Hello everyone and welcome to the Insmed Fourth Quarter and Full Year 2022 Financial Results. My name is Nadia and I'll be coordinating the call today. I will now hand over to your host Eleanor Barisser, Investor Relations to begin. Eleanor please go ahead.

Thank you, Nadia. Good morning and welcome to today's conference call to discuss our fourth quarter and full year financial results for 2022, and to provide a business update. Before we start, let me remind you that today's call will include forward-looking statements based on current expectations. Such statements represent our judgment as of today and may involve risks and uncertainties that may cause actual results to differ materially from the results discussed in the forward-looking statements. Please refer to our filings with the Securities and Exchange Commission, which are available through the SEC's website at www.sec.gov or from our website for information concerning the risk factors that could affect the company. The information on today's call is not intended for promotional purposes and it is not sufficient for prescribing decisions. Joining me on today's call are members of the Insmed executive management team, including Will Lewis, Chair and Chief Executive Officer, and Sara Bonstein, Chief Financial Officer. Please note that today's call includes slides which are available through the webcast on the Investor Relations section of our website. Let me now turn the call over to Will Lewis for prepared remarks. Upon completion of those remarks, we will open the call up for your questions.

Thank you, Eleanor, and good morning, everyone. We believe that Insmed, as you know it today, will undergo a significant transformation in less than 18 months. During this crucial time, we anticipate generating clinical data from each of our four pillars, and as a result, we think you will start to see the benefits of the investments you have supported over the past several years. We expect to expand our focus from tens of thousands of patients to over a million. Our goal is for each of our programs to be recognized as first-in-class or best-in-class treatments for their respective diseases. For my prepared remarks, I will outline upcoming milestones in chronological order, starting with the initial set of potentially transformative milestones we expect in the next 18 months. To begin, I'm thrilled to share that as of today, all adult screening has been completed for our Phase 3 ASPEN study evaluating Brensocatib for treating bronchiectasis. This is a significant milestone, allowing us to anticipate completing enrollment in the first quarter of this year. More importantly, we remain on track to report topline results in the second quarter of 2024 as previously indicated. This study, targeting over 1,600 patients, is more than 50% larger than previous Phase 3 programs for this indication. Despite challenges from the global respiratory pandemic, we completed adult screening in a timeframe comparable to earlier studies, reflecting the real-world need for treatment among these patients. There is considerable enthusiasm for this clinical trial, and we eagerly await the topline results anticipated in just over a year. Looking ahead to the second quarter of this year, I invite you to save the date for our Research Day on May 8th in New York City. Bring your top artificial intelligence, protein engineering, and gene therapy specialists, as we will be showcasing ours. This event has been long-awaited because we wanted to ensure we had validating preclinical data and the first IND filing completed before reviewing our platforms. We believe our research capabilities are world-leading and should be recognized as vital to our business and considered in your evaluations. Specifically, you can expect an overview of our multiple research platforms, with a deep dive into several specific programs. On May 8th, we will first highlight the team from Dartmouth at the Hitchcock Medical Center, which is utilizing artificial intelligence to create deimmunized proteins through a process we call Deimmunized by Design. Earlier this year, we shared the initial targets of this program, focusing on rheumatology, immunology, and improving viral capsids. Leading this initiative are Dr. Hannah and Dr. Chris Bailey-Kellogg, former professors at Dartmouth, who have been advancing this work since we partnered with them nearly two years ago. Next, we will discuss several, but not all, of our gene therapy programs, including our first product candidate targeting a musculoskeletal condition that we anticipate entering the clinic this year. We expect to have already filed an IND for this candidate by the time we speak on May 8th. We will also share our first indications for CNS and ocular disorders and the expected timelines for their clinical entry, along with supporting preclinical data for these programs. Although the gene therapy sector is crowded, we have adopted a strategic approach that we believe will yield better efficacy, safety, and innovative delivery, combined with established chemistry, manufacturing, and controls capabilities. Dr. Brian Kaspar, the scientific founder of AveXis and our Chief Scientific Officer, oversees our gene therapy programs based in San Diego, joined by critical members of AveXis' original scientific and regulatory team. Our third research platform focuses on a potential manufacturing capability that could significantly reduce the cost of producing proteins from viral capsids used in gene therapy and other therapeutic proteins, including those in development by our team in New Hampshire. We are optimistic about the potential of these platforms to be both cost-effective and productive. Our early-stage research currently makes up less than 20% of our expenditures, and we anticipate generating at least six new INDs or Phase 1 studies by the end of 2025. Each program will only advance to the next development stage upon achieving successful data. If it seems like our early-stage research could function as an independent company, we agree. Each of our four pillars at Insmed could stand