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INSM > SEC Filings for INSM > Form 10-Q on 6-Aug-2014All Recent SEC Filings

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Form 10-Q for INSMED INC


6-Aug-2014

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: failure or delay of European Medicines Agency, Health Canada, United States Food and Drug Administration and other regulatory reviews and approvals; competitive developments affecting the Company's product candidates; delays in product development or clinical trials or other studies; patent disputes and other intellectual property developments relating to the Company's product candidates; unexpected regulatory actions, delays or requests; the failure of clinical trials or other studies or results of clinical trials or other studies that do not meet expectations; the fact that subsequent analyses of clinical trial or study data may lead to different (including less favorable) interpretations of trial or study results or may identify important implications of a trial or study that are not reflected in Company's prior disclosures, and the fact that trial or study results or subsequent analyses may be subject to differing interpretations by regulatory agencies; the inability to successfully develop the Company's product candidates or receive necessary regulatory approvals; inability to make product candidates commercially successful; changes in anticipated expenses; changes in the Company's financing requirements or ability raise additional capital; our ability to complete development of, receive regulatory approval for, and successfully commercialize ARIKAYCE; our estimates of expenses and future revenues and profitability; our plans to develop and market new products and the timing of these development programs; 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 risks, 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, 2013 filed with the Securities and Exchange Commission ("SEC") on March 6, 2014. 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, 2013.


Table of Contents

OVERVIEW

Insmed is a biopharmaceutical company currently focused on developing and commercializing inhaled therapies for patients battling serious lung diseases that are often life threatening. Our lead product candidate, ARIKAYCE, or liposomal amikacin for inhalation (LAI), is an inhaled antibiotic treatment that delivers a proven and potent anti-infective directly to the site of serious lung infections.

In March 2014, we reported top-line clinical results from the double-blind portion of our phase 2 clinical trial in the United States (US) and Canada of ARIKAYCE in patients who have lung infections caused by nontuberculous mycobacteria (NTM). The randomized, double-blind, placebo-controlled phase 2 clinical trial compared ARIKAYCE (590 mg delivered once daily), added to standard of care treatment, versus standard of care treatment plus placebo, in 90 adult patients with treatment resistant NTM lung disease. Eligibility for the study required patients to have been on the American Thoracic Society/Infectious Disease Society of America guideline therapy for at least six months prior to screening and to continue to have persistently positive mycobacterial cultures. The primary efficacy endpoint of the study was a semi-quantitative measurement of the change in mycobacterial density on a seven-point scale from baseline (day one) to the end of the randomized portion of the trial (day 84). ARIKAYCE did not meet the pre-specified level for statistical significance although there was a positive trend (p=0.148) in favor of ARIKAYCE. However, ARIKAYCE did achieve statistical significance with regard to the clinically relevant key secondary endpoint of culture conversion, with 11 out of 44 patients treated with ARIKAYCE (added to standard of care treatment) demonstrating clearance of the infecting mycobacterial organism (culture negative) by day 84 of the study as compared to 3 out of 45 patients treated with placebo (added to standard of care treatment) (p=0.01).

In May 2014, additional data were presented at the American Thoracic Society meeting. At the conclusion of the 84-day double blind phase of the trial, 78 of the 80 patients agreed to receive once-daily ARIKAYCE plus standard of care treatment for an additional 84 days. Data from 68 of these patients who completed the visits during the additional open label phase were available for inclusion in the poster. These results collected from the open label phase show that 21 of these patients were culture negative for NTM at Day 168. This data reflects 10 patients who were culture negative at Day 84 as well as 5 additional patients from the ARIKAYCE arm and 6 additional patients who were on placebo, switching to ARIKAYCE during the open-label phase.

In June 2014, the US Food and Drug Administration (FDA) granted ARIKAYCE Breakthrough Therapy Designation for the treatment of adult patients with NTM lung disease who are treatment refractory. This designation is based on findings from our U.S. phase 2 clinical trial of ARIKAYCE to treat NTM lung infections. ARIKAYCE has already received Orphan Drug, Qualified Infectious Disease Product (QIDP) and Fast Track designations from the FDA for the treatment of NTM lung infections and has also received Orphan Drug Designation from the European Medicines Agency (EMA).

