Good day, and welcome to the Insmed First Quarter 2020 Financial Results Conference Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Sara Bonstein, Chief Financial Officer. Please go ahead.

Thank you, Jason. Good morning, and welcome to today’s conference call to discuss our first quarter 2020 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 SEC, which are available through the SEC’s website at www.sec.gov or from our website, for information concerning the risk factors that could affect the Company. We plan to reference a non-GAAP financial measure during today’s call. For a reconciliation of that measure to our GAAP results, please refer to the earnings release we issued earlier today. Additionally, 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 Insmed executive management team, including Will Lewis, Chairman and Chief Executive Officer; Roger Adsett, Chief Operating Officer; and Dr. Martina Flammer, Chief Medical 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, Sara. Good morning, everyone, and thank you for joining us. We hope you and your families are safe and healthy during these challenging times. The first quarter of 2020 will be remembered as one of the most trying in history and by the unexpected personal and business disruptions brought on by this global pandemic. For those of us at Insmed, the challenges posed by COVID-19 shine a bright light on the critical needs of patients living with serious and underserved diseases. We remain as committed as ever to our mission of serving these patients, as well as the healthcare providers who care for them. We are pursuing this mission from a position of strength. Our solid balance sheet will enable us to stay the course with several meaningful inflection points along the way. I’ll turn first to INS1007, which we’re now calling by its new name, brensocatib. Notably, last week, we announced the start of an investigator-initiated study of brensocatib in hospitalized patients with severe COVID-19. The results we observed from our Phase 2 WILLOW study in patients with non-cystic fibrosis bronchiectasis give us hope that the novel mechanism of action of brensocatib will have an impact on patients with acute respiratory distress syndrome or ARDS, a devastating outcome of COVID-19 for which there are no currently approved therapies. We are proud to be a part of the innovative efforts in the fight against this pandemic. Martina will go into greater detail about this study and share new data from the WILLOW study on today’s call. We originally in-licensed brensocatib from AstraZeneca to explore its potential in patients with bronchiectasis. Following the successful Phase 2 WILLOW study, we are continuing to advance brensocatib into Phase 3 development and expect to begin this program in the second half of this year. We believe that brensocatib also has the potential in multiple indications beyond bronchiectasis. We view this drug as a pipeline within a product and are increasingly excited about the future that brensocatib may offer to patients. Our belief in the potential of brensocatib was further validated last month when AstraZeneca exercised its first option under our license agreement, allowing AstraZeneca to pursue clinical development of brensocatib up to and including Phase 2b clinical trials for COPD or asthma. As a next step, we are working with AstraZeneca to form a joint steering committee for the development of brensocatib in either of these indications. Turning to ARIKAYCE, this quarter saw challenges, both expected and unexpected. Nevertheless, we were able to produce solid revenue performance. Roger will address the impact of these crosscurrents during his remarks. Overall, we remain confident in the performance and potential of ARIKAYCE. As we look ahead, we are hopeful that we can accelerate growth in the second half of this year, assuming the COVID-19 situation continues to improve. In the meantime, our team continues to adapt seamlessly to the current environment, finding new virtual ways to ensure patient access to and physician support for ARIKAYCE. We also look forward to initiating a frontline clinical study of ARIKAYCE and in parallel, a study to validate the patient-reported outcome that will serve as the primary endpoint in the frontline study in the second half of 2020. Roger will go into more detail on these plans. Let me now turn the call over to Martina to drill down a bit more on the progress of our development programs.