alone due to the promise of their lead indications and potential for expansion. However, strategically, we aim to leverage cash flow from our more advanced programs to fund long-term development work, hoping to create a leading self-sustaining biotechnology company. In summary, we feel our progress in early-stage research has been substantial, and we invite you to join us for this first review of our capabilities. We look forward to seeing you on May 8th, whether in person in New York City or virtually. Later in May, we will have a significant presence at the American Thoracic Society International Conference. I am pleased to report that we submitted eight abstracts related to ARIKAYCE, Brensocatib, and TPIP, and all have been accepted for presentation at ATS. We will update you on these presentations, which will cover ARIKAYCE's adverse event mitigation in a real-world context, long-term hospitalization burden in NTM, and an analysis of bronchiectasis patients by severity subgroup from the WILLOW study. ATS will also be a key platform for discussing disease awareness as we prepare for a potential launch of Brensocatib, pending approval. As you can understand, May will be a busy month for us, but shortly thereafter, we expect to reach the next significant milestone. In mid-2023, we plan to initiate a Phase 2 trial of Brensocatib for chronic rhinosinusitis without nasal polyps. Subject to FDA feedback, the trial will involve approximately 270 patients randomized to receive either 10 mg or 40 mg of Brensocatib or a placebo over a 24-week treatment period. The primary endpoint will assess changes in daily sinus symptom scores. We intend to use this same endpoint in a Phase 3 study. Similar to bronchiectasis, there are no approved therapies for CRS without nasal polyps, which affects tens of millions of people. Initially, we will target the most severe cases, estimating an addressable patient population of 400,000 in territories where we have commercial presence. Now, let's turn to catalysts for the latter half of 2023. The next major update from the ARIKAYCE frontline program will be topline efficacy and safety data for ARISE, expected in the third quarter. This will include differences in patient-reported outcomes between treatment arms, the impact of ARIKAYCE on culture conversion and related timing, and correlations between culture conversion and changes in symptom scores. The goal of ARISE is to demonstrate a directional effect in endpoint differences between treatment groups, although it is not designed to achieve statistical significance. We're excited about ARISE's overall progress. Recently, we reported a 15% blinded treatment discontinuation rate, indicating that patients with early, less severe disease may tolerate ARIKAYCE well. This suggests a significant advantage of early treatment compared to the current wait-and-see approach by some physicians, and the frontline opportunity could greatly expand the addressable market in refractory cases. As we move forward, we plan to share interim blinded dose titration and safety data in the second half of 2023 from patients involved in both TPIP Phase 2 studies, one focusing on PHILD and the other on PAH. These trials employ a maximum tolerated dose strategy, and previous evidence suggests that high doses of inhaled prostaglandins can reduce pulmonary vascular resistance and arterial pressure. Our ability to reach higher doses should improve our chances of success. Finally, we expect the ENCORE trial to be fully enrolled by year-end 2023. While this goal is ambitious, we are diligently working to achieve it. We have seen a solid and accelerating pace of enrollment since the last patient was enrolled in October 2022. Looking to early 2024, we are on track to report topline data from the TPIP Phase 2 trial in PHILD in the first half of the year. We also plan to share clinical data from the early patients enrolled in a Phase 1/2 study utilizing gene therapy in musculoskeletal indications. By the second quarter of 2024, we anticipate topline results from the ASPEN study, which examines two doses of Brensocatib in bronchiectasis—a condition with no currently approved therapies, representing about one million patients at launch. There are also up to 6.7 million patients misdiagnosed or comorbid with COPD or asthma who could benefit from a reduction in pulmonary exacerbations beyond our initial launch focus. The ASPEN trial continues to progress well. We reported a blended rate of pulmonary exacerbations of 1.12 to 1.15 events per patient per year over the last three months, indicating enough events are occurring, in line with what we witnessed in the successful Phase 2 WILLOW study. Lastly, regarding our cystic fibrosis data released earlier this year, we are confident that Brensocatib's mechanism of action is functioning as anticipated. Last month, we shared positive topline results from the Phase 2 pharmacokinetic/pharmacodynamic study in CF patients, demonstrating clear dose-dependent inhibition of blood neutrophil serine proteases across all doses. Safety and tolerability were consistent with previous findings in the WILLOW study, even with an increased 40 mg dose in some CF study participants. Given the efficacy and safety observed at 10, 25, and 40 mg, we concluded that additional cohorts at a 65 mg dose were unnecessary, though we have the toxicity data to enable this. In closing, regarding the ARIKAYCE franchise, we achieved 30% revenue growth in 2022. According to our guidance for 2023, we expect ARIKAYCE's global revenues to fall between $285 million and $300 million. We are confident in our ability to sustain growth globally. Sara will provide further insights into the dynamics shaping our expectations in each key geography. I'm excited about the future of Insmed. 2023 is poised to be the year we realize the impacts of our investments over recent years. I hope you are as eager as I am for the important clinical events expected over the next 18 months and beyond. We look forward to updating you on our progress. Now, I will turn the call over to Sara for her commentary.

