Sunday, June 7, 2009

Insmed (INSM) Approaches Two Dollars on High Volume

Based on the volatility of the stock that has been accompanied by days of high trading volume, I've been predicting for weeks now that Insmed (INSM) was gearing up to release some significant news, most likely regarding the preliminary data collected from a Phase II trial measuring IPLEX's effectiveness in treating Myotonic Muscular Dystrophy (MMD).

After the stock closed Friday at near the high of the day on over two million shares traded, that news could be imminent.

The company has been relatively quiet since announcing the sale of their Follow on Biologics (FOB) platform to Merck in February, but the most recent quarterly report reiterated the fact that the MMD data was due to be released by the end of 2Q.

As I've covered before, due to a patent infringement lawsuit which Insmed lost a couple of years ago and took IPLEX off the market for treating short stature in children, Ipsen Pharmaceuticals can choose to opt-in as Insmed's partner in the development, marketing and distribution of the drug if it proves effective in a Phase II trial.

An opt-in on Ipsen's part would require that the company issue Insmed a milestone payment and both firms would then share future profits. If Ipsen chooses not to opt-in, Insmed would go it alone, meaning no milestone payment, but also no sharing of profits. The additional Ipsen variable makes Phase II results for Insmed much more interesting than they ordinarily would be.

Investors speculating on the outcome of all this have caused some pretty significant price swings in the INSM stock of late, but the most recent action looks encouraging for longs and the future of IPLEX- and most importantly, for the patients that can benefit from the drug.

Even more encouraging, MMD is only one of many indications that IPLEX has the potential to treat. An expanded access program in Italy is testing the drug's effectiveness in treating Amyotrophic Lateral Sclerosis (ALS), also known as Lou Gehrig's disease and, according to the company's website, Insmed has early stage research programs investigating retinopathy of prematurity (ROP) and HIV Adipose Redistribution Syndrome (HARS). As you can see, IPLEX, which has already been approved by the FDA and faces no safety concerns, has a lot of potential.

It's hard to believe that this stock traded for around thirty cents not too long ago.

Already approaching two dollars, INSM is still a good buy, especially on any pullbacks. With a boatload of cash on hand after the Merck deal and a potential partner in Ipsen, Insmed is in a strong cash position.

The sale of the FOB pipeline, in my opinion, can only be seen as a positive because if company leadership had any doubts about the potential goldmine that IPLEX could become for investors and patients alike, I don't see them making that deal. Follow-Ons are the next big thing for biotechs and the company gave up a lot of potential future cash flow to fill their coffers now.

Insmed, without a doubt, is a stock on the move. Here's where long-time accumulation and patience starts to pay off.

Disclosure: VFC is long INSM.


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