Thanks, Will, and good morning, everyone. As Will mentioned, we believe brensocatib represents the opportunity to build the pipeline around the product. Let me remind you that brensocatib is a novel oral reversible inhibitor of dipeptidyl peptidase 1 or DPP1. DPP1 is an enzyme that catalyzes the activation of neutrophil serine proteases or NSP, key agents of neutrophil-mediated inflammation. Last week, we announced the initiation of the superiority trial of protease inhibition in COVID-19 or STOP-COVID-19, an investigator-initiated study of brensocatib in hospitalized patients with COVID-19. The rationale for this study, which is being conducted by Professor James Chalmers at the University of Dundee, is that in patients with severe COVID-19, neutrophil influx into the lungs is a defining characteristic of acute respiratory distress syndrome or ARDS. As Will mentioned, ARDS is a severe outcome of COVID-19 that is associated with high mortality. It is believed that the reduction of neutrophil proteases in these patients may reduce the progression of lung injury and the need for mechanical ventilation. The STOP-COVID-19 trial is a multicenter, prospective, randomized study expected to enroll up to 300 patients with confirmed COVID-19 who present to the hospital at risk of needing increased levels of supplemental oxygen and/or ventilation. Patients will be randomized to receive either a 25-milligram dose of brensocatib once daily, or matching placebo, on top of standard of care. The primary endpoint is clinical improvement on a seven-point ordinal scale as defined by the World Health Organization. Patients will be treated for up to 28 days with a sample-size reassessment performed once 100 patients have been enrolled and treated. While the timing of the study is enrollment-dependent, we look forward to the sample-size reassessment sometime in the third quarter of this year with final data expected by the end of the year or early next year. Should brensocatib prove effective in this study, we believe the trial design could support the regulatory pathway for brensocatib as a potential treatment for patients with COVID-19 at risk for ARDS. In the meantime, we continue our efforts to advance brensocatib into Phase 3 development for bronchiectasis. Bronchiectasis stands out as one of the more significant pulmonary diseases with no approved therapies. It is marked by frequent pulmonary exacerbations requiring antibiotic therapy and/or hospitalization. Prevalence estimates for non-CF bronchiectasis range from about 330,000 to 520,000 in the U.S. with significant overlap with patients who have non-nontuberculous mycobacterial lung disease for NTM lung disease. Given the strength of the top-line results we observed in the WILLOW study and subject to our discussion with the FDA, we plan to focus the Phase 3 program on bronchiectasis patients with two or more exacerbations within the prior year. We expect to initiate this program in the second half of 2020 following alignment with the FDA on the trial design. We’re also planning to share additional results from the Phase 2 WILLOW study during a virtual forum anticipated to be held by the American Thoracic Society or ATS. While we will provide a more detailed update at that time, we can share that our analysis of the data validates top-line results. For example, we saw a significant improvement for several of the QOLB domains including physical functioning, emotional functioning, vitality, and health perception. In addition, changes in FEV1 showed a trend in favor of brensocatib over placebo even in the six-month study. Finally, in addition to the reduction of sputum neutrophil elastase that we observed with brensocatib as a result of its mechanism of action, we have also observed a correlation between sputum neutrophil elastase reduction and the reduction of pulmonary exacerbation based on pharmacokinetic and pharmacodynamic modeling analysis. The overall safety profile was similar across treatment groups. However, headache, skin and dental-related adverse events were numerically higher with brensocatib than with placebo. Following the virtual ATS forum, we plan to host an investor call with key opinion leaders featuring the data. We look forward to sharing further details and the broader set with you once the details of this virtual ATS session are finalized, which we currently expect will be before the end of June. Beyond bronchiectasis, we believe that brensocatib has the potential to be effective in treating other neutrophil-driven diseases, including cystic fibrosis. CF patients have even greater levels of neutrophil elastase than bronchiectasis patients. Therefore, we believe brensocatib may benefit CF patients by addressing the harmful effects of neutrophil elastase in inflammation and sputum production. While our core development interest for this compound remains with bronchiectasis and CF, there is a biological rationale that suggests brensocatib may be applicable across a broad range of indications including alpha-1 antitrypsin deficiency, granulomatosis with polyangiitis, inflammatory bowel disease, lupus, and rheumatoid arthritis. As Will mentioned earlier, AstraZeneca has exercised its option, which allows for the pursuit of clinical development of brensocatib in COPD or asthma, subject to our ultimate agreement regarding commercially acceptable terms. Our pipeline also includes Insmed 1009, which we’re now calling by its new name, treprostinil palmitil. This is a dry powder, inhaled treprostinil prodrug formulation that we are advancing for the potential treatment of pulmonary arterial hypertension. We remain on track to file an IND and initiate a Phase 1 study of treprostinil palmitil later this year. We’re very excited about the multiple opportunities in our pipeline. Let me now turn the call over to Roger to discuss some key operational updates, including the ARIKAYCE franchise.