Thank you, Will and good morning everyone. Earlier today, we issued a press release with our detailed fourth quarter and full year financial results. Let me walk through a few of those results for you now. We ended 2022 with $1.15 billion in cash and cash equivalents and marketable securities. We anticipate this robust cash position will allow us to reach a re-inflection point over the next 18 months as outlined on today's call, inclusive of pivotal ASPEN data with the potential for meaningful cash remaining on the balance sheet post-ASPEN readouts. Earlier this year, we were pleased to share with you our approach to capital allocation. To remind you, we anticipate over 80% of our total expenditures will be on our mid to late stage and commercial programs ARIKAYCE, Brensocatib, and TPIP. We anticipate less than 20% of our overall spend will be on our early stage research programs, a level that is neither new nor incremental but reflects the approach we have followed for the past several years. Let me now walk through ARIKAYCE revenues for the full year 2022 and the regional dynamics driving performance in each market. Total net revenue for ARIKAYCE was $245.4 million for the full year 2022, reflecting the 30% growth that we set out to achieve over 2021. On a regional basis, net revenue for 2022 was $186 million in the US, $56.5 million in Japan, and $2.9 million in Europe and the rest of the world. As Will mentioned, we believe there is an opportunity for continued growth across our three key geographies. Although quarterly revenue levels can fluctuate due to inventory and gross to net changes, in the US, we have been encouraged by positive trends in several key metrics, including enrollment forms and new patient starts. In fact, these metrics grew quarter-over-quarter throughout 2022. We are also back to pre-COVID levels in terms of our therapeutic specialists' ability to visit physicians in person. Together, these positive trends point to what we anticipate will be another solid year of growth in the US market. Turning to Japan. Japan remains a crucial territory for us and we are seeing evidence that fundamental demand continues to be strong. In 2022, we did see the effect of COVID surges on the launch as well as the impact of foreign exchange rates on global revenue levels. However, as lockdowns abate and ease the pressures on the Japanese healthcare system and as we roll out our relaunch initiatives, we believe the back half of this year could usher in growth in this important market. Looking ahead to the second quarter of this year, in Japan, we anticipate a one-time price cut in the high single to mid-teen range which was expected and also consistent with what we have seen in prior product launches in this territory. Moving to Europe, as expected, the European market continues to make up a relatively small percentage of global revenues. In France, we agreed to a final reimbursement price for the ATU compassionate use program, which was lower than expected. As a result, we recorded a one-time charge in the fourth quarter of 2022 of $7.5 million, of which $5.8 million was related to prior periods. Nonetheless, Europe remains an important territory for us strategically and supports our operations across the many indications we are pursuing, including medical community thought leadership, tax-benefiting cost-effective manufacturing, as well as a significant contribution to our clinical trial programs. In an effort to support our development programs, it is our ambition to continue to drive global revenue growth from our commercial franchise. To that end, as previously disclosed, we expect 2023 global revenues to be between $285 million and $300 million. Let me now talk to some additional financial highlights from the year. In 2022, our gross to nets in the US were approximately 13%, which is in line with our guidance of mid-teens throughout 2022 and consistent with our gross to net in prior years. In 2023, we continue to anticipate our gross to nets to be in the mid-teen range. Cost of product revenues for the full year 2022 was $55.1 million or 22% of revenues on a percentage basis. Turning to our GAAP operating expenses. For the full year 2022, research and development expenses were $397.5 million and SG&A expenses were $265.8 million, reflecting continued support of the operations driving our early stage research programs and mid to late stage pipeline. In closing, Insmed entered 2023 in a strong financial standing, with two important elements in our favor: over $1 billion of cash on the balance sheet, and a steady revenue stream that supports our pipeline. Looking ahead to our distinct transformation period, we are exactly where we want to be as we begin to realize a series of clinical catalysts that have been in the making for the past several years. I'll now turn the call back to Will for closing remarks.

Thank you, Sara. I'd like to thank our shareholders for their patience during what has been an intense execution period for Insmed. Now, we are prepared for the momentum of a catalyst-rich future. I would like to thank the patients who participate in our studies, the caregivers and families who support them, the Insmed team, and those who have sponsored us financially. We are extremely grateful for your support and are excited to deliver on this for all of you. And with that, I'd like to open the call to questions. Nadia, can we take the first question please?

Hey, this is Nick filling in for Jess. Thanks for taking our questions. We have two. First regarding ARIKAYCE, it seems that US revenue decreased slightly compared to the previous quarter. I know you mentioned a positive trend over the year, but as we consider 2023, how should we evaluate the growth compared to Japan as the product approaches its fifth year? Are you experiencing any plateauing, or is it simply a moderation?

Yes. So, on ARIKAYCE in Q4, that quarter was a little light relative to what we were expecting. There are a number of forces that sort of augmented that including some inventory shifts. But I would just tell you that what we're seeing right now is very positive in the US. And I think this is finally the culmination of the return to normalcy post-COVID that we've been waiting for. And that is manifest in the form of the ability to access physicians. We're seeing early signs that are the enrollment forms, etc. are in the right direction. And if that trend continues, then the US is in a good and strong position, I would say, for return to growth of the kind we would like to see in 2023.

Great. And just a quick one on the ARISE data. I believe it takes some extra time to collect some of the culture conversion data. So, is there a scenario where we could see PRO data first and 3Q followed by culture conversion data, or should we expect them all at once?

So, our intention is to put it all out at once because I think context is important for interpreting anything we have by way of data. So, that's our plan for Q3. You are right. It does take a little longer to get the results because you have to grow out cultures that can take as long as three months because you need to confirm that there's nothing there. But the simple conclusion is topline results will be a package deal in Q3.

