insmed is a biopharmaceutical company focused on developing and commercializing inhaled therapies for patients battling serious lung diseases that are often life threatening. Our lead product candidate, ARIKACE® or liposomal amikacin for inhalation, is an inhaled antibiotic treatment that delivers a proven and potent anti-infective directly to the site of serious lung infections to improve the efficacy, safety and convenience of this therapeutic approach for patients.


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Currently, we are conducting clinical trials of ARIKACE for two initial indications in orphan patient populations: a Phase 3 clinical trial in cystic fibrosis ("CF") patients who have lung infections caused by Pseudomonas aeruginosa (Pseudomonas) and a Phase 2 clinical trial in patients who have lung infections caused by non-tuberculous mycobacteria ("NTM"). Our primary development focus is to obtain regulatory approval for ARIKACE in these two initial indications and to prepare for commercialization initially in Europe and Canada and eventually in the United States ("US"). If approved, ARIKACE will be the first once-a-day inhaled antibiotic treatment option available for these CF and NTM indications. Our strategy is to continue to develop ARIKACE for additional indications beyond Pseudomonas in CF and NTM. The following table summarizes the current status of ARIKACE development.

Product
Candidate/Target
Indications                 Status                 Next Expected Milestone(s)
                   †††††† In a Phase 3         †    We expect to report top-line
                   registrational clinical     clinical results from our Phase 3
                   trial in Europe and         registrational clinical trial in
                   Canada that completed the   mid-2013.
                   patient treatment phase     †††††† If approved, ARIKACE would
                   of the trial in early       be the only once-a-day treatment
ARIKACE            May 2013.                   for Pseudomonas lung infections in
Pseudomonas        †††††† In a two-year        CF patients.
aeruginosa lung    open-label extension        †††††† If approved, we plan to
infections in CF   study that is enrolling     commercialize ARIKACE ourselves in
patients           patients from the Phase 3   Europe and in Canada.
                   registrational clinical     †††††† We plan to evaluate our
                   trial and is expected to    plans for CF in the US after
                   be completed during the     reviewing the results from our
                   first half of 2015.         Phase 3 clinical trial in Europe
                   †††††† Granted orphan       and Canada.
                   drug designation in
                 † Europe and the US.        †
                 † †                         † †
                   †††††† In a Phase 2         †††††† We expect to report
                   clinical trial in the US    top-line clinical results from our
                   and Canada that began       Phase 2 clinical trial during the
                   enrolling patients in       fourth quarter of 2013.
                   June 2012.                  †††††† We expect to commence a
ARIKACE            †††††† Granted orphan       limited compassionate use program
Non-tuberculous    drug designation in the     in the second half of 2013.
mycobacteria       US.                         †††††† If approved, ARIKACE would
(NTM) lung                                     be the first approved inhaled
infections                                     antibiotic treatment for NTM lung
                                               infections.
                                               †††††† If approved, we plan to
                                               commercialize ourselves initially
                                               in the US and eventually in Europe
                 †                           † and in Canada.
                 † †                         † †
ARIKACE            †††††† Phase 2 clinical     †††††† We expect to evaluate
Pseudomonas        trial in the US             development and commercialization
aeruginosa and     completed.                  strategies when we complete our
other              †††††† Granted orphan       Phase 3 clinical trial in CF
susceptible        drug designation in the     patients with Pseudomonas lung
organisms          US.                         infections and Phase 2 clinical
causing lung                                   trial in patients with NTM
infections in                                  infections.
non-CF
bronchiectasis
patients         †                           †

ARIKACE is considered a new molecular entity (NME) by the US Food and Drug Administration ("FDA") primarily due to its proprietary liposomal technology. The key active ingredient, amikacin, is an FDA-approved antibiotic with proven efficacy in the treatment of a broad range of gram-negative infections, including Pseudomonas and NTM. ARIKACE is in the aminoglycoside class of antibiotics.


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ARIKACE is differentiated from other inhaled antibiotics used to treat serious lung infections by our proprietary advanced liposomal technology, which is designed specifically to enhance the delivery profile, safety and efficacy of pharmaceuticals delivered to the lung via inhalation. We believe ARIKACE provides potential improvements over existing treatments for these indications. In Phase 2 studies in CF patients with Pseudomonas lung infections, ARIKACE demonstrated improved patient lung function during treatment as well as in the period following treatment (the "off-treatment" period). In a Phase 2 open label extension study, ARIKACE also demonstrated statistically significant effectiveness for up to 56 days off-treatment over multiple treatment cycles.

