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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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