Great. Thanks so much.

Thank you. And the next question goes to Jason Zemansky of Bank of America. Jason, please go ahead. Your line is open.

Good morning, everyone. Congratulations on the quarter and thank you so much for taking our call. Just a quick question here. Looks like research and development was up pretty significantly, both quarter-over-quarter and year-over-year. How should we think of spend moving forward? Is this primarily the result of the investments in the new fourth pillar and what does that look like moving forward?

Yes, Sara, you want to take that one?

Sure. I'm glad to address that, Jason. Thank you for your question. As we mentioned in our prepared remarks, our investment in the early-stage research program is under 20%. This isn't a new or additional amount, and the majority of our competitors, more than 80%, will focus on our mid to late-stage programs like ARIKAYCE, Brensocatib, and TPIP. There are some fluctuations and timing variations in R&D expenses. In the fourth quarter, we have ASPEN, ARISE, ENCORE, the two Phase 2 studies, and TPIP, along with the necessary medical work for these potential opportunities in bronchiectasis, contingent on the success of ASPEN. I want to emphasize that we have enough cash to support ourselves through all these significant value inflection points we discussed during today's call, including the ASPEN data.

Great, thanks. For a follow-up on ARIKAYCE, what do you think are the main growth drivers in the US? Is it mainly new patient starts, access to physicians, or is there something else that could speed up progress going forward? Thanks.

You're right. It is a mix, but I think the most encouraging thing we look for is the ability to access the physicians directly. This is a very promotion-sensitive product and so seeing that trend positive and then that carrying through and manifest in some of the KPIs that we looked at as early indicators of success being positive is why we've got some enthusiasm for the United States right now in terms of its performance.

Great. Thanks for the color.

And one thing I would add there. One thing I would just add Jason is in the US specifically what we talk about internally is are we on year three or year five of launch because those two years during COVID. So, while we launched at the end of 2018, which would mean that we're in year five, we believe that there could potentially be some additional opportunity thinking through being more so in year three, if that makes sense.

Absolutely.

Thank you.

Thank you. And the next question goes to Jeff Hung of Morgan Stanley. Jeff, please go ahead. Your line is open.

Thanks for taking my questions. Last fall, you indicated that the lowest price in the US, Europe, and Japan were the same. And so, with final reimbursement price in France, how should we think about European pricing relative to that in the US?

Yes, I mean the simple answer is, we've said this for a long time, Europe is a very challenging market environment for pricing for many drugs. And indeed, you're seeing a trend of companies leaving Europe as a consequence of the low reimbursement rates. I think that flows from real financial pressures that European countries are feeling for a whole variety of reasons that people are well aware of. The good news I guess for us is that the refractory market for NTM in Europe has always been anticipated to be a very small contributor to our global revenue number. So, while the French price is disappointing in terms of our ability to get in and be active in supporting patients more robustly, it is not material in the way we think about our revenue growth on a global basis going forward.

Great. And then for the ARISE top line results, if you have to make changes to the PRO, how should we expect best to read out in the press release? Like would it say that you need to make adjustments and then we just have to wait until you have agreement with the FDA? Or would there be any indication as to what changes might need to be made? Thanks.

Yes, that's a great question. We're currently evaluating the data first, and then we'll share our insights as transparently as possible regarding its implications. I don't think we will include much detail in a press release due to the nuances involved. There might be scenarios where no changes are needed. However, PROs can sometimes yield unexpected results, so we want to thoroughly analyze that data. The positive aspect is that we can adjust the PRO and enhance our statistical analysis plan to improve our chances of success in ENCORE. This is precisely the purpose of the ARISE trial, and we are eager to review those results. We will ensure to be open with everyone about our intentions regarding any potential changes to the PRO. If we decide to pursue changes, we would approach the FDA for guidance, and their feedback would likely come by the end of the year. While we aim to communicate as clearly as we can, we may provide general direction to avoid any misunderstanding with the FDA. Our goal is to keep everyone informed about whether we plan to make changes to the PRO and what those changes would entail.

Great. Thank you.

Thank you. And the next question goes to Andrea Tan of Goldman Sachs. Andrea, please go ahead. Your line is open.

Good morning, everyone. Thanks for taking my question. Will, maybe a follow-up there on the PRO. Just characterize for us your level of confidence that this tool will be able to detect clinically meaningful changes. And how does your blinded look at the data support this? And then Is there a scenario where the FDA might not agree with the changes that you would look to implement for ENCORE?