If approved for CF patients with Pseudomonas lung infections, we expect ARIKACE would be the first inhaled antibiotic to be approved for once-daily administration in this indication. If approved for NTM patients, we expect ARIKACE would be the first and only approved treatment for NTM lung infections. ARIKACE has been granted orphan drug designation for CF patients who have Pseudomonas lung infections in both the European Union ("EU") and the US, and for NTM patients in the US. We plan to file for orphan drug designation for NTM lung infections in Europe in 2013.

Corporate History

We were incorporated in the Commonwealth of Virginia on November 29, 1999. On December 1, 2010, we completed a business combination with Transave, Inc. (or "Transave") a privately held, New Jersey-based pharmaceutical company focused on the development of differentiated and innovative inhaled pharmaceuticals for the site-specific treatment of serious lung infections. Our current operations are based on the technology and product candidates historically developed by Transave.

Lead Product Candidate - ARIKACE

Our lead product candidate, ARIKACE or liposomal amikacin for inhalation, is a once-a-day inhaled antibiotic treatment engineered to deliver a proven and potent anti-infective directly to the site of serious lung infections. There are two key components of ARIKACE: the liposomal formulation of the drug and the nebulizer device through which ARIKACE is inhaled through the mouth and into the lung. The nebulizer technology is owned by PARI Pharma GmbH ("PARI"), but through our licensing agreement with PARI, we have exclusive access to this technology, which is specifically developed for the delivery of our liposomal encapsulation of amikacin. Our proprietary liposomal technology and nebulizer are designed specifically for delivery of pharmaceuticals to the lung and provides for potential improvements to existing treatments. We believe that ARIKACE has potential usage for at least two orphan patient populations with high unmet need: CF patients who have Pseudomonas lung infections and patients who have NTM lung infections. We estimate the combined global market potential for these two orphan indications to be approximately $1 billion.

ARIKACE has the potential to be differentiated from other marketed drugs for the treatment of chronic lung infections by improving efficacy, safety and patient convenience. We believe efficacy may be improved due to the ability of ARIKACE to deliver high, sustained levels of amikacin directly to the lung and to the specific site of the underlying infection. We also believe that ARIKACE may have increased durability of effect, benefiting patients when off treatment. In addition, the inhalation delivery of ARIKACE may reduce the potential for adverse events such as ototoxicity (hearing loss, ringing in the ears and/or loss of balance) and nephrotoxicity (toxicity to the kidneys), as compared with intravenous (IV) administration of amikacin. If approved, we expect that ARIKACE will be administered once daily for approximately 13 minutes via inhalation using the eFlow® Nebulizer System, which has been optimized specifically for ARIKACE by PARI. We believe that this nebulizer system will reduce treatment time or dosing frequency, as compared with the currently marketed inhaled antibiotics, which require dosing two to three times daily with treatment times ranging from approximately 10 to 40 minutes per day. By easing the patient's treatment burden we believe that ARIKACE can potentially improve patient compliance, which we believe may in turn lead to a reduction in the development of antibiotic resistance and, ultimately, lead to clinical benefit.

We believe that ARIKACE may provide: (1) improved efficacy resulting from sustained deposition of drug in the lung and improved ability to reach the site of infection (for CF Pseudomonas infections, this means penetration of biofilm and facilitated drug release by factors that are secreted by the bacteria, and for NTM, this


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means enhanced uptake into macrophages, where NTM often grows); (2) decreased adverse events and improved tolerability as compared with amikacin delivered intravenously; and (3) reduced dosing frequency or treatment time as compared to existing products.

ARIKACE for CF Patients with Pseudomonas Lung Infections

Disease

CF is an inherited chronic disease that is often diagnosed before the age of two. CF occurs primarily in individuals of central and western European origin. CF affects roughly 70,000 children and adults worldwide, including 30,000 children and adults in the US (Cystic Fibrosis Foundation Patient Registry, 2011) and 35,000 patients in Europe (Hoiby, BMC Medicine, 2011, 9:32). There is no cure for CF.

Despite extensive treatment with multiple antibiotics, improved nutrition, and other treatments, life expectancy of a CF patient is only about 37 years (Cystic Fibrosis Foundation Patient Registry, 2011). Median predicted age of survival is calculated using life table analysis (as calculated by actuaries) given the ages of the patients in the registry and the distribution of deaths. Using this calculation, half of the people in the patient registry are expected to live beyond the median predicted survival age, and half are expected to live less than the median predicted survival age.

Among other issues, CF causes thick, sticky mucus to develop in and clog the lungs. This creates an ideal environment for various pathogens, such as Pseudomonas, to colonize and lead to chronic infection of the lung, inflammation and progressive loss of lung function. In fact, chronic bronchial infections with Pseudomonas are a major cause of morbidity and mortality among patients with CF. Once a CF patient acquires a Pseudomonas infection, it is difficult to eradicate. The current, best available treatment is chronic administration of antibiotics to suppress the bacteria, reduce inflammation and preserve lung function for as long as possible. The rate of infection with Pseudomonas in CF patients increases with age. It is estimated that 70% of adult CF patients have chronic infection due to Pseudomonas (CFF Patient Registry, 2011). A study reported in the Journal of Cystic Fibrosis (Liou, 2010) found that deterioration in lung function of CF patients is the main cause of death and that, despite best efforts, lung function declines by 1% to 3% annually.

