Thursday, June 25, 2009

Insmed(INSM) Hammered on Sub-Par MMD Results

Contrary to press releases issued by most biotech or biopharm firms after the completion of clinical trials, Insmed seems to highlight the negative before the positive in Thursday's release regarding an exploratory Phase II trial that tested the effectiveness of Iplex in treating MMD.

Keep in mind that this was an exploratory trial, so there were no 'primary endpoints' to meet. That being said, according to Thursday's press release, Iplex failed to show "statistically significant improvement in the functional measure of endurance by the six-minute walk test, muscle function, muscle strength, or quality of life in any of the tests utilized in this study." In other words, the use of Iplex was demonstrated to provide no benefit over the use of insulin.

The trial was not a total loss, as Iplex did demonstrate some improvements in patients, specifically in a subset of those patients who were severely insulin-resistant. Based on that subset, and the fact that a larger scope of patients needs to be investigated than just the 69 who took part in this trial, Insmed plans to initiate an additional Phase II trial and will apply for a grant with the Muscular Dystrophy Association (MDA) to do so.

Disappointing results aside, Iplex is far from dead in the water. Even though this trial indicated that the MMD market for Iplex may be sinficantly less than earlier speculated (if used only to treat insulin-resistant patients), the full potential of the drug remains strong in the treatment of other indications, such as ALS.

Insmed is also sitting on a boatload of cash from their earlier sale of the Follow-on Biologics (FOB) pipeline to Merck for $130 million. The sale of the FOB pipeline indicated, at the time, that the company was confident enough in the future of Iplex to have let go of a potentially significant future cash cow. In my opinion, nothing has not changed there. I believe, based on the actions of the past few months, that this company has full confidence that Iplex will prove to be hugely profitable in the future.

Also take note of the fact that Insmed management is not sugar coating anything. Many other companies would have issued a fluff PR stating that "Insmed's IPLEX demonstrated positive results in a subset of MMD patients in a Phase II trial". Press Releases like that one tell investors that a company is doing anything it can to keep people interested because the prospects of the company on their own won't.
Insmed's PR is pretty straight forward in stating that Iplex is not dead, just the MMD market may not be as big as previously thought.

I'm always disappointed for the patients of a particular illness when a potential treatment fails to work, but I am not disappointed that the INSM stock is again trading for little over a dollar. I had accumulated INSM for a while, but I was not satisfied with my position. As the stock price was cut in half during early trading on Thursday, I'm using this opportunity to accumulate more.

There is also the potential that the company, with a lot of cash on hand and an already FDA approved drug, may be sold. These results will lower the value of a sale, but shareholders could make out handsomely if a transaction does go through. However, never buy solely on the prospects of a sale- if you don't have confidence in the future of Iplex, don't buy INSM, it's simple as that.

For VFC, the Insmed story is far from over; I say buy this most recent dip.

Disclosure: VFC is long INSM

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4 comments:

  1. " The sale of the FOB pipeline indicated, at the time, that the company was confident enough in the future of Iplex to have let go of a potentially significant future cash cow. In my opinion, nothing has not changed there."

    Are you smoking crack??

    Insmed had NO other choice than to sell the FOBs. Iplex was and is still unproven/unmarketable. Insmed was down to 1.8M cash (about 30 days' worth). Insmed could get no loan with no cash flow. And a share offering was not an option when the stock was trading at $0.40/share.

    What do you propose INSM could have done rather than sell FOB?

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  2. To sgc:

    In response to your question, No, I do not smoke crack, it's not my style.

    VFC

    ReplyDelete
  3. OK-try to be dismissive because I use a joke that allows you to avoid addressing my point. INSM had no options other than to sell the FOB assets. The sale was not a comment about the viability of Iplex and the other INSM drugs in development. It was a survival tactic.

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  4. sgc,

    A little subtle now?

    You have a valid arguement, although I still disagree.

    I do not believe that the company would have sold that FOB pipeline unless they had faith in Iplex. That would be commercial suicide. Credit was tough to come by, but there could have been other options- partnerships, licensing agreements, and many companies, even some that traded for a lot less, even did do stock offerings as a last resort just to get through the credit crunch.

    I wasn't there, so I do not know the options laid out in front of the board, were you?

    It's speculative game, and I believe that indications point to the fact that this company has full faith in the potential of Iplex.

    VFC

    ReplyDelete

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