I believe we have a strong confidence in the Patient-Reported Outcome tool's ability to detect changes. This confidence stems from our experience treating patients commercially since our launch five years ago, which has given us valuable insights into symptom changes that the tool captures. We've also engaged extensively with physicians and patients, in line with FDA requirements, to understand the changes they experience, which helps us monitor and document those changes effectively. Using the modified bronchiectasis questionnaire for NTM patients increases our chances of success in detecting meaningful changes in symptom scores. Regarding the blinded data, we have observed groups of patients who show significant clinical improvements in their symptom scores. While we won't know the specific outcomes until the data is fully analyzed, we're optimistic that a successful treatment arm will emerge from this. If we need to make adjustments, we would consult with the FDA, and depending on our proposals, they might provide feedback. However, I don't foresee any drastic changes that would cause concern for the FDA. Our relationship with them has been very positive, owing to our responsible and compliant approach in addressing patient populations over the years. The FDA has seen all the successful treatment data, and we have received full approvals in Europe and Japan without restrictions, which is a testament to our efforts. Overall, the situation looks positive, and we anticipate having productive discussions with the FDA, which should enhance our likelihood of success in the ENCORE trial.

Great. And then maybe just one question. As you think about Japan, for you or Sara, could you speak more on your efforts there as you sit in front of these potential launches of Brenso or the frontline expansion in NTM? What learning specifically are you taking from the current experience in the refractory setting?

Sure. The good news is that our executive committee recently spent a week in Japan, where we engaged with a diverse group of individuals, including our employees and key opinion leaders, to gain a deeper understanding of the market. It's important for everyone to be aware of the upcoming developments because the current market for refractory MAC in Japan is showing incredibly strong fundamentals. While there are many patients, COVID resurgence has significantly limited our ability to connect with physicians. During our visit, we observed stringent health measures similar to earlier strict controls seen in the United States. The positive news is that the situation is beginning to improve, and we anticipate enhancements in the market, likely in the second half of this year, though it could happen sooner. We are enhancing our capabilities to address opportunities in frontline and bronchiectasis treatment. A key takeaway from our experience is the critical need for strong relationships with physicians and hospitals, which is essential for ensuring patients receive appropriate treatment for ARIKAYCE, as well as future therapies like frontline and Brenso. Overall, the fundamentals in Japan are very promising at this time.

Thanks so much.

Thank you. And the next question goes to Ritu Baral of Cowen. Ritu, please go ahead. Your line is open.

Hi, guys. Good morning. This is Yanil on for Ritu. I want to talk about the Brenso study for the daily sinus total symptoms score. What can we expect? Or what's a reasonable delta for this endpoint? And then a follow-up.

So, it's something we're still looking at. I think because the score, the endpoint we're using, we're still not past FDA's sign off. I want to be hesitant about getting too much into the weeds about what we're expecting to see and how that's all going to unfold. You can expect us to communicate additional detail in the future as that study gets kicked off in terms of what we think would be adequate to measure and how the study is statistically powered around that. Once, we've completed our dialogue with the FDA. I will say that, we feel really good about the potential in this indication. We've done a lot of work here. And this is a very sizable market with nothing approved to treat it. So, the opportunity for Brenso just continues to grow even beyond the enormous market opportunity of bronchiectasis. But we'll come back with a little bit more detail after we've completed our discussion with FDA, if that's okay.

Do you have any updates on FDA interactions this year for Brenso, specifically regarding the CRS program and Aspen? Are there any plans for discussions with the FDA this year for Aspen? Have there been any changes in the FDA's perspective on that particular NDA?

No, none. Our interaction with the FDA around Brenso for bronchiectasis parallels the enthusiasm we've encountered in both Japan and Europe. Just to remind everyone, we're the only respiratory product to receive prime designation in Europe. So, the regulatory authorities, I would say, are leaning in to help in whatever way they can as they see that compelling data from the WILLOW study and are very anxiously awaiting the results of Phase 3. This is an incredibly robust and very well-powered study that is going to provide just an enormous amount of clinical data, which I'm sure the FDA and PMDA and EMEA and UK authorities will all review with great interest. But we don't have any formal interaction planned for those folks with regard to Brenso and bronchiectasis. We will of course be reviewing the protocol with the regulatory authorities as we move the CRS without nasal polyps study forward.

Thank you. And one quick question. Will there be data for the musculoskeletal program presented after May 8th, your R&D day, and before the first data in 1H?

So, when you mention the first data, I'm not quite sure I'm following you.

Will there be any data released after the R&D day on May 8th, but before the initial program announcement in the first half of 2023?

Yes. So, the intention is that we'll start the clinical trial this year. And depending on how we're able to enroll that, the earliest patients from that will certainly be data that we can share with the market and we intend to do so. With the timing for that, we would just sort of frame out as being expected before we would put out the Aspen data. So, we will have an important point is we'll have a critical read on this gene therapy program prior to Aspen data being turned over. And that sort of feeds into our theme of having all of the pillars reporting out meaningful clinical data before the Aspen study.

Okay. All right. Thank you. Thanks for taking my questions.

Thank you. And the next question goes to Judah Frommer of Credit Suisse. Judah, please go ahead. Your line is open.

Yes. Hi, good morning guys. Thanks for taking the questions. A couple from us. First, just maybe a little more clarification on if the PRO does change based on what you see in a rise. Can or would that affect ENCORE timing? Is it data collection analysis? Would you have to wait for that conversation with the FDA, or can ENCORE kind of continue as planned?