Current Clinical Program

ARIKACE was granted orphan drug status in the US and Europe for the treatment of Pseudomonas lung infections.

We are conducting a registrational Phase 3 clinical study of ARIKACE for CF patients with Pseudomonas lung infections in Europe and Canada. The Phase 3 trial includes 302 patients and is a 1:1 randomized trial comparing ARIKACE 560 mg, delivered once daily for approximately 13 minutes via the eFlow Nebulizer System, to Tobi (inhaled tobramycin solution), which is delivered twice daily approximately 15 minutes per treatment for a daily total of approximately 30 minutes per day. The first patient in this trial was dosed in April 2012, and the trial met target enrollment in November 2012. The study's primary endpoint is relative change in forced expiratory volume in one second (FEV1) from baseline measured after the completion of three cycles, each comprising a 28-day on-treatment period and a 28-day off-treatment period. Approximately 260 patients are required to demonstrate non-inferiority at an agreed-upon margin with 80% power. Secondary endpoints for the study include change in pulmonary function, time to and the proportion of patients experiencing pulmonary exacerbation, the time elapsed to first antipseudomonal antibiotic treatment for pulmonary exacerbation, time to and number of hospitalizations, reduction in bacteria as measured by reduction in colony forming units, change in patient-reported symptoms and evaluation of safety and tolerability. We previously agreed with the European Medicines Agency (EMA) on the study design. The last patient, last visit for this study occurred on May 6, 2013. We currently expect to announce clinical results from the Phase 3 trial in mid-2013.

In addition, patients completing the initial 24 week Phase 3 study will have the option to enroll in a two-year open-label extension study. The patients in this study will receive ARIKACE for a two year period, using the same cycles of a 28 day on-treatment period and a 28 day off-treatment period.


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Strategy for Commercialization

We currently plan to retain marketing rights for ARIKACE in certain countries in Europe, and in Canada and the US. We believe ARIKACE will require a limited commercial infrastructure in these regions because of the small focused nature of the potential physician prescribing population for CF patients. We may license ARIKACE for certain indications in certain countries in Europe, as well as outside of Europe, and in Canada and the US. In 2013, we commenced preparations for the potential commercialization of ARIKACE in Europe and Canada, including hiring Matt Pauls, our chief commercial officer. We plan to hire several other positions to support our sales and marketing efforts.

ARIKACE for Patients with NTM Lung Infections

Disease

Non-tuberculous mycobacteria, or NTM, are organisms common in soil and water that have been associated with lung disease in select patient groups. NTM have characteristics that are similar to tuberculosis, or TB, but NTM are not contagious. Many people have NTM in their bodies, but NTM do not normally lead to an infection, perhaps because the body's immune system successfully overcomes the threat of infection. It is not completely understood why certain individuals are susceptible to NTM infections. However, the patients who become infected by NTM often are immune-compromised or have structural damage in their lungs at the time of the infection.

NTM are organisms that invade and multiply chiefly within macrophages. They are characteristically resistant to most antibiotics. NTM lung infections are chronic, debilitating and progressive and often require lengthy, repeat hospitalizations. Signs and symptoms of NTM pulmonary disease are variable and nonspecific. They include chronic cough, sputum production and fatigue. Less commonly, malaise, dyspnea, fever, hemoptysis, and weight loss also can occur, usually with advanced NTM disease. Evaluation is often complicated by the symptoms caused by co-existing lung diseases. According to a study published in the American Journal of Respiratory and Critical Care Medicine, these conditions include chronic obstructive airway disease associated with smoking, bronchiectasis, previous mycobacterial diseases, CF and pneumoconiosis (Olivier et al. 2003).

Current Clinical Program

ARIKACE was granted orphan drug designation in the US for the treatment of patients with NTM.

We are currently conducting a Phase 2 clinical trial in the US and Canada for ARIKACE in adult patients with NTM lung infections. We began enrolling patients in June 2012. The Phase 2 clinical trial is a randomized, placebo-controlled study of approximately 100 adult patients with recalcitrant NTM lung infections. There are two parts to the study: a randomized portion and an open-label portion.