In August 2014 we announced that, following discussions with European regulatory authorities, we intend to file by the end of 2014 a Marketing Authorization Application (MAA) with the EMA for ARIKAYCE for the treatment of NTM lung infections in treatment refractory patients as well as for Pseudomonas aeruginosa (Pseudomonas) lung infections in cystic fibrosis (CF) patients.

In August 2014 we also announced that, we will proceed with our previously planned Phase 3 study of the effectiveness of ARIKAYCE for the treatment of lung infections in the broad NTM population. This decision follows a meeting with the FDA in which the FDA acknowledged that exploration of the effectiveness of ARIKAYCE in a broader population is appropriate, based on the results of the recently conducted Phase 2 trial, which showed statistically significant negative culture conversion in patients refractory to standard therapy. We also plan to initiate a second Phase 3 study which will be designed to confirm, in as short a timeframe as possible, the positive culture conversion results seen in the Phase 2 study. This confirmatory study will primarily investigate ARIKAYCE for use in the treatment refractory population with mycobacterium avium complex (MAC) NTM lung infections. This subgroup of the Phase 2 trial's patients responded particularly strongly to the treatment.

We believe this two-trial approach will enable both the rapid confirmation of the previous study results to provide the quickest path to filing, as well as expansion of the potential overall label for approval. Following discussions with the FDA, both trials will focus on culture conversion as the primary measure of efficacy with additional goals of demonstrating sustainability and safety. We expect results from the smaller confirmatory study in the first half of 2016 and results for the larger trial in 2017.

The CF and NTM target indications address orphan patient populations. Our strategy includes plans to continue to develop ARIKAYCE in the NTM patient population and for additional indications beyond Pseudomonas in CF and NTM. We also plan to develop, acquire, in-license or co-promote other products that address orphan or rare diseases in the fields of pulmonology and infectious disease. Our current primary development focus is to obtain regulatory approval for ARIKAYCE in these two initial indications and to prepare for commercialization in the US, Europe, Canada and Japan. We anticipate that if approved, ARIKAYCE would be the first once-a-day inhaled antibiotic treatment option available for the CF indication and the NTM indication. The following table summarizes the current status of ARIKAYCE development.


Table of Contents

Product
Candidate/Target
Indications                   Status                  Next Expected Milestones
                   †††††††† We reported top-line   †     We intend to file by the
                   clinical results from our       end of 2014 a MAA with the EMA
                   phase 2 clinical trial which    for the treatment of NTM lung
                   stated that ARIKAYCE did not    infections in treatment
                   meet the pre-specified level    refractory patients as well as
                   for statistical significance    for Pseudomonas lung infections
                   with respect to the primary     in CF patients.
                   endpoint, but did achieve       †     We will proceed with our
                   statistical significance with   previously planned Phase 3
                   regard to the clinically        study of the effectiveness of
                   relevant key secondary          ARIKAYCE for the treatment of
                   endpoint of culture             lung infections in the broad
                   conversion.                     NTM population.
                   †††††††† Results collected      †     We also plan to initiate
                   from the open label phase       a second Phase 3 study which
                   show that 21 of these           will be designed to confirm, in
ARIKAYCE           patients were culture           as short a timeframe as
Non-tuberculous    negative for NTM at Day 168.    possible, the positive culture
mycobacteria       †††††††† Granted Orphan Drug    conversion results seen in the
(NTM) lung         designation in Europe and the   Phase 2 study. This
infections         US.                             confirmatory study will
                   †††††††† Granted QIDP           primarily investigate ARIKAYCE
                   designation, which includes     for use in the treatment
                   Priority Review, by the FDA.    refractory population with MAC
                   †††††††† Granted Fast Track     NTM lung infections.
                   designation by the FDA which    †††††††† If approved, we expect
                   permits a rolling submission    ARIKAYCE would be the first
                   of an NDA.                      approved inhaled antibiotic
                   †††††††† Granted Breakthrough   treatment for NTM lung
                   Therapy designation for         infections.
                   ARIKAYCE in the US in           †††††††† We are developing
                   June 2014 based upon the        plans to commercialize
                   culture conversion results in   ARIKAYCE, if approved, in
                   the phase 2 clinical trial.     certain countries in Europe and
                                                   in the US, and eventually
                                                   Canada, Japan and certain other
                                                   countries including Korea,
                 †                               † Taiwan and China.
                 † †                             † †
                   †††††††† Reported top-line      †††††††† We intend to file a
                   results from our phase 3        MAA with the EMA by the end of
                   clinical trial conducted in     2014 and in Canada during the
                   Europe and Canada, in which     first half of 2015.
                   once-daily ARIKAYCE achieved    †††††††† We are developing
                   its primary endpoint of         plans to commercialize
                   non-inferiority when compared   ARIKAYCE, if approved, in
                   to twice-daily tobramycin       certain countries in Europe and
                   inhaled solution.               in Canada where we expect it
ARIKAYCE           †††††††† Conducting a           would be the only once-a-day
Pseudomonas        two-year, open-label safety     treatment for Pseudomonas lung
aeruginosa lung    study in patients who           infections in CF patients.
infections in CF   completed the phase 3           †††††††† We currently do not
patients           clinical trial. We expect to    plan to initiate any further
                   complete this study in          studies in Pseudomonas lung
                   mid-2015.                       infections.
                   †††††††† Reported top-line
                   results from the first group
                   of patients who completed the
                   first year of the two-year
                   open label extension study.
                   †††††††† Granted orphan drug
                   designation in Europe and the
                 † US.                           †