So, ENCORE will continue as planned. What we've said with the FDA and they've agreed to is that if we're going to propose to make changes, they obviously will want to be a part of that conversation. But so long as ENCORE is blinded, it's perfectly appropriate to propose and make changes. Because it's not like we're looking at the ENCORE data and making changes post hoc. So, I don't anticipate that there'll be any impact on ENCORE needing to pause or anything along those lines at all. Would we change the size of the ENCORE study? I don't anticipate that. It's designed and powered. We think adequately based on what we know in our assumptions. There's nothing in the blended data that would suggest that that would need to change. But of course, once we reveal the detailed data, we'll look at that carefully. And I suppose it's possible that I would characterize it from what we know today is unlikely.

Okay. That's helpful. And then somewhat connected just on the cash runway commentary. I think the commentary was you have cash to get through the next 18 months and you have cash left after a pivotal Aspen readout. Should our assumption and the market assumption be that would be the next potential capital raising opportunity? Are there any other catalysts or milestones that you've talked about kind of between now and Aspen that you consider going to market around or should we be thinking about 18 months from now?

Sara, do you want to take that question?

Sure. Happy to. So, we obviously augmented the balance sheet in the fourth quarter of last year; very grateful for the supporters in that raise. We're now in a position that we don't have to worry about capital augmentation. I obviously cannot comment on if and when we will choose to raise money, but we are now in a position that we have the balance sheet to support all these catalysts that we just spoke through inclusive of the Aspen data.

Great. Thanks.

Thank you. And the next question goes to Joseph Schwartz of SVB Securities. Joseph, please go ahead. Your line is open.

Hi, thanks very much. I have a couple of questions. First, regarding frontline NTM and then on Brensocatib. I was wondering if you could provide any insight into how much flexibility you have in adjusting the weightings of the domains for the PRO to be used in the frontend of ENCORE. How does this compare to what you observe in ARISE? Also, are there any examples of other sponsors who have weighted individual components differently that you could share with us to help us understand the precedent for this type of analysis?

Sure. So, let me take on the second half of the question and understand that there is no PRO that has been approved for NTM. And that therein lies the challenge. The process of developing one de novo takes years. So, what we've agreed to with the FDA is to use a modified bronchiectasis questionnaire alongside a fatigue questionnaire to specifically address the symptoms we identified through our research following the FDA's protocols for such work. When we talk with patients and physicians and indeed the FDA. So, we feel this PRO that we have is a winner. That's based on our experience in treating these patients for more than five years. The other clinical trials we have and we utilize the bronchiectasis questionnaire in the refractory setting previously. So, we have seen the performance of it in that setting. So, there's a lot of good data that goes into this design and it's what gives us a high conviction rate. There was an active debate about whether we even needed to do the ARISE study internally, but what we are students of is precedents as you ask. And when we look at things like global blood where they had a PRO that they were confident in, but it missed when it finally was utilized because it had never been tested prior to that clinical trial. We thought the prudent thing to do is to test the PRO and validate it. And with that information, should we find changes are needed, we can go and enhance our probability of success in the ENCORE study by making those changes. FDA agreed with that. So long as ENCORE is blinded, we can make changes just as if we were running two separate trials separated by time. We just run them in parallel and shorten one to ensure it reads out first. And so that design is novel, but the FDA blessed it. And because ENCORE is blinded, the changes can be made. But you would see the same approach in anyone developing a PRO where they would trial the PRO and then based on that make adjustments to it before using it in a clinical setting. All we've done is run those in parallel. No one to my knowledge has done it this way before, but I think it just speaks to our desire to use time and capital efficiently while also increasing our chances of success.

Thank you. Regarding Brensocatib, it's interesting to note that the blended rate of exacerbations in Aspen is between 1.12 and 1.15, which is lower than what was observed in WILLOW and what you anticipated for Aspen. Do you have any insights on how much of this is due to a generally lower rate of exacerbations during pandemic quarantine versus the potential positive effects of Brensocatib? Additionally, how does the power and calculations appear in scenarios where the event rate is influenced more by an overall reduced rate of exacerbations rather than the drug's efficacy?

Yes. So, as you might imagine, we look at many scenarios and I would characterize our conclusion from all of that work is feeling very positive about the event rate in the Brensocatib, Aspen bronchiectasis study. The reason for that is that despite what you're describing, which is true, that during COVID, there was a decline in the number of events taking place in bronchiectatic patients—not specifically in our study, but just generally that was the trend that was seen. Because people were masked and they were indoors and less likely, one assumes, to get sort of virally driven causes for exacerbation. The key thing to understand about Aspen and why it's in such a good position in our mind is that we were recruiting patients during the time that everyone was locked down and those patients had to have documented two or more exacerbations in the prior 12 months during the time of lockdown. So that means that the patients in our study were reliable exacerbating patients. And therefore, if we're seeing event rates that are consistent with WILLOW, we have a patient profile that's consistent with WILLOW that suggests that the trial is going as needed. And if we think about historic trials again to the column of precedent, what we've seen in the past is that there have been an inadequate number of events to have adequately powered trials showing the effect of, in these cases, inhaled antibiotics. In our case, we are very well powered, 90% powered to show a 30% reduction in exacerbations. And I think given that two or more exacerbations are required for entry into the study. We feel really good about the event rates we're seeing, the powering of the study and therefore the likelihood our drug to show its impact and therefore have success.