In the randomized portion of the study, patients are screened initially to include in the study those who have NTM lung infections with persistent sputum culture for MAC or M. abscessus while on ATS/IDSA-guidelines-based treatment regimen for at least six months prior to screening. Patients who are NTM culture positive and meet the eligibility criteria to enroll in the study will receive, in addition to their ongoing antibiotic treatment regimen, either ARIKACE 560 mg or a placebo both delivered once daily for approximately 13 minutes via an optimized, investigational eFlow Nebulizer System.

The primary efficacy endpoint for this study is the change in mycobacterial density from baseline to the end of 84 days of treatment. At a public workshop discussion in September 2012, the FDA agreed that the microbiological end-point is an appropriate primary end-point for NTM lung disease. The study will also measure secondary endpoints, including the proportion of patients with culture conversion to negative, the time to "rescue" anti-mycobacterial drugs, the change from baseline in six-minute walk distance and oxygen saturation, the change


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from baseline in patient reported outcomes, and evaluation of safety and tolerability. At the conclusion of the randomized portion of the study, eligible patients will receive ARIKACE once daily for an additional 84 days during the open-label portion of the study, primarily to measure longer-term safety and efficacy. We previously agreed with the FDA on this clinical trial design. We expect results from this clinical trial in the fourth quarter of 2013.

In addition to the Phase 2 clinical trial outlined above, we intend to pursue a limited compassionate use program starting in the second half of 2013. We currently anticipate this program's participants will consist of approximately 25 patients who have NTM lung infections but are not eligible for entry into our Phase 2 clinical trial. We believe that clinical data collected from the experience with these patients will help regulatory authorities to evaluate ARIKACE's safety and suitability for treating NTM lung infection patients.

Strategy for Commercialization

We currently plan to retain marketing rights for ARIKACE in certain countries in Europe, and in Canada and the US. Given the current lack of approved treatments for NTM lung infections, we believe we will immediately have a strong market position if ARIKACE is approved for commercialization in the NTM indication. We believe ARIKACE will require a limited commercial infrastructure in these regions because of the small focused nature of the potential physician prescribing population for NTM patients. We may seek to license ARIKACE for certain indications in certain countries in Europe, as well as outside of Europe, Canada and the US. We believe there will be substantial carryover between lung specialist physicians who treat CF patients with pseudomonas lung infections and those who have NTM lung infections thereby allowing us to leverage our commercial infrastructure across both indications.

ARIKACE for Non-CF Bronchiectasis Patients with Pseudomonas Lung Infections

Disease

We believe ARIKACE has the potential to be used to treat non-CF bronchiectasis characterized by Pseudomonas lung infections. However, we are currently concentrating our development efforts on the treatment of Pseudomonas lung infections in CF patients and patients with NTM lung infections. We will evaluate our development and commercialization strategies for this indication when we complete our Phase 3 study in CF patients with Pseudomonas lung infections and Phase 2 study in patients with NTM infections.

Non-CF bronchiectasis is a serious pulmonary condition characterized by localized, irreversible enlargement of the bronchial tubes. Accumulation of mucus in the bronchi leads to frequent infections, which causes inflammation and further reduces lung function. Patients evolve to a chronic inflammation-infection cycle. Disease burden has primarily been linked to productive cough and high levels of sputum production.

Development Program

ARIKACE was granted orphan drug status in the US for the treatment of bronchiectasis in patients with Pseudomonas or other susceptible pathogens.

In May 2009, we completed our randomized, placebo controlled US Phase 2 study (TR02-107) of ARIKACE for the treatment of chronic Pseudomonas infection in non-CF patients with bronchiectasis. In the study, 64 study subjects were randomized (1:1:1) to receive ARIKACE 280 mg, ARIKACE 560 mg or a placebo on a daily basis during a 28-day on-treatment period. The subjects completed follow-up assessments at the end of a 28-day off-treatment period. This study provided an initial evidence of safety, tolerability and clinically meaningful improvement in pulmonary function throughout the on-treatment period in the treatment of chronic Pseudomonas infection in non-CF patients with bronchiectasis.

In the study, both ARIKACE 280 mg and ARIKACE 560 mg were well tolerated. The adverse events experienced by patients during the study were consistent with underlying chronic lung disease in bronchiectasis patients. There was no evidence of renal toxicity or ototoxicity. Patients in the 560-mg cohort appear to have a slightly higher frequency of dry cough post administration than patients in the 280 mg cohort. Cough was of short


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duration and self-limiting. One patient discontinued treatment due to dysphonia (hoarseness or difficulty speaking) and cough.

There was a statistically significant reduction in Pseudomonas density observed in the 560 mg ARIKACE cohort relative to the placebo cohort. Patients receiving ARIKACE experienced fewer pulmonary exacerbations at a rate of 4.7%, as compared to 10.5% in those receiving placebo. No patients in the ARIKACE cohorts required anti-Pseudomonas rescue treatment, whereas 15% of patients in the placebo cohort . . .

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