Table of Contents

ARIKAYCE          †††††††† Completed phase 2      †††††††† We currently do not
Pseudomonas       study in the US.                intend to initiate further
aeruginosa and    †††††††† Granted orphan drug    clinical studies with respect
other             designation in the US.          to a non-CF bronchiectasis
susceptible                                       indication.
organisms
causing lung
infections in
non-CF
bronchiectasis
patients        †                               †

Amikacin sulfate is an FDA-approved antibiotic with proven efficacy in the treatment of a broad range of gram-negative infections, including Pseudomonas and NTM. ARIKAYCE is in the aminoglycoside class of antibiotics. We believe there currently is no drug approved in Europe or the US for treatment of NTM lung infections, and as a result all current drug treatments for NTM are used off-label. If approved for NTM patients, we believe ARIKAYCE would be the first and only approved inhaled antibiotic for the treatment of NTM lung infections. If approved for CF patients with Pseudomonas lung infections, we believe ARIKAYCE would be the first inhaled antibiotic to be approved for once-daily administration in this indication. ARIKAYCE has been granted orphan drug designations in the following indications:

† US: NTM lung infections, Pseudomonas lung infections in CF patients, and lung infections in non-CF bronchiectasis patients; and

† European Union (EU): NTM lung infections and Pseudomonas lung infections in CF patients.

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. (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 Strategy

Our strategy is to focus on the development and commercialization of innovative inhaled therapies for patients with serious lung diseases in orphan indications. While we believe that ARIKAYCE has the potential to treat many different diseases, our attention is initially focused on regulatory approval and commercialization preparation for our two initial indications: (1) NTM lung infections and (2) Pseudomonas lung infections in CF patients. Our current priorities are as follows:

† Continue generating additional clinical data from studies showing the effects of ARIKAYCE to treat NTM lung infections and Pseudomonas lung infections in CF patients;

† Actively pursue new drug filings to secure approval for ARIKAYCE to treat NTM lung infections in the US, Europe, Canada and Japan;

† Actively pursue new drug filings to secure approval for ARIKAYCE to treat Pseudomonas lung infections in CF patients in Europe and Canada;

† Expand our product supply chain in support of clinical development and if approved, commercialization;

† Prepare for commercial launch in the NTM indication in the US, Europe, Canada and eventually Japan and certain other countries including Korea, Taiwan and China;

† Prepare for commercial launch in Pseudomonas in CF patients indication in Europe and Canada;

† Attempt to develop, acquire, in-license or co-promote promising late stage or commercial products that we believe are complementary to ARIKAYCE and our core competencies; and

† Continue to develop novel formulations of existing therapies, where such reformulation could materially improve the treatment paradigm for the underlying disease or to enable pursuit of a new indication.