Great. Thank you for the insights.

Thank you. And the next question goes to Stephen Willey of Stifel. Stephen, please go ahead. Your line is open.

Yes. Good morning. Sorry if I missed this earlier, but could you maybe just kind of speak a little bit to the rationale for the selection of the doses that you chose for the Phase 2 CRS study with Brensocatib? And I guess specifically why the 40 mg dose? I know you had a little bit of experience with it in the CF study, but why drop 25 altogether? And then I just have a follow-up.

We are trying to determine the drug's true effect in a population at the severe end of the spectrum for CRS. The 40 milligram dose showed promising results in the CF study. Initially, we considered using 40 in the original WILLOW study but decided against it due to lacking toxicity data at that time. We did not want to delay the start of that study for the toxicity results. Now that we have the toxicity data for both 40 and 65 milligrams, which are both clean, we can increase the dose without any issues. Since this is a Phase 2 study, we believe the best approach is to understand the dose response curve in CRS without nasal polyps, using 10 and 40 as reference points. This is the rationale behind our dosing decisions.

Okay. And then maybe just quickly on ARIKAYCE, I guess, if you assume that ENCORE works out either frontline label expansion, how do you think about just the persistency of ARIKAYCE utilization in the refractory setting? I know you've talked about some of these retreatment trends that you've been seeing, I think mostly in the US. So how do you just think about the stickiness of the refractory franchise? Thanks.

Yes. I think it's unfortunately going to be there. And the reason for that is we hear this from KOLs all the time and I'm sure you have as well when you talk to them. Once a patient comes into their clinic as a refractory NTM patient, they never leave. They get treated for a period of time. They're successful in the eradication of the underlying infection that gives the patient reprieve, but these patients are vulnerable to these infections and the pathogens that give rise to the infection are ubiquitous in the environment. They're in the soil, the air, the water, and consequently vulnerable patients stand a good chance of being re-infected. And so it's going to be necessary to retreat them when they present. I think the promise here is that especially given the low discontinuation rate. There's a very strong case that is being created and formed around early and aggressive intervention to prevent these patients from getting to the place where they become refractory. But we know from experience that even successfully treated patients will require retreatment. And indeed, a retreatment patient is in effect a refractory patient. So I think we will see the refractory market continue. We know that there are some refractory patients who frankly stay in acute chronic treatment for years now. And so that's why I think it's going to continue to be unfortunately a market that will be resilient.

Great. Thanks for taking the questions.

Thank you. And the next question goes to Leon Wang of Barclays. Leon, please go ahead. Your line is open.

Hey, folks. Thanks for taking my question. I have a question on Europe. So when you're normalizing the trend for sales, it seems like there is a year-over-year decrease. How do you expect that to kind of play out going forward in terms of sales? And also you took the one-time charge due to unfavorable pricing in France? Is that something that could potentially happen with other countries in Europe? I'm just trying to understand if there is potential for additional one-time charges in the future and how that kind of like sales play out?

Yes. So, on the one-time charge, we don't expect another one-time charge from another country and the specifics of the ATU program and the way it works sort of remind everybody, before a drug is approved, you can petition the French Government for the ability to use and get reimbursed for a drug under the ATU program. And we have worked very successfully in doing that for a number of years and treated successfully a number of different patients. Frankly, in many cases, these were patients that had abscesses as well as MAC. And that experience was a very positive one. Regrettably, because of the dynamics in the European market and in particular in France, there is significant pressure being placed on healthcare budgets and that caused them to set a very low price in France for full-time going forward reimbursement. And then there's a make-whole for whatever we have been charging through the ATU program. That's how that operates. We don't see that because there is no equivalent program anywhere else in Europe. So we don't see that as a risk. The positive trends in Europe are in places like the UK where reimbursement is at a very attractive level. The patients are there. It takes a little while to get things off the ground. And of course, Europe overall is not a major driver of our revenue. But I would tell you that notwithstanding the overpressure of pricing, excuse me, I'm actually kind of bullish about what we might see out of places like the UK and Germany where we're making some concerted efforts and think there will be some success. But the overall picture in Europe is a difficult and challenging one for healthcare and for biotech companies in general.

And if I could just add one more point. The 7.5 million adjustment that we booked in Q4, a reminder that 5.8 of that was related to prior period. So as you're looking at year-over-year, there would have been an impact to the prior periods for France as well, which is all being booked in Q4 of 2022.

Great. Super helpful. And one more question related to the Brenso and CRS. Can you share any of the powering assumptions?

So we're not doing that today, but we will be happy to provide that once we come to agreement with the FDA, this trial as proposed is acceptable. We don't anticipate any difficulty in that discussion, but just out of respect for them, we want to wait until that process is finalized. And then we can present what has been agreed with the FDA and indeed any characterizations that come out from that interaction.

Got you. Thank you.

Thank you. And the next question goes to Graig Suvannavejh of Mizuho Securities. Graig, please go ahead. Your line is open.