Thanks, Martina, and good morning, everyone. I’m pleased to report that from an operational perspective, we continue to execute on our strategy, delivering across all areas of our organization, including research and development, manufacturing, and international expansion. While we have adjusted our approach significantly, we continue to support our customers and patients and execute at a high level across medical affairs and commercial. As we previously shared, COVID-19 has had an impact on our U.S. commercial efforts related to ARIKAYCE. In mid-March, we pulled our sales force from the field to ensure the safety of our team, patients, and physicians, and to respect the tremendous efforts of healthcare professionals directing to the care of COVID-19 patients. Our first quarter sales were also impacted by the expected reset of deductibles, including the donut hole effect. Notwithstanding these obstacles, we announced early today total net sales of $36.9 million for ARIKAYCE for the first quarter of 2020. I’m extremely proud of the commercial team’s ability to deliver this result in the face of the significant challenges we face. To dig a bit deeper, we are seeing regional variability around the response to COVID-19 and the impact it is having on ARIKAYCE, but no clear trends have emerged. In light of the necessary adaptation of our sales force to a remote model, we expect new patient adds to be modest in the near term. That said, while these are challenging times, we remain confident in the long-term strength of the ARIKAYCE franchise and are hopeful that we can continue to grow in the second half of this year, assuming the COVID-19 situation continues to improve. In the meantime, our teams are continuing to support customers through virtual engagements. We’re encouraged that physicians are continuing to start new patients. Additionally, in recent survey work with targeted physicians, over half of the targets say they anticipate an increase in their index of suspicion for pulmonary infections, with the majority of those saying they will test more often. In fact, two-thirds of those surveyed say they will bring patients into the office with urgency to assess their progress and consider changes with current treatment when the crisis subsides. We were also encouraged to see that existing patients are remaining on therapy and new patients are receiving support. Our Arikares Trainers are providing remote training for new patients, and Arikares Coordinators provide frequent remote support for existing patients and doctors. Patients have expressed how much they appreciate the support Insmed continues to provide and that the comfort of familiarity of hearing from the coordinator is especially meaningful right now. In addition, our market access team is working with payers to address patient and physician access to diagnostic tests. We are pleased that most payers are extending reauthorization times and/or awaiting certain reauthorization requirements. It’s extremely encouraging that payers have acted quickly to ensure NTM patients continue to have access to their medication throughout this crisis. I’m also pleased to note that to-date, our supply chain and manufacturing infrastructure remain intact. To-date, patients on drug continue to receive drug shipments with no interruptions. We believe we have an adequate supply of the active pharmaceutical ingredient used in ARIKAYCE to meet our anticipated global requirements, including commercial, clinical, and compassionate use through the end of 2022. ARIKAYCE may also benefit from two other potential catalysts for growth. First, a peer-reviewed paper was published in early March that provides potential practical solutions to address the most common adverse events that could accompany the use of ARIKAYCE in the treatment of refractory lung disease caused by Mycobacterium avium complex or MAC. We expect these practical solutions will serve to improve patient’s continuation on therapy. Second, we continue to anticipate the introduction of a set of new treatment guidelines from multiple scientific societies, including the American Thoracic Society, The Infectious Disease Society of America, and European Respiratory Society, which we remain optimistic will support the use of ARIKAYCE for appropriate patients. While we await the new guidelines, we’re encouraged that on a recent European Respiratory Society webinar, a member of the committee announced that ARIKAYCE will be included in the guidelines with a recommendation that it would be added to background therapy if a patient remains culture positive after six months of treatment. This is consistent with our clinical trials and U.S. approved standards. We are excited about the potential inclusion of ARIKAYCE in the guidelines and the impact it may have, especially with community pulmonologists and infectious disease specialists. We view the anticipated arrival of these guidelines as an important opportunity to reinforce the appropriate approach to treating refractory MAC patients. Let me turn now to our global expansion efforts in both Japan and Europe. In Japan, we have submitted a new drug application to the Ministry of Health, Labor and Welfare for ARIKAYCE for the treatment of patients with NTM lung disease caused by MAC who did not sufficiently respond to prior treatment. As we previously disclosed, we plan to deploy an intimate sales force dedicated to educating Japanese physicians on MAC lung disease and promoting the appropriate standard of care regimen, including the use of a macrolide to treat patients. We expect to begin to hire our sales team when the global health crisis will allow us to safely execute on this opportunity. Once the pandemic subsides, we intend to allow our sales force in compliance with Japanese law to establish and build relationships with physicians, who are treating MAC lung disease patients. In Europe, as previously shared, our marketing authorization application has been validated by the European Medicines Agency. We expect that if it is approved, we could potentially launch ARIKAYCE by the end of the year in Germany with the UK following shortly thereafter. Finally, let me turn to our efforts around label expansion for ARIKAYCE. We are advancing ARIKAYCE in a frontline study that, if approved by the FDA, would allow us to address the estimated 95,000 to 115,000 patients in the U.S. diagnosed with NTM MAC lung disease and that will serve as a necessary confirmatory study for our case, as agreed in that post-approval commitment with the FDA. We anticipate that this study will also address frontline approval requirements for Europe and Japan, using the primary endpoint of durable culture conversion, which we intend to discuss with the relevant regulatory authorities. We’ve planned for a study duration of 13 months with treatment for 12 months, followed by one month off-therapy. The primary endpoint of this study in the U.S. will be a composite patient-reported outcome or PRO, in order to demonstrate the clinical benefit, which is required by the FDA. We expect that the validation of the PRO and the confirmatory study will track in parallel, pending alignment with the FDA. We remain on track to initiate these trials in the second half of 2020. In these challenging times, we are working diligently to maintain the strength of the brand and maximize the long-term potential of ARIKAYCE in the U.S., Europe, and Japan. I’m very excited about what lies ahead, and I want to thank the team for their continued commitment to the NTM community. From a strategic perspective, when we look at our product portfolio through a broad lens, we see an impressive potential commercial overlap among our programs, particularly the synergies between NTM and bronchiectasis, and we’re excited about advancing treprostinil palmitil, a promising medicinal candidate for a rare pulmonary disease. We remain committed to advancing these programs and look forward to sharing our progress with you. I’ll now turn the call over to Sara, our Chief Financial Officer, for the financial update.

