Why Insmed Shares Sank

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of biotechnology company Insmed (NASDAQ: INSM  ) plunged 15% today after a phase 3 trial of the company's experimental lung-infection drug Arikace disappointed Wall Street.  

So what: The trial showed that patients taking the once-daily drug Arikace had a smaller improvement in lung capacity than those treated with Novartis' (NYSE: NVS  ) twice-daily competitor TOBI, triggering plenty of investor concern over Arikace's position in the market. While Insmed said that the trial met its main objective of showing that Arikace was not statistically inferior to TOBI, the lackluster results -- it isn't exactly superior -- suggest that the drug's sales potential is limited.

Now what: Management expects to file for regulatory approval in Canada and Europe during the first half of 2014.

"[I]f approved by the EMA and Health Canada, we look forward to bringing ARIKACE to market in order to benefit the thousands of [cystic fibrosis] patients in need of an effective and convenient treatment for these chronic and often life-threatening Pseudomonas aeruginosa lung infections," said CEO Will Lewis.

Given the competitive and regulatory risks that continue to surround Insmed, however, only biotech-savvy Fools should even consider buying into that optimism.  

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  • Report this Comment On July 01, 2013, at 11:41 AM, jad9000 wrote:

    First, you might want to wait until the end of the day to start yapping about the share price. Second, there was little to know statistical difference in the results between TOBI and Arikace but TOBI users don't take their twice daily doses at a factor of 40% to 50%. So, in reality, the comparisons are apples to oranges. IF TOBI users took their doses correctly they would be same same, but, in fact, they don't. A single dose, comparable product will likely be far more popular with both treating physicians and patients and alleviate the chronic non-compliance of patients. In addition, after a relatively short period of time TOBI becomes ineffective. Arikace may well start out as a continuation of therapy when TOBI quits working - and it does. This is sti;; a very large market. And, finally, you managed to leave out the NTM indication - which Arikace is also targeting and has zero competition in. In the future you might want to tell the whole story and not a fraction of it.

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11/25/2014 3:59 PM
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