Okay. Thanks so much for taking my question. Will, I know you started off your prepared remarks by talking about your translational medicine efforts. So maybe since the question has been asked there, and that's maybe still your thumb during your May 8th R&D day, but I'm curious as to kind of the overall picture that maybe you can paint for me again, which is I know that you brought in some very experienced people from AveXis. There are other biotech companies that are standalones, that are spending, I would assume lots more than you might be able to spend, and perhaps investors don't want you to spend all that much. But what is it really that you think is going to help you differentiate versus the other efforts that are out there? Is it literally more about the people and the know-how? Or is there some other technological edge that you think that you have as it relates specifically to your gene therapy efforts? Thank you.

Yes. So I think the gene therapy space, which is but one component of the fourth pillar and the different platforms we have that we'll be talking about on May 8th. But it's a particularly powerful technology. And the reason I like it so much is because I see it as a productivity tool. There aren't many of those in biotech. It's a tool that can shorten the time and cost to commercialize drugs that are impactful, because with a Phase 1, 2 trial, that demonstrates real impact on a disease state, you can secure potentially a conditional approval for that and move to commercialize it earlier at less cost. And so just fundamentally, the technology as a productivity tool is an important thing for the market to digest and understand, because most of the drug development pathways you're following are Phase 1, 2, 3, twin Phase 3s; time and money are quite significant. As we progress through gene therapy, I think we possess a number of advantages. We have a strategic view on this market. As you know, I used to sit on the Board of Uni Care, I've been around the gene therapy space for a very long time. And so we understand that it is a very bespoke technology, and therefore, it requires the very best people and that is what we have very quietly assembled out in San Diego. And for the last 18 or more months, they've been working very hard diligently to advance a number of different programs in parallel because of their experience, they can do this very efficiently. As we've said, our spend for the entire fourth pillar will be less than 20% of our overall spend, and that trend will continue. So this will not become a white elephant project. This is a program that is being driven by people I consider to be the very best in the world at this and the data that we'll be talking about on May 8th, I think will support that assertion. As we think about where we can go next, there are a number of different opportunities. In addition to people, we have very specific approaches and technologies that we think could be game-changing in this space. And we will be sharing those in some detail on May 8th.

Okay. Thank you very much.

For its people, its technology, and its experience.

Thank you. And the next question goes to Jennifer Kim of Cantor Fitzgerald. Jennifer, please go ahead. Your line is open.

Hey, thanks for taking my questions. Maybe to start off with ARIKAYCE front line. Could you just clarify for US approval, does ENCORE need to hit only on the respiratory symptoms score or does it have to hit on the fatigue symptom score as well?

So those two are combined sort of mosaic of patient response to the drug. It will depend on what we see, but my guess is you'll see impact on both measures. It's not pre-specified that one or the other must hit. And of course, the FDA's assessment is does the drug make a patient feel function or survive longer or better than not being on the drug. And so I think a clear win on either one of those is a very strong argument for approval. But let me remind you that this is really only the US market that is particularly focused on the PRO and the instruments that that underlie that. In Japan, culture conversion is what they're focused on. And so we have in one trial all of the answers to both markets, but a split opportunity if you will. If we hit on culture conversion, we’re good in Japan and that's a very substantial market. If we hit on the PRO, that's good in the US, and that's a very substantial market. Each will read into the other and so that will provide some I think additional opportunity to make an argument should something go a little bit sideways. We don't anticipate that's going to be the case. We think we know how these patients respond. We've seen them culture convert. And as a consequence, the study is designed to capture that and I think it's going to do so successfully.

Okay. And then maybe hitting on Japan, I know there's a pricing adjustment coming up. Do you have any color on the exact timing in terms of whether or not that's coming in the first quarter or maybe later in the second quarter?

Sure. So what we communicated is we anticipate it will occur in the second quarter of this year. And it will be in the high single to mid-teen range. And that's expected in plans and what you see for products in Japan.

Okay. And then my last question is, TPIP, the interim blinded data coming in the second half, so it seems like it's coming from both studies. And I think previously you said this would be PHILD only. Is there a reason for that change? And does that indicate, I guess, the enrollment rates that you're seeing for either study so far?

Yes. So what I would tell you is that we want to share as much data we can, because we think showing the blended blinded titration data really gives insight into the likelihood of success of the trial and the impact of the drug. So if there are sufficient patients in — from each study that will make the sample that we're presenting meaningful, we will share it. If for some reason, for example, the PAH study is enrolling slowly, then we might not have enough data. But our expectation right now is that by the end of the year we'd have enough data to share from both studies and that in fact data from each would be helpful to people's understanding. I can tell you that there is a lot of enthusiasm for this program, not just among key opinion leaders, but among the sites we're talking to. And I think we're going to be able to get some real sense of the likely success of this drug as anecdotes build throughout the year.

All right. Thanks so much guys.

Thank you. We have no further questions. I'll hand back to Will Lewis for any closing remarks.

Thank you all for joining us today.

Thank you. This now concludes today's call. Thank you so much for joining. You may now disconnect your lines.