In the first quarter of 2020, we made significant progress across all of our programs, maintaining a keen focus on the management of our operating expense. As Will mentioned at the start of the call, Insmed is well-positioned to support the next wave of its growth through multiple value inflection points. In the current climate, operating expenses are as difficult to predict as revenues. For the first quarter, our operating expenses were well below budget. While we continue to face uncertainties brought on by COVID-19, we can say that our cash runway coupled with our focus on appropriate spending leaves us confident that our financial resources could carry us into 2022. Our quarterly results are detailed in our press release issued this morning. For today’s call, I want to draw your attention to a few key line items. This morning, we reported total net revenue for the first quarter of $36.9 million, comprising $35.2 million in U.S. net sales of ARIKAYCE, and $1.7 million ex-U.S. net sales of ARIKAYCE. The ex-U.S. net sales reflect utilization from the compassionate use named patient programs in both France and Germany. Total net revenue increased 68% as compared to the first quarter of 2019. Our gross to net for the first quarter was approximately 14%, similar to what we saw in the first quarter of 2019. While we anticipated our gross to net in Q1 to be higher due primarily to the coverage gap as a result of the benefit reset at the beginning of the year, we reiterate our previous guidance of our gross to net for the full year to be in the mid-teens. Cost of product revenues for the quarter was $8.4 million and gross margin was approximately 77%. As a reminder, our gross margin in 2019, which was 81%, benefited from inventory expense prior to FDA approval of ARIKAYCE. We do not anticipate this will continue at a similar rate in 2020. Turning to expenses. For the first quarter of 2020, research and development expenses were $36.2 million and SG&A expenses were $51.3 million. Our GAAP operating expenses for the first quarter were $88.8 million, compared to $87.3 million for Q1 2019. We defined adjusted operating expense in our earnings press release as GAAP operating expenses excluding stock-based compensation expense, depreciation, amortization of intangibles, and certain milestones related to ARIKAYCE payable under our amended agreement with the Cystic Fibrosis Foundation Therapeutics. In the first quarter of 2020, our adjusted operating expense was $76.3 million compared to $78 million in the first quarter of 2019, highlighting our continued efforts and focus on cash discipline and preservation. For 2020, we will continue to invest in our core operating business, which includes continued commercialization of ARIKAYCE, global expansion activities in both Europe and Japan, and pipeline advancements. In addition, we will invest in the planned Phase 3 program for brensocatib. We ended the quarter with a strong cash position of $428.9 million. We intend to maintain a strong balance sheet where we manage appropriate development investments with responsible cash management. With that, let me turn the call back to Will for closing remarks.

Thank you, Sara. Let me close out our prepared remarks by reiterating that we are extremely proud of the continued execution by the team at Insmed. We believe we are advancing a pipeline of high-value opportunities in areas of stark unmet medical need. In tandem, we believe our commercial efforts for ARIKAYCE have enabled us to create a strong franchise with great future potential globally and across additional indications. I want to congratulate the Insmed team for staying the course and making tremendous progress in these uncertain times. We all remain very excited about what lies ahead for the Company. With that, I’d like to open the call to questions. Operator, can we take the first question, please?

The first question comes from Matthew Harrison from Morgan Stanley. Please go ahead.

Hi, all. Thanks for taking the question. This is Connor Meehan on for Matthew. So, just a couple from us. How has the physician and patient engagement trend during COVID? I know you guys mentioned the digital sales force. And I guess, we are just looking for maybe some more color on that. And then, could you provide some guidance on how new diagnoses for NTM have fallen off, if they have?

I appreciate the question. I’m actually going to turn this one over to Roger to sort of address from the commercial point of view.

Thanks, Will. Yes. So, I think that we’ve had tremendous engagement from physicians and healthcare professionals, the office staff in a very trying circumstance. So, we have the digital engagement from our sales team, we have the virtual training from our Arikares Trainers, we have engagement from our Arikares Coordinators. Now, I would say, there’s regional variation with some areas of the country being hit a lot harder than others. And that’s made the priority of physicians to focus on COVID-19 rather than on NTM patients. But, I would say that the biggest challenge we’re seeing right now is just the patients. We did some survey work that I mentioned in the prepared remarks. Just some survey work. And I think what physicians are telling us is that the biggest challenges they’re seeing is just the number of patients who aren’t comfortable coming into the office yet. We’re certainly seeing a rise in telemedicine, but that hasn’t offset the volume of patient visits that you would expect in a normal situation. Having said that, they also mentioned that the physicians have moved to managing patients and making sure that they stick with their therapy and continue on their therapy for the patients who are already on ARIKAYCE. So, it really turned their attention away from new patients because the opportunity is not there right now as robustly as it was previously, but they’re focused on making sure that the patients already on therapy continue. And as we mentioned, there’s an increase in index of suspicion that they reported with over half of the physicians reporting an increase in that index of suspicion with an intention to do more screening, once these patients return. Additionally, about two-thirds of these physicians report with pulling the NTM patients in with some urgency, so proactively asking them to come in for screening and to manage their NTM rather than waiting for them to make appointments. So, I think all of those trends are very encouraging. What we’ll see is this is just a delay. We’re pushing out these diagnoses. We may see a bolus of these NTM patients coming in for therapy in the second half of the year.

And I would just add to that. I think one of the interesting and unintended features of the global pandemic is this increased attention to respiratory conditions, generally. So, I think we will be the beneficiary of that as it goes forward. Now is actually the time to be a company with products that are focused and developmental products, candidates that are focused on pulmonary health.

The next question comes from Adam Walsh from Stifel.

My first one is, you mentioned the donut hole in the first quarter of 2020. Do you feel that that’s behind you now in terms of the impact on ARIKAYCE in the first quarter?