Table of Contents

In support of these priorities, we completed our registrational phase 3 clinical study of ARIKAYCE in CF patients with Pseudomonas lung infections in Europe and Canada. We plan to submit regulatory marketing applications for the CF and NTM indications in Europe by the end of 2014 and in Canada in the first half of 2015. In the first half of 2014, we completed our US and Canadian phase 2 clinical study of ARIKAYCE for the treatment of NTM lung infections in treatment refractory patients. We plan to initiate two global Phase 3 clinical trials of ARIKAYCE in NTM; one for the broad NTM patient population and one confirmatory study for treatment refractory patients with NTM lung infections. We plan to scale up manufacturing, we are identifying second source suppliers, and we plan to implement supply and quality agreements in preparation for commercialization of ARIKAYCE. In February 2014, we entered into a contract manufacturing agreement with Therapure Biopharma Inc. (Therapure) for the manufacture of ARIKAYCE at the larger scales necessary to support commercialization. In July 2014, we entered into a commercialization agreement with PARI Pharma GmbH (PARI), the manufacturer of our drug delivery nebulizer, to address our commercial supply needs. We have commenced the build-out of our commercial infrastructure in preparation for potential commercial launches in Europe, Canada and the US. We will continue to evaluate opportunities for additional products through various business development channels.

Product Candidates

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

ARIKAYCE has the potential to be differentiated from amikacin and certain marketed drugs for the treatment of chronic lung infections if it can be demonstrated to provide improved efficacy, safety and patient convenience. We believe ARIKAYCE's ability to deliver high, sustained levels of amikacin directly to the lung and to the specific site of the underlying infection could distinguish it from other alternatives. We are also investigating ARIKAYCE's potential for durability of effect, benefiting patients when off treatment or for an extended period of treatment. In addition, the inhalation delivery of ARIKAYCE 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 ARIKAYCE will be administered once-daily for approximately 13 minutes via inhalation using the eFlow® Nebulizer System, which has been optimized specifically for ARIKAYCE 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 patients' treatment burden we believe that ARIKAYCE 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 ARIKAYCE may provide: (i) 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 means enhanced uptake into macrophages, where NTM often grows);
(ii) decreased adverse events and improved tolerability as compared with amikacin delivered intravenously, and (iii) reduced dosing frequency or treatment time as compared to existing products. In the future we may conduct head-to-head comparative studies that would be necessary to make comparative statements against other products.


Table of Contents

ARIKAYCE for Patients with NTM Lung Infections

Overview of NTM Lung Infections

Nontuberculous 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 believed to be 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, due to comorbidities such as HIV or rheumatoid arthritis, or have structural damage in their lungs, due to smoking, chronic obstructive pulmonary disease or CF, 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 Treatment Options and Limitations

We believe there currently is no drug approved in Europe or the US for treatment of NTM lung infections, and as a result all current drug treatments for NTM are used off-label. Patients are often treated with the same antibiotics that are used to treat TB. Such treatments usually consist of lengthy multi-drug antibiotic regimens, which are often poorly tolerated and not very effective, especially in patients with severe disease and patients who have failed prior treatments. NTM patients average 7.6 antibiotic courses per year (SDI Healthcare Database, July 2009). Treatment guidelines published in 2007 in the American Journal of Respiratory and Critical Care Medicine reported that few clinical trials were under way to identify treatment recommendations, and no new antibiotics had been studied for the treatment of NTM lung infections in multi-center, randomized clinical trials since the late 1990s.

Although approved for other indications, amikacin sulfate is not approved by the FDA for NTM lung infections. In practice, however, it is often recommended by physicians as part of the standard treatment regimen for some NTM patients. It is delivered most commonly by intravenous administration and, far less often, by inhalation. Because the drug is delivered for months at a time, resulting in high systemic (blood) levels of the drug, there can be considerable toxicity, including ototoxicity and nephrotoxicity, associated with intravenous treatment. There are very few prior studies to support what doses should be . . .

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