Yes. The short answer to that is, yes. I think, it was behind us much earlier in the year. In fact, we pretty much put it in the rearview mirror. And then, we got hit with COVID. So, it was an interesting first quarter, as you’ve seen. The good news is, I think, the team responded very well to that. I would just say structurally, the donut hole is something you’re going to encounter every year. I think we move through it pretty quickly. It doesn’t speak to fundamental demand or interest in writing a prescription. It speaks to the delay of the initiation of therapy. I don’t know, Roger, if you’d add anything to that?

I would agree with that, Will. I think we’re well past that and we’re working our way through that. As you mentioned, this just slows down the processing while the patient lines up assistance to meet those co-pays. We think we’re on the other side of that now.

That’s helpful. And then, a couple of quick ones here. For Sara, you mentioned supporting the STOP-COVID-19 trial. What does that mean in terms of increased cost outlay or spend? And then, one final one on 1007. You mentioned kind of numerical trends for periodontal disease with that. I’m just curious kind of what are the thresholds of periodontal disease that might cause concern?

Yes. So, I’ll let Sara answer the first one on the costs related to COVID-19.

Yes. Thanks, Adam. I appreciate the question. Immature for providing for drug and some nominal costs but immaterial from a total cash operating expense impact.

Yes. And then, on the issue of periodontal disease, I just want to be clear. The reason we look at this is because if you look at patients who have Papillon-Lefèvre syndrome, which is a total absence of DPP1. They tend to have increased levels of periodontal disease. So, we included periodontal disease as a rate as one of the adverse events of special interest. And we tracked it very closely. That meant that we had a dentist literally inspecting each patient throughout the course of the study. As you may recall from the top line data we released, if you look at the different percentage rates of periodontal disease in the placebo was 2.4%; at the 10-milligram arm, it was 7.4%; and in the 25-milligram arm, it was 10.1%. None of this led to discontinuation of the drug, but it was something we were tracking. The characterization of periodontal disease was a minimal change in the recession level of the gum, if I remember it correctly. The consequence of that was not considered to be meaningful. I don’t know, Martina, if you want to add any characterization to that particular item and how we’re going to think about that going forward?

Yes, that's correct. We truly assess any changes in the gum pocket, and it must also be evaluated independently. Based on what we've observed in Phase 2, we currently do not expect to implement this type of dental monitoring in Phase 3. We will discuss this with the agency. That represents our current assessment based on the data.

And I think, the final point of encouragement there is that our DPP-1 inhibitor in contrast to others that were developed is reversible. We demonstrated this very clearly in the Phase 2 study. So, even if we were to get to a place where somehow this was viewed as something to be watched carefully, it’s something we can always accommodate by discontinuing the drug and seeing the reversibility and the return of DPP-1.

Thanks.

The next question comes from Martin Auster from Credit Suisse. Please go ahead.

Thank you all for taking my question. I have a couple of inquiries about the pipeline. First, Roger, you mentioned the PRO study and its validation being conducted alongside the confirmatory study. I was wondering if that validation will likely be available before the confirmatory results. The timelines are somewhat uncertain at the moment, but if you initiate that trial later this year, how far ahead of the final data would that validation readout occur? Would that allow for resizing the trial or modifying the PRO? My second question concerns treprostinil palmitil. I'm interested in your thoughts on how success will be defined for the Phase 1 trial. Is the goal to demonstrate comparability to the currently available form of treprostinil? How will you measure that through positive pharmacokinetic indicators? Are there other metrics you are considering? Additionally, if the Phase 1 trial is successful, will it enable you to move directly to a registrational study in pulmonary arterial hypertension and any other approved indications?

The first thing I want to mention about the frontline study is that it has two components. One component is the study designed to secure approval for the frontline use of ARIKAYCE in MAC patients, which will last for 13 months and use the PRO as the primary endpoint. Alongside this, we will conduct what I refer to as the sentinel study, aimed at addressing uncertainties related to a new PRO that we've encountered in other biotech development areas. This will involve validating the PRO through a parallel study, which will run for 7 months. As a result, we will obtain the information from the PRO validation study about half a year before we receive the results of the main study, assuming both studies maintain the same enrollment rates. Our goal is to leverage insights gained from this validation study to potentially adjust the primary study, which will still be blinded. This is an essential aspect of the sentinel study. We can validate the PRO and monitor its response in this population, allowing us to adjust either enrollment or our approach to the PRO before the main study is unblinded. This sentinel study will provide information sooner than the main study, which should help investors understand how the PRO is performing. We are very enthusiastic about this and are in a positive position concerning the FDA's acceptance of this strategy. This reflects their interest in seeing this develop in a way that could lead to successful approval, provided the study demonstrates positive results. Regarding 1009, we will enter Phase 1 this year. This program excites us greatly. When we previously assessed 1007, I described it as a lottery ticket, which turned out to be a significant win. People often ask if we have other similar opportunities, and I believe 1009 is another one of those. The reason for this optimism lies in our animal data comparing treprostinil palmitil to other compounds, showcasing a marked difference in efficacy, including disease modification. This has raised our expectations for its potential. Phase 1 will involve an ascending dose study, and we aim to quickly follow this with a validation study in PAH patients. Our objective is to promptly include diseased patients to determine if we observe similar outcome modifications as seen in animal studies. If that's the case, based on our years of target product profile research and positive feedback from physicians, we believe they may change how they use treprostinil if our human data aligns with animal results. We anticipate this validation study will begin next year, contingent on a successful Phase 1 trial this year. Overall, I feel that the timeline to achieve this is not lengthy and will not be costly, providing us with an answer about whether we have a significant addition to PAH treatment by 2021.

Got it. Thanks Will.

The next question comes from Ritu Baral from Cowen. Please go ahead.

Good morning, everyone. Thank you for your questions. Can you discuss what you are observing in the second quarter regarding ARIKAYCE? How confident are you in the visibility for the current ongoing quarter based on first quarter results? Are the geographic impacts you are noticing persisting? As you consider the initiation of new patients, how do you see the reopening of clinical trial sites affecting this in the second quarter, or do you believe it will primarily impact the second half of the year?

Yes, that’s a great question. I'll pass it over to Roger shortly to share his insights. I would describe COVID-19 as introducing significant uncertainty in the markets. However, I want to highlight that the commercial team has excelled in enabling patients to start and continue their treatments and experience the benefits of this therapy. We've observed new patient initiations even in some of the most challenging areas, like New York City. This is a significant achievement amid such distracting circumstances. Roger, you might have additional thoughts on this.

Yes. Thanks, Will. I would only add that as we mentioned, I think the most challenging aspect that physicians are telling us is the patients are postponing or canceling their visits. So, I think it’s going to be, as we talk to patient advocacy groups, it’s certainly top of mind. We’ve got a patient population that is potentially more vulnerable to COVID-19. So, that’s where I think it’s going to be a combination of telemedicine as well as the in-person visits. But certainly for new diagnoses, it’s easier to do this over in-person, but we have reports of physicians, who are able to make the diagnosis and are able to initiate new patients on ARIKAYCE using telemedicine. They’ve figured out how to do this. I think it’s going to be a combination of both. Ultimately, it’s when patients decide that they’re ready to go back into the offices that’s going to be the controlling factor. Physicians are anxious, particularly in areas where they’re not overwhelmed with COVID-19 and they are not being called into the hospital. Physicians are anxious to reopen and get their practices back on track. And certainly they’re concerned with targets that we’ve talked to. They’re concerned about the health of their NTM patients.

Roger, just to clarify something that you said. You mentioned the states reopening. Based on your conversations with doctors, how much are they actually paying attention to that, given some of the aggressiveness of the timelines? Are they telling you that yes, these are their patients, will pay attention to that and start coming in, or are we necessarily thinking about some sort of lag upon reopening before those patients feel comfortable coming in?

So, what they’re telling us is that patients are canceling their appointments or postponing their appointments. So, I think it’s going to be, as we talk to patient advocacy groups, it’s certainly top of mind as we’ve got a patient population that is potentially more vulnerable to COVID-19. So, that’s where I think it’s going to be a combination of telemedicine as well as the in-person visits. But certainly for new diagnoses, it’s easier to do this over in-person, but we have reports of physicians, who are able to make the diagnosis and are able to initiate new patients on ARIKAYCE using telemedicine. They’ve figured out how to do this. I think it’s going to be a combination of both. Ultimately, it’s when patients decide that they’re ready to go back into the offices that’s going to be the controlling factor. Physicians are anxious, particularly in areas where they’re not overwhelmed with COVID-19 and they are not being called into the hospital. Physicians are anxious to reopen and get their practices back on track. And certainly they’re concerned with targets that we’ve talked to. They’re concerned about the health of their NTM patients.

So, we’re not necessarily thinking about some sort of lag upon reopening before those patients feel comfortable coming in. It’s a very fluid situation, and we’re monitoring this actively. There are patients that need their treatments, and I believe that the physicians will reach out to them and work closely to ensure that they feel comfortable.

And just a quick follow-up question, more housekeeping than anything. In your 1007 Phase 3 study, what’s left to discuss with FDA? I mean, it sounds like you've cashed out the primary endpoints in all of the geographies. Do you have the final design in hand or is there some FDA left to have before you can start the Phase 3?

So, we’re not going through the sort of back and forth with FDA. There’s nothing really there in detail to share at this time. What we really want to do is wait until we have the definitive answer from the FDA where everything is resolved, and then we can come out and share with everyone the details. But the discussion of the Phase 3 study, our approach with this compound, I think, we are sitting on a mountain of very encouraging data. We want to make sure that the Phase 3 varies little from Phase 2, because we're studying the relevant endpoints in Phase 2 and just simply carrying that over to Phase 3. If you think about the history of drug development in bronchiectasis, the challenge has been that every company prior to us has had to change the primary endpoints they're focusing on in Phase 3 from their Phase 2 program. Our case, we had more than 250 patients studying the relevant primary endpoints that would be needed for approval in Phase 3. So, all we have to do is replicate Phase 2 to secure access and approval from the FDA. If we accomplish that, we’ll be the first-ever approved drug to treat a disease that has hundreds of thousands of patients in the U.S. We’ll be treating it with a chronic approach with a once-a-day pill that had a dropout rate that was higher in placebo than in the treatment arms. I went over the periodontal disease. But, I just want to remind everybody, the rates of adverse events leading to discontinuation were 10.6% in placebo versus 7.4% in the 10-milligram arm, and 6.7% in the 25-milligram arm. We are sitting with a very attractive safety profile and great clinical data that we think is going to pave the way for approval. We’ll get those final details nailed, and once they are, we’ll share it with everyone.

Got it. Thanks for the details.

You bet.

The next question comes from Joe Schwartz from SVB Leerink. Please go ahead.

Great. Thanks so much. I was wondering if you could give us any sense of the order of magnitude reduction in new patient adds since the pandemic hit? It would be helpful for us to calibrate our models, if you could give us any insight into what you’re seeing in terms of, for example, how many patients have started ARIKAYCE in the post-COVID world versus the pre-COVID world?

Yes. I appreciate that question, Joe. As Roger said in his prepared remarks, it’s really hard to discern any trends that we think are reliable enough to be able to use as predictors. We don’t really want to go into splitting it down to that level of detail. But Roger, I don’t know if you have any color you can add with regard to this question?

Yes. Thanks, Will. I think what I would add to that is just the number of patients and the physicians who are recording the reduction of visits. About two-thirds of the healthcare professionals say that they've been impacted by this with fewer NTM diagnoses. So, it's about a third reporting that they’re about the same, and two-thirds say that they’re seeing fewer NTM diagnoses. The primary reason for that is the patients postponing or canceling the visits. As I said, I think the return to accelerating our growth here is going to be dependent on patients getting back into the offices and physicians continuing to adapt to telemedicine.

It's difficult, Joe, to give you more detail there, because I think the other thing to consider is that while we are beginning to see certain things in certain regions, that variability gets compounded by the fact that some physicians through their practice and their experience now are finding new ways to address their interactions. So, think about the first early news that came out about COVID-19 and everybody was in a reactionary mode, and they were focused exclusively on preparing the hospitals and shutting everything down. Now, I think enough time has gone by. People are going to find their way back to the new normal. There will be variability across the regions as to how that happens, but physicians know the patients with serious pulmonary conditions can't be postponed forever.

And then, how well do you think your commercial team is prepared to deal with the bolus in the second half, if we get that? How do you expect to manage your sales and marketing efforts given the geographic variability of the disruption you’ve seen so far, and do you see any need to make adjustments in any of it?

Yes. The first thing I want to say before I turn it over to Roger is I would put this sales force against any on the street. They have delivered time and time again. What’s remarkable about them, from my interactions, is their deep commitment to helping these patients. They are not at all shaken by the fact that they've had to step out of their normal route. They're finding new ways to get ready to address this bolus. So, when it comes, if it does, as we expect, they will be ready. Roger, do you want to talk a little bit more detail about what they've been doing and how you think about this?

Yes. Thanks, Will. I would agree with that. What’s been remarkable in my mind is watching the sales team and the Arikares Coordinators and Trainers, it’s just the adaptability and the willingness to engage and support physicians and patients and healthcare professionals through different means. It’s been a real pleasure to watch. I have no qualms at all when we see this increase in patients, if we do get to this bolus that surveys are predicting, I think we are well-positioned to handle that. We have our intact sales team, we have our PAL team, patient access leaders, who support the reimbursement process. I think, as I mentioned in the prepared remarks, payers have been remarkably supportive here. That’s very encouraging. We expect to be able to continue to process and have access for patients to ARIKAYCE with minimal disruption based on attestation for physicians who prescribe. We’re prepared to talk with and support the patients virtually. So, we had a very strong response to virtual interactions and training with our Arikares field trainers in onboarding patients, training them on how to use the device and what to expect from therapy. That’s something that we can continue and we’ve got new ways to support patients and healthcare professionals. I think that’s going to serve us well as we get on the other side of this and get some semblance of normalcy in the second half of the year.

Thanks for all the color. Best wishes.

Thanks, Joe.

The next question comes from Liisa Bayko from JMP. Please go ahead.

Hi. Thanks for taking my questions. Do you have any sense on the sort of size of this group of warehouse patients? Is there any quantification you can give us or?

I don't know that there is at this point. The way I would describe it is there are a number of vectors that are coming together here that are going to contribute to that. We think there will be both the immediate byproduct of COVID-19 delays coupled with the arrival of adverse event management paper opportunities through prior treatment in guideline. All of those come together. I don't think we can quantify it, but it is possible qualitatively to describe.

Yes. I would agree with that. I mean, certainly we didn't quantify it in our survey work. We didn’t ask the positions to quantify that. But certainly what we're seeing is a deferral right now. It's not an elimination of the prescription. I think when the patients come back into the offices and reengage with the physicians, you're going to see that prescribing accelerate. I would also say that the index of suspicion and the increased attention on respiratory disease is a positive outcome of this. Physicians are recognizing how vulnerable they are. As much as they can treat the patients and get them into as healthy state as possible, I think the better everybody's going to be.

Are patients able to start therapy on their own, or are they doing this through telemedicine? Is that occurring?

Is that happening? Yes. Roger, do you want to give any detail?

Yes. So, we’re certainly seeing new patient starts. We have reports from physicians that they are able to make the decision to put patients on ARIKAYCE if they were not responding adequately to the background therapy. So, they’re refractory patients. As I mentioned, payers are relaxing some of their criteria for reauthorizations and sputum testing. Physicians are able to through an attestation process, get the reimbursement. We can support those patients virtually, getting them onboarded through different means. We can either do a video chat with them and walk them through the device and what to expect from therapy or we talk with them over the phone with supplemental video support. We are able to and continue to support the onboarding of new patients throughout all of this.

And then, I wanted to ask a little bit more about brensocatib and its potential role on ARDS. Will, can you maybe talk about sort of the delayed onset of action and yet how you still think there may be an opportunity and a window for it to work in ARDS given that also has a relatively short window? I'm just curious how you think about that.

Yes. No, I appreciate the question, because it allows me to say once again, the proper pronunciation of this new word, brensocatib, what I introduced today.

I'm sorry.

No, that's okay. I got it wrong when I started out, and I can't tell you how many times I practiced it. But, I'm going to actually ask Martina to address the thought process behind this question, which is it takes a couple of weeks for full pharmacodynamic effect, yet in the context of COVID-19 severe patients, why we think this might be a particularly useful. I think the principal investigator from our Phase 2 WILLOW study, Professor Chalmers, is in fact the one who is directing this study. His thorough understanding of the mechanism of action is what informed his enthusiasm to approach us to want to initiate this study. Martina, you can talk about the science a bit.

Yes, sure. Liisa in COVID-19, basically has an acute inflammatory process in the lungs. In the early stages, this is neutrophil-driven. Then, neutrophil proteases just by blocking the neutrophil elastase and proteases, we hope that we will impact to stop that lung damage and potentially also the progression to ARDS. In early stages, ARDS is characterized by heavy neutrophil influx into the lungs, and because of a higher density of neutrophil, there may even be an opportunity for brensocatib to work faster. It’s interesting to see different how different ARDS presents in different types of infections. We believe there is an opportunity for brensocatib to start working and then help patients not to progress and actually come out with a better outcome so they don't have to necessarily go on to mechanical ventilation.

Okay. Thank you.

The next question comes from Graig Suvannavejh from Goldman Sachs. Please go ahead.

Thank you very much. Congrats on a quarter, really nice quarter. Just maybe one question, just for modeling purposes. Obviously, the first quarter, the numbers were below budget I think, is what you mentioned. As we're anticipating in the second half, a number of new clinical trial starts, can you maybe perhaps give us a sense of, at least relative to what we were originally budgeting? How we should be thinking about the flow of quarterly OpEx throughout the balance of the year?

Thanks, Graig. I appreciate the question. So, as we’ve mentioned in our prepared remarks, there are obviously a lot of uncertainties with COVID-19. We had previously pulled revenue and operating expenses at the same level of uncertainties. What we felt was a more important metric for the investment community is to think about modeling is really on our financial resources. That’s why we have communicated that we feel confident that we have financial resources that could carry us into 2022. In this current year, we do have the pivotal programs that we have adopted to start later this year to see some increase in OpEx once those start. But we feel confident we have financial resources to carry us into 2022.

The last question comes from Josh Schimmer from Evercore ISI. Please go ahead.

I'm not sure if I missed the number of new patient additions for the quarter. I believe that's information you've provided in the past, and I'm uncertain if you're willing to share it for the first quarter. Additionally, considering the target age demographics for ARIKAYCE and their potential vulnerability to SARS-CoV-2, have you observed any direct impact from COVID-19?

I'll just turn that over to Roger to talk about new patient starts and anything we've seen in terms of detail at the patient level experiencing the COVID-19 pandemic.

So, we're not sharing new patient starts at this point and we're trying to give more qualitative direction as to we think the new patients, certainly there's been a delay as patients are putting off or postponing their visits. But the second half is when we really anticipate that we'll see that return to normalcy and physicians calling patients in to examine and to make sure they’re prescribing appropriately. So, there’s increased focus on NTM patients. While we are certainly not privy to patients talking about or sharing their medical conditions, I think the increased attention from the physicians reflects their concern that this patient population may be vulnerable. If we contrast that to many of the conversations we had when we launched ARIKAYCE back in the fourth quarter of 2018, physicians didn't call their patients in to initiate. They waited till the regular appointments for the patients to show up and prescribe ARIKAYCE. So, this is a change in behavior. A much greater sense of urgency is what they're reporting to us for these patients.

And I think it's an interesting proposition, Josh. We have not looked at that scientifically, but it probably merits some additional attention. We'll put a pin in that one and maybe get back to you. In general, on new patient starts and the metrics we’ve got, philosophically, I’d just have to say, last year we spent prior to COVID-19, a lot of time putting on a lot of detail. I think we did that as effectively as we could. I'm not sure that the additional detail actually helped. With our exceptionally strong performance, I think it is best to deliver the performance and have that stand as the information that's of greatest relevance.

Thanks so much.

You bet.

This concludes our question-and-answer session. I would like to turn the conference back over to Will Lewis for any closing remarks.

Just thank you to everyone for dialing in and bearing with us through the long Q&A. I certainly appreciate your interest in the Company. We hope you all remain safe and healthy through this unusual time. Thanks